The Trump effect on private equity recruitment

The private equity industry in the US has so far welcomed the prospect of deregulation promised by President Donald Trump’s new administration.

Some, however – particularly in the venture capital world – are less enthusiastic about the ramifications of Trump’s curb on immigration.

One of Trump’s executive orders restricts travel to the US for citizens from seven countries: Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen. Demonstrations sprouted across the country to contest the ban, and as we went to press, a federal judge had blocked it nationwide, although it remains high on Trump’s agenda.

Some in Silicon Valley have begun to worry.

“Everybody’s head is spinning,” a partner at a venture capital fund of funds says. “We talked to a few managers and this impacts travel for employees from the seven countries. Employees from other Muslim countries are concerned as well.”

There’s much at stake. Investors and entrepreneurs have immigrated to the tech hub for decades and have helped staff some of the best venture capital and private equity firms, as well as portfolio companies.

More than half, or 51 percent, of the country’s $1 billion start-up companies had at least one immigrant founder, according to a March 2016 policy brief from public policy research organisation the National Foundation for American Policy.

Some in the Bay area wonder whether India, Bangladesh and Pakistan, countries heavily represented in local firms, will be targeted next.

“That could really impact start-ups,” the partner says.

Others are concerned with the status of H-1B visas, used widely at start-ups and in venture capital for employees in a specialised occupation. The Senate introduced a bill in January that would tighten criteria for issuing those visas.

Tech Crunch reported that in response, “at least one small group of co-founders has banded together to make it easier for US companies to create subsidiaries in Canada and to move their US-based employees to a new, Vancouver-based office”.

On the private equity front, Blackstone has asked all its portfolio companies to audit the extent to which their employees and families would be impacted by the immigration ban.

“In general, immigration is important,” Joe Baratta, global head of private equity at Blackstone, said on Bloomberg TV in early February. “Our ability to hire the best possible talents is a core value, so it’s something we look at and we’re concerned about.”