These Highly Skilled Immigrants Succeed in Startup Business

US policy makers have long debated the role of immigration in the success of startups, but a working paper released by the United Nations and reported initially by Quartz, indicate the success of highly skilled immigrant workers in getting funding, winning patents and going public. 

Another group of researchers, from Nanyang Technological University in Singapore and University of Illinois at Urbana-Champaign, found that startups with a higher rate of winning the H-1B lottery were more likely to get venture capital or private equity investment within one year, three years, and five years of the lottery. Not only that, startups with higher win rates in the lottery are also more likely to get to a successful exit.

Getting acquired for at least $25 million or having shares sold in public markets — such as through an IPO — can and do happen. 

Startups that win the H-1B lottery get more patents and were referenced in more patent citations. It doesn’t hurt that these high-skilled immigrant workers bring innovation mindset with them.

That’s well and good, but then again, the US government issues work permits to at most 85,000 high-skilled immigrant workers every year via H-1B visas. Fortunately, US Customs and Immigration Services randomly grants visas through a lottery.

Startups with more H-1B workers also scored more patents, and were referenced more often in patent citations. The sample size of 1,866 for-profit startups had completed a round of external financing and applied for at least one H-1B visa in 2008, 2009, 2014, or 2015—the years when an H-1B lottery took place. The rate of applications winning the lottery and subsequent outcomes of the businesses. 

The study looked at all companies that went through the lotteries, not just startups. The new research findings suggest that H-1B workers have larger effects on startups than companies in general. 

These cohorts of random winners and losers have provided the researchers a straightforward way to examine how winning a visa in the H-1B lottery affects a startup’s success irrespective of its business characteristics or the quality of its potential hires. 

Researchers’ sample pool included 1,866 for-profit startups that had undergone at least one round of external financing. From the UN study, Quartz summarized the researchers’ approach to ensuring other actors aren’t necessarily responsible for higher rates of success or patents.

Any startup that wants to bring H-1B workers aboard, however, must face a rising rate of application rejections by U.S. Citizenship and Immigration Services (USCIS). While the research may be true, the challenge is how to even bring someone here when it’s harder than ever.

“In the first three quarters of FY 2019, USCIS adjudicators denied 24 percent of H-1B petitions for ‘initial’ employment and 12 percent of H-1B petitions for ‘continuing’ employment,” read a recent report (PDF) by the National Foundation for American Policy (NFAP). 

“The 12 percent denial rate for continuing employment is also historically high—four times higher than the denial rate of only 3 percent for H-1B petitions for continuing employment as recently as FY 2015.” 

Denial rates have also spiked at contractor and services firms that provide professional and IT services to other U.S. companies, including Accenture and Capgemini.