Wednesday, May 21, 2008

Immigrant Network Economy

Say Richard Herman and the Great Lakes cohort convince Congress to create a Rust Belt High Skilled Immigration Zone. Then what? One problem facing the Postindustrial Heartland is the abundance of highly risk averse residents. Not only is there a lack of entrepreneurs, venture capital is still notoriously conservative. (Might Youngstown emerge as a notable exception to the rule?) Enter The Indus Entrepreneurs (TiE), a networking group of India-born international migrants:

TiE quickly became the one-stop source for Indo-Americans who wanted to launch a start-up, but were repeatedly turned away from Sand Hill Road. In the early 1980s, Kanwal Rekhi cracked through this resistance when he received funding for his start-up, Excelan, a computer networking company, which went public and eventually merged with Novell.

"They made over 100 times their investment," said Rekhi, a TiE co-founder. "We produced over 100 millionaires."

Nonetheless, Indians in the valley still struggled to get funding well into the late 1990s.

"When I'd send them to VCs, they'd all get turned down. They were seen as people who could design and write software," recalled Rekhi. "But to run a company and manage people - there was no history of that."

Venture capital used to be tight in Silicon Valley as well, but TiE managed to loosen the purse strings. TiE already has chapters in Pittsburgh, Detroit, and Chicago. Might this group be able to break open Rust Belt banks as they did a decade ago in the Bay Area?

Vivek Wadhwa told the City Club of Cleveland to unleash immigrant entrepreneurs in Northeast Ohio. The carrot to attract these innovation dynamos is a Green Card. Byzantine immigration regulations are a significant drag on the American knowledge economy and Indians are lined up for 5-10 years seeking permanent residency. This legal limbo is not conducive to a start-up, but the United States is still dragging its feet in crafting a better economic immigration policy. The European Union is rushing in to fill the void.

What all of the above spells is a tremendous economic opportunity (e.g. Fast Track Green Cards) for shrinking cities, which I will detail tomorrow.

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