Indian startups in Silicon Valley

Neesha Bapat is Lead Researcher for the ”America’s New Immigrant Entrepreneurs – Then and Now” project at the Arthur & Toni Rembe Rock Center for Corporate Governance, Stanford University.

If you visited Silicon Valley in the ‘50s and ‘60s the only Indians you would meet were a few low-level engineers who came to the U.S. to study and ended up staying. Indians were stereotyped as beggars and snake charmers, and finding them in leadership positions in the technology industry was unimaginable.

Then in the ‘70s and ‘80s, waves of IIT graduates migrated to the Valley because they felt stifled by India’s socialist regime (IIT’s are India’s top engineering colleges). One by one they mastered the Valley’s unwritten rules of engagement and shattered its glass ceiling. Engineers such as Vinod Dham started creating breakthrough technologies such as the Pentium chip, and entrepreneurs such as Kanwal Rekhi and Vinod Khosla co-founded companies like Excelan and Sun Microsystems. They also started helping each other and formed their own entrepreneurial networks.

In 1999, UC-Berkeley School of Information dean AnnaLee Saxenian discovered that Indian-born entrepreneurs had founded 7% of all Silicon Valley startups between 1980 and 1998. By forming their own networks and mentoring each other, they had changed the perception of Indian technologists. They showed America that they could indeed be CEOs.

Nearly eight years after Saxenian published her findings, Professor Vivek Wadhwa partnered with her and Professor F. Daniel Siciliano of Stanford Law School to update and expand the research. The results were astonishing. Twenty five percent of the nation’s startups and 52% of those in Silicon Valley were founded by immigrants. Indian immigrants were the leading company founding group. They founded 13.4% of Silicon Valley’s startups and 6.5% of those nationwide. This was particularly surprising, because Indian immigrants comprised much less than 1% of U.S. population at the time.

I worked with Professor Wadhwa at Stanford University to once again update this research. Kauffman Foundation just published our report titled Then and Now: America’s New Immigrant Entrepreneurs. We learned that because of flaws in the U.S. immigration system, immigrant entrepreneurship has dropped. Skilled immigrants are trapped in limbo and they cannot get the visas necessary to start companies. As a result, they are becoming more and more frustrated and returning to their home countries to start companies and bring innovation there instead of the U.S.

The decline in the proportion of immigrant founded startups reflects this trend. Nationwide, the proportion has dropped from 25.3% to 24.3%, and the decline is even greater in Silicon Valley—from 52.4% to 43.9%. This is very bad news for America—the country needs startups now more than ever to revive its economy.