U.S. Immigration Policy Is Killing Entrepreneurship. Here’s What to Do About It

Republished from Forbes. Co-written with Matt Marx.

When we teach our introductory entrepreneurship class at MIT, we take it for granted that each of our 75 students will be able to start an American company upon graduating. But many of them lack one thing they need to be able to do so—permission from the United States government to continue working in our country.

In this academic year, three in 10 MIT students, including four in 10 graduate students, are not U.S. citizens or permanent residents. So for them our entrepreneurship class is likely to remain just an academic exercise. Their student visas expire when they graduate, leaving them with two options, to leave the country or find an existing company to sponsor them for a chance at an H-1B visa.

Either way, they can’t start a company in the United States. Their only hope is to secure a visa extension for “optional practical training,” after which they must apply for an H-1B visa for their startup once it grows large enough to be recognized as a legitimate enterprise—among other things, one that employs 25 or more employees. But even if they follow this path, they are not allowed to become a majority shareholder in their own startup.

Much discussion about immigration views it as a zero-sum game, where a set number of jobs at existing companies will be awarded either to Americans or to foreigners. Indeed, the logic underlying the H-1B process is that a visa should be granted only when a qualified American cannot be secured for a position. The present view of immigration policy, where the resulting labor supply is applied only toward jobs at existing companies, misses the essential contribution that would-be immigrant entrepreneurs sitting in our classroom can provide, the creation of new American companies, and with them new American jobs.

Innovation-driven entrepreneurs are the engine of a vibrant economy. Their high levels of education and their pursuit of global markets and rapid expansion create jobs and economic prosperity. And many of them, such as these MIT students, were not born in the United States. There is a global competition to recruit this talent, and countries such as Canada, Singapore, and Australia have introduced policies that are far more welcoming than ours. Although strides have been made in retaining immigrant science, technology, engineering, and mathematics students, these measures are largely designed to let immigrants to fill jobs in existing companies. Would-be immigrant entrepreneurs still face major obstacles and uncertainty.

However, a window of opportunity around immigration may be opening. Alejandro Mayorkas, director of the United States Citizenship and Immigration Services, recently addressed a group of MIT students and acknowledged the benefits of keeping talented foreign-born entrepreneurs in our country. He is working to streamline USCIS procedures to aid entrepreneurs as much as possible under existing laws and has just launched a website, www.uscis.gov/portal/site/uscis/eir, to help entrepreneurs understand their options. Meanwhile President Obama and a number of congressional Democrats and Republicans alike have publicly expressed a desire to help foreign-born entrepreneurs stay in the United States.

Certainly we don’t pretend to have all the answers, and we are mindful of moral (and political) hazard. But we see three areas that the U.S. government should revisit in order to address the needs of foreign-born entrepreneurs’ desire to start American companies and create American jobs.

First, immigration policy needs to focus not just on skilled immigrants filling positions in existing companies, but on immigrants’ potential to create new companies, leading to the creation of new jobs. Perhaps a new EB-1 (priority worker) category could be created for entrepreneurs, similar to the existing category for scientists. The United Kingdom has designed a new entrepreneur’s visa for just such a purpose.

Second, we need to appreciate the talent of these entrepreneurs rather than making them feel like aliens. We have heard more than one outstanding foreign-born student reveal feelings of being treated like a suspect at a crime scene rather than a highly valuable asset. Other countries are increasingly becoming more welcoming to them, so our customer service policy has got to become more sensitive.

Third, one of the great advantages of startups is that they typically move fast and run lean and mean. They eschew bureaucracy in favor of action and experimentation, which is what makes them so great. We are in a competitive market and must actively recruit this talent and be more responsive to its needs.

We hope that our talented, foreign-born students at MIT and other higher learning institutes aren’t shown the door at the conclusion of their American education. Let’s instead use immigration as a tool to promote innovation-driven entrepreneurship and the gains in jobs and economic prosperity that result.

Or to put it another way, what if Steve Wozniak had been born not in San Jose but in Saskatchewan?