Why Silicon Valley Is Losing Foreign-Born Talent

As immigration laws make it harder for foreigners to stay and work in the U.S., Silicon Valley is losing some of its most promising talent -- and its unrivaled reputation as ground zero for tech innovation. Those who came here for education or to take a stab at fame and fortune are no longer waiting around for a local job and visa to start their careers. They're going home -- to India, China, Brazil, or other countries courting them. With the growth of global tech hubs and the capital available abroad, some immigrant entrepreneurs are wondering why they should bother to stay.

Kunal Bahl, who got his engineering and business degrees at the University of Pennsylvania, made money on campus by charging students to watch cricket games. Bahl was hired at Microsoft for what he calls a "super-exciting" role traveling the globe, selling their products in Asia and Latin America. Bahl’s steady climb was halted in 2007, after his professional H1B visa was not chosen in the immigration lottery system.

But Bahl didn’t pine to stay in the U.S. He declined Microsoft's offer to place him in another country and try again. After losing the lottery, Bahl was ready to place a new bet.

“Maybe the time is now getting to a point where it would be right to start a business in India,” Bahl said. “Earlier than that, there was just no meaningful internet penetration to start a technology business.”

Today, at age 29, Bahl is the CEO of Snapdeal, India's largest e-commerce company (much like eBay) and employs more than 1,000 people.

In the global market, two big shifts have made it possible for Bahl’s business to grow: First, people in Asia, Latin America and the Middle East are going online and buying things at breakneck speed, and what were considered “developing countries” are now called “emerging markets.” Secondly, it's a lot cheaper to build an internet company than say, a semiconductor plant.

“This is a wave, and this wave is not stopping,”Bahl said.

AMERICAN INVESTORS FOLLOW THE TALENT

American money is following the foreign talent. Leading venture capitalists are opening offices in Asia and Latin America in order to more easily scout start-ups, and funds that buy start-ups are promoting foreigners to be partners.

Silicon Valley investor Dave McClure is eager to invest. McClure is the captain of a global expedition he calls Geeks On A Plane: “Fifty crazy people from all over the globe, having fun, learning about technology and meeting new friends,” as he explains in his promotional video.

We've known for a long time that capital is global and money knows no borders. The difference now is that Americans like McClure are warming up to start-ups founded and based outside the U.S.

Christen O’Brien, who does market research on the Geeks’ upcoming tour sites, says that when she started in the tech industry in 2006, “venture capital firms wouldn’t invest in start-ups in New York. That was too far away.”

McClure, who just returned from India, where he took a gang of investors and technologists to visit Bahl's company Snapdeal and newer ones, estimates "at least 25 percent of our investment strategy is probably outside the U.S. and that's probably growing to 50 percent over the next two or three years."

That doesn't mean McClure is done with America. Silicon Valley is his home, and he wants this round of immigration reform to make it easier for foreign tech entrepreneurs to stay.

For years McClure and fellow investors have pushed for a new brand of visas, dubbed Start-up Visas, with the premise that it will help stop the so-called “Reverse Brain Drain.”

The visa, now part of the immigration reform debate in Congress, would allow foreign entrepreneurs who start businesses in the U.S. to stay, so long as they generate revenue, have American investors and employ others.

"And in fact, the crazy thing is after we tried to announce these ideas, other countries copied the idea and passed legislation before we did,” McClure said. “And we’re still sitting here with our thumbs up our asses, trying to get it done."

OTHER COUNTRIES LURE ENTREPRENEURS

Chile got it done, thanks to a Chilean citizen educated at Stanford Business School. During his master’s program, Nicolas Shea noticed that many of his fellow students couldn’t get visas to stay in the U.S. After Chile’s earthquake in 2010, Shea talked his government into courting America’s visa rejects.

Start-Up Chile, a tech incubator, gives entrepreneurs $40,000 to build their companies. Unlike American investors, the government does not take a share of the new companies in exchange for the cash. Unlike America's start-up visa proposal, the companies do not have to employ others.

"We're giving taxpayers money to people who don't vote here, and people who are not forced to hire local talent," said spokeswoman Maitetxu Larraechea. "We don't force them to do anything."

A webcam tour of the Santiago hub showed that the startup workplace is much like a bunker: two big rooms with 20-something-year-olds hunched over laptops, writing code for their various Internet start-ups.

Indian citizen Jeetu Melwani, who hopped on the webcam to share his story, said he worked in the U.S. for five years, and decided to come to Chilecon Valley -- yes, that's what they call it here -- because he got tired of being the foreign worker for someone else's company.

"Am I going to wait 10 more years in Corporate America to get a Green Card when I can go anyplace else in the world like Chile, where they want us to come and start business and give us money to do it?” Melwani said. “Hell yeah, I'm going to Chile."

The investor McClure said that Americans should not be cavalier about our lead in the technology race.

“There’s 6.7 billion people who don’t live in the U.S.,” McClure said. “A lot of those people are smart.”

McClure is taking his geeks to Southeast Asia next. Though he hasn't seen a tech hub that compares to home yet, McClure guesses that within 20 years, it's entirely possible that a Chilecon Valley will overtake Silicon Valley.

Click play to hear the story from The California Report on how immigration law is impacting Silicon Valley.

HOW OTHER COUNTRIES ARE VYING FOR FOREIGN TALENT

Since the global economic crisis, many countries have been courting foreign entrepreneurs. From the U.K. to Chile, American citizens are among the largest applicant pool. Take a look at who's in the game:

The Migration Policy Institute has written a lot about Start-Up Visa efforts around the globe.

MEET THE CHILE-CON VALLEY ENTREPRENEURS

Aljosha Novakovic calls himself “Yosh” because no matter where he lives, he says “no one can pronounce my name.” The Serbian-American is a U.S. citizen who grew up in San Jose, studied psychology at U.C. Santa Barbara, and headed to Chile to build Medko – a global health network of patients and doctors. Many of the foreign entrepreneurs being courted by countries like the UK and Chile are American citizens.

Carlos González de Villaumbrosia, a citizen of Spain, got his MBA at U.C. Berkeley and worked for a Silicon Valley start-up. Gonzalez says he went to Chile because “Latin America is blowing up like crazy,” and Santiago is a good place to expand his business. Gonzalez is building Floqq, a marketplace for online courses in Spanish.

Jeetu Melwani, an Indian citizen, is building keeZILLA, a site that uses algorithms to change how people shop online. Melwani says he lived in the US for five years before coming to Santiago, and could not find a way to start a business in the US while keeping his legal status. He’s nostalgic for Los Angeles, and recalls when a friend visited from back home, they rented a 350Z Nissan sports car and “ripped it all over town.”