Economic Outlook - May 2007

Immigrant entrepreneurs need a warmer welcome

North Carolina does a poor job courting and keeping foreign-born high-tech entrepreneurs, according to a study by Duke University's Pratt School of Engineering and the University of California's School of Information. Immigrants were key founders - CEO, president or chief technology officer - in 13.9% of North Carolina engineering and technology companies started 1995-2005, compared with a study average of 25%. Nationwide, immigrant-founded companies produced $52 billion of sales and employed 450,000 in 2005. Vivek Wadhwa, executive in residence at Pratt, led the study. Born in India, he stepped down in 2003 as CEO of Relativity Technologies, a Raleigh software developer he founded.

BNC: Immigrants participate in startups at a higher percentage than they represent in the general population.

Wadhwa: It's relative. When you compare North Carolina to other states and map the growth of entrepreneurship and tech companies to the foreign population, you'll see a correlation. The fact that Georgia is so far ahead of North Carolina is a big surprise.

Why is that?

Georgia is making a concerted effort to be immigrant-friendly and provide the structure for tech companies. They aren't taking it for granted. I spoke to a bunch of people there, and they are well aware of Research Triangle Park's position as a tech center. But they have been making a conscious effort to succeed, and we haven't.

What's the problem here?

I was with Seer Technologies when it moved here from New York in 1991. We looked across the country, but RTP made sense because of everything that was already here. I was the chief technology officer of a $100 million company. Then in 1997, when I started my own company, I started calling local venture capitalists, but none would take my phone calls. I had to go through my Silicon Valley contacts and network back.

Why the cool reception?

The local VCs told me, "You people don't make good CEOs. You make good engineers." I was stunned. That was the mindset here. If you speak to Indians in Silicon Valley, that was the mindset there 25 to 30 years ago. My people had to prove that they're more than just engineers, that they can build and run companies. We find it very hard to get our phone calls returned even today. There are about half a dozen venture-capital firms in the state, but you might find only one or two examples of those firms funding a company with a foreign-born owner. That is an indication of the problems and issues. We don't make it easy for those who want to succeed.

North Carolina's pool of immigrants is growing.

Unskilled immigrants from Latin America have an easier time. If we need unskilled laborers, we bring them in. But there is no focus on skilled immigrants or on immigrants as entrepreneurs. This is not a report that I wanted to publish, because North Carolina was so low.

What does that mean when our state competes against others?

If we're going to compete, we need to import the right talent from outside the state. These immigrants are highly educated, they take risks, and they succeed in building businesses. We're churning out good scientists and engineers in our universities across the state, but they're not staying. Let's get as many as we can and then keep them here.

The percentage of immigrant-started companies in RTP is 18.7% - higher than the rest of the state.

But RTP is still below the national average. It's not immigrant-friendly, and I say that from my own experience. The only reason I stayed is that I love the area. But no one made it easy for me.

Why were a quarter of the immigrant-started engineering and tech companies in RTP founded by natives of India?

Mostly Indians come here because of the universities, and then they stay here and network. Entrepreneurs help others with the same background. But they don't have critical mass here yet. They're bootstrapping their way through and starting companies even though they aren't getting venture capital.

Is there anything that the state can do to encourage more immigrant startups?

Perhaps a pool of funding or a way to facilitate networking. They can make it easier for students to stay here by helping them get visas, scholarships or by hooking them up with companies. They can lobby for legislation that is skilled-immigrant-friendly. The caliber of foreign students is excellent. If they stay, they're going to be productive for 30 or 40 years after they get here.

If the state helps out, how can it ensure a return on its investment?

I wouldn't give anything for free to anyone. If there was a pool of money to fund new and promising businesses, this should be strictly like a venture-capital investment with tough terms and the potential for high returns.

How could legislation address the issue?

We need to start by becoming aware of the issue, and our study is a first step. Then we need to look for solutions. I wish I had the answers, but I'm just a tech guy taking a sabbatical in academia.