U.S. President Donald Trump’s plans to position $100,000 fees on H-1B visa applications will disproportionately harm America’s startup space, founders and enterprise capitalists told CNBC this week.
H-1B visas — which permit firms to temporarily hire foreign employees in expert occupations comparable to IT, healthcare and engineering — were already difficult to secure for U.S. startups, because of limited annual quotas.Â
Over the past 12 months, Desmond Lim, CEO and co-founder of HR, payroll and hiring tech platform Workstream, said all of his startup’s H1-B applications had been rejected — something he called “very disappointing” as he tries to secure more top engineering talent.
Last 12 months, nevertheless, Workstream did secure a few H-1B hires that Lim told CNBC were “life changing, each for the staff and for the corporate.”
“As an early-stage startup, every hire is precious, and we only select the most effective to undergo the H-1B program, since it not only costs money, but additionally takes time,” he added.Â
Now, securing this talent is ready to develop into even harder. The White House plans to require firms to pay a $100,000 fee when submitting petitions for brand new H-1B visas, though many details remain unclear.
Lim said the fee can be too high to justify for early-stage firms like his, complicating recruitment strategies.
Uncertainty and panicÂ
Lim’s not alone in his concern — startups across the country, together with employees on H1B visas, have been left worrying concerning the implications of the brand new fees.Â
Alma, a San Francisco-based legal tech startup that gives immigration advice to professionals and other startups, told CNBC it had seen a 100x spike in inquiries for the reason that White House’s declaration on Friday.Â
“Over the past couple of days, clients have been scared and anxious, because the scale of their firms suggests that they will not find a way to pay $100,000 and compete when it comes to salaries,” Alma founder and CEO Aizada Marat said.Â
Alma not only advises firms on hiring H-1B talent, but additionally hires candidates under this system itself.Â
“The essential problem becomes: is there enough local supply to fulfill demand if this international talent goes away?” Marat questioned. Startups often depend on finding “undiscovered” foreign talent to realize an edge over larger competitors, she added.
Marat said she had been advising firms to attend for more clarity on the H-1B visa changes before altering hiring strategies.Â
Startups hit hardestÂ
Enterprise capitalists and innovation experts agreed that startups can be hit hardest by H-1B visa fees.Â
A $100,000 fee “disproportionately hurts early-stage startups,” as they lack the resources of huge incumbents to soak up the fee and depend on global talent to scale, Alexandre Lazarow, managing partner of Fluent Ventures, told CNBC in an email.
He added that startups often struggle to rent the engineers and specialists they need locally, but decide to import talent through immigration, somewhat than constructing distant teams outside the country.
Meanwhile, Robert D. Atkinson, president of the Washington, D.C.-based Information Technology and Innovation Foundation, argued that just a number of talented employees from overseas can often be a deciding consider a startup’s success.Â
Foreign talent may also help startups establish stronger overseas networks and customer bases, he added.Â
Less enterprise capital?
Opponents of the H-1B visa program argue that it removes job opportunities for U.S. nationals. But an unintended consequence of the $100,000 fee may very well be a discount in entrepreneurship and enterprise capital funding more broadly. Â
A 2020 survey found that startups hiring employees through the H-1B visa process were related to a rise within the likelihood of obtaining external funding, going public or being acquired, and of constructing progressive breakthroughs.
Now, the brand new fee could “dampen PE and VC appetite for early-stage U.S. names that rely heavily on H-1B employees, lots of whom may now look abroad to secure their careers somewhat than risk further uncertainty within the U.S.,” Crossbridge Capital’s Chief Investment Officer Manish Singh told CNBC in an email Monday.Â
Singh added that changes to the visa program could as a substitute create a stronger case for investors to deploy capital into markets comparable to the U.K., Canada and Europe.Â
“U.S. startups may experience reduced funding momentum, while Europe could see a relative uplift in each talent inflows and investor attention,” he added.Â
Brain drain reversal?
Many markets on the European continent, including the U.K., have been reporting problems with “brain-drain” in recent times, referring to a phenomenon where expert and educated employees emigrate to hunt higher opportunities in countries comparable to the U.S.Â
This is usually related to the event of high-skilled industries and entrepreneurship within the receiving country.
Now, uncertainty around U.S. immigration, including the H1B development, may very well be an actual turning point for tech talent that has been on the fence about moving to the U.S.,” said Laura Willming, head of individuals and talent at Octopus Ventures, certainly one of Europe’s most lively enterprise capital investors.Â
“Talented individuals who once saw the U.S. as the apparent destination at the moment are looking seriously on the U.K. and Europe to construct their careers,” she added.
— CNBC’s Hugh Leask and Ernestine Siu contributed to this report
