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Opportunities Unleashed: Why the Tech Sector Should Invest in Immigrant Talent
15 May 2024

Opportunities Unleashed: Why the Tech Sector Should Invest in Immigrant Talent

In recent years, an intensive study about the significant effect of immigrants' contributions to the tech industry has taken place, primarily focusing on the US and Europe. Despite the abundance of available data, it is essential to continually reexamine this issue, especially given the common misconception that immigrants are a financial drain on host countries – a thought that can influence investors' opinions, causing hurdles for immigrants in their fundraising efforts.

In contrast, reality shows a different picture. The pivotal role of immigrants in tech sector expansion and innovation is undeniable. They have displayed notable entrepreneurship by founding high-value companies and leading successful startups, substantially benefiting their host countries' economies. Additionally, they introduce new concepts into the industry and form a significant part of the tech workforce.

Interestingly, these untapped potentials and existing misconceptions regarding immigrants present an excellent opportunity for new funds to invest in promising immigrant entrepreneurs.

The Migrant Advantage: Driving Economies Within Five Years

Research reveals that relocated individuals and migrants significantly boost their host nations' economies within just five years of arrival, demonstrating swift economic integration and productivity. In the U.S, where 13.7% of the population hail from overseas, immigrants astonishingly make up 20.2% of the self-employed workforce and quarter of startup founders. This highlights the economic value immigrants add via integration.

A 2016 study by the Global Entrepreneurship Monitor (GEM) shows that immigrants are three times more likely than local UK citizens to start a business, shattering the false notion of them as an economic liability. Data prove that immigrants largely contribute to economies, notably in the technology sector due to their entrepreneurial tendencies.

The Impact of Immigrant Founders on the Global Startup Scene

The entrepreneurial prowess of immigrants is notably celebrated in the world of business startups. Immigrants play a significant role in pushing technological innovation and economic growth in various markets like the United States, United Kingdom, Germany, and Estonia.

In the U.S, despite having a foreign-born population of 13.7%, immigrants' contributions to new ventures far exceed this percentage. They are 80% more likely to start a business, with their Silicon Valley contributions in the decade from 1995 to 2005 surpassing 50%. More than half of U.S startups valued over $1 billion have at least one immigrant founder, highlighting the integral part they play in shaping the economy.

In the UK, foreign-born individuals make up 15% of the population but account for 39% of the fastest-growing companies' founders. These entrepreneurs have brought significant investments and contribute to the UK's economic growth, particularly within the tech industry, having founded nine of the ten unicorn businesses.

Germany also has a thriving tech scene thanks to immigrant entrepreneurs who establish 44% of new businesses. Much of Estonia's tech sector growth is driven by immigrants, thanks to policies promoting innovation and immigration. Initiatives such as the Startup Visa program, Estonia’s e-Residency, and the Digital Nomad Visa have drawn global investment and talent; 32% of Estonia’s founders are of foreign origin.

Introducing a New Investment Strategy: Focusing on Immigrant Entrepreneurs

With a marked preference for male exponents with advanced STEM degrees, top U.S. venture funds are neglecting a flourishing sector—immigrant entrepreneurs. As noted by Defiance Capital's founder, Christian Dorffer, most seed funds often err by overlooking this type of founders. Research suggests that 62% of successful new ventures, or 'unicorns', are initiated by immigrant entrepreneurs, who come from regions where launching such businesses is close to impossible.

This underestimation unveils a golden opportunity for new investment bodies to actively target these diverse entrepreneurs who are demonstrating a remarkable resilience, resourcefulness, and producing impressive results. Acknowledging this untapped potential, venture firms like Unshackled Ventures and OneWay Ventures are trailblazing by establishing funds specifically for immigrant-led businesses. They provide startup aid, including legal advice and visa support, to foreign-born founders. This shift in investment strategy, based on substantial evidence, suggests that immigrant founders due to their inherent potential and resilience, hold a key to creating globally influential enterprises.

Diversity in Tech: An Economic Advantage We Can't Ignore

Welcoming the various skills that immigrants bring to the tech field can be a massive economic advantage. The 2022 Tech Nation report states that out of 14.85 million job openings in the U.K, a staggering 2 million belong to the tech space. This highlights the global issue of a severe lack in skilled workers in this sector. Not making full use of immigrant talent due to misunderstanding seems unreasonable.

History has shown that immigrants have a knack for founding successful businesses and leading inventive start-ups, greatly boosting the economies they join. The Korn Ferry Institute stresses the importance of this issue, predicting that the talent shortage could result in a loss of $8.5 trillion by 2030 for companies and governments. Therefore, it is crucial to capitalize on the untapped abilities of immigrant entrepreneurs. As more investment is made into this group of talented individuals, the tech industry is set to gain a windfall of advantages from this wide range of innovative and entrepreneurial thought.