Government policy inflames visa crisis

One data point that encapsulates the nation’s debate over skilled immigration is this: During the five-day application window for H-1B visas this April, 190,098 people petitioned for 85,000 spots.

The more than 2-to-1 imbalance shows how skilled workers who want to come to the U.S. continue to overwhelm the available visas, as they have during the first week of availability for the five previous years.

But here’s the more alarming news: Applications this year are down 16 percent. In the final year of the Barack Obama presidency, 236,000 applied against the same visa cap.

With the Donald Trump administration crackdown on immigration, including skilled workers, fewer people see the U.S. as the land of promise.

For the venture-capital industry, the news couldn’t be more concerning.

The industry relies on immigrants to start innovative companies and fill work slots at portfolio holdings, when Americans can’t be found. Anywhere from a fifth to a quarter of tech companies have at least one immigrant founder, according to various estimates.

Without these high-skilled immigrants, the supply side of the talent equation becomes more difficult.

“I think the general consensus is people like the diversity and what immigrants bring to the table,” said Namek Zu’bi, a managing partner at Silicon Badia, reflecting on recent conversations with his portfolio companies.

Namek Zu’bi, managing partner, Silicon Badia.

But startup CEOs find hiring from abroad more difficult, and with visa rejections, legal fees and requests for additional information up over the past several years, “it is making companies rethink their diversity strategy,” he said.

The impact on the industry could be profound: a cut in the number of quality companies available to investors and talented workers to join them.

Against this backdrop, most VCs appear to agree that present U.S. policy harms the nation’s competitiveness and the industry’s effectiveness.

While the impact may be greater on large public companies, since they have more positions to fill, immigration is viewed as essential to a thriving economy and present policy as failing to live up to the task.

“I don’t think our government process right now is adequate,” said Dixon Doll, a general partner at Impact Venture Capital.

Yet little appears ready to change. What’s more, while it is fashionable to blame the Trump administration for the immigration hurdles, the immigration gridlock has been in place for years.

For instance, the annual limit on H-1B visas hasn’t been lifted in 13 years and remains low relative to the size of the U.S. labor force. This comes as more than 260,000 IT jobs go unfilled.

In addition, despite years of debate, the nation still doesn’t have a startup visa for foreign founders, even as other western countries adopt welcoming policies.

Some of the blame for the skills gap in the U.S. workforce also goes to the U.S. education system, which simply does not graduate enough students with STEM ()science, tech, engineering and math) degrees to fill demand.

“There is an acute shortage of talent in this country,” said Manuel Henriquez, CEO of Hercules Capital. “We have been ignoring this problem for years.”

Many observers say, however, that the Trump administration has worsened the situation.

Under Trump, H-1B visas for skilled workers take longer to get, face extra requests for evidence,or supporting documentation, and cost more as applications more frequently go for decision before administrative law judges, Silicon Valley immigration lawyers and company founders say.

Under Trump, for instance, the denial rate for skilled worker H-1B visas more than doubled in November of last year, according to a San Francisco Chronicle review.

The administration also this year suspended premium processing for H-1Bs, which pays for accelerated handling.

The Trump administration as well torpedoed the closest thing the U.S. had to a startup visa: the International Entrepreneur Rule, a program the Obama Administration adopted in 2016.

It has been kept alive, though just barely, by legal challenges from the National Venture Capital Association. Only 10 people had applied as of April.

From a policy perspective, the nation’s doors can be opened to more skilled workers in a number of ways.

For one, the NVCA and numerous venture capitalists support raising the number of H-1B visas and reshaping the program to favor startups, instead of outsourcing and consulting firms.

Some change on this front already appears to be taking place. Top Indian companies have sharply cut back their visa applications in recent years.

One supporter is Henriquez, who suggests issuing an unlimited number of H-1Bs as long as a particular skillsets are needed in the U.S. That means doing away with present cap and lottery and tying the visa to achievement.

It also means shifting away from the narrative that H-1Bs threaten U.S. jobs and emphasizing how they are filling shortages to make the U.S. more competitive.

But the H-1B visa is a recruiting tool for established companies rather than a direct invitation to foreign founders to form new ones. The most logical path to encourage creation of new companies is a startup visa.

One recent attempt at this is the Startup Act, backed by Sens. Jerry Moran (R-Kansas) and Mark Warner (D-Virginia). The legislation so far has slim odds of passing.

Another useful approach would be a STEM visa for foreign students with advanced degrees from U.S. universities.

For one VC, a useful lesson may lie in today’s immigration struggle.

“The biggest shift you’re seeing is now, as an employer, you have to prove this is irreplaceable, high-skilled talent that you can’t find in the United States population,” said Manan Mehta, a founding partner at Unshackled Ventures.

Perhaps it will serve as a necessary evil, triggering more awareness of the need to change.

“There has been so much more conversation,” Mehta said. In the end, “We need to modernize our immigration policy.”