Amr Awadallah, founder of AI startup Vectara, responded two times when he heard about the changes to the H-1B visa program, which increases the application fee for each visa to $100,000.
He was not surprised. But he was disappointed.
“We can’t afford to pay $100,000,” Awadallah told TechCrunch. He employs one employee on the H-1B, and although the new fees apply only to new applications, he believes it is too expensive for many startups, and he hires internationally before setting the price.
The H-1B visa was created to allow companies to hire skilled talent from global markets of occupations such as IT and engineering. On Friday, Trump announced that the rate increases that employers normally pay will increase from $2,000 to $5,000 per application to $100,000. This is a change that is particularly felt in the new batch of visas available in March.
Immigration is an important issue for President Trump. President Trump even accused the 2016 campaign of using H-1Bs to take on jobs from American citizens.
Critics of the rate hiking should note that the visa helped bring in people starting or running multi-billion dollar businesses. Former holders include Google’s Sundar Pichai, Microsoft’s Satya Nadella and Elon Musk. Visas are more accessible than O-1 visas due to their extraordinary capabilities and are available faster than green cards.
“This impact will be more competitive and innovation in small startups compared to hyperscale, large companies,” says Awadallah. Big Tech can afford such a fee more easily, but he feels the startups are missing out. Startup pricing “will affect innovation in a very negative way in the long run,” he said.
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The tech industry could cost $5.5 billion a year
Over 700,000 people live in the US on H-1Bs and brought in more than half a million dependents, including spouses (who are permitted to work under this visa) and children, according to the immigration and criminal justice advocacy group FWD.US. According to the US Citizenship and Immigration Agency, Indian citizens are the largest recipients of visas, followed by China and other regions.
Only 85,000 new people per year can receive a visa (of which 20,000 must have just graduated from a US university), and H-1Bs will be randomly assigned at the lottery ticket held in March. High-tech companies have been lobbying for years to increase annual H-1B restrictions.
Critics argue that these companies are using H-1B owners to replace US workers with low-wage employees overseas. Others say workers are unable to switch jobs easily because visas are tied to employers, and will face deportation if they lose their jobs.
Those who support the increase in visa fees said that the lottery can be eliminated because employers limit applications.
According to Business Marketplace DesignRush, of the 85,000 new H-1B visas issued each year, approximately 55,000 are sent to computer-related jobs. Previously, the total cost of hiring these workers had dropped from $200 million to $400 million, but under the new fees, it cost $5.5 billion a year to hire H-1B tech workers in the tech industry.
Under the proposed changes, minimum pay employers will have to pay H-1B recipients, increasing the number of changes advertised to prevent a lack of pay for US citizen workers.
But many questions are still looming. For example, Sophie Alcorn, an immigration lawyer working for a startup, said it is unclear whether $100,000 will be returned to the payer if the application is rejected. It is also unclear whether the price hike was technically enacted on Friday, or not the scope of the visa petition currently under review.
“This forces us to temporarily suspend a number of H-1B petitions against aspiring founders,” she said. “We’re waiting for more guidance.”
“This makes me a little sad.”
The founder of Silicon Valley says it looks like it all over the world, especially because of skills like AI engineering.
Brian Sathiaathan, co-founder and CTO of AI Company Iterate, has a small number of employees on the visa and praises the visas from previous successful startup exits.
“I co-founded and sold my last company, and my co-founder was on the H-1B visa. My engineering head was on the H-1B visa,” says Sathiaathan. With such a high fee for a visa application, it would have been “not possible.”
Other founders warn that the fee will send a signal that foreign talent may not be welcome.
This impact is severe in the competitiveness and innovation of small startups compared to large companies that are hyperscale.
Hemant Mohapatra, an India-based partner of Lightspeed Venture Partners, served as H-1B for about 15 years. He said the expensive barriers to high-tech worker visas could leave an innovation gap in the US startup ecosystem, as the majority of unicorns and big cones are actually established by immigrants.
Often he said people who brought to the US on H-1B visas would continue to launch their own US companies later. Sometimes children grow up to be founders.
That’s the experience of Jeffrey Wang, co-founder of AI Company Exa.ai. Some of his workers obtained H-1B visas from their previous employers, but Wang’s parents moved to the United States as recipients of H-1B.
“After hearing this news, this has made me feel a bit sad,” he told TechCrunch. “It feels like people like my parents can’t come to America anymore.”
The Trump administration said that visa changes are about protecting national interests, but Wang believes that bringing the best in the United States will help the country’s security. As a country of immigration, he said almost every important engineering or scientific achievement in the United States involves immigrants.
Startups explore options
US startups are currently scrambling. Some want exceptions that are engraved on startups. The administration said exemptions are possible in cases of national interest.
Meanwhile, Visa Consultation Company Cesium told TechCrunch that it has found that the number of early-stage founders considering O-1 visas has increased by more than 50% (although spouses cannot work on this visa). Late stage companies are usually considering EB-1A visas given to those at the top of the field, and spouses are permitted to work.
It feels like people like my parents can no longer come to America.
Jack Thorogood, CEO and founder of Payroll Company’s native team, said his company has tracked a 50% increase in US companies exploring visa-free global employment options, such as international remote work.
A native team, working with over 3,000 companies in 85 countries, said one H-1B employer equals to a remote recruitment of up to 20 people in many other countries.
He believes our startups will just start outsourcing talent or keep workers overseas. “It wouldn’t be more expensive to have overseas talent anyway,” Trogood said.
Markets in Canada, Germany and the UK are already burgeoning the fast-growing high-tech hubs that serve as landing sites for companies opening international offices.
“If the US is raising barriers, the UK and others need to adapt accordingly to take advantage of the incredible talent that exists from every corner of the world,” Oliver Kent Braham, CEO and co-founder of UK-based Unicorn Marshmallow, told TechCrunch.
Daniel Wigdoll of Canada, founder of AI Venture Studio and professor at the University of Toronto, agreed that changing visa fees is not a good step for the US.
“Instead of competing for the best in the world, they’re testing how many companies pay to import them,” he said. “That stance may be revived domestically, but there is a risk that it will put an end to America’s global technological advantage.”
This work has been updated to reflect the appropriate title of Daniel Wigdoll.
