Wednesday, September 30, 2009

Startup Visa : The Sausage Is Half Stuffed

In my first, very personal post about what's now become the Startup Visa movement, I referred to the sausageworks nature of modern USAmerican Immigration policy. Brad Feld has come out with a straw-man policy, and asked for ways the system can be "gamed". Check the comments for my took-me-10-seconds way to game it.

More than that, though, I think the simplistic nature of the argument is ignoring the types of detailed policy issues that come out whenever you attempt to meddle in immigration policy. Let me try to come up with a few that came to my mind right off the bat.

So let's say your founders aren't 23-year-old Ramen-eating YCombinator founders. Let's say they've got a family of any kind. How do you deal with the family members?
  • First of all, how do you even define family member? Child? Adopted child? Step-child without adoption? Spouse? Parent? Brother/Sister? There are clauses in immigration law in the US to handle all those types of situations. [1]
  • Can they move to the US? While you might at first guess "of course," this isn't always guaranteed.
  • Can the spouse work? What about the children [2]? Do they have any restrictions on what types of employment they can take?
  • What about benefits for the family? Can the children go to school? Are they eligible for school lunches and after-school programs?
  • What about someone who wants to get married after they move here? Can they bring their fiance in from their original country?

Families are messy, and you can't just wave your hands and say "well, just do whatever it is you do for Class X," because all visas have a different way of dealing with family members.

Exit and Employment
Okay, so you've managed to get a startup going, and it's been successful, and now it looks like some big, rich company is going to buy it. Great! What happens to the founder?

At that point, the founder will, no doubt, have a big set of golden handcuffs keeping him or her with the purchasing company. That will require that the founder convert from being a founder to an employee. What does that do to the immigration status under a Startup Visa? Does it auto-convert? Under what terms? After the acquisition can the employee then leave to another firm? If not, can they go back to VCs and found another company, or has their Startup Visa status altered irrevocably?

Because if it auto converts, here's a very easy loophole in the system:

  1. Borrow $500k
  2. Give it to a trusted source
  3. Trusted source #1 invests the $500k in your firm, and takes 100% ownership. Firm now has $500k.
  4. You get your visa and move to the states
  5. Trusted source #1 sells the firm for $1 to a shell company run by Trusted source #2 (who now has the $500k)
  6. Trusted source #2 gives the $500k back to the founder as a sign-on bonus, who now has a work permit and the original $500k.
  7. Founder now takes work permit and moves somewhere else (possibly by selling the shell corporation to the ultimate employer).
Sure, there would be transaction costs along the way, but it's another way to game the system. And I'm pretty sure that you can't come up with ways to stop this gaming of the system without stopping the type of constant acquisition flow that happens in the real world.

If you don't give the founders conversion rights to an employee, their startups are effectively defunct before they get started, because they're essentially acquisition-proof. If you do, the system can be gamed. [3]

Long-Term Conversion
So let's say that you've got your two-year renewable visa. What does that eventually translate into? Because at some point you're going to want to actually settle down, and you might not have had a successful exit yet. Do you have to keep being a founder of a company until you hit the jackpot? You can never join an existing startup?

You're going to need some means of long-term visa normalization. Does the visa translate directly to a Green Card? Would be difficult given the number of years it takes to live in the US before you can apply for a Green Card under other statuses. What about converting to an H1-B? Oh, wait, that's full of issues at the best of times, and now, you have to factor in the annual lottery (how would an H1-B conversion affect the numbers in the lottery?).

So you're going to have to come up with some means of normalizing the long-term immigration status of the founder, and his family, and I don't think there's an existing mechanism for that that works for this type of visa.

"My Turn For Reform."
So you've got a bill that's sensible, and covers all the various bits and pieces and makes sense from a legislative perspective. Here's the problem: there are people who have vested interests in immigration reform that have been waiting for longer than you have, and they're not going to be happy if you skip to the head of the immigration reform queue.

For example, let's consider gays and lesbians, who have UAFA to correct the circumstances that led to my leaving the USA, which has been pending in the house since 2000. That's a long time. And as you can tell, I don't like some upstarts coming in and trying to jump to the head of the queue.

Yep, I'm bitter, and biased, and ranty. I'm also the exact type of person likely to go ballistic and get my representative to try to attach UAFA to your bill, which will then tank it [4]. And if you don't think there are at least 5 other aggrieved groups in America who will do the same, you're wrong.

Because immigration policy affects people so intimately, it really REALLY touches people's buttons, and they will fight tooth and nail for their own pet reform, at the expense of anything and everything else, which is one reason why this is such a morass.

Again, I have vested interests here: I'm bitter, and I want London to succeed as an independent tech hub outside of the US. But I think if you read this far, you should be convinced that a proposal for a visa that fits into a single paragraph isn't sufficiently worked through to be practical.

I repeat myself from several comments on Other People's Blogs: getting a Startup Visa is going to require a lot of long, hard policy debates. Why not spend that time working on more meaningful immigration reform that solves the underlying problem, rather than just a symptom? And why not push for the UAFA while you're at it?

[1]: Note that for the sake of simplicity I'm just going to assume that the US continues to have its "no gays desired" immigration policy and not even go into that minefield.
[2]: If you've got teenage children, they might want to have a summer job so they can fit in. Heck, they might even want to have an after-school job.
[3]: I don't want people to game the system. I merely want to point out that if I see it, others in lawmaking and the immigration lobby will as well.
[4]: Because if there's something that kills bills instantly, it's not being suitably discriminatory to teh gheys. Heck, just add something discriminatory to the Startup Visa bill and it'll probably get through first try!
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