‘A Bonanza for Other Countries': Founders Denounce Trump's Visa Changes & Look to Offshoring Jobs
Plus, 2021 vintage funds are finally turning a corner & California's AI transparency bill set to become law.
The Week in Short
President Trump’s $100,000 fee for H-1B visas stuns Silicon Valley, and there could be more to come. 2021 funds show first returns. European hyperscaler Nscale raises north of a billion. Y Combinator says maybe stay in college after all. TikTok deal inches ahead as Australia blanches at possible Murdoch involvement. IPOs took a break after their best month since 2021. California Governor Gavin Newsom to sign AI bill.
The Main Item
$100,000 Fee for an H-1B Visa Roils the Tech Industry. $1 Million Visa Levies Are Next.
The Trump Administration’s move to charge $100,000 for new H-1B visas sent many in Silicon Valley into a panic this week, and understandably so.
We’re not against reforming a program that has its share of issues. But as numerous founders and investors argued eloquently this week, Trump’s new policy is terrible for startups, and will likely drive both jobs and companies offshore.
In case you haven’t followed every flip-flopping statement out of Washington, here’s what’s changing and what is yet to come:
New applicants for H-1B visas will now be required to pay a $100,000 fee to come to the US. Existing visa holders will not have to pay this fee. There were contradictory statements from the administration on this, though most recently press secretary Karoline Leavitt clarified the fee is only for new applicants.
The Department of Homeland Security on Tuesday also proposed new rules for H-1B applications that would favor higher-paid workers, as opposed to the current system where visas are capped at 65,000 and allocated by lottery. There’s a 30-day comment before these new regulations are finalized; the Institute for Progress, a pro-tech think tank, has a detailed breakdown about why these wage levels would backfire.
Treasury Secretary Howard Lutnik made comments last Friday about ending the EB-1 and EB-2 visas, which are also tied to exceptional abilities or advanced degrees and provide a direct path to a green card. In their place would be Trump’s proposed “gold card” program, where wealthy individuals can pay $1 million for a fast-tracked green card. This would be another terrible development for startups.
On the H-1B question, founders we spoke with said the the new policy would have the exact opposite effect of what Trump intended.
“It’s a bonanza for other countries,” Neo founder Ali Partovi texted us. “Startups will adapt to hire more remote engineers, and capital will flow to wherever the talent is.”
Ezra Gershanok, the co-founder and CEO of apartment lending startup Ohana, would like to hire more in the US but has to freeze any hiring of new H-1B employees given the new steep surcharge. He told us his company will likely prioritize hiring new overseas workers instead.
“$100,000 is a lot of money,” noted Jeff Wang, the founder of AI search startup Exa, who said the policy will likely lead startups to outsource rather than pay.
Sequoia’s Michael Moritz slammed the move in a Financial Times op-ed Wednesday, calling the new policy rollout “chaotic and half-baked” and arguing that the Trump administration has “demonstrated yet again the fragile grasp the president and his acolytes have about why the US — especially its technology sector — has worked so well.”
The Trump Administration argues the H-1B program has been abused by consulting firms and tech giants who are merely looking to cut costs — an allegation critics have made for years, and one that isn’t entirely off-base. A well thought-out reform could solve this problem though without blocking startups from hiring the people they need.
It was a bit surprising to see Nvidia’s Jensen Huang and OpenAI’s Sam Altman both giving soft approvals of the new rules during a Monday press conference on their $100 billion chip deal. “We need to get the smartest people in the country, and streamlining that process and also sort of outlining financial incentives seems good to me,” Altman said.
Unfortunately, their comments looked like another case of big-tech chieftains trying to curry favor with Trump.
What Matters Most For Startups?
There are other visa issues hanging in the balance that are even more important to the startup economy. Founders often face a tricky choice of visa categories, since none directly fit an “entrepreneur” job title.
The O-1 visa for people of “exceptional ability,” which has become a key route for many overseas entrepreneurs looking to come to the US, is likely to face fresh scrutiny too. O-1s come with a host of criteria for proving a person counts as exceptional, but it can be a little squishy.
It turns out that media mentions or participation on industry conference panels can count as evidence of exceptional abilities. We’ve heard from multiple founders who have aggressively sought to get written up in the news, at outlets including Business Insider, as a means of proving their importance. All requested anonymity so as not to jeopardize their status.
We’re of course champions of the importance of the press, but we’re not sure getting your name in the paper is hard evidence of founder talent.
Groups like the NVCA have long advocated for the creation of a “startup visa” that could solve some of this confusion for high-achieving founders wanting to build stateside.
That could be especially important if the Trump Administration goes after the EB-1 and EB-2 green cards.
Restricting those categories would be extremely harmful to foreign-born entrepreneurs, said Sampei Omichi, the founder of Ellis, an immigration law firm that helps tech workers come to the US. “Startup founders would have no path to permanent residence without a million-dollar donation,” he said.
In the meantime, in case Trump and Lutnick need a refresher on what’s at stake in all this, the world’s other formidable economic superpower raised its hand to “help.” Just two days after the H-1B announcement, China announced a new “K visa” category for foreign workers in science and technology fields. Applications will open October 1.
Newcomer Podcast
A16z’s Expanding Power & Trump’s War on Media
This week, we’re giving listeners a peek behind the curtain at how our biggest Newcomer stories of the last week came together. First, we look at Andreessen Horowitz’s expanding media ambitions, exploring why A16z wants to shape the narrative around everything from defense tech to TikTok.
Next up, we break down Trump’s feud with Jimmy Kimmel, which led to Kimmel’s suspension and re-hiring by Disney — a moment that highlights the uneasy dance between business leaders, politics, and late-night TV.
Finally, we take a deep dive into the Klarna IPO, a $15 billion milestone that was more than 15 years in the making, unpacking the winners, the losers, and the lessons that investors and founders can learn from the journey.
One Big Chart
2021 Vintages Start To Pay Off, But Barely
There’s been much handwringing over whether or not 2021 will be a decent vintage year, with all of its inflated valuations. Fortunately for funds who spent during the boom, some returns are starting to come in, even if they still lag other vintages.