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Analysis & Opinion
04.06.10 A Ticket To Silicon Valley
Comment by Irina Aervitz

As the global economic recession progresses more countries are turning to innovation and technology in the hopes of boosting their global competitiveness and economic growth. In Russia, President Dmitry Medvedev is promoting the idea of a technology park just outside Moscow as “Russia’s Silicon Valley.” He recently hosted a group of venture capitalists from California to discuss the development of the venture capital sector in Russia, especially in the high-tech area. In the meantime, American venture capitalists are rallying around a new type of visa in order to entice foreign entrepreneurs to start businesses in the United States.

On February 26 U.S. Senators John Kerry and Richard Lugar introduced a new bill called the “StartUp Visa Act of 2010.” The new legislation, if approved in its current form, will allow a foreign-born entrepreneur to receive a two-year-long visa (an “EB-6”) if a qualified U.S. or U.S.-based investor or group of investors (with a minimum of $100,000 in capital per investor) put at least $250,000 into the entrepreneur’s startup venture in America. After two years the entrepreneur would qualify for permanent residency if he could demonstrate that his business had accrued $1 million in revenues or $1 million in additional investment and created five full-time jobs.

More than 160 American venture capitalists and entrepreneurs have endorsed the senators’ proposal. The “startup visa” initiative is, in fact, an inspirational story of a “grass-roots” movement empowered by modern social media like blogs, Twitter, Facebook and YouTube. The center of the movement was the Web site, discussing the minute details of the EB-6 program. Silicon Valley entrepreneurs and venture capitalists, many of whom are immigrants themselves, made several trips to Washington to promote the idea among lawmakers. They argued that the “startup visa” would attract the entrepreneurial spirit, skills, talent, and knowledge from all over the world to stimulate innovation, create jobs, and help the U.S. economy grow.

The representatives of five of the 20 U.S. venture capital funds that visited Moscow last month signed the EB-6 visa support letter. They include Accel Partners, Bessemer, Canaan Partners, Draper, Mohr Davidow Ventures, and Fisher & Jurvetson. Of course, this could just be a coincidence. After all, venture capitalists are scouting all over the globe in search of new opportunities, ideas, and projects. But it still demonstrates that the global competition for innovative ideas and the entrepreneurs to implement them is intensifying.

The “startup visa” was conceived to fill a gap in professional immigration, to allow entrepreneurs to immigrate to the United States, especially in high-tech and related fields. The current employment-based non-immigration visa, the “H1-B,” is continuously criticized due to its annual cap of 65,000 visas, the long queues of immigrants primarily from India and China, and because it links immigration to employment at an American company. The “startup visa,” on the other hand, encourages immigrants to start their own companies and to employ Americans. Although there are some overlaps between the five different categories of the employment-based immigration visas, there is no equivalent of the EB-6 startup visa in the U.S. immigration system.

According to a 2006 study commissioned by the National Venture Capital Association, 40 percent of publicly-traded venture-backed companies in the United States operating in high-tech manufacturing today were launched by immigrants. In 2006, the market capitalization of those companies exceeded $500 billion. The largest of these include Intel, Sanmina-SCI, Solectron, Sun Microsystems, Yahoo, Google, and eBay.

Regarding Russia’s contribution to the original Silicon Valley in California, the name of Google founder Sergey Brin is the most often mentioned – even though his parents immigrated to the United States when he was a boy. However, there are other examples: the Silicon Valley-based American Business Association of Russian-speaking professionals (AmBAR) consists of entrepreneurs, venture capitalists, engineers, lawyers and other professionals. Not surprisingly, AmBAR has been identified as one of the advocates of different forms of technology cooperation between the United States and Russia. The organization helped to organize the recent meeting of American venture capitalists with Medvedev and hosted Rusnano CEO Anatoly Chubais last year. Rusnano is indeed featured as the organization’s “platinum” sponsor.

The “Promised Land” and the Russian answer to the U.S. Silicon Valley – Skolkovo – is being set up just outside Moscow to attract private investors and channel state funds into technology companies in telecommunications, IT, biomedical and nuclear-based technologies. However, despite this enormous project and the financial prominence of government-backed players like Rusnano and Russian Technologies, Russia’s venture capital infrastructure is weak. And the sector has not yet bridged the huge gap between basic research and its successful commercialization; which, indeed, is what made the Silicon Valley successful.

One positive aspect is that Russia possesses human capital in science and engineering, as well as successful high-tech companies that demonstrate extraordinary entrepreneurial talents. For instance, the Russian Digital Sky Technologies (DST) recently bought stock in Facebook and Groupon. Another such company is Yandex, the Russian search engine champion which now controls roughly 64 percent of the search engine market share in Russia. It recently announced the launch of a global search engine,, and will compete with the leviathan Google in the global arena.

There could be a foundation for building a high-tech-oriented venture capital infrastructure in Russia, like the valley across the seas. But skepticism toward this project stems from the fact that the government is involved. Last year, president Medvedev made it clear that the government feels the need to closely monitor the entry of foreign investors into Russian search engines and social networks because of national security concerns. Following this alert, Sberbank acquired a priority share in Yandex’s parent company, Dutch-registered Yandex N.V., for the symbolic price of one euro. This does not grant Sberbank a seat on the company's board, but it does grant it veto powers over any sale of more than 25 percent of Yandex’ shares.

In the global competition for the “best and the brightest,” the “startup visa” movement in the United States is lobbying for government involvement to create a special visa focused on the entrepreneur. In recent years U.S. immigration laws have made it ironically difficult for immigrants to launch new companies. However if the “startup bill” passes, it will define another of many options available to a Russian innovator. These bright individuals will have to decide on whether to contract with the Russian government (a major consumer, player and investor in the high-tech industry in Russia), start their own companies in Russia, or pack up their ideas and plans, find an American investor, get on a plane, get a green card and start living the American dream.

Irina Aervitz is the head of International Research and Analysis and an adjunct professor at George Mason University and the University of Maryland.
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