US Lags in Race for Tech Talent

SAN FRANCISCO—From all appearances, Silicon Valley is booming, but it’s a deceptive image. The sources of innovation that have always powered the Valley are seeping away, taking with them the lifeblood of a giant technology wealth machine. A steady stream of immigrant innovators are saying good-bye to America and heading home.

Rents and salaries are soaring in Silicon Valley. The tables are full for breakfast at Buck’s in Woodside and The Creamery in San Francisco, with venture capitalists quizzing young masters of the digital universe in search of the next Facebook or Instagram.

The United States remains the overwhelming destination of choice for founding a company.

Across the Bay Area, free lunch is served, preferably organic and local. But many talented individuals no longer find the United States an attractive place.

While everyone remains busy counting the many billions in future IPO earnings or big buyouts by Google and Microsoft, few have noticed that the immigrant entrepreneurs who have increasingly driven technology sector growth in Silicon Valley are leaving for greener pastures.

Google, Instagram, Tesla, Yammer, Sun Microsystems, and PayPal all count immigrants among their key founders. So signs that the tide of immigrant founders flowing into the U.S. technology sector has reversed must be taken seriously by anyone who cares about maintaining the country’s global leadership in this economically critical area.

Legal Red Tape

AnnaLee Saxenian, dean of the School of Information at University of California, Berkeley, documented that in 1998, Chinese and Indian computer scientists and engineers were running one-quarter of the region’s high-tech firms. In that year alone, these firms accounted for nearly $17 billion in sales and more than 58,000 jobs.

In 2006 and 2007, I worked with Saxenian to update this research. We surveyed 2,052 tech companies founded between 1995 and 2005. The proportion of immigrant-founded companies in Silicon Valley had increased to 52.4 percent. Nationwide, the proportion was 25.3 percent, and these companies generated sales of $52 billion and employed 450,000.

That research received significant media coverage. Not surprisingly, we began to receive emails from young immigrant entrepreneurs. Rather than telling us how great it was to launch a business in Silicon Valley, or the United States in general, a significant portion of those missives contained tales of visa hell and immigration limbo.

From their viewpoint, the free-flowing ideation and the fast company formation of Silicon Valley did not match the legal red tape required for people not born in America to start and run a business in this country.

Significant Decline

During the spring and summer of 2012, our research team conducted a follow-up survey of 2,042 tech companies with at least $1 million in revenues, the latest and most comprehensive survey to date on the topic. As in previous surveys, we included a significant cohort of companies from Silicon Valley and the Bay Area.

Our research team found significant decline in the percentage of technology companies headed by immigrants in Silicon Valley and signs of the beginning of a drop in other parts of the country.

The drop, reversing more than two decades of increases, is troubling. More troubling still, the drop occurred precisely when the country should have experienced rapid increase in immigrant entrepreneurship.

During the late 1990s and the early 2000s, the U.S. government dramatically raised the number of immigrant tech workers allowed to enter this country with H-1B visas from roughly 65,000 to 195,000, in response to the Y2K crisis and a boom in the technology industry.

Our research team found significant decline in the percentage of technology companies headed by immigrants in Silicon Valley.

These visas are the most common pathway to permanent residency in America for skilled immigrants. Silicon Valley remains the premiere destination for skilled workers in the United States.

Outside of Wall Street, engineers and technologists in the Valley earn the highest salaries of almost any profession. There should be a large upswing in immigrant entrepreneurship in Silicon Valley, yet the very opposite appears to be occurring.