Why immigrants start successful companies

In the venture capital world (of which I am not a part, but I enjoy peeking into) there are tools used to classify, categorize, and compare potential startup investment opportunities. Some of these are public-facing, others are internal processes developed in-house on Sand Hill Road (the area of Silicon Valley famous for headquartering VC companies).

Many factors are used to sort out potential opportunities…looking at how profitable a startup is, how lean it runs, if the CEO knows how to code, if the founders have good track records, etc. But one of the most common factors is immigrant founders.

At first glance you might think that’s just more PC nonsense.

("Ah! A company founded by a proto-pescatarian Pacific Islander nonbinary skateboarding activist! We must invest!")

But it’s not.

VC companies prefer to back immigrant-founded startups because they are more successful.

End of story. The data is so wildly strong on this that it’s not even up for debate.

43% of all tech startups in the US were founded by immigrants…and of all the unicorns in the US (startups valued over $1B) a solid 55% of them were started by immigrants.

And it’s not just startups, or new companies…of the companies in the Fortune 500, a full 45% were started by either immigrants or their kids.

As far as small business creation: every year from 1996 to 2016, there were twice as many small businesses started by immigrants than from native-born Americans.

Immigrants from a gamut of countries ranging from Australia, Russia, Switzerland, Ukraine, Germany, Cambodia, and Vietnam all have significantly higher household incomes than native-born Americans - with immigrants from India taking the cake with an average household income of $135,705.

This isn’t random correlation, to be sure. There is significant causation, and I think most notably it’s because there's a significant hurdle to immigration. It’s a pre-filter. You're going to get the highest-performing software developers, accountants, scientists, entertainers, and even tradesmen coming to make serious moolah.

And frankly, I think a lot of it is simply grit.

It's often been said, and I believe it, that being born in the US is like winning the lottery. You can live your whole life, if so desired, barely lifting a finger.

I know people my age who still haven't ever had a real job, and they somehow still enjoy the luxuries of life like Netflix, advanced education, new cars, hoppy beers and organic seltzer waters.

If one could have all this at one's fingertips, why would you really bother with the risk of starting something new?

One could bemoan the state of the American entrepreneurial spirit, and there might be some truth in that.

But as long as we have people building stuff, I think we'll be fine.

---------------------

I’ve been writing The Iconoclast for exactly six months now — and I’d just like to say it’s not easy to write an original newsletter each Friday. I don’t have that many good ideas.

But 25 issues and around 13,000 words in (that’s like 1/4 of a book!) I’ve gotten some good feedback from readers and I’ve also learned what sort of topics folks are interested in.

I get 3-4 thoughtful responses each week, and I’m going to double down on the topics that stir the most emotions. For some reason, hearing about the corrupt nonprofit industry is more interesting than hearing about rare Magic: The Gathering cards.

So I’ll have to put a lid on the loser nerd stuff, and stick with tales of corruption.