Summary:
$100,000 H-1B visa fees proposed by the Trump administration could severely impact U.S. startups, making it harder to hire skilled foreign talent.
Startups like Workstream report rejected applications and fear the high cost will complicate recruitment of essential engineers and specialists.
Legal tech startup Alma saw a 100x increase in inquiries, highlighting widespread anxiety among companies and workers.
Experts warn that the fee disproportionately hurts early-stage startups, which rely on global talent to scale and innovate.
The change may reduce venture capital funding for U.S. startups and shift investor interest to markets like Europe and Canada.
Uncertainty could reverse brain drain, encouraging skilled workers to build careers in other countries instead of the U.S.
U.S. President Donald Trump’s plans to impose $100,000 fees on H-1B visa applications are set to disproportionately harm America’s startup ecosystem, according to founders and venture capitalists who spoke with CNBC this week.
H-1B visas, which allow companies to temporarily hire foreign workers in skilled occupations like IT, healthcare, and engineering, were already challenging for U.S. startups to secure due to limited annual quotas.
Desmond Lim, CEO and co-founder of HR tech platform Workstream, shared that all of his startup’s H-1B applications were rejected in the past year, calling it "very disappointing" as he strives to attract top engineering talent. However, the previous year, Workstream successfully hired a couple of H-1B workers, which Lim described as "life-changing" for both the employees and the company. He emphasized that for early-stage startups, every hire is precious, and the H-1B program is costly and time-consuming.
With the White House's new fee proposal, Lim warned that the expense would be too high for companies like his, complicating recruitment efforts.
Uncertainty and Panic
Lim is not alone in his concerns. Startups nationwide, along with H-1B visa holders, are anxious about the implications. Alma, a San Francisco-based legal tech startup offering immigration advice, reported a 100x spike in inquiries following the announcement. Founder and CEO Aizada Marat noted that clients are scared and anxious, fearing they cannot afford the fee or compete on salaries. Alma itself hires through the H-1B program, and Marat questioned whether local talent can meet demand if international talent diminishes. She advises companies to wait for clarity before changing hiring strategies.
Startups Hit Hardest
Venture capitalists and experts agree that startups will bear the brunt of the H-1B fee hike. Alexandre Lazarow, managing partner of Fluent Ventures, explained that early-stage startups lack the resources of large companies to absorb such costs and depend on global talent for scaling. He noted that startups often import talent rather than building remote teams abroad. Robert D. Atkinson, president of the Information Technology and Innovation Foundation, added that a few key foreign hires can be crucial for a startup’s success, helping establish international networks and customer bases.
Less Venture Capital?
While critics argue the H-1B program reduces job opportunities for U.S. nationals, the fee could unintentionally reduce entrepreneurship and venture capital funding. A 2020 survey linked H-1B hires to increased chances of startups securing funding, going public, or achieving innovations. Manish Singh, Chief Investment Officer at Crossbridge Capital, warned that the fee might dampen investor interest in U.S. startups reliant on H-1B workers, potentially shifting capital to markets like the U.K., Canada, and Europe.
Brain Drain Reversal?
The uncertainty around U.S. immigration could reverse the "brain drain," where skilled workers emigrate to the U.S. Laura Willming of Octopus Ventures suggested that talented individuals may now consider other markets, such as the U.K. and Europe, for career opportunities.
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