Why Are Immigrant Founders In The US So Successful?

In recent years, the narrative of successful immigrant founders in the US has considerably evolved.
Ahead of the release of our mini-movie on Immigrant Founders in the US, we take a look at this issue gathering momentum in venture capital.
> Who are immigrant founders? What are the main obstacles they face? What makes them so successful?
Origin Story: #Startupvisa
This Twitter hashtag gained popularity when the vote on the so-called Startup Visa Act came to Congress in 2011.
The idea was to allow the founders of startups backed by qualified US investors to settle and work legally in the United States.
Several criteria had to be met both at the time of entry and within the following three years.
“Sponsored Alien Entrepreneurs” Welcome
Unsurprisingly, prominent US venture capitalists and figures of the startup world flocked to Twitter to defend the proposal.
They include many of those we mention in our online courses: Eric Ries (the Lean Startup guy), Semil Shah (Haystack), Brad Feld (Foundry), Rob Go (NextView), Jeff Bussgang (Flybridge), Dave McClure (500Startups) and many others.
In the end, the bill was not passed into law despite bipartisan support at Congress. It was the second time this happened, as the first Startup Act 2010 pushed forward by John Kerry had undergone the same fate.
As we will in this post, VCs are big backers of the Startup Visa Act because there is ample evidence immigrant entrepreneurs make very successful startup founders.
So why did it prove so challenging to amend immigration policies to let them come and stay in the US to create companies, as many other countries had done already?
It doesn’t seem likely that significant reforms will happen soon on this issue.
Not born in the USA
Chobani, An Immigrant Founder’s Success
People love stories. Immigrant founders making it big on American soil are among the favorite ones.
They keep the American Dream alive: no matter who you are or where you come from, you can become hugely successful if you work hard, conduct yourself honorably, and display both business acumen and uncommon grit.
Oh, and don’t forget to give back to the community when you become big.
The Chobani story ranks among the top ones showcasing immigrant founders. So much so, that the Harvard Business Review even made a case study out of it.
As a boy, Hamdi Ulukaya loved yogurt. But not just any yogurt. The thick Turkish kind his mother made on his family’s dairy farm.
After he moved to the US, he discovered a market opportunity he was destined to fill.
American yogurt was too sugary and watery to his taste, and he was willing to bet all his savings (and more) that Americans would love his home-made, non-fat, non-sweet variety.
So he bought a factory in upstate New York that Kraft was selling and started perfecting his recipe. It didn’t matter to Ulukaya that his lawyer, his friends, and even private equity investors were telling him he wouldn’t make it on his own – or even at all.
Confident in what he knew they didn’t – how great yogurt can make you addictive to it -, Ulukaya kept pushing Chobani forward.
And the rest is history: Chobani reported sales of $1.5 billion, which makes it the second yogurt manufacturer in the US.
How Influential Are Immigrant Founders In Corporate US?
Statistics seem to confirm what anecdotes such as this Turkish Cinderella story tell us.
A very comprehensive study published by the US National Venture Capital Association in 2006 analyzed data on public companies that were VC-backed – arguably the most innovative, and often fastest-growing companies in Corporate America.
These companies founded by immigrant entrepreneurs accounted for:
- 25% of all publicly traded VC-backed companies that had been started over the 1990-2005 period
- These included the likes of Intel, Sun Microsystems, eBay, Yahoo!, and Google
- Unsurprisingly, the percentage is even higher when one focuses on high-technology manufacturers (up to 40%)
- Jobs created in the United States alone were in the hundreds of thousands
A follow-up study focusing on 2006-2012 found that this percentage had risen to 33% over the period.
More recently, a phenomenal analysis by Internet-guru-turned-venture-capitalist Mary Meeker showed that 56% of the 25 most valuable companies in the US had a founder who was a first- or second-generation immigrant. They include all the GAFA and 7 out of the top 10 largest companies by market capitalization at the time.
And guess what, it’s the same for private tech companies like Uber, SpaceX, Palantir, WeWork (hum…), Stripe, and many more.
Meeker Magic More Meeker Magic
And it’s not only high tech companies: a 2017 study by the Center for American Entrepreneurship found that 43% of Fortune 500 companies have a 1st or 2nd generation immigrant as a founder.
The list includes companies like Estée Lauder, Ford, and Walt Disney.
Many sectors like wholesale & retail, finance & insurance, and energy have large proportions of immigrant founders (or their children).
In industrials, consumer goods, transportation, and business services, the proportion is equal or tips towards immigrant founders.
The list goes on and on. Wherever you look, statistics say the same thing: immigrant founders account for a large proportion of Corporate America’s wealth and job creation.
What Are Immigrant Founders’ Unfair Advantages?
At first thought, this is a strange question to ask.
Most people will tell you that immigrant founders arriving in a new country are, if anything, at a disadvantage compared to locals.
And they often are. They initially don’t know the business etiquette, lack networks, and sometimes have limited financial resources.
But here’s what they possess that locally-born people often don’t: they decided to leave the comfort of their homes and start anew in an unfamiliar place.
Sometimes, they didn’t even decide. They were forced out by conflicts or dire economic circumstances, or both.
But one thing they know is that they will make a better life for themselves and their families – and, ultimately, those around them. It’s the 21st Century American Dream.
This mixture of grit, not taking “no” for an answer, and a visceral belief that they will succeed in the US, sets these founders apart.
One striking example is Eric Yuan, the now-billionaire founder of Zoom, a web-based video conferencing software company, which went public earlier this year. Trying to immigrate from China, Yuan was denied the visa eight times before his application finally got accepted.
VC Firms Like Immigrant Founders
Given all that precedes, it’s no wonder venture capitalists want to invest in startups founded or co-founded by immigrant founders.
They have been doing so for decades, as the 2006 NVCA study shows. With much financial success.
Haystack Venture’s Semil Shah ran an analysis back in 2015 and found that ex-post, half of the teams he had invested in had a co-founder with 1st- or 2nd-generation status.
Other VC firms have gone one step further: they actively help immigrant founders to grow their startup successfully.
VC firm Unshackled Ventures even goes as far as having internal lawyers work on visa applications.
A founding partner for the firm, Manan Mehta, shares his experience investing in, and helping, 40+ startups in our mini-movie on immigrant founders in the US.
Another VC firm investing only in immigrant founders is the aptly named One Way Ventures, founded by Semyon Dukach out of Boston.
Conclusion
This post lays the groundwork for a much more ambitious endeavor, which is to document why immigrant founders succeed in the US, what obstacles they have to overcome, and how they do it.Â
Through our interviews with such founders and those who help them, we have gathered a set of best practices on how to build networks, whether prior higher education in the US is a plus, what visa strategies to put in place, and much more.Â
This is a continuous effort. It will not stop when our movie is out. So please share this post with anyone interested, and join us on social media to give us your testimony, or tag someone who wants to.
Last but not least, please note that our Ambassador Program helps certain categories of the Startup ecosystem, including immigrant Founders, to access our courses for free. Sign up now.