Mr. Bush, tear down this wall

The best minds from China and India remain frustratingly out of reach for US venture capital-backed portfolio companies, thanks to strict caps on visas for the highly skilled.

OVP Ventures recently wanted to bring a French scientist to work at one of its portfolio companies, a life sciences company in Boston. The man was ?the equivalent of a National Science Foundation fellow? in his home country, says managing director Chad Waite, one of the top 20 logicians and algorithmic computer scientists in France. Normally this type of highly skilled professional would enter the country on an H-1B visa, but it was late in the year and the annual cap on H-1Bs had been reached months ago. OVP was told there was simply no way the man, as brilliant as he was, would be able to obtain a work visa.

Luckily, OVP found an exception. The firm solicited recommendations from top scientists at the National Academy as well as the chairman of the systems biology department at Harvard University, in order to secure an O-1 visa for the new hire. The O-1 visa is designed for individuals of ?extraordinary ability,? people who have risen to national or international prominence in their field and can demonstrate this with major prizes or recognition among their peers.

?Of course it was just totally luck that we found this exception, just a smart lawyer,? Waite said. ?Meanwhile we had to wait for four months, and of course the company was burning cash while we were trying to get this guy.?

For years now overseas universities, particularly in China and India, have been turning out some of the best engineers and scientists in the world. The US technology industry, unrivaled anywhere, is hungry for them. But bringing the two together is surprisingly difficult.

Private equity and venture capital firms want to staff their portfolio companies with the best and the brightest, but this process can be an uncertain and unforgiving one, largely because of strict caps set on many visa categories by the US Citizenship and Immigration Services department (USCIS).

?The problems for private equity firms, and any employers who need to hire highly skilled professionals from overseas, are reaching a really catastrophic level right now, and it mainly has to do with shortages,? says Bo Cooper, an attorney in the US immigration practice of Paul Hastings.

The most commonly used visa for highly skilled professionals entering the US is the H-1B. The H-1B is granted to foreign nationals employed in a ?specialty occupation,? typically those that require a bachelor's degree or higher. The visa grants them three years in the US with the option to renew the visa for an additional three years. The US issues 65,000 H-1Bs per year, a cap that was set in 1990. The visas are issued in October, at the start of the fiscal year, and professionals can apply for the visa starting on April 1. Visas are then granted on a first-come, first-serve basis.

For fiscal year 2007, the entire supply of H-1Bs was exhausted by May 26, 2006. For fiscal year 2008, the entire supply was exhausted before the end of April 1. USCIS decide to pool all the applications received between April 1 and April 3, then issued visas through a lottery which applicants had a less than 50 percent chance of winning, Cooper said.

There are ways to increase your chances of being awarded an H-1B, Cooper says. Of the 65,000 visas, 6,800 are set aside for citizens of Chile and Singapore as a result of trade agreements with those countries. Outside of the H-1B, Australian citizens can apply for 10,500 E-3 visas each year, and Mexican and Canadian citizens can apply for TN status, which allows them to work for one year in a limited set of occupations.

A multinational firm can apply for an L visa to transfer managers or executives from an overseas office to a US office. Foreign nationals of ?extraordinary ability? in the sciences, athletics, education or business can apply for an 0-1 visa. Foreign students studying in the US on an F-1 student visa can also apply for a year of ?optional practical training? in the workforce. The optional practical training option can be a good one, but after it expires the student must wait until October 1 before an H-1B visa would begin. During the gap, the student must return to his or her home country.

Even after a foreign national has successfully obtained one of these visas, he or she must still clear the equally difficult hurdle of obtaining a green card in order to work in the US permanently. The supply of green cards is just as oversubscribed as that of any other type of visa, Cooper says, and if an employee is unable to obtain a green card after reaching the end of his visa eligibility, he has to return to his home country.

Nearly every venture capitalist seems to have a horror story about the visa shortage ? that one brilliant Hungarian physicist who wasn't deemed worthy of an O-1 visa, the team of Indian programmers who had to leave the country for six months while waiting for their H-1Bs. And most concur that there is no real way to avoid visa problems but to hire the smartest lawyer you know and try to find a loophole.

OVP knows this well. In another instance of fancy visa footwork, one of its portfolio companies tried to hire a Canadian national, born in India and living in Switzerland at the time, and could not find any type of visa for her. Her credentials were airtight: she had been a senior vice president of business development at Novartis, and the number two executive at an Italian pharmaceutical company backed by healthcare investor MPM Capital before. OVP eventually found that due to a shortage of pharmacists in the US, Canadian or Mexican pharmacists are eligible for TN status, so the professional used her undergraduate degree in pharmacy to gain entry into the US. She is now chief executive of an OVP company that has raised more than $50 million.

So OVP has seen success, but at a cost: hiring lawyers with the kind of expertise needed to work around visa restrictions is ?usually a $150,000 to $200,000 exercise,? Waite says, which can be a hefty burden for a small VC firm or tech startup. For a larger firm than OVP, hiring an in-house immigration expert might be money well-spent. But OVP will have to tough it out on a case-by-case basis.

Another solution, and an increasingly popular one, is simply to set up operations in the home country of the professional you want to hire. With communications technology today this option is more and more viable. If the new hire is senior enough, simply tell him to build a satellite team in his home country.

?For a startup it's certainly not desirable, because you want all the people under the same roof, collaborating on a day-to-day basis,? Waite says.

Blueprint Ventures has resorted to several similar courses of action for its portfolio companies, says managing director George Hoyem. One portfolio company, SpectraSensors, had to spend more than $20,000 proving that an engineer with a PhD qualified for an O-1 visa after her period of optional practical training ran out.

Another Blueprint portfolio company had to set up a satellite team of engineers in China that communicated with the US headquarters on a virtual basis. It is ironic, Hoyem says, that the visa restrictions have the unintended effect of exaggerating the trend toward outsourcing. One Blueprint portfolio company ultimately outsourced its entire research and development facility to India, simply to avoid going through the cumbersome visa process again and again. Even the major players are affected: last summer, Microsoft opened a software development center in Vancouver, and announced its intention to attract ?the next generation of software developers from all parts of the world? to the new office.

Canada is just one of many countries in the developed world that are making an effort to attract the most brilliant minds from around the world at the same time as anti-immigration sentiment in the US seems to be on the rise. The European Union, for example, introduced the ?blue card? last fall for highly skilled workers, in an effort to attract more ?qualified and highly qualified migrants.?

Meanwhile, the debate over immigration policies grinds on at home. The issue gained some momentum last year with President George W. Bush's proposals to implement guest worker and amnesty programs, primarily targeted at Mexican nationals. But critics excoriated the proposals, fearing a flood of aliens would rob Americans of low-skill jobs.

The problem, Cooper says, is that immigration policy for the highly skilled has been dragged into this mess as well. The debate has become such an acrimonious one, Cooper says, that Congress is paralyzed, unable to address any aspect of the question of immigration without stirring up political passions.

?It's sort of a shame for the US,? Cooper says. ?At the same time we are essentially cutting off our own access to the world's best talent by having limits on these key visa categories for the highly skilled, other countries who understand the importance of top talent in the race for global competitiveness are watching what we're doing and moving in exactly the opposite direction.?

Waite echoes this sentiment, with a note of desperation that comes from time in the trenches.

?There are people who are getting their Masters degrees and PhDs here, and then being forced to go home,? he says. ?Why are we letting them leave? Give them their Stanford or MIT PhD and staple a green card to it.?

US visas for highly skilled professionals
H-1B visa

For ?specialty occupations? that require a bachelor's degree or equivalent, capped at 65,000 per year, valid for three years and renewable once.

H-1B1 visa

1,400 H-1Bs are set aside each year for citizens of Chile, and 5,400 for citizens of Singapore.

e-3 visa

For residents of Australia, capped at 10,500 per year.

TN status

Allows residents of Canada and Mexico to work in certain occupations for a one-year period, no annual cap, indefinitely renewable.

O-1 visa

For individuals of well-documented ?extraordinary ability,? at the top of their fields in the sciences, education, the arts, athletics or business, no annual cap, valid for three years and renewable indefinitely for one-year increments.

Optional practice training

Allows foreign nationals on an F-1 student visa to pursue one year of training in the work force during or immediately after their period of study in the US.