Adapted from the broadcast audio segment; use the audio player to listen to the story in its entirety.
Concern about the United States’ ability to attract entrepreneurial talent is reflected in several expert studies, which show a drop in the proportion of immigrant-founded companies.
So what does the United States do about this?
One answer may be to look at and learn from what other countries are doing to attract the best immigrant entrepreneurs.
Countries as diverse as Ireland and Chile have taken very aggressive positions on luring foreign entrepreneurs to their shores.
I recently visited Ireland to see how the place was doing after suffering a crippling recession in 2008.
Ray Suarez: I’m asking just a general cross-section of people how they think the economy’s doing? How does it look to you?
Irish citizen: We’ve had our ups and downs. It’s fallen from a height, but that was five years ago, something’s got to be getting better soon.
The global recession had a terrible effect on Ireland. Once strong from the banking, tech and export sectors, all of them suffered huge job losses during the downturn.
Construction projects were halted in mid-stream.
And, many Irish were buried by the same mortgage debt seen here in the U.S.
So things aren’t perfect yet in Ireland, but its economy is showing signs of recovery.
Here’s a startling fact: Last year, around 13,000 businesses were started in Ireland. That’s in a country of around just four-and-a-half million people and it’s on pace for the same to happen this year.
Ciara Leonard is one of the people keeping her eye on attracting foreign entrepreneurial talent into Ireland. She’s the program manager of NOVA UCD, the University College of Dublin’s business incubator program. It works in conjunction with a government program called, “Enterprise Ireland.”
“They have a very successful program set up a number of years ago called the ‘Competitive Start Fund’, where the company gives 5,000 Euros and Enterprise Ireland matches that with 50,000 Euros in equity funding. It’s competitive, but it’s very much pitched to early-stage startups.”
The way these business incubators, as well as Enterprise Ireland, work is to take government funds--taxpayer money, and use those funds to seed new businesses.
“The next stage, as the company moves on, is they can get ‘high potential startup funding’ and that’s for companies that are export led, and have the potential to create employment in Ireland and the next funding you can get up to 300,000 Euros from Enterprise Ireland in equity investment and you can match that with a private investor,” Leonard says.
She also says her incubator also recognizes that it’s often harder for start-ups to get what are called “softer supports.”
“Setting up a company is a very lonely journey for a entrepreneur, and, therefore, being part of an incubator and an entrepreneurial community is very, very important, so the entrepreneur isn’t reinventing the wheel. We provide support from access to facilities, to linkages, to expert researches at the university, to advice on business planning, government grants and introductions to investors.”
Ray Suarez: Who said we ought to encourage people to innovate and start new businesses?
Leonard: It mainly came from the university. As far back as the early 90s, the university decided it was necessary to support startup companies, and in the later 90s, early 2000s, the government also supported a number of incubators around the country, mainly those based at universities and institutes of technology. The incubation services always supported both companies coming directly from university research, which we call “spin out” companies, and equally companies coming from outside the university.
So these incubator programs in Ireland service both native-born Irish, as well as foreign-born entrepreneurs. According to Leonard, at least a quarter of the incubator businesses in her program came from outside of Ireland.
These immigrants tend to have higher levels of education and depth of study.
Leonard says, “You know, we have Italians here, we have Indians, who have decided to come here to set up a company in Ireland and benefit from supports.”
Abinhav Chugh has started a couple of companies so far. One, Videocrisp, enables businesses to more easily create videos for their websites.
“In simple words, if you are a business – you could be a solicitor, you could be a sales guy, you could be a marketing person, and you could be a dentist. If you have a website, you have a need for a video. If you don’t have a video, you don’t appear on top of Google, people are less likely to click on you…”
Chugh came to Dublin from India, and he found it to be an ideal place to start up, even over Silicon Valley.
Ray Suarez: Why do it in Ireland? Is Ireland a particularly good place to do what you just did?
Abhinav Chugh: Yes, it’s really amazing…It’s what I call the “Silicon Valley of Europe.” The number one reason is Enterprise Ireland. I don’t think anywhere else in the world there is a government agency, which is like a lifesaver for businesses. They have funding, support for sales. Both of my startups have been clients of Enterprise Ireland. We’ve got funding from them, we’ve got mentorship, we got everything we needed at the right time.
Ray Suarez: If you look at the businesses you’ve created and the jobs you’ve created, have you been a good deal for the Irish taxpayer?
Abhinav Chugh: Yes. Absolutely. We’ve raised around $100,000 and we’re in the process of raising another $1,000,000 dollars. And one of the very first things we’re aiming to do with that money, which is taxpayers’ money, is to create 10 jobs by the end of 2013. We believe that if we are raising the money that basically belongs to the taxpayer, we need to give in return and that comes from the jobs we’re creating. So, Videocrisp will have 10 full-time employees in Ireland by the end of 2013 because of the funding we are raising now, half of which is from Enterprise Ireland – or taxpayers money.
Even in the less cutting-edge sector of food, skilled labor can be important. Marta Gutierrez is from Spain, and though she’s not an owner of Brother Hubbards, a cafe specializing in local Irish ingredients, with fare prepared from scratch, she’s still a key employee.
She says: “When it was quiet at the beginning we were a bit scared, because maybe you think ‘we’re not doing anything right,’ but we are, we make everything here, and with love and passion. I think we’re doing everything right."
Gutierrez and owner Garret Fitzgerald stress that new businesses are important to the Irish economy, not just because they produce, but because they also employ other businesses.
Fitzgerald says: “We do try to use, to the extent that we can, local suppliers and Irish products. All our cheeses and meats are Irish. The only thing we don’t make ourselves is our bread, which is from an artisan bakery down the road. I feel ‘together we’ll prosper.’”
But there are still risks to a fragile, if recovering, Irish economy.
Richard Bruton is the Irish minister for Jobs, Enterprise, and Innovation.
Richard Bruton: We have a pretty vibrant environment for startups. But, the constraints on finance brought on by the bank crisis, has been a problem. So, we’re seeking to replace that -- to make sure the environment for startups is strong, and that’s been part of our strategy.
Ray Suarez: People have said to me ‘well, it’s cheap to borrow money, if you can get a loan.’ There’s a reluctance to lend. So, it makes it tough to take advantage of low interest rates.
Bruton: Yeah that’s true. Our banks are risk averse. They’re trying to manage down a loan book that got far too big and recover losses on that loan book. That has made them very averse to taking risk. If you look across the euro zone, I think we’re the second highest refusal rate of loans in Europe. That’s coming down. But, we still are one of the worse economies for getting access to credit.”
Director of Ireland’s Small Firms Association, Avine McNally, says that even with these obstacles, the country is committed to turning around the entrepreneurship picture.
“One thing we’re still calling for is a national entrepreneurship policy. We don’t actually have a formal policy and that’s a big challenge for us and something we really need to do. We are actually, I think, 9th out of 28 OECD countries in terms of the ease of setting up a business here in Ireland, and the government is very much committed to Ireland being the best place to do business by the year 2018.
It’s one thing to revive a flagging economy like Ireland’s, particularly when a program like Enterprise Ireland is well established.
It’s another thing to try to build a “Silicon Valley” from scratch. But that’s exactly what Chile, for the past two and a half years or so, has been trying to do.
“This startup Chile program sounds like the absolute perfect place, where I would have loved to go, where they give you just a little help, a little help in terms of resources, and a friendly environment, and welcoming entrepreneurs. So, I think this is just the greatest program of its type I’ve seen in the world,” says Apple co-founder Steve Wozniak of the Chilean program.
The program has also earned praise among other proponents of startups worldwide.
“It was created because the founder of the idea was finishing his MBA at Stanford and he realized a lot of immigrants there didn’t have a chance to finish their projects because they had to come back to their countries, because of the immigrant policies in the States,” says Sebastián Vidal, the Associate Director of Startup Chile, a program not unlike Enterprise Ireland.
He says that before Startup Chile, the support structure for startups was, well, nonexistent.
“The entrepreneurial environment in terms of innovation and technology was not developed at all,” says Vidal.
But Startup Chile seems to be, slowly but surely, changing the landscape.
Vidal continues: “One of the main goals of Startup Chile is to increase the entrepreneurial ecosystem of Chile. That’s why we give certain benefits to the entrepreneurs we bring to Chile. But they need to give back to the country. And how do they do it? They give talks, they give mentorship, they give conferences, all around Chile, spreading the word about entrepreneurship.”
Nathan Lustig is from Milwaukee, Wisconsin. He is an entrepreneur working on a couple of different things in Latin America, including teaching entrepreneurship at two universities in Chile.
Nathan Lustig was one of the first entrepreneurs to take advantage of the Startup Chile program. He joined in its pilot phase. “So, in 2010 I was sitting with my business partner in Madison. We had just graduated university, and we were looking to escape the Wisconsin winter, with our startup, and we were looking at California, New York, Austin, Texas, and I saw an article in Forbes that said Chile was giving $40,000 to entrepreneurs to come move there for six months. We applied, made it, and that’s how we arrived in Chile.”
Lustig’s company, Entrust It, helps customers set up a sort of “digital will.”
You can either pass on or delete your files and online records when you die.
Though he partly chose Chile as a place to start up because of the cash, and partly out of a sense of adventure, he soon saw the advantage of doing business in Latin America.
“The big advantage of Latin America is that it’s generally between three and ten years behind the U.S. and Europe in terms of internet adoption and products that are really popular in the U.S., might not be popular in Latin America yet. There’s not very much competition, whereas in the U.S. if you have a pretty good idea, there are going to be a lot of other companies trying to copy you, in Latin America there’s not that much competition,” says Lustig.
When Startup Chile was founded, Chileans weren’t used to the idea that someone would want to go into business for themselves, rather than working for a large, established company. But, says Lustig, that’s changing: “Generally entrepreneurship is not very supported, it’s kind of looked down on, people are conservative, they’d rather work for a big company than start out on their own. It’s changed a lot. Part of that is from Startup Chile, part of that is from foreign entrepreneurs.”
And, according to Sebastián Vidal, Chileans are being drawn more and more, by influence of foreign entrepreneurs, into the idea of starting their own businesses.
“Today, the most important percentage of applications in Startup Chile is Chileans, so 40% of the applications are Chileans,” says Vidal.
That still means 60 percent of applicants to the Startup Chile program are foreigners, many of which are Americans, looking to branch out from the competitive startup hubs of Silicon Valley, Austin, and the like.
But there are some detractors to the sorts of programs Ireland and Chile are promoting. Some question whether government should be in the business of subsidizing business.
Veronique de Rugy, a senior research fellow at George Mason University’s Mercatus Center, says: “I feel that the government shouldn’t be in the business of giving grants for private businesses. The government is a very crappy venture capitalist, as we’ve seen over and over and over again.”
De Rugy says there are risks and a real downside when the government rushes to give government breaks for certain industries or companies, as the U.S. has seen recently with the failure of solar energy companies like Solyndra.
She argues that any economy, for startups as well as established companies, would be better off with a level playing field: “The thing that the taxpayers should really be against is the fact that the government picks winners and losers."