The Big Story: H-1B changes threaten the innovation ecosystem
In a series of moves over the last week, the Trump administration weakened the talent pipeline that supports startups and innovation. Last Friday, President Donald Trump signed one executive order announcing a new $100,000 fee for H-1B high-skilled visa recipients and a second order establishing a “gold card” visa costing millions of dollars and aimed at replacing visas for those with “exceptional ability” that startup founders have used. Also this week, the Department of Homeland Security (DHS) proposed changing H-1B visa allocations from a lottery system to being one weighted on Department of Labor wage levels. These measures shift the immigration system to one that prioritizes wealth over innovation, while creating barriers for the visa pathways that many startup founders and employees rely on.
A pro-innovation, pro-startup immigration system would prioritize clear and accessible pathways for startup founders and high-skilled talent. Coupled with robust programming and resources to boost the domestic talent pipeline, smart immigration policy could work to fill workforce gaps so that startups don’t have to compete against well-resourced and larger competitors for a limited talent pool. Engine, and various members of the startup ecosystem have long called for improvements to H-1B to make the process more accessible for immigrant founders and talent to bring their skills and ideas to the U.S. Other pro-startup immigration reforms include establishing a startup visa for foreign-born entrepreneurs to launch and grow companies and strengthening the International Entrepreneur Parole (IEP) program so it has shorter processing times, greater visibility, and easier access for founders to obtain status in the U.S.
Pro-startup, pro-innovation immigration policy doesn’t just benefit founders, it also drives economic growth, creates new jobs, and ensures the next wave of innovative companies is built here in the U.S. versus elsewhere. Research shows that a 1 percentage point increase in presence of foreign STEM workers increased the wage growth of domestic college educated labor by 7 to 8 percentage points. And immigrant entrepreneurs are vital to the country’s startup ecosystem, specifically, contributing to 55 percent of unicorn startups and 65 percent of AI companies. By layering more barriers onto the process of obtaining a visa—which many startups already struggle to navigate—the administration risks driving jobs offshore, ultimately weakening the role the U.S. plays as the leader in global innovation.
Policy Roundup:
SBIR set to expire, Congress must act. The Small Business Innovation Research (SBIR) and Small Business Technology Transfer programs are set to expire Tuesday, September 30th, leaving mere days for Congress to reauthorize these critical sources of non-dilutive funding for startups. For decades, these programs have been lifelines for startups, allowing them to pursue costly R&D and bring new products to market. Throughout the year, lawmakers have proposed reauthorization bills, including a House-passed short-term extension and bills to extend the program for three years and permanently. With the deadline now imminent, even a temporary lapse would disrupt the funding pipeline, threaten innovation, and create unnecessary uncertainty. Congress should ensure not just renewal, but improvement of SBIR, so it continues to power innovation and strengthen the startup ecosystem.
California agency finalizes AI rules, adding to myriad actions from states this year. This week, the California Privacy Protection Agency finalized a long running rulemaking that will regulate the use of AI tools in areas like finance, housing, education, employment, or healthcare—scoping in many of the services startups create. In a new blog post this week, we examine what these rules and dozens of others considered and enacted in other states will mean for AI innovation and the startup ecosystem.
Creating the next Silicon Valley, an update on the Tech Hubs Program. In a new blog post, Engine explores the current state of the highly anticipated Tech Hubs program. Authorized under the CHIPS and Science Act in 2022, the Tech Hubs program was designed to create tech innovation hubs across the country. The program is severely underfunded, and as of yet hasn’t been able to deliver its goal of creating the next Silicon Valley. This leaves many innovators, especially those outside of traditional funding hubs, without the critical infrastructure and resources to successfully join the startup ecosystem.
Startups face uncertainty as government shutdown approaches. The U.S. government is once again on the brink of a shutdown as Congress struggles to reach a funding agreement before next Tuesday’s deadline. For startups and small businesses, a shutdown could mean delays to Small Business Administration loans, access to federal grants, and critical issues with agencies like the U.S. Patent and Trademark Office and the Securities and Exchange Commission.
On the Horizon:
TUE 9/30: The Federal Communications Commission will convene an open commission meeting to discuss rolling back E-Rate funding eligibility at 10:30 AM ET.
Startup Roundup:
#StartupsEverywhere: Stanford, California. Drew Barvir is the co-founder and CEO of Sonar Mental Health, a mental health and coaching platform supporting the mental welfare of students. We sat down with Drew to discuss his company, data privacy, the use of AI in sensitive spaces, and more.
