Startup News Digest 05/22/26
The Big Story: Administration weighs making foreign-born talent more expensive
The Trump administration is considering a change that would make the immigration system more expensive and even harder for startups to use. This week, Engine submitted comments to the Department of Labor on a proposed rule that would increase salary requirements for employees with visas, including H-1Bs. While the proposal is aimed at ensuring foreign workers are not used to undercut domestic wages or displace U.S. workers, it risks creating additional barriers for startups that already struggle to navigate an expensive, uncertain, and time consuming immigration system and further restricting the talent available for the innovation ecosystem.
Early-stage startups often have small teams and hard-to-fill roles that can require specific expertise in technical fields where domestic labor shortages persist, including machine learning, cybersecurity, and semiconductor design. Many look to fill those roles with foreign-born talent, either by having employees work remotely from abroad or attempting to navigate the immigration system. As one founder explained, the answer is not “as simple as only hiring American employees,” because sometimes the person with the “exact skills or experience” a startup needs is not based in the U.S. Immigrants have historically played a critical role in the U.S. innovation system, with foreign-born talent responsible for founding more than half of American startups, valued at $1 billion or more. Foreign-born workers who come through programs like H-1B often strengthen the broader startup talent pipeline as founders, early employees, technical advisors, and investors. But the startup ecosystem has always faced significant obstacles using employment-based immigration pathways, including the time-consuming, unpredictable, and expensive H-1B lottery system.
The proposed changes would make that already difficult system harder for startups to use by increasing labor costs associated with hiring high-skilled foreign talent. Because the proposed changes focus primarily on cash compensation and do not meaningfully account for equity, the framework would ultimately favor large corporations that can offer higher salaries while disadvantaging startups that use equity to attract talent. Increasing wage requirements will limit labor mobility into startups and push more technical hiring and R&D activity outside the United States.
Policy Roundup:
White House delays AI executive order. The White House delayed President Donald Trump’s signing of an executive order on AI, which was expected to create a voluntary framework for AI developers to engage with the federal government before releasing frontier models. Under the framework, developers of covered frontier models could be asked to provide the government and certain critical infrastructure providers access to models before public release. The vast majority of AI startups leverage frontier models, and policymakers should carefully balance concerns about safety with the impact on innovation as they consider pre-release review processes.
States are the new QSBS battleground. In a new blog post this week, we explore how states are increasingly reconsidering their tax treatment of Qualified Small Business Stock (QSBS), with some moving to tax gains exempt under federal QSBS rules despite recent federal changes strengthening the incentive. QSBS is often misunderstood as merely a tax break for the wealthy, but startups use it to attract capital and create more competitive compensation offers for early-stage employees taking on the risk of building new companies. As states weigh whether to conform to federal QSBS treatment, policymakers should carefully consider the downstream effects decoupling could have on startup activity, investment, and their appeal to new innovative businesses.
FCC advances broadband mapping and affordability program review. The Federal Communications Commission (FCC) advanced streamlining broadband data mapping processes on Wednesday to ensure accuracy of the National Broadband Map. The FCC also voted to review the $4.5 billion High-Cost program, which subsidizes broadband for rural areas. Greater accuracy in broadband mapping can help identify and close connectivity gaps, but policymakers must also consider how efforts to review and restrict broadband affordability programs could reduce options that enable startups and users to maintain high-speed Internet access.
[Patent Icon] Patent review reform creates uncertainty. On Monday, the U.S. Patent and Trademark Office held a listening session to discuss Patent Trial and Appeal Board (PTAB) administration and reform. Stakeholders called for greater clarity and consistency in light of the expanding set of factors, most recently the addition of public interest considerations, guiding Director John Squires’ discretion in instituting PTAB review. Combined with policy proposals and changes over the past year that have created uncertainty for innovators, restricting the most accessible patent review tool risks enabling weak, overbroad patents to be more easily weaponized against startups.
Startup Roundup:
#StartupsEverywhere: Seattle, Washington. Kunal Chopra is no stranger to the world of innovation. He founded Certivo, a supply chain compliance assistant, after more than two decades in the tech sector and serving as CEO for three separate companies. We sat down with Kunal to discuss his company, the role of public-private partnerships in innovation, and how startups engage with vague laws around the world involving their operations.