The scale of the returns enjoyed by US tech investors from companies started by US immigrant entrepreneurs versus the scale of returns generated by non-immigrant entrepreneurs is rarely discussed. However, we just ran the numbers using data from CB Insights, Forbes, Hatcher+, NFAP, and PitchBook - and the initial findings are pretty thought-provoking. Check it out:
Before we discuss this table and what it means, let's re-arrange some of the usual biases around unicorns - and immigrants. "Unicorn rankings" are things of whimsy - a small set of outlier outcomes, almost always ranked in a table by country (a typical press piece often shows the US leading with 48% of all unicorns, followed by China, India, the UK, etc). But they are also essential to venture returns - a lack of these outliers in your fund can seriously, and negatively, impact multiples - while the inclusion of just one unicorn can return the entire fund.
Immigrants? US immigrants (NB: I was one myself once) are too often characterised as lower-level "smart/skilled labor" - coders and math geeks - rather than idea originators, founders, and executives - especially when it comes to pronouncements from politicians about H1Bs, etc. But this is far from the real story. The NFAP data related to the returns generated by immigrants should be reason enough for anyone to change their views. But what got us thinking this week came from an entirely different source: a back-of-the-envelope analysis of the number of unicorns created per capita around the world.
Yes, we thought it would be fun to explore the propensity of a county to produce unicorns on a per capita basis - with the goal of presenting a "Per Capita Unicorn Table" focused on South Korea during our talk in Seoul later this week (spoiler alert: South Korea has nine unicorns, according to CB Insights, which equates to a per capital rate of unicorn creation that exceeds all other countries studied except the US, Israel and the UK - and a small handful of holding company jurisdictions - which is pretty awesome.)
To do this, we used data on 375 current unicorns (defined as private-held companies with a valuation in excess of US$1 billion) and relative population sizes for each country, and took note of NFAP data on immigrant contributions to tech companies, and an excellent recent article in Forbes on the role of immigrant founders in 2019 1H IPOs. And we did our own digging around as well. This produced a quite different-looking table than the normal rankings - a table in which developing and developed countries sit in close proximity, regardless of average age or population size (Japan, Indonesia), European startups get a bit more credit that they often do - and China and India show there is potentially much more in store for both ecosystems.
But that wasn't the biggest surprise - the biggest surprise came next, from a moment of double-whimsy - when we decided to divide the US unicorns into those generated by immigrants, and those generated by non-immigrants.
As most of you are probably aware, based on recent events, the US has by far the largest immigrant population in the world, with an estimated 47 million immigrants living in the US - almost 15% of the population. But what you might not be aware of are the number of companies founded or co-founded by this group. Here's the numbers: NFAP estimates that 55% of unicorns are generated by immigrants. This year, US immigrants co-founded or founded four (CrowdStrike, Slack, Uber, Zoom) of the five largest tech IPOs in 2019 - a total of 80% of listings versus non-immigrants.
Other famous immigrants who started (or fixed) companies you might know? Sergei Brin (Google), Steve Chen (YouTube), Andrew and Peggy Cherng (Panda Express), Andy Grove (Intel), Arianna Huffington (Huff Post), Jan Koum (WhatsApp), Nigel Morris (Capital One), Elon Musk (Tesla), Satya Nadella (Microsoft), Adam Neumann (WeWork), Pierre Omidyar (eBay), Peter Thiel (PayPal), Jean-Luc Vaillant (LinkedIn), and Jerry Yang (Yahoo) - just to name a few. Second generation immigrants? Try imagining the Valley without Steve Jobs (Syria) or Jeff Bezos (Cuba) or Alexis Ohanian (Armenia).
Using the 55% number in combination with the CB Insights data yielded a thought-provoking (and still yet to be fully verified) result: 100 unicorns generated by immigrants, versus 83 created by non-immigrants. On a per capital basis, the comparison is even more interesting: while US non-immigrants still come third on the list of unicorns created per capital with 5.9x the number of unicorns created relative to those created the immigrant population, the data seems to show that US immigrants are founding - and listing, at billion-dollar-plus valuations - unicorns at over 7x the rate of non-immigrants.
Note: There are some big assumptions at play in this article - and it's entirely possible that something in this day-old back-of-the-envelope analysis needs a fix (the 2018 NFAP report cites data from only 50, not 100, immigrant-co-founded unicorns) - but even if the data is off by 50%, it clearly shows that US immigrants are a must-have group of value creators that could positively impact the US economy for decades to come.
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