Do Immigrants Make Better Entrepreneurs?
Guts + ingenuity + hard work = success.
That's been the formula for prosperity in America since Benjamin Franklin climbed from his working-class Boston roots to retire on his riches at the ripe old age of 42.
Is it still? Yes. But these days, the formula is often applied by recent arrivals to our shores.
A recent study by Duke University, University of California, Berkeley, and Harvard University found that almost 52 percent of Silicon Valley startups launched from 1995 to 2005 were founded by immigrants. A quarter of the patents filed during the same period came from immigrants. Research by the National Venture Capital Association shows that 40 percent of the publicly traded, venture-backed companies in high-tech manufacturing today were started by foreign-born entrepreneurs. These are pretty impressive figures when you consider that immigrants still make up just a small fraction of the population.
The same is true in the small business sector. Analysis by New York City's Center for an Urban Future shows that while immigrants account for 36 percent of that city's of total population, they make up nearly half of all self-employed workers there, and the organization says the same is true in most major U.S. cities.
The numbers clearly indicated immigrants are more entrepreneurial than native-born Americans. What the numbers don't say is why.
To many foreign-born entrepreneurs, though, one reason is obvious: People who come to the U.S. from other countries have already demonstrated unusual levels of guts, ingenuity, and appetite for hard work -- not to mention the crucial ability to step out of your comfort zone and see things from a different perspective.
"Americans who are born here have their homes and their fancy cars and they are afraid to take a risk," says Ahmad Meradji, CEO of Booklogix, a self-publishing service in Alpharetta, Georgia. "And if you are afraid to lose, you will never win. A lot of foreigners are not afraid because they have nothing to lose."
Meradji came to the U.S. from Iran in 1978 at the age of 21. He spoke no English and worked almost around the clock at several jobs at a time -- busboy, cab driver, waiter, deliveryman. He went to school, ascended the ladder, and eventually reached senior executive positions at Xerox and H&R Block. Not bad. But not good enough for Meradji. In 2006, he walked away from his comfortable corporate suite and started Booklogix, which today has annual revenue of more than $2.5 million.
"My wife thought I was crazy," Meradji says. "I left a high-paying job. But I looked at it this way: I had nothing when I came here, and I figured the worst that could happen to me is that I lose everything."
Of course, he's doing his best to make sure that doesn't happen. He still works 80 hours a week, arriving at his office most days at 3 a.m.
Would you do the same? A lot of Americans won't, but many immigrants routinely do.
Carol Roth, an investment banker, business strategist, author of The Entrepreneur Equation, and star of AllBusiness's Business Boxing video series, says immigrants' hardworking, go-for-broke attitude is key to their success in the U.S. Sure, plenty of native-born Americans have that entrepreneurial drive, and not every immigrant creates a successful new company. But the trends hold.
"Entrepreneurship really is about being comfortable with being uncomfortable and being willing to take risks," Roth says. "What's more uncomfortable than being in a new land where you may not speak the language and don't know the culture but are doing it anyway? Everything in the U.S. today is about being comfortable, having that cozy chair and that comfort food. But for somebody who doesn't have a lot to lose, what's the downside?"
Roth laments that many Americans these days are looking for "the magic bullet," the shortcut to success. "That's just part of the zeitgeist in this country, sadly, and immigrants don't have that mind-set."
The Outsider's Advantage
Meradji's is the stereotypical immigrant success story: Step off the plane with nothing, take risks, toil insane hours, and claw your way to the top. But that's not the only route to immigrant entrepreneurial success.
Chris Dagger's comes from England, and he was never poor. But he did face obstacles in launching his small business, Custom Confections, Inc., in small-town Massachusetts.
Mainly, the locals didn't like the new Englishman on the block. But he thinks his outsider status has been crucial to building his venture, which today consists of two stores in Massachusetts and a partnership with a company in Los Angeles that sells Custom Confections products under license.
"I believe immigrant entrepreneurial success is largely a result of being able to look at things from the outside," says Dagger, CEO of Custom Confections. "I haven't spent the last 27 years of my life growing up in the American school system and conforming to a predefined lifestyle. So when it comes to doing business, I believe an immigrant has an advantage there, which is naturally exploited without thinking too much about it."
Syed Shuttari, founder of LetsLunch.com, a sort of LinkedIn-over-lunch social network that launched this year, agrees. He came to the U.S. from India seven years ago and thinks that challenge -- building a life from scratch in a new country -- has made all the difference.
"The reason I and other immigrants focus on business and job creation is because being in a different culture and away from the pack of support -- family, friends, community, culture -- brings you out of your comfort zone. You take this as an experience to create something."
Shuttari's experience led directly to his new business. He was having a hard time meeting new people, and he figured a website that makes it easier to network would click. "I realized I should create a site that helps you set up networking meetings over lunch. I would never have thought of that idea if I had still been in India."
He guesses the same process works in reverse: When Americans go abroad they bring a fresh perspective, see opportunities that the locals don't, and start new businesses to take advantage of them.
The Reverse Brain Drain
Immigrant entrepreneurial vigor has been a historical strength of the U.S. economy, attracting the best and brightest from around the world to come here to innovate and build. And that has helped fuel America's economic dominance.
As technology, globalization, and the rise of other economies challenge that dominance, though, many talented, hardworking foreigners are deciding there may be better opportunities back "home." So they're leaving.
Vivek Wadhwa, director of research at the Center for Entrepreneurship and Research Commercialization at Duke University, authored the study (noted at the beginning of this article) that shows more than half of Silicon Valley startups launched from 1995 to 2005 were founded by foreigners. And he's just completed new research that shows this trend making a U-turn.
"Skilled immigrants are leaving the U.S. in droves," Wadhwa says, noting that nearly half of 264 immigrant entrepreneurs from India and China that he surveyed said they wanted to start companies back home. Furthermore, 72 percent of skilled Indian immigrants who have returned home and 81 percent of Chinese returnees say they went back because the opportunity to start their own business is better in their home country, according to Wadhwa. "Innovation that would otherwise be happening here is going abroad," he says. "We can't turn the clock back now and keep the entrepreneurs who have already left, but we can certainly increase our competitive odds by keeping those who are already here and who want to play for our team."
The opportunities available in China, India, and elsewhere may be out of our control, and they may be good for the world economy as a whole. But anti-immigrant sentiment and artificial barriers to immigrant entrepreneurs in the U.S. aren't helping. To stay competitive, the U.S. needs to promote homegrown innovation but also work to remain a beacon for would-be entrepreneurs -- no matter where they happened to be born.
