Trump's Proposed $100,000 H-1B Visa Fee Threatens Startup Ecosystem

American startup founders and venture capitalists have expressed significant concerns over the Trump administration's proposed policy to charge 100,000 dollars for each new H-1B visa application. This policy is expected to severely impact the ecosystem of American startups, which already face challenges in securing these visas due to limited annual quotas.

The H-1B visa program allows companies to temporarily employ foreign professionals in fields such as IT, healthcare, and engineering. For startups, the process of obtaining these visas is already fraught with difficulties, and the proposed fee increase is likely to exacerbate these challenges.

One such startup, Workstream, which provides human resources, payroll, and recruitment technology, has seen all its H-1B applications rejected in the past year. The CEO and co-founder expressed deep disappointment, as the company was actively seeking top engineering talent. In the previous year, Workstream successfully hired two employees through the H-1B program, describing the hires as "life-changing" for both the employees and the company.

The CEO emphasized the critical nature of each hire for early-stage startups, stating that the company only selects the best talent for H-1B applications due to the significant time and financial investment required. The proposed 100,000 dollar fee is seen as prohibitively high for early-stage companies, complicating their recruitment strategies.

Uncertainty and anxiety are prevalent among startups and H-1B visa holders nationwide. Alma, a legal tech startup that provides immigration consulting for professionals and other startups, has seen a 100-fold increase in consultations since the White House announced the new policy. Clients are feeling fearful and anxious, as the proposed fee is beyond the reach of many small companies, making it difficult for them to compete with larger firms in terms of salary offerings.

Alma itself relies on the H-1B program for hiring employees and advises other companies on H-1B recruitment strategies. The primary concern is whether the local talent pool can meet the demand if international talent is lost. Startups often gain a competitive edge by discovering "undiscovered" foreign talent, and the proposed changes could disrupt this dynamic.

Venture capitalists and innovation experts agree that the increased H-1B visa fees will disproportionately affect startups. The managing partner of Fluent Ventures noted that the 100,000 dollar fee will disproportionately harm early-stage startups, which lack the resources of larger companies and rely on global talent for scaling. Startups often struggle to find the necessary engineers and experts locally, making immigration a crucial strategy for talent acquisition.

Meanwhile, the chairman of the Information Technology and Innovation Foundation in Washington, D.C., highlighted that a few exceptional foreign employees can be pivotal to a startup's success. These employees also help startups build stronger international networks and customer bases.

Critics of the H-1B program argue that it takes jobs away from American citizens. However, an unintended consequence of the 100,000 dollar fee could be a reduction in overall entrepreneurial spirit and venture capital funding. A 2020 survey found that startups hiring through the H-1B program are more likely to secure external funding, go public, or be acquired, and are more likely to achieve innovative breakthroughs.

The chief investment officer of Crossbridge Capital suggested that the new fee could "diminish private equity and venture capital interest in early-stage U.S. companies that heavily rely on H-1B employees." Many of these employees may now consider developing their careers abroad rather than facing increased uncertainty in the U.S. This shift could lead investors to allocate more funds to markets like the United Kingdom, Canada, and Europe.

In recent years, many markets, including Europe, have reported "brain drain" issues, where highly skilled and educated workers migrate to countries like the U.S. in search of better opportunities. This migration is often linked to the development of high-skill industries and entrepreneurial spirit in the receiving countries. The uncertainty surrounding U.S. immigration policies, including changes to the H-1B visa program, could serve as a turning point for tech talent who were previously hesitant about moving to the U.S. These individuals are now seriously considering career development in markets like the United Kingdom and Europe.