Trump's $100K H-1B Fee Called 'Talent Tariff' by Startup Founders

H-1B Visa Fee Increase Sparks Concern Among Startups

Amr Awadallah, the founder of the AI-focused company Vectara, expressed a dual reaction upon learning of modifications to the H-1B visa program. These changes involve a substantial increase in the application fee for each visa, now reaching $100,000.

While not unexpected, Awadallah conveyed his disappointment regarding the new fee structure.

“A $100,000 expense is simply unaffordable for my company,” Awadallah stated in an interview with TechCrunch. He has previously sponsored one employee through the H-1B visa process. Although the increased fee currently applies only to new applications, he anticipates it will create a significant barrier for many startups seeking to recruit international talent.

The Purpose of the H-1B Visa

The H-1B visa program was established to enable companies to employ highly skilled professionals from across the globe. These positions typically fall within fields like information technology and engineering.

Former President Trump announced on Friday that the application fee, traditionally ranging from $2,000 to $5,000 and borne by the employer, would be raised to $100,000 per application. This change is expected to have a pronounced effect with the upcoming availability of new visas in March.

Political Context and Criticism

Immigration policy represents a central focus for President Trump. Even during his 2016 presidential campaign, accusations were made that the H-1B visa program was being exploited by companies to displace American workers.

Opponents of the fee increase emphasize the program’s role in attracting individuals who have subsequently founded or led companies valued in the billions of dollars. Notable examples include Sundar Pichai of Google, Satya Nadella of Microsoft, and Elon Musk.

The H-1B visa has historically been a more accessible pathway compared to the O-1 visa, which is reserved for individuals with extraordinary abilities. It also offers a faster route to employment than obtaining a green card.

Impact on Innovation and Competitiveness

“The consequences will be substantial, negatively impacting the competitive standing and innovative capacity of smaller startups in relation to larger, established corporations,” Awadallah explained.

While large technology companies possess the financial resources to absorb these increased costs, Awadallah believes startups will be disproportionately affected. He argues that excluding startups from accessing international talent “will have a very detrimental impact on innovation in the long run.”

Here's a breakdown of the potential consequences:

• Increased costs for hiring skilled international workers.
• Reduced ability for startups to compete with larger companies.
• Potential slowdown in innovation due to limited access to talent.

Potential $5.5 Billion Annual Cost for the Tech Sector

Currently, over 700,000 individuals reside in the United States under the H-1B visa, accompanied by more than 500,000 dependents – including spouses authorized to work and their children – as reported by the advocacy organization fwd.us. The largest proportion of these visas are granted to nationals of India, with China and other countries following.

A cap of 85,000 new visas is issued annually (with 20,000 reserved for those with U.S. university degrees). Demand consistently exceeds this number, resulting in a randomized selection process, or lottery, conducted each March. For years, technology companies have actively campaigned for an increase to the annual H-1B visa limits.

Concerns Regarding the H-1B Visa Program

Some critics contend that companies utilize H-1B visa holders to substitute domestic employees with lower-cost foreign labor. Conversely, others argue the program exploits foreign workers, as their visa status is employer-dependent, limiting job mobility and creating risk of deportation upon job loss.

Proponents of the increased visa fee suggest it could eliminate the need for the lottery system. The higher costs would likely discourage companies from submitting numerous applications.

Approximately 55,000 of the 85,000 new H-1B visas issued annually are designated for positions in computer-related fields, according to data shared with TechCrunch by DesignRush. Previously, the total expense of employing these workers ranged from $200 million to $400 million. However, the new fee structure is projected to raise the annual cost to $5.5 billion for the tech industry.

Proposed Salary Increases and Uncertainties

The proposed changes also include a rise in the minimum salary employers are required to pay H-1B visa recipients. This adjustment is intended to safeguard the wages of U.S. citizens and prevent wage suppression.

Several questions remain unanswered. For example, immigration attorney Sophie Alcorn notes uncertainty regarding the potential refund of the $100,000 fee if an application is rejected. Furthermore, it is unclear whether currently pending visa petitions are subject to the new fee, as it officially took effect on Friday.

“This situation is compelling us to temporarily suspend numerous H-1B petitions for potential founders,” Alcorn stated. “We are awaiting further clarification and guidance.”

• H-1B Visa Holders: Over 700,000 currently reside in the U.S.
• Dependents: More than 500,000 dependents accompany H-1B holders.
• Annual Visa Cap: Limited to 85,000 new visas each year.

Concerns Arise Over Tech Worker Visa Fees

Founders in Silicon Valley express a need to seek talent globally, citing a deficiency in specialized technical skills within the United States, particularly in areas like AI engineering.

Brian Sathianathan, the co-founder and CTO of Iterate, an AI company, currently employs several individuals through the visa program and attributes a prior successful startup acquisition to its availability.

Sathianathan recalls that his previous co-founded and subsequently sold company benefited directly from the contributions of individuals holding H-1B visas; his co-founder and head of engineering both utilized this visa pathway.

He emphasizes that the substantial costs associated with the visa application process would have presented a significant obstacle to this success.

Potential Impact on Innovation

Several founders have voiced concerns that increased visa fees may convey a message discouraging the recruitment of foreign-born talent.

Hemant Mohapatra, a partner at Lightspeed Venture Partners based in India, personally held an H-1B visa for approximately 15 years.

Mohapatra suggests that erecting expensive barriers to tech worker visas could create an innovation deficit within the U.S. startup landscape.

He points out that a considerable proportion of both unicorn and decacorn companies were, in fact, established by immigrants.

Often, individuals initially arriving in the U.S. on H-1B visas subsequently launch their own ventures within the country.

Furthermore, the children of these immigrants frequently emerge as founders themselves, contributing to a cycle of innovation.

Personal Connections to the Visa Program

Jeffrey Wang, the co-founder of AI company Exa.ai, shares a personal connection to the H-1B visa program.

While some of his current employees previously secured H-1B visas through other employers, Wang’s own parents initially immigrated to the U.S. utilizing the same visa pathway.

“I heard the news and was like this makes me kind of sad,” Wang stated to TechCrunch, expressing concern that individuals like his parents might now face insurmountable obstacles to immigrating to America.

The previous administration justified the visa changes as necessary for safeguarding national interests.

However, Wang contends that attracting top-tier talent to the U.S. actually strengthens national security.

He highlights the historical role of immigrants in nearly every significant engineering and scientific advancement achieved within the United States, emphasizing the nation’s long-standing tradition as a haven for innovators.

Startups Assess Alternative Strategies

American startups are currently reassessing their strategies in light of recent policy changes. A number of them are seeking specific exemptions tailored to their unique circumstances. The administration has indicated that waivers may be granted when matters of national importance are involved.

Simultaneously, Casium, a provider of business immigration services, has reported to TechCrunch a surge of over 50% in inquiries from early-stage founders regarding O-1 visas. It's important to note that employment authorization is not extended to spouses under this visa type.

Companies in more advanced stages are increasingly investigating the EB-1A visa, which is generally reserved for individuals who have achieved prominence in their respective fields; this visa does allow spouses to work.

Increased Interest in Global Hiring

Jack Thorogood, CEO and founder of Native Teams, a payroll company, stated that his firm has observed a 50% rise in U.S. businesses exploring options for global hiring that do not require visas, such as employing international remote workers.

Native Teams, serving over 3,000 companies across 85 countries, estimates that a single H-1B hire can now be equivalent to as many as 20 remote hires in various other locations.

Thorogood posits that U.S. startups may increasingly turn to outsourcing talent or maintaining their workforce outside of the country. He further suggests that the cost of overseas talent would likely be comparable.

Emerging Tech Hubs

Countries such as Canada, Germany, and the United Kingdom are rapidly developing into significant tech centers, attracting companies establishing international operations.

Oliver Kent-Braham, CEO and co-founder of U.K.-based unicorn Marshmallow, emphasized the need for other nations to capitalize on the situation. He told TechCrunch, “Should the U.S. erect barriers, the U.K. and others should proactively adjust to attract the exceptional talent available globally.”

Daniel Wigdor, a Canadian venture studio founder and professor at the University of Toronto, concurred that the alteration in visa fees represents a detrimental step for the U.S.

“Rather than actively competing for the world’s leading minds, they are evaluating the extent to which companies are willing to pay for their importation,” Wigdor explained. “While this approach may resonate domestically, it carries the risk of diminishing America’s standing in the global technology landscape.”

This article has been updated to accurately reflect Daniel Wigdor’s title and the correct spelling of Casium.