Africans joke that Indians are bad at football because every time they are awarded a corner, they build a shop. An American version could be: Why are Indians so bad at rafting? Because the only thing Indians want to launch are startups. Unfunny, but significant as more evidence arrives of the Indian-American consolidation as the nobility of the United States of Technology.
A recent Duke University study has affirmed earlier research that Asian-Americans play a stellar role in setting up new engineering and technology firms in Silicon Valley. It has gone further. First, it has shown this is now a nationwide US phenomenon. Second, Indian-Americans have emerged as the leaders of the startup pack.
Put these figures under the microscope and the results are even more interesting. Indians, though forming less than 1 per cent of the US population, are key players in 26 per cent of the startups founded by immigrants. That, the report notes, “is more engineering and technology companies in the US in the past decade than immigrants from the Britain, China, Taiwan and Japan” combined.
The trendlines seem to favour desis. A 1999 study by AnnaLee Saxenian, one of the co-authors of the Duke University study, noted that 17 per cent of Silicon Valley firms were founded by Chinese and 7 per cent by Indians. The figures are reversed in the new study: 15.5 per cent had an Indian parent, 12.8 per cent Chinese.
The question is why Indians should be such capitalist geeks. Like most things regarding immigrants, the answer has many layers. The first reason is simply the nature of the Indian and Chinese immigrants to the US. Large numbers of Indians came over in the 1980s and 1990s when the only legal immigrant avenues open to them were to be highly-skilled temporary workers or students. Even the students tended to be laboratory-bound because that ensured scholarships.
This structural reason is probably the most important reason for the large Indian — and Chinese — presence in tech startups. Says Saxenian, “The rate of immigrant entrepreneurship tracks closely the proportion of immigrant scientists and engineers in the workforce. For example, in Silicon Valley today, 53 per cent of the science and engineering workforce is foreign-born and 52 per cent of startups have immigrant founders.”
The second reason could be discrimination. Jeanne Batalova of the Migration Policy Institute notes that studies in the 1990s of Indian-Americans in the San Francisco area showed that many believed they faced a glass ceiling in the managerial hierarchy. The problem was less colour than not being able to fit into the prevailing corporate culture. As one Indian blogger said on a recent startups.com discussion: “One of the attractions of startups is that you control your own destiny… and the opportunity for being limited by the discrimination of others is lower.”
Indian-Americans are less worried about discrimination today, given their amazing track record in the US. Says Wadhwa, “The glass ceiling is much less of an issue today. New Indian immigrants are much more confident and outgoing than their predecessors.” Seshan Ram-mohan, Executive Director of the Silicon Valley chapter of The Indus Entrepreneurs (TiE), a community tech network, agrees: “Today it is more about reaching a certain level in a company and deciding that it’s better to be working for yourself.”
The third reason is the ease with which one can found a company and get finance in the US, especially using an untested technology or service. This reflects the maturity of the US venture capital market, a greater corporate appetite for risk and an acceptance of immigrant entrepreneurship. A US National Venture Capital Association report released in November 2006 spoke of immigrants and finance partnering more frequently because of “a common affinity for high technology.”
Websites about startups are filled with complaints about the amount of paperwork and insurance costs facing a new company in France. Even in business-friendly Britain, an Asian immigrant blogger complained: “I don’t feel entrepreneurial at all. Here… you would try to get a stable job first because the immigration services expect you to.”
There are truckloads of data showing that immigrants are more likely to set up their own company than long-standing locals. This pattern is true in almost every Western country and covers pavement vending to putting together multinationals. In Britain, an “economically active” South Asian is twice as likely to be an employer than the average Briton. Entrepreneurship levels among immigrants is about 40 to 25 per cent more than native-born Americans. “The immigrant is not an average Joe. He is already primed to take risks. And an educated immigrant, who often comes from a well-off family at home, has the intellectual capital to believe he can succeed,” says Batalova.
The acceleration of Indian-American entrepreneurship in technology in the past decade and a half is remarkable. The obvious comparison is to Chinese-Americans whose levels of educational attainment and immigration avenues are more or less comparable. In addition, they were the entrepreneurial emperors of Silicon Valley in the 1990s.
There are some who argue that being Indian gives you a slight edge. The cultural argument looks at the leg-up given by ethnic networking. The community has a widely-praised mentoring programme in which older Indian-American tech businessmen help younger ones find a foothold. TiE, whose Silicon Valley chapter alone is estimated to have formally and informally helped about 10,000 Indian-Americans set up firms, is the best-known network. Chinese and Korean-Americans have similar mentoring groups but none have had quite the success of TiE.
The networking factor in technology may be underestimated. After all, as sociologist A. Aneesh of the University of Wisconsin-Milwaukee points out, most Indian-Americans are not entrepreneurs and the bulk of those who are, own hotels, taxi companies and groceries. This class is not exceptional among ethnic groups. A recent study of New York City rated Indian-Americans as 18th out of 24 ethnic groups in terms of self-employment — Bangladeshis and Pakistanis scored higher.
The language argument says Indians’ greater proficiency in English gives them greater leverage in the US. A 2002 study by Rafiq Dossani of Stanford University showed Indian-Americans were more likely to pursue management degrees than Chinese-Americans. This, in turn, led to their being more likely to hold executive jobs — and eventually become entrepreneurs. He noted this was “perhaps influenced by language differences”.
However, both Wadhwa and Rammohan agree Chinese-Americans tend to spend more time in picking up degrees in technology and science. Indian-Americans make the jump to CEO or company founder earlier and more often.
The Indian-American technology fairytale shows no signs of coming to a conclusion. If anything, it seems to be hardening into a permanent reality. What is understood of the phenomenon indicates it has little to do with South Asian genes or California sunshine. The basic ingredients are good education, a business-friendly environment and, perhaps, a very small dose of racism and ethnic brotherhood. Theoretically, this is replicable anywhere, including India. But, as the World Bank noted only last week, it still takes 35 days to register a startup in India. It takes a few hours in the US. The Indian tech story will continue to be an American tale for some time to come.
Pramit Pal Chaudhuri is a Bernard Schwartz fellow at the Asia Society, New York