How more states and cities can retain immigrant entrepreneurs

By Connor O’Brien

Key Takeaways

• States, cities, and universities can form and fund Global Entrepreneur-in-Residence (Global EIR) programs to retain immigrant founders building companies locally.
• Global EIR programs can provide cap-exempt H-1B visas to promising founders who might otherwise not be able to remain in the United States. 
• At scale, Global EIR programs can serve as anchors of new tech clusters.

Introduction

States and localities have few policy levers to pull if they want to attract and retain immigrant founders. One of the most promising—Global Entrepreneur-in-Residence—remains underused and underpublicized, but state lawmakers have finally started making use of it. 

A Global EIR program takes advantage of universities’ cap-exempt H-1B status to provide visas to entrepreneurs who are building promising companies nearby. In the most recent state budget cycle, New York approved $4 million in state support for up to eight Global EIR programs throughout the state, which could provide a much-needed infusion of entrepreneurship to a state suffering from a steep decline in economic dynamism. Washington, too, appropriated funding for a state pilot program. And lawmakers in New Jersey are considering the appropriation of $500,000 for a new AI-focused Global EIR program at the state’s universities. These programs would enable more entrepreneurial graduates to remain local, rather than be forced by our inadequate immigration system to leave the country.

The recent enthusiasm in New York, Washington, and New Jersey is in addition to a growing number of states and cities using Global EIR programs to build clusters of high-potential entrepreneurs, viewing immigration policy as a key part of their economic development toolkits. In this report, we briefly describe how state and local governments, as well as universities themselves, can take advantage of this model to foster entrepreneurship and innovation in their own backyards. 

How states and cities can use the Global EIR model to build tech hubs close to home. 

The problem

Foreign-born startup founders have few options for entering and remaining in the United States. 

The United States, unlike many developed peer countries, does not have a stand-alone startup visa. 

At the same time, the main temporary visas used by skilled workers to enter the United States either prohibit entrepreneurship or make it difficult in practice. While research finds that immigrants overall are far more entrepreneurial than natives when given the opportunity, existing visa programs make founding a startup challenging. 

Entrepreneurs can technically use the H-1B visa, though this is often difficult and rare in practice. Establishing the required employer-employee relationship for H-1B sponsorship often requires founders to give up majority control to a co-founder. The Department of Homeland Security is nearing finalization of a rule that would make this easier, clarifying that certain entrepreneurs—even those with controlling interests in their company—can be sponsored by their firm for a visa in the annual H-1B lottery. 

The complexity of H-1Bs for founders aside, there is an added problem: the H-1B program is simply too small to meet demand. Each year, private sector companies across the United States compete for a limited pool of 85,000 H-1B visas with which to sponsor skilled foreign-born workers in specialty occupations. Demand for H-1B visas has grown dramatically since the cap was last updated in 2006—USCIS received 470,000 applications last year—meaning the odds of any individual winning the random lottery by which they’re allocated have been in steady decline. 

Crucially, founders whose firms attempt to sponsor them for H-1Bs are subject to the annual visa cap. This level of uncertainty can make it next to impossible for founders to raise money and likely deters would-be founders altogether. 

However, through a Global EIR program, local universities, with the help of state governments, can help solve this problem for entrepreneurs and develop their local economies at the same time. 

The solution

In 2000, Congress exempted universities and non-profits from the H-1B cap through the American Competitiveness for the 21st Century Act. Universities—and certain non-profits housed within universities—can use this authority to sponsor immigrant entrepreneurs in two ways. 

The first is what the Global EIR National Peer Network calls the “employed by” model. With this program design, universities employ local entrepreneurs for part-time work, typically mentoring business students or teaching a course. The university files a cap-exempt H-1B application for the part-time job. Once approved, the startup also files a concurrent H-1B application for the founder, who is then exempt from the 85,000 visa cap due to his or her university employment. By day, the entrepreneur builds his or her business in the community, creating jobs and value within the local economy. In the part-time role, the founder brings his or her relevant expertise to help students. 

The second, “employed at” model allows startups to directly sponsor founders who are both physically located at a university and whose activities are directly aligned with the mission of the university. In this model, the founder’s firm can directly apply for a cap-exempt H-1B without additional university sponsorship if it submits documentation that can “demonstrate a logical connection or nexus between their work and the university’s essential functions.” This second model requires more specialized legal services on behalf of the founder but typically does not require direct university funding. 

State and local governments across the country can help encourage this sort of sponsorship by providing dedicated funding to Global EIR programs. Individually, Global EIR programs can scale to ultimately sponsor dozens of local founders each year who might otherwise have to leave the state or country. In contrast to many other forms of local economic development spending, Global EIR directly attracts and retains top talent actively building businesses in targeted communities. 

In a mockup of a Global EIR program, the Global EIR Peer Network estimates one-time legal fees at about $10,000 per founder, ongoing annual costs of about $12,000 per founder, and a full-time program manager with salary plus benefits summing to about $80,000. Extrapolating these estimates, a small program sponsoring two dozen entrepreneurs can be built with annual operating costs somewhere between $500,000 and $700,000. Compare this with an average public cost per job of more than $100,000 from typical firm-specific development incentives. 

At scale, and with vision and a degree of entrepreneurship from local leaders themselves, Global EIR programs can serve as integral parts of tech clusters in states and cities across the country. 

More states are funding Global Entrepreneur-in-Residence programs. 

With greater clarity from USCIS on the use of H-1Bs for entrepreneurs, a growing number of states, recognizing the power of a GEIR-like model for building new tech hub ecosystems, are considering funding such programs locally. 

With New York becoming the latest last month, five states have now approved funding for state GEIR programs. Earlier this year, Washington also approved $300,000 to pilot an entrepreneur-in-residence program at the University of Washington. The program will sponsor graduate and post-graduate students from UW. 

New Jersey Governor Phil Murphy also proposed a new, AI-focused GEIR program for his state in his most recent budget request. Governor Murphy asked legislators for $500,000 to pilot an AI GEIR program “​​to encourage promising international students to employ their talents in New Jersey after graduation.”

In 2014, Massachusetts appropriated $3 million for a Global EIR program in the Boston area under the UMass Boston’s Venture Development Center. Today, dozens of VDC-backed GEIR participants have created more than 1,600 jobs and raised more than $1 billion in investment–an incredible return on investment for economic development spending. 

Over the past two budget years, Michigan awarded Global Detroit two $1 million grants for Global EIR efforts across multiple college campuses in the state, including the College for Creative Studies, Grand Valley State, Lawrence Tech, Michigan Tech, and Wayne State University. This is part of a larger Michigan Global Talent Initiative which has to date been appropriated $10 million.

Last year, the State of California dedicated $2 million to the establishment of a Global EIR program run by the University of California system. 

Finally, in Utah, Governor Spencer Cox proposed a Global Talent Accelerator Program which, among other activities, would support part-time opportunities for international graduates pursuing entrepreneurship. The state legislature, however, failed to appropriate the proposed $250,000 in state funding. 

Cities and universities can act even without state funding or permission. 

While only a handful of states have funded or are considering funding new Global EIR programs, the good news is cities and universities can start and fund these programs themselves. State funding can bring additional visibility and centralized coordination, but communities do not need permission to take full advantage of this economic development tool. 

Organizations in several cities now exist independently of state-level programs. One example is Global Cleveland, an organization working on an array of immigration initiatives in the city, including its Global EIR program. One entrepreneur, Aaron George, was able to stay in Cleveland after graduating from Case Western to found SupplyNow, an AI firm now operating across multiple states.

Note that the list of states and cities with GEIR programs is unlikely to be comprehensive for two reasons. First, Global EIR is not an official pathway; rather, it is the name of a non-profit network that popularized the concept of strategically utilizing universities’ cap-exempt H-1B status to retain local entrepreneurs. Cities and states can create such programs independently. Second, there is no data from the Department of Homeland Security on the number of entrepreneurs who are using this pathway to secure an H-1B visa. It is likely that some have successfully used this pathway independently.

Conclusion 

State and local leaders have few levers they can pull to allow more promising young entrepreneurs to stay in the United States and build their businesses. The Global Entrepreneur-in-Residence model is an imperfect tool; the U.S. still needs a startup visa. Nevertheless, Global EIR is a powerful, underutilized tool communities can use to retain top talent, anchor new hub initiatives across the country, and seed future economic growth at very little cost.