Private capital wrestles with travel ban

Trump’s immigration policy could affect current employees and future recruitment in private equity and venture capital, and has already prompted some in the industry to apply for naturalisation.

The private equity industry in the US has so far welcomed the prospects of policy changes and deregulation that are coming with the new Trump administration.

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

One of Trump's executive orders has restricted travel to the US for citizens from seven countries: Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen. Demonstrations sprouted throughout the US to contest the ban and a federal judge has blocked it nationwide for the time being, 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 said last week. “We talked to a few managers last week. This impacts travel for employees from the seven countries. Employees from other Muslim countries are concerned as well.”

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 portfolios companies.

More than half, or 51 percent, of the country's $1 billion startup companies had at least one immigrant founder, according to a March 2016 policy brief on immigrants and billion dollar startups from the non-profit, non-partisan public policy research organisation the National Foundation for American Policy.

There are some unknowns that concern people in the Bay area. Some wonder whether India, Bangladesh and Pakistan, countries heavily represented at startups and firms, will be next to be targeted.

“That could really impact startups,” the partner said, adding that he knows at least three people on green cards from those countries who have applied for their citizenship in anticipation – and has done so himself in the past month. 

The other big unknown is what will happen to H-1B visas, which are used widely at venture capital firms and startups for employees in a specialised occupation. The US Senate introduced a bill last month that would tighten criteria for issuing those visas, and the White House has said it also plans to overhaul the H-1B visa programme.

Tech Crunch reported on Wednesday that in response to such prospects, “at least one small group of cofounders 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 do an audit, assessing the extent to which their employees and families would be impacted by the immigration ban. It is still awaiting feedback from companies.

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

Harvard Business School, the alma mater of many venture and private equity professionals, also sent a letter to alumni expressing distress and outlining the impact of the immigration ban.

“Whatever the intention of the order, its implementation has led to disruption and fear, and it undercuts the very foundation of academic institutions like HBS,” wrote Nitin Nohria, the dean of Harvard Business School, in a letter obtained by PEI.