Editor’s note: The guest post below was written by Reid Hoffman, CEO and Founder of LinkedIn. Reid has some strong opinions about how startups can help right the economy, and he offers some suggestions below. (You can also catch him tonight on Charlie Rose, or check out our interview we did with him at Davos). Reid is an investor in over 60 web ventures including Digg, Facebook, Flickr, Friendster, FunnyOrDie, Ning, Last.fm, Six Apart and Technorati.
While at Davos this year, the conversation spurred a lot of thought about how we can navigate through the economic crisis. Yesterday, I shared a few of these thoughts in a Washington Post op-ed to offer a Silicon Valley perspective to lawmakers.
I believe the real fix for the economy is massive entrepreneurship and innovation to create new jobs through new products and services. Here are a few of my proposals:
1. Small business loans. Apply a micro-lending model that has proved successful in developing countries, extending credit lines up to $50,000.
Why? Because models of investment besides just venture capital can stimulate the economy. Let’s not neglect entrepreneurs who create coffee shops, florists, taxi services or other small businesses that help the economy thrive at the local level. Sometimes, a coffee shop becomes Starbucks. These don’t require venture funding; they just need a small business loan to get started and grow. Micro-lending has proved viable around the world — let’s do more of it at home. If a service like Kiva.org (disclosure: I’m a board member) can succeed in 12 countries, it can succeed here too.
2. Abolish the limit on H-1B Visas. Remove the cap on H-1B visas and impose a 10 percent payroll tax beyond the benchmark salary for each visa. Then channel the proceeds from the payroll tax into US re-education programs.
This is a country founded on immigration. We should welcome the best and the brightest as our own. Abolish the H-1B cap, and give me an economic reason for preferring local. I’ll only do foreign if I need to. A 10 percent payroll tax for each H-1B visa can be reinvested in whatever it takes to get American talent up to the same level. This has been proposed previously, but a payroll tax ensures that H-1Bs are used for skilled labor, not cheap labor.
3. Match funds for venture capital and angel investors. Match up to $100 million in stimulus funds for qualifying venture and angel investments if they create jobs in the US. Let these investors keep their normal return plus 50 percent of the returns on the matching funds, while the other half goes back to the government to revitalize further investment.
While others feel differently, I disagree that VCs are grinching because of a lack of good opportunities. VC investment declined 30% in Q4, but I don’t believe this is due to 30% less innovation. In my experience as an investor, there are a fixed proportion of good ideas and bad ideas. It’s not a percentage that goes to zero. Investors are keeping their powder dry in order to see if valuations decrease and to save capital for their top investments, in case they need more down the road. Let’s create incentives to invest now and to invest more widely. Even if there’s a higher failure rate, there’s also an increased likelihood of funding eventual winners. This is the kind of stimulus that creates not only more jobs, but more start-ups with a chance to succeed and contribute to a sustainable economy.
These are just a few suggestions for a dialogue that we, the entrepreneurs, should be weighing in on. Let’s get this stimulus invested in the long term before it’s spent on the short term. We know how to create markets and products and services. We know how to innovate. Let’s invent new solutions for lawmakers to help build a sustainable economy. We don’t have lobbyists, but we have our voices and our track records.
Definitely agree on the H-1B visas.
The fact that this is still a problem is a tribute to the incompetence of Washington. Banning talent from working the United States! Brilliant!
My views of immigration in general aside (I think it’s one of this country’s greatest “renewable resources”) I’m not so sure that H1-Bs need singling out here.
These days, the tide to offshoring and the ability for folks to live with their families in their native countries to work remotely for startups is more compelling than ever. Slap on Skype, a desktop sharing app, and they’re practically telecommuters working in distributed agile environments.
The big flaws there then are the potential time zone differences and the lack of higher-bandwidth leadership development locally.
Wish it was that simple to offshore people. Sometimes the talent lives in countries with a lot of instability. Sometimes so bad that you can’t even send them payments, or their electricity and internet access isn’t reliable.
When you bring them in its also good for the economy because they live and spend the money earned right here, helping the local economy.
Also foreign talent is very likely to make it big and even become millionaires that will pay large sums of taxes. When everything in life has been against you all your life, doing business in the US is like going to Disneyland, we’re used to extreme crisis and we can thrive easily in first world countries.
I came to this country in 2004 with a suitcase and $50. I figured out the system and if you’re not a millionaire in this country you are a moron or you’re just not trying, I’m proud to say that I paid this year over a million dollars in federal and state taxes. I probably contributed more tax money to this country this year than all my neighbors together the last 5 years.
It’s stupid to not allow smart people in this country.
I’m a big supporter of promoting the US as a destination for the world’s best and brightest, and we should do all we can to encourage folks to learn here, earn here and build businesses here. However, the lack of empathy for non-millionaires (”you are a moron”) will certainly encourage the folks on the other side of the debate to encourage you to leave our country. Given the state of the economy there are a lot of “non-morons” who are struggling. Be thankful and generous for the opportunities that are possible.
Agree with Reid in points 1 & 3.
Partially agree on 2: agree on removing the cap on H1-B visas, but the legislation needs to be re-written. Currently this is a “slave” type of visa, given the worker cannot change employer or take a promotion. On the other hand, the processing timeframe makes no sense at all, since applications are received in April and visas are approved in October, so the employer needs to wait at least 6 months for the employee to start working.
Instead, immigration legislation should provide a flexible visa program for qualified aliens with professions in demand in the US as well as for entrepreneurs that want to focus on founding start-ups.
“Abolish the H-1B cap, and give me an economic reason for preferring local. I’ll only do foreign if I need to.”
Lots of compassion there Reid.
Why is it unique to the tech industry that people feel they have a right to import whatever worker they want?
I can open a barber shop (name any industry except maybe ag) but that doesn’t give me a right to import 10 cheap hair dressers from Bulgaria to make me money. Why is tech different?
Cutting hair and innovating new technologies are certainly the same. Yep. Definitely.
Straw man. From the point of view immigration law, yes, they are.
Sometimes cutting hair is more profitable. SuperCuts is probably one of the biggest franchise in this line.
Dave, why not? Why are you trying to keep Bulgarians from making a living?
Because there are plenty of Americans around me and you who are also struggling to make a living. But thankfully the current administration understands this too.
There’s a very clear answer to this very good question.
Tech companies, unlike haircutters, can get the work done anywhere. You can’t open up a hair salon in India to serve your US customers. But with tech you can.
So having incentives to hire foreign workers should be compared not only to hiring domestic workers, but to outsourcing the work completely. I think we should all agree that bringing in an H1-B worker is better than exporting a job. Probably for the H1-B worker as much as anyone.
Lastly, have you ever tried hiring tech people? It can be extremely difficult to find people. They’re just in high demand and short supply, period. Hiring cheap Bulgarian haircutters would be exploiting them for profit, since haircutters are already plentiful right here.
Your reasoning makes me think we should abolish the H1-B program for tech and institute it for haircutters instead.
you clearly missed the last point of the paragraph: “a payroll tax ensures that H-1Bs are used for skilled labor, not cheap labor”
are you really willing to pay your Bulgarians 10% more (in taxes) to do the same work? obviously not. so what if you can find Bulgarians (or any immigrant) to do a job cheaper than an American will do it? it means the American expects too much compensation for their labor, nothing else. are you going to hire haircutters who demand higher pay just because they were born in the US? sounds to me like it’s the American worker whose expectations need to meet reality. maybe we can just get the US Gov’t to subsidize all American workers with higher pay? This seems to be the current thinking out of Washington. Hey, let’s throw a bunch of money (that we don’t actually have) into a broken system and hope it rights itself. *sigh*
@ Dave
I think you misunderstand the H1B. Tech firms are legally free to discriminate on the basis of nationality during hiring. So are barber shops. H1Bs are not entitled to a job by any means. They are being hired at the employer’s pleasure. I think you don’t realize that H1B is granted AFTER a job offer is received. Perhaps you assumed that H1B is granted to a foreigner who is interested in looking for a job. That would explain your illogical argument.
Reason why there are more H1Bs in tech is because demand for talent in this particular industry exceeds local supply (at present). Barber shops don’t face this situation.
Most employers would hire a local vs a foreign worker, all else being equal, because H1B sponsorship is a financial hassle for the employer. So if you see a large number of H1Bs in a particular company/industry, you can assume that it’s just a matter of supply and demand. If it was about cheap labor, you would see H1Bs in every single industry. The pro-H1B lobby is mostly comprised of American business owners (employers like Bill Gates and Reid Hoffman), whereas all the anti voices emanate from American workers. Guess who is driven by economic rationale and who is driven by paranoia.
Reid, first off I want to say that living in Hong Kong we are currently seeing the re-investment of government funds to small business. The last time I looked at the figures, there was a 3% rejection rate for these micro-loans. So far the economy here has only dwindled noticeably in the financial sector, but honestly- who hasn’t.
I have many friends who attended university with me in the US and had to leave soon afterwards because companies would not hire them on visa’s. The need for non-US workers with a true education and world experience was not present. So of course, I agree that letting qualified and skilled labor into the US is a great way to raise tax revenue as well. Instead of the $6/hr worker probably not paying taxes, that can be offset by the salaried professional at $50k+.
As I do have contacts here in international VCs, they all say the same thing. None are making large outlays. They are keeping the money coming in where it is, trimming the fat and sitting pretty weathering the storm.
The only real point that I see a trouble with is getting companies to actually take their current operations and move back into the US. It will be extremely difficult to complete, and will cost more than keeping things current.
Good post, hopefully it gets around to some desks in DC.
-Derek
Think about root of America. It’s an immigrant based country. Reid what your root?
Piss off!!! Your H1B visa position does nothing but unseat talented Americans from their positions and forces them to train their replacements for half the pay. And don’t even go into what the rules are. They are universally flouted. Try feeding a family on a re-education program fat man. If you think the opportunities for talent are greater outside the US then just move your organization to where you think the talent is. Don’t ask Americans who have worked for generations to raise living standards to compete for jobs against people who are exploited for slaves’ wages. Quit running on the nationalistic canard about being a country of immigrants. Corporate America wants infinite minions of low wage slaves to undermine the demands of American Labor.
There is plenty of talent and highly qualified engineers produced in the US who go untapped every year because of corporate predilection for foreign workers who put up with so much corporate intimidation and general bullshit.
Hey jackass, in case you didn’t know. There are billions in cash sitting on the sidelines. If VC was such a great investment the money would be there in a heartbeat. You think investors like being stuck in treasuries??? Get a clue and pull your head out. VC doesn’t need anything from government. Basic science needs a lot more from government.
I piss on the whole trickle down point of view that you’ve expressed here. Don’t try to do Americans any favors. Just go back behind that big ass monitor and feel contented in the knowledge that you’re helping third world entrepreneurs.
A guy makes a few dollars in business and suddenly thinks he knows how to fix the economy. Each point of your plan is 100% corporate welfare. Piss off.
Ok Marc.
By the kind of comment you left I was trying to judge what kind of a person you are. First off, you are straight forward rude. Secondly, your points make sense, but need no abuse, they are rational enough.
So you are definitely one of those desperate, burnt before Americans who must have lost a job to an Indian, which makes this whole thing so much fun to me.
Cheers to America and 3rd world entrepreneurs,
and good luck fixing the economy smarty pants.
KC
There is a Dept of Labor law that enforces the “minimum wage” concept in every state. No H1B worker can work for less than this salary. Of course there some agencies mess it up and that’s bad. The last one year has seen stringent actions by the Dept of Labor to tackle these issues, there were a few arrests and Washington should put in more rules to enforce this.
By telling a race or set of people as the cause of American economy in the tech industry is mere racist and shallow thinking.
I’m an Indian, working in the US for 5 years and aspire to become an US citizen one day. I have a house in the city, a great car, clean credit history and manage my lifestyle comfortably. I just got three job offers, most recently as a Sr engineer, making 120k more than 25% salary than any Ameican engineer in my firm and I’m just 28. And — I got a hike in less than 3 months.
Do you think my American Boss is naive to do this? FYI — I’m the only Indian in the whole company of 200 employees.
If someone thinks they want to buy two SUVs, drink free Diet Pepsi at work, working for a mere eight hours a day and never show up on weekend when the project is at stake, don’t want to “change” or learn new technologies and still “claim” to be responsible Americans, they should think again. This is not Russia, it’s America where if you’re not competitive, and adaptive, someone will eat you up.
Don’t take me wrong, I admire a lot of my co-workers and one my best mentors is this 36 yr old Arhcitect, who is an American too. But I feel sad to see that some other “Americans” just don’t understand and are not just ready for a non white person to be competitive in this country. Ask the Irish, Ask the Italian, Ask the Jewish and Ask the Germans — a hundred years ago, they’ve all worked for half the wages, double the times than most Americans and today they are a “part” of the society. What’s so wrong about a new generation being competitive — Chinese, Indian, Philippines and Korean?
There’s something fundamentally wrong with someone’s upbringing if they raise concerns on immigration or race.
Without sampling the entire data and conditions that prevail, comments like these just put a shame to a great country like America.
2nd that…
Dude, don’t you get it. It has nothing to do with race. It’s about labor standards, wages and Americans. Congrats on doing well in America. Just be aware that will be someone else willing to do your job for a lot less than you get now. It doesn’t matter how good or valuable you think you are. You are a completely replaceable cog. Once you’re off your upwardly mobile ‘high’, you’ll have a better appreciation of your own very precarious position.
Just put yourself in the position of a very ambitious technology company that wants to do something very innovative.
You put job postings, and all the americans with the skills are already taken, the only people that can do the job usually beg you to sponsor them for an H1.
We’re hands tied with the damn cap.
Removing the cap won’t hurt any americans, since they’re just not fit for those jobs, and those that are, are already making a great living.
You probably lost your job because you didn’t have any special skills, and maybe someone in India is doing it from there at 1/2 the price.
Dude, don’t tell me that. You read TC don’t you? The Deadpool called… It’s spilling over tons of talented people in need of jobs. Or are you selling me that imported workers with no first world experience are just better than these guys?
This makes perfect sense!
Golden words, banks lost trillions on mortage speculation it is startups that created enormous wealth and jobs.
Helping SMBs, which could be future Apple (they raised only 200K) is not far fetched. Look at Apple founders they are not Stanford MBA, VCs are not going to fund them, microloans are great.
Reid, hope you make these things reality, just like linkedin that we all love.
Awful plan: http://www.taxr...he-deficit/340/
We’d be paying more now to make the next bailout even bigger.
Reid, I agree. I would add:
Another $1B to build out award grants for new businesses and business plan competitions.
Spread the money across a variety of industries in small chunks from $25,000 to $500,000.
Green, mobile, web, renewable, non-profit and healthcare.
Funds should be made available to all ranks of partners from high-schools to universities and community colleges.
Businesses must prove ability to create jobs in the U.S.
Yeah, I’ve been tweeting about this for weeks. The gov’t has an SBIC program that could get them equity participation in young, SME market firms. But that program has seen very little investment from the financial stimulus plans. It’s a real shame as what makes the US such a unique place is that ideas are supposedly supported by capital formation here, while in the rest of the world capital is used to squash innovation. Imagine providing companies with less than 250 FTEs with a working line of credit of anywhere from $1M-$5M based on a factor of rolling average EBITDA for past 12 months at a 0% cost of funds for 12 – 24 month terms. That would be a boon for businesses as they have access to capital. And as small businesses they will invest it to keep their employees employed. They will invest it for capex. And most importantly, they will invest it to get us out of this rut!
I like the thoughts on the H1-B Visas especially.
Good perspective. The more foreigners you can bring in, the more companies will get created thereby creating jobs for local.
And the more lost American jobs. The H-1B thing is just completely nuts.
No one here that supports the H-1B increase realizes that the people coming over here aren’t being put in newly created jobs, they are being put in place of American workers that are unemployed and getting paid less by their ‘agents’, who still charge less than a comparable American worker.
Great ideas but unfortunately the only way things get done in Washington are through the use of lobbyists. The influence peddlers call Reid’s points earmarks. I’m syre Reid knows that lawmakers avoid addressing important matters unless they see green.
Completely agree on H1-B visas – we are cutting ourselves off at the knees by not letting people in the country
Okay- is it just me or is Reid’s face dancing around the editorial every time I scroll? It’s incredibly creepy.
How about adding that if people want to collect unemployment after 3 months that they must volunteer for a company of their choice for a minimum 20-30 hours a week. A manager must sign off on their unemployment to receive their check. This is great for 3 reasons. First it gives companies free work, second it allows unemployed workers to increase their skills in their field of choice, and third it keeps people from sitting on their ass and doing nothing and draining our economy.
You’re a troll, right?
Slavery makes for poor economics, even a Nazi financial supporter like Henry Ford knew that.
Note that many of the bottom performing states in the US today are former Slave states, and routinely go Republican.
Ummm if they’re volunteering (or entering indentured servitude, whatever) 30 hours a week, when are they supposed to look for a job?
It looks like we do have plenty experts proposing do this! do that!
The one lesson I take from this economic crisis is that we humans think we do know but the fact is we don’t even know that we don’t know!!
That is why I trust more my self ever than anyone else!!
Maybe farming out our most skilled labor jobs to H-1Bs isn’t really a good idea. The people who sponsor these are just going to pay the individuals that get the visas 10% less money and they will still take the same cut off the top and still undercut some of the competent US workforce.
There has to be a better way.
Regulating pay standards maybe. Forcing companies to pay competitive wages to the H-1Bs so that they must actually pay more for a foreign person and thus would only be used where workers in the US could not be found.
Isn’t that what they were for in the first place? They weren’t created to replace the US workforce with underpaid indentured servants, like they have often become.
I agree. I’m not sure why everyone is so for removing the cap for the H1-B’s. If there wasn’t a cap the only people that would benefit would be the foreigners and the company executives. The American work force would be forced out.
Higher revenues -> Higher Taxes
Economics aren’t simple my friend.
Great post. Let’s hope TC50 will choose more start ups that focus on helping the economy this year.
“This is a country founded on immigration.”
But what you’re suggesting is in fact not immigration but migrant labor without representation that sends remittances to other economies with governments less familiar with human rights than we are.
“and give me an economic reason for preferring local.”
Umm, your home(s) have gone done in value because this nation’s biggest producing sector is financial fraud — and not much else is produced around here because we’re competing against a fascist regime that controls 1 in 6 humans on earth (that’s China) and another system in which 100,000 women die a year by fire (3x as many as men) and controls another 1 in 6 humans on this planet (that’s India).
JC,
You’ve lost the competition. Go home and make more babies and maybe you’ll be able to catch up.
Here here!
But don’t we also need a bit of “capitalism 2.0″ to get things going again?
Would you like an example of the rectal exam that a small business loan application is like? The city of Salem, MA, for example and any SBA loam program with participating banks – they all require years of Tax returns, carefully detailed pages of projections, and personal references. All of this is exactly the opposite of the TARP and other bailout programs for the WORST of the criminally negligent banks.
We would all do well to make it easy for any small business to get a loan, even without stellar credit and piles of docs, as long as the money is spent on real local labor and supplies, or research etc.
This is how many Asian countries handle the econ dev – they hand oout small amounts of cake in the form of small biz loans of up to 25K, no big doc requirements – though the business nust be registered and have a bank account.
see here http://abmw.wor...s-loan-program/
Didn’t we have a tech bubble a few years ago?
How do the following companies contribute to the economy? Or what’s the business model in these?
” Digg, Facebook, Flickr, Friendster, FunnyOrDie, Ning, Last.fm, Six Apart and Technorati.”
Good question. Total lack of sense of purpose!What problems did they solve? How on earth did those companies make people’s lives better!
They entertain us and help us connect with others, while selling shitload of advertisement which leads to real product sales.
I wonder what hollywood did for us too, same thing, entertain us and sell us a lifestyle paradigms.
If you really want to bring in the “best and brightest” then why not set a minimum IQ requirement of 180, or ACT aggregate score of 32, or SAT aggregate of 1400.
Look at that flat graph of employment of production workers in software product publishing.
Then we’ll talk about whether what’s needed is an expansion or a 20 year moratorium on one or several of E-3, F, OPT, H-1B, J and L visas.
4. Expand on #1 with a new type of SMB loan for existing businesses to help get through tough times so that they can purchase inventory, invest in new programs/services/products, purchase new equipment, etc. Keep requirements reasonable so that a small biz doesn’t have to hire someone just to fill out the forms.
5. A “go to the moon” scale renewable energy initiative. Certainly could provide big benefits for startups.
6. Large scale focus and investment in higher education. The payoff may be 8 or more years down the road, but studies show fairly high returns for higher education spending.
One way (of many) for entrepreneurs to be involved is to get first and second year college students working and hopefully providing value in our businesses on a large scale. I’d like to see the government help existing internship programs and companies expand this to a large scale, enhancing mechanism for finding qualified student(s), adequate marketing of the programs, and funds so that more businesses and students are able to participate. Short and long term benefits for both sides. Of course many details here to protect workers, limit student work hours, etc.
oh god wait until Drama 2, or is 3 now, reads this. He will have a field day, but then again he was the idiot that said Newspapers were a good investment 6 months ago.
I agree fully. Oh, and republicans always say ’small business’, but last I checked small business meant $1mil or $2mil in sales per year, maybe it was $5mil, but then I haven’t checked on that again in the past 8-10 years. Not what I would call small?
I say this with good intentions –> I think startups are what caused some of the meltdown, well that and the youth. The web has or is putting a lot of those old dinosaurs out to die. Its churn. Its good for the forest to be cleared every once in awhile. Lets see…newspapers, soon to be tv, a bit further out…movies, definitely music industry, telecoms (current form), video stores, etc….
The issue isn’t the banks, well that is part of it, as they invested heavily in the bad home loans, because business, personal, other loans weren’t paying off. All those stable industries (see above) others cars, etc… are all dying. VC’s and angels are owning all the startups before they get a chance, though they wouldn’t be interested anyway as its to risky, but then again how did those home loans work out for them?
I am an Obama fan, but putting money into the banks isn’t going to help if they have nobody to loan to unless they want to accept more risk with younger, less established, businesses. The economy won’t turn around until the dead weight is gone and the old forest has burned down.
Right now its just a waiting game for the old companies, hope to get some of the bailout funds to last them until their competition goes bankrupt or gets bought out. We are going to lose a lot of newspapers, auto manufacturers, auto dealers, banks, retail stores/chains, and possibly some airlines. Guessing drop down to 30% to 40% of what existed before the crisis.
Just like the depression we had a major shift of workers move from farming/farm related jobs to other types of work. We are doing the same again. People are moving to where the youth is spending, and that isn’t on newspaper, cars, etc… If you are an investor, I would put all my money where the youth are spending in those niche trendy areas as long as the companies are healthy. These companies will the base of our economy in 5 years.
Bailout 2008, a poem by David Jeffrey
Like a bloodied warrior,
laying broken and torn.
Like a dying soldier, hopeless and forlorn.
But the blood, it be green,
the color of money.
And the soldier is an economy,
and it is anything but funny.
Broken are it’s people and shattered are their dreams.
Thanks to the ultra rich and their full proof schemes.
It is a tragedy with more pain to come.
Finance will be Hell, and their wills will be done.
http://www.voic...berid=982900010
“Thanks to the ultra rich and their full proof schemes.”
The notion that the economy is suffering purely because of the rich is asinine. Sure, there is greed in Wall St. and the Banks that caused some damage, but the fault is in the american people.
Is it the banks fault for giving someone a loan? Or is it the individuals fault for taking out a loan they couldn’t afford?
If anyone is going to suffer it will be the rich.
Who will pay for the mistakes of millions of homeowners who were foolish to buy homes they couldn’t afford? It will be the folks who did everything the were supposed to, paid their taxes, worked hard and were rewarded for it.
People could afford homes and credit if the banks didn’t act like loan sharks and charge 18 to 30% interest.
They should let the banks fails. You can’t charge that much interest and become predators on college campuses, thus helping to ruin their credit and take advantage of those with less life experience/knowledge and not hit the bottom of the barrel sooner or later. They have nobody left to offer credit to because they had a major hand in ruining their customers (the people) credit rating.
It would be like Apple somehow damage their users fingers each time they type or text and not run out of customers.
Great points jason. It is funny how the credit card companies use predatory practices on young and they cry foul when a large percentage of adults have a low credit score and thus aren’t able to get money at a decent rate, thus default on their high payments.
It is like a “who gets their interest first” party rather than a “lets be responsible for our youth and our money” party like it should be.
Most people in foreclosure are in that position because they weren’t able to read and understand the amount of debt they could potentially get into.
I’ve a friend teaching on a community college, and it’s really frustrating to talk with the average person, they talk about buying shit they can’t afford so that they can “earn the points” in their credit cards.
Americans can’t understand it’s not ok to buy things you can’t afford, they did the very same thing once banks were irresponsible because real state prices were appreciating so well.
It’s both banks and morons that did this
Great ideas. I’ve never been happy with H-1B because it tends to make cheap labor, which can screw local workers. The 10% idea is great – can still pull in skilled workers, but doesn’t make them into cheap sweat show labor.
You do realize that many are only paid $50 for even skilled positions. That is only an additional 5k a year worth of extra. That 5k is nothing when the rate for their job should have been 70-100k to begin with and the employer has replaced an American employee for the H-1B. 10% is nothing and will just be treated as a tax and dealt with by greedy tech companies.
As a venture capitalist, I’m in 100% agreement with the thrust of Reid’s article. Venture-backed innovation could well be one of the top modes for economic re-invigoration and the Obama-Biden administration should work to ensure that the appropriate vehicles – including some of the ones mentioned above – are in place to drive this stimulus.
But, one of these has actually existed in the very recent past, albeit in a slightly different form. Reid mentions “Match[ing] funds for venture capital and angel investors.” In fact, the SBIC (Small Business Investment Company) participating securities program was designed to do just this.
The SBIC dates back to 1958, when it was created by Congress to bridge the gap between entrepreneurs’ need for capital and traditional financing sources. Administered by the Small Business Administration (SBA), the SBIC program is essentially a fund of funds, meaning the capital is the government’s but portfolio management and investment decisions are left to private fund managers. Since its inception, SBICs have provided over $50 billion to more than 100,000 small U.S. companies, including Intel, Apple Computer, Palm Computing, Staples, Federal Express, and Costco.
Even though the SBIC program is still around, the participating securities program (the best vehicle for VC-backed start-ups, as opposed to the debenture program, since it acts as equity without any debt interest payments) does not. It ceased issuing new leverage commitments in late 2004 and officially sunsetted in September 2008. This was, of course, because it was a fantastic financial failure for the government. What the government failed to realize, though, was that the hundreds of small investments created countless jobs and other positive ripple effects. Had there been better structuring of the program, I’m sure money would have been made. (N.B.: My firm, Core Capital, is an SBIC and a fantastic success story of the program.)
With that in mind, I simply encourage Washington to assess this and other creative investment stimulus programs such as those that Reid Hoffman mentioned to drive innovation and job creation. Perhaps then Obama’s vision of Hope will extend to the many wonderful start-ups seeking capital in this constricted financial environment.
Grant-I believe the matching process has to improve and VCs and angels need to do more to reach out to graduates, middle level execs, etc etc. I have seen Indus Entrepreneurs etc at work and the end result is not impressive to be honest. There is a big gap between money and talent as I see it. Should not generalise but this has some merit. If VCs can reach out better, you will get a better success percentage. My two cents, for what it’s worth. Also Reid’s argument needs to be global in nature. Get businesses you invest in overseas to commit to job creation in America. Then we will have much of this useless argument about H1B and outsourcing vanish. American jobs should not be taken away but neither should talent be constrained from migrating at will.
Reid said it best, ‘the real fix for the economy is massive entrepreneurship and innovation’. No wonder LinkedIn has grown by leaps and bounds.
Couldn’t agree more…
The top 12 ideas that should get money.
Banking 4.0(Mobile, Net, ATM, Branch, Cloud, No gambling with my money)
Internet banking.
Microfinance.
Smart Grid.
Micro-community power plants.
Waste recycling.
Community news.
Urban agriculture.
Green housing design.
Mature city re-planning.
New transport solutions.
Water recycling.
I have also noted with some unease that in the last few years, a lot of money has been spent on companies that seem to go nowhere-that’s ok, but what’s NOT ok is good ideas not getting money and me-toos getting it.
A lot of folks have ideas, leadership and business experience and are just slogging 9-9 saving their jobs. Look for the talent in the middle- the balding, sweating, family man whose talents are steamrolled over everyday and who hits a glass ceiling everytime he speaks up. That’s who needs a leg up-and that will shake up the industry.
Everyman, Every Big Idea, Everyday.
i am sorry pt 2 should not be internet banking- it was a repeat. that makes it 11 ideas.
Very good post.
Specifically, #1 is the key imo. There are over 6 million small businesses started every year that have employees (non – sole proprietorship). This is the job creator!!!
The problem with VC money is that only a couple thousand of these new businesses receive VC money and a great percentage of them go out of business, but not before sucking up billions of dollars along the way.
Change is coming! VC funds will get smaller and alternative means will be made available for the millions of other ventures that deserve a shot. Let’s hope.
Mr Hoffman and every other VC on this forum- would you be willing to work with the national university of Singapore’s school of design and environment to create a corpus venture fund and angel network that can generate 5 new companies every year started by graduating students? EDB in Singapore has a matching capability. We need this kind of push. What if each of us commits to hire 1 US citizen/Green card holder in a US location for each local hire?The ideas and talent is out here. We are waiting.
should be “are here” not “is here”. Dont want to trip over my grammar.
@ kaustuv
Curious – why would you look for funding from Hoffman? Singapore has plenty of funds, both public and private, no?
One possible/practical way of dealing with the H1B-employees-work-for-less issue, is to decrease the influence a H-1B sponsoring employer currently has on a H-1B sponsored employee.
There are few things in play here :
1)Right now , the way the laws are structured if an employee(one who is on an H-1b visa) wants to change employers he/she is faced with a lot of government red-tape .
2) As per the current laws if an employee wants to resign from a job , say , to take a break and start his/her own company or to go back to school the employee has to jump through a lot bureaucratic hoops .
3) Also, the way the laws are structured currently , only the H-1B employer can apply a Green Card for the H-1B employee. Once a Green Card is filed, the employee has to keep working for the employer until his/her Green Card gets approved by the Govt. unless he/she is willing to put up with a lot of red-tape; for most people this would mean working with the same employer for years .
All the above factors tend to reduce the negotiating power of the employees with their employers and thus bring down the wages.
Reducing the Green Card Backlog (needs a Congressional Approval) would be a sensible thing to do . I think ProgrammersGuild should actually lobby for this.
Another good alternative would be to allow employees to file for a Green Card without having to go through the employer(I think Canada does this way).
If you make those changes then no green cards would be issued because no employer would see the benefit of importing their labor. You might as well scrap the program.
@Dave
It is not the companies that issues Green Cards. It is the US government through an agency called USCIS.
It is kind of a catch 22. If we open the flood gates, we will just have all the remaining billion developers from India and other tech-oriented nations flooding into the US and robbing all our American jobs while funneling the money back to their families rather than spend it in our economy.
I personally know a bunch of Indian H-1B workers who send basically all of their non essential money back to their families in India. This practice is not only taking jobs away from American workers, but it is taking the money out of our economy and putting it into another.
Maybe rather than loosen the restrictions, we should strengthen them and make it more cost prohibitive to bring in the indentured servants. If it must be done, to fill a particular need, it should be costly and should be done as a last resort, not as the golden standard as it is today in the tech industry.
In the end, lower paid employees equals less money for the US economy which equals lower living standards.
Reid,
I like your focus on startups and micro-lending, however I don’t think your thinking big enough in terms the amount and types of loans that could quickly get deployed. I also think the following would open the program up to folks who are already employers and would take the opportunity to marginally grow their business (and hire new employees) if the government would give them a low interest loan to do so.
In my view, Pres. Obama is looking for a “smart” bipartisan proposal for job creation (you can dick this link to read about a group supporting such a plan ):
http://www.face...gid=65493749080
The group’s goal is to help build support amongst Democrats and Republicans for legislation to create a Small Business Expansion Fund and job creation plan
that is guaranteed to create 4,000,000 net new jobs in 2009 for a one-time cost of $375 billion (which will be repaid and is half the size of the current stimulus plan).
See the following note for a full description of how the Small Business Expansion Fund (SBEF) will work:
http://www.face...&topic=6812
Thanks,
Lee Lorenzen
Check out this graph: It speaks for itself.
In 2010 a scary line will be crossed with venture capital and micro-lending:
http://scottdig.com/?p=560
Sorry but I was expecting bit more details from a high profile like ceo of linkedin.
useful proposals. my thoughts would add to this specific long-term areas policy ideas that would inject more ’startup culture’ more broadly across american industry. specfically,
(1) if you take gov’t money (e.g., bailout folks), then you should live like a startup. no business class airfare, motel 6 as corp hotels, skype, etc. this is how startups thrive, no reason GM can’t do the same.
(2) break unions in return for greater shift to stock option pools in all companies. startsup are inherently non-union (i may be wrong here, but i’m struggling to think of a startup that’s broadly unionized, can’t think of one.) despite the ills that many see in stock options and grants, startups thrive by aligning the interests of ownership with the interests of employees through large equity grants. large industrial employers are struggling under the weight of unions; shifting this is a big issue for the US.
(3) long-term idea–get personal financial management classes into public education system at grade 7. kids should understand early the impact of how to budget. they should also, frankly, understand the lifetime earning trajectories of different careers. kids are smart–information is power. let’s give it to them, and you’ll see interest in math, science, engineering and so on go up.
You have no understanding of how Unions created the middle class in the US and Europe. They are no more wasteful than any other corporate bureaucracy. You get lunch time because of unions, you get breaks because of unions, you get a 40 hour week because of unions, you get overtime pay because of unions. You get health care because of unions. You enjoy all these benefits and more because of unions. It doesn’t matter if you have ever been in a union or not. You have personally benefited from the bloody struggle of labor unions. Obviously you’ve been brainwashed by the past 30 years of US labor destructionism. None of those benefits are guaranteed to you as inalienable in Constitution. They can all be taken away if no one is there to defend them. Why would any start-up be unionized?
“understand the lifetime earning trajectories of different careers.”
Wish my guidance counselor would have advised me on the earning trajectory of my internet career in the late ’80s.
P.S. The wiki-fund outlines Reid’s first concept for change: http://scottdig.com/?p=84
Follow the Singapore model of talent accquisition, providing PR status in 6 months-1 year and citizenship in another 2 years.
Make it compulsory to hire 5 US white collar workers for every 1 H1B visa hire. We will then really separate those who need talent from outside badly from those who want cheap labour.
Provide more funding to foreign students-they may make for loyal citizens.
Make each company pay a foreign worker levy for every H1 B visa hire-thats the 10% i assume.
@kaustuv, you sound like a smart man… If you really are, why are you asking venture capital from an American investor?
There are many, many wealthy businessmen/investors in Asia – yes, think local, benefit the local economy, local workers, highly educated or not.
Really, think about this. Get your friends, colleagues, etc., to pool some money and then start a company with the best chance of success, even modest. Once you get clients that actually buy your products or services, that would be the time to think big and expand… and of course, to make serious money. It takes a lot of work, but it is worth it…
#1 is right on, exactly what Entrepreneur Commons is about – http://www.entr...neurcommons.org
Entrepreneurs are the ones who will get us out of the mess…
@Daniel- the whole VC trade in Asia is still run by valley firms. There’s some pvt equity etc by local players but at the end of the day it is US vcs who are most used to the culture of putting in angel money. Most of us here in Asia struggle at the end of the day to make ends meet. We need outside infusion of cash into ideas to help make those work. The real big rollers among professionals here seem to be too busy buying houses and then failing the mortagages and they don’t want to take risks. I think it’a a culture thing really.
I am asking US VCs to help recreate the early days of the valley in Singapore because this is one place where the govt is still proactive. We tried working on pure equity based rewards model but it does not work.
It is obvious that Reid Hoffman is a successful entrepreneur, however, I am afraid that by having his head in the Silicon Valley’s millionaire’s bubble has made him lose touch with reality, American reality, that is. Moneyed “global entrepreneurs” easily lose touch with common sense and easily forget about their own country…
“Abolish the limit on H-1B Visas” — Oh, *PLEASE!!!!*
“… investments if they create jobs in the US …” This directly contradicts the previous quote…
“… the other half goes back to the government to revitalize further investment …” — This takes the cake: Why in the world would you want “the Government” to be involved???
Any sensible person knows that “the Government,” *anywhere* always screws up everything, starting with yourself.
Sorry, but Silicon Valley’s *gurus* make me sad, because I realize that they truly believe the absolute nonsense constantly coming out of their mouth – But, I understand the weird fact that they are “out there” playing the dubious role of *visionaires.*
It’s true Josh – we’re all idiots in Silicon Valley.
And you’re the genius. I’m 100% certain of this…
Judging by the number of flameout start-ups and overall returns as an industry. Silicon Valley investors seems to fit squarely in the middle of mediocrity, given the tons of cash that’s dumped on the place.
Ah, sarcasm, the expected refuge of the perpetually masturbating teenager…
If you really live in the valley, your comment shows that *IDIOTS* do live there…
@Daniel-This has always been the irony. The people with ideas and education in Asia have no money of their own. Those who do work for wall street firms and will not take risks. We exhaust ourselves studying,then working, then struggling against a glass ceiling(yes it exists more in Asia then in USA i believe) and then migrating and working hard again. Our generation is really the first which is even daring to do it’s own stuff but it’s very hard and the local VC scene does not help. I still see the old boys network cornering all the money-do a analysis over the last 3years on who gave money to whom. Nothing wrong with that, but the US-qualified engineer-MBAs have taken the market for funds. We want to talk to US investors directly and sell our ideas directly to them. Local businesses will give money only when we get a core fund with the valley stamp all over it. US VCs need to think really about how they have been distributing money out here. So don’t want to sound defeatist but the valley is where people still believe in new ideas and maybe the singapore govt. Not confident about the rest.
In 2006 something called “The Access to Capital for Entrepreuneurs Act” was in the senate and the house. It had bipartisan support. The bill is already written and what it does is provides tax incentives for angel investors to put money into start-ups. Something like this is perfect. 1) It is already written 2) It had merit before the recession 3) It get’s private capital off the sidelines and provides a financial incentive to invest in early stage ventures today. Eliminating a little of the risk with tax write offs for earlys stage investing could go a long way.
The result jobs and innovation.
http://sbc.sena...d.cfm?id=263916
http://www.govt...?bill=h109-5198
Our startup is based in Toronto, and this post is just as relevant here in Canada. Our VC industry is no existant, so I am not sure the matching would make sense. Seeding relevant startup companies in tech, and green tech would create jobs, no doubt. Our government’s stimulus is supposed to have funding for tech companies looking to expand into new markets. The this is a totally common sense approach. With the sums they are all throwing around, there must be some kindling left over for tech startups. It would create a nice fire, and keep 1′000’s of people warm!
Generally, a good idea. Which will do more for the economy, $ 180 billion to AIG, or 180,000 $1 million grants to entrepreneurs?
The exact modus needs debate. If you are in bed with VCs or have rich angel friends, you will like Reid’s idea. There are thousands of others with equally good ideas but not as well connected, and the Government could fund them as well.
In fact, I’ll argue that matching funds is yet another welfare for the rich. Expand SBIR? Perhaps, but needs to be fast.
Regarding the H1B comments, I agree in principal. As someone currently looking for work, a move to the US has become an attractive proposition in many respects; types of companies, lifestyle, remuneration etc. However the current H1B process, specifically the time to process and the lottery aspects, rule me out of applying for advertised roles. A reworking of the process as you describe would mean a US employer could consider me purely on merit and be less concerned with logistics and chance.
In France there is a new law that allows employees to start a business aside their day jobs.
About 35,000 small companies were founded last year.
nice post but you may want to avoid tv appearances from now on. Your stint on CNBC was absolutely terrible.
Lets not forget that working in startups are the best school for becomming better at what you do. Thus investing in start up will create the competent people needed to grow the economy.
I fear the H1-B flurry is obscuring a bigger problem: we are not producing enough scientists and engineers in the U.S., who want to stay here.
I am privileged to observe Engineering Entrepreneurship classes in a major U.S. university. Incredibly talented technology students building critical business skills. Typically 30 in a class, with only 3 being U.S. citizens. The U.S. kids are NOT showing up! And the other 27 are finding good opportunities to innovate, create wealth and enjoy a quality life in Singapore, China, India, etc. Wouldn’t it be ironic if we discovered the best talent didn’t want the visas if the restrictions were off?
I also sense several commenters have experienced or observed layoffs by U.S. corporations, with outsourcing somewhere in the mix of contributing factors. U.S. executives and managers must own the consequences: seeing how you have treated their parents, there is a whole generation of kids who will not trust and who will not want to work for your company.
Alas, I hope I will meet a U.S. executive who cares about these points, but not holding my breath. db
I agree with the SMB loans and the H1B visas. Both of those programs make sense and will help drive innovation and job growth.
I can’t see the logic in the matching funds for venture investment. Is there really a shortage of investment funds for venture-backed entrepreneurs? Yes, the current market is difficult and entrepreneurs need to demonstrate that their products have the potential to generate revenue. But those that meet that requirement are getting funded.
We’ve seen the problems that happen when too much money is thrown into the venture capital market. Companies that should get $250k in seed money instead take $2M in venture funds; those who might need $2-3M to bring their company to the next level instead take a $10M round.
At least for tech, the cost of starting a company has dropped significantly (with cloud computing and web 2.0 infrastructure), so throwing more money at these companies just causes them to mismanage the business and to set the bar too high for the ultimate exit.
What I’d recommend instead is more targeted funding of science through universities, etc. This has worked in biotech and could have a similar impact for alternative energy. But matching funds for venture investors? That will just result in too much money being thrown at too many bad ideas.
>> I believe the real fix for the economy is massive entrepreneurship and innovation
NO SHIT. All VALUE is CREATED by entrepreneurs. Americans don’t understand this because Americans (like nearly everyone else) are economic idiots.
Government action only causes harm, but the people of this country are so morally corrupt, they cannot even imagine a free society.
Americans are going to lose their retirements which serves them right for being a gang of thieves and murderers who thought they could vote their way to prosperity.
The only thing that is going to make the economy better is stopping the mental illness, especially voting and other forms of sociopathic behavior. As long as the mental illness continues, so will the government, and so will all the economic problems which are the direct result of the fact that government exists in the first place.
I can see why “nonsense” wouldn’t tell us his real name after writing something like this “nonsense” above.
Great post. Absolutely agree with 1 and 2. I like the concept behind 3, but I hate the idea of having taxpayers subsidize venture capitalists returns. VCs as a whole have actually underperformed the broad equity markets over the last 25 years, largely due to charging high management fees. The last thing I want is to give them free money at the taxpayer expense.
However, I do like the matching investment idea. But the government should keep 100% of the returns on its side of the investment, and reinvest it in public programs. Its only fair to the taxpayer.
http://www.musimuse.com