U.S. technology startups panic over immigration ban

[February 03, 2017]  By Heather Somerville and Kristina Cooke

SAN FRANCISCO (Reuters) - Silicon Valley venture capitalist Kate Mitchell said her startup companies have a message for their employees who are foreign nationals: Don't travel outside the country right now.

"Common sense would say, why take the risk?" said Mitchell, co-founder and partner at Scale Venture Partners.

Silicon Valley draws on a global workforce. These young businesses depend on hiring quickly from every corner of the world, traveling globally to find customers and having access to Silicon Valley venture capitalists to raise funding.

President Donald Trump issued an executive order a week ago that put a 120-day halt on the U.S. refugee program, barred Syrian refugees indefinitely and imposed a 90-day suspension on people from seven predominantly Muslim countries - Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen. It triggered widespread protests, and the chilling effect has spread far beyond citizens of those nations.

"Here and now, today, we have businesses that are stopping because their employees can't travel in and out of the United States," said David Cowan, a partner at Silicon Valley firm Bessemer Venture Partners, one of the oldest top-tier venture practices.

"This will be the No.1 cause of missed business plans in 2017."

The immigration issue is still unfolding, but the broader and potentially more injurious effects could include a blow to the nation's competitiveness in technology, hindering job growth and sending more capital overseas to the detriment of the American economy.

The extent of the impact on startups is still unclear, but more than 15 venture capitalists and technology company founders described immediate concerns about the consequences of the travel ban.

"I've never seen something impact the day-to-day thought process of CEOs so fast," said Neeraj Agrawal, general partner at Battery Ventures.

CRISIS MODE IN SILICON VALLEY

Immigrants have been behind many of Silicon Valley's high-flying companies. More than half of all "unicorns" - or startups valued at $1 billion or more - have at least one immigrant founder, according to a 2016 study by the National Foundation for American Policy, a non-partisan think tank based in Arlington, Virginia.

Since Trump's order, some lawyers and venture capitalists have been in crisis mode, fielding inquires from concerned startup founders and their employees about travel and pending visa applications. Concerns stretch beyond the seven countries targeted by the order.

"There is a panic in the startup community," said Bill Stock, president of the American Immigration Lawyers Association. "Startups are very concerned because of the unpredictability of the order."

Startup founders often lead sales deals, globe-trotting to meet customers. The scrappy companies rarely have big human-resources departments or the ability of larger corporations to protect employees in immigration battles.

Adil Aijaz, a Pakistani immigrant, is considering sending new hires of his software startup, Split, to Argentina, rather than the Silicon Valley headquarters.

Demonstrators participate in a protest by the Yemeni community against U.S. President Donald Trump's travel ban in the Brooklyn borough of New York, U.S., February 2, 2017. REUTERS/Lucas Jackson

"I need to be able to hire the best and the brightest in the world," he said. "Any restriction on that, I'll move the jobs over to Argentina."

Cowan sits on the board of a cybersecurity company in Israel that has put the brakes on plans to move its headquarters to the United States because its employees are "from all sorts of countries," he said.

A Pakistani founder has decided to start his artificial intelligence company outside the United States rather than incubate it with Bessemer in Silicon Valley, Cowan said.

Some entrepreneurs funded by startup accelerator and venture fund 500 Startups have suspended plans to go to the United States, where their offices are. Some had returned to their home countries from the United States for the holiday season and are now unsure if they can get back in, according to a 500 Startups spokeswoman, who was informed of the situation.

Amin Shokrollahi, founder and chief executive of Kandou, a semiconductor company, is rethinking his plans to open a U.S. design center to employ at least 20 people.

The Iranian-German dual citizen is based in Switzerland, and he and his Iranian colleagues canceled plans to attend a trade show in Silicon Valley this week due to the travel ban. He was supposed to receive an award.

'GO TO HAWAII INSTEAD'

San Francisco-based immigration lawyer Gali Schaham Gordon said an early-stage startup founder emailed her Wednesday evening asking whether he should tell his foreign national employees not to travel, regardless of their nationality or immigration status.

Gordon has been warning people who are identifiably Muslim or Middle Eastern against non-essential travel. "Now might be a good time to go to Hawaii on vacation instead," she said.

The travel ban is already threatening the bottom line at Totango, a customer relationship software firm. The company is holding a conference in February in San Francisco. But on Monday, some attendees started backing out, said co-founder and Chief Executive Officer Guy Nirpaz.

They cited the travel ban and asked for a refund.

(Reporting By Heather Somerville and Kristina Cooke; editing by Peter Henderson and Cynthia Osterman)

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