Pascal-Emmanuel Gobry makes a strong case against the startup visa:
Investors already have too much power in the investor-entrepreneur relationship. If this act is passed, fundraising won’t just affect an entrepreneur’s company, but his or her life. You have to raise that round, or you’ll get deported!
How many terms can a wily investor wring from this new leverage? How much liquidation? How much liquidation preference? What kind of super pro rata rights?
Brad Feld and other Startup Visa supporters like Fred Wilson would doubtlessly argue that they wouldn’t do these kind of dirty things. I believe them, because they realize it’s in their long-term interest to be good to startup founders. But, sadly, people like Brad and Fred are a small minority.
The Startup Visa Act entrenches the idea that entrepreneurs depend on investors and not the other way around. It makes a mockery of the dozens of successful companies that got started and grew successfully without outside institutional investment. Attracting investors shouldn’t be the prerequisite for starting a successful company, it should be a consequence of it.
Another big problem with the Startup Visa Act is that it increases, rather than decreases, risk for the entrepreneurs. Launching a startup by definition means taking on a lot of risk: financial, reputational, you name it. The Startup Visa would increase risk for the entrepreneur by making the stakes so much bigger, by making literally everything depend on success — and not business success, but success how Congress defines it.
Part of the reason why Silicon Valley, and America more generally, is so great for starting companies, is the low cost of failure: if your company fails, people won’t think you’re a loser, and you’ll still be able to get a job. So it’s less daunting to get started. The Startup Visa magically makes the high cost of failure even higher: if you get started and you fail, not only will your dream get crushed, but we’ll kick you out of the country you so desperately wanted to join in the first place.
Pascal is, like me, pro-immigration and pro-startup. But it’s important to look at the fine print. Encouraging more people to come to the US and start companies is a great concept, but the execution is terrible.