Why Immigrants Are More Likely To Start Companies

Written By: admin_onstartups.com admin_onstartups.com January 6, 2007

I came across an interesting article from the Seattle Times this week which cites a Duke University study.  The study found that 25% of the technology and engineering companies started from 1995 – 2005 in the U.S. had at least one senior executive (founder, CEO, President or CTO) that was born outside the United States.  The article was particularly timely as I just got back (less than 12 hours ago) from a trip to India.

The original article can be found here: http://seattletimes.nwsource.com/html/businesstechnology/2003508453_immigrant04.html

The article cites a lot of interesting data (including the fact that of the immigrant-backed startups mentioned, 26% have Indian founders/CEOs/Presidents).  It also talks about why these immigrants are important for the
U.S. economy because of the jobs created and value produced.  However, one thing the article doesn’t talk a lot about is why the numbers of immigrants starting technology companies is so high.

Being an immigrant myself (I was born in
India and spent a lot of my “formative” years there), I’ve thought about why it is that those that are foreign-born seem more likely to start companies.  Here are a list of reasons I think this may be the case.  Apologies if some of these thoughts are controversial or border on drawing stereotypes.  My intent is simply to try and seek patterns.

Why Immigrants Are More Likely To Start Companies
  1. Entrepreneurial Upbringing:  I think many immigrants in the
U.S. have one or more parents that were entrepreneurs of some sort.  I’m not sure about other countries, but in India, the number of people that had nice, stable jobs in big companies was really small.  In fact, in all the time that I spent there, I knew very few people that had traditional “jobs” in big companies.  Most were doing something more entrepreneurial.  It stands to reason that those growing up in entrepreneurial environments may more naturally lean towards starting companies themselves.
  1. Circumventing Discrimination:  It’s possible that immigrants working in larger companies at one time or another felt discriminated against – or otherwise limited in their career growth.  As such, their “opportunity cost” for leaving a stable career behind may be lower than the average employee.  One of the attractions of startups is that you control your own destiny (to some degree) and the opportunity for being limited by the discrimination of others is lower.

  1. Higher Risk Tolerance:  Many immigrants come over to the
U.S. with very little by way of resources.  As such, they may have less to lose than the average person.  Those with less to lose may be more likely to start companies as their risk tolerance is higher.
  1. Academic Intensity:  Going through high-school in
India, I experienced a relatively rigorous academic environment – particularly when I was preparing for my 12th grade “board” exams.  Since competition for getting into University is fierce (particularly into medical and engineering programs), students take the standardized tests very, very seriously.  I’m guessing this is similar in other countries outside the U.S. as well.  It’s possible that this experience with long, intense hours makes for an easier “transition” to the startup culture which has a similar, grueling work-week.  Not sure about other people, but working on my first startup and spending 80+ hours a week working was not that much harder than my 12th grade board exam preparations.

What do you think?  Are there other factors at play that I missed?  Do you think that in the next 10 years, immigrants will continue to play a disproportionately large role in starting tech companies in the
U.S.?  Would love to hear your thoughts in the comments.

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