Entrepreneurs: The New Wave of Immigrants

03 October 2014 Privacy, Cybersecurity & Technology Law Perspectives Blog

In the last ten years, the number of US companies started by foreign-born entrepreneurs has skyrocketed. From Google, Facebook, LinkedIn, Zip Car and Tesla, foreign-born founders created some of the most successful US companies. Indeed, whereas before 2006 approximately 20% of venture-backed public companies were founded by immigrants, from 2006 to 2012, this percentage grew to 33%.

At the same time, the number of foreign technology and life science companies that established highly successful US operations also exploded. Coming from all parts of the world, including China, India and Central Europe, these companies have established a powerful American presence and have advanced their business by leveraging their domestic technology and experience with US management expertise.

Both foreign entrepreneurs and foreign companies recognize the enormous value of establishing a US business and proving their mettle in the US market. They believe, quite correctly, that a company which thrives in the US gains invaluable credibility and experience to succeed in the rest of the world.

However, foreign companies coming to the US face many challenges, both cultural and legal. Many foreign entrepreneurs do not appreciate the diversity and sheer size of the US economy. Subtle cultural differences often create barriers that are difficult to overcome, whether in hiring and retaining US personnel or entering US markets. Legal conventions, from corporate governance to equity compensation, often seem alien to foreign businesses. Simple logistical issues, such as opening a bank account or establishing proper tax and wage reporting mechanics, become a major stumbling block. Corporate structures defining the relationship of the US entity and the foreign company raise complex tax and control issues which impose significant concerns for potential US partners and venture investors, among others. Lawyers who can navigate the treacherous shoals of these differences are few and far between. To be most effective, they must straddle both cultures, so that they can understand US requirements and explain those requirements to their foreign clients in a credible and understandable manner.

As a Hungarian-American, I had the good fortune of acting in this bridge building role between my Hungarian and other Central European corporate clients and American venture capitalists, partners and management. Some of my Foley law partners have similar dual perspectives with companies originating in Germany, China, France and Japan.  Having a dual perspective helps all of us appreciate the technical and human differences, even where clients come from countries other than our place of birth.

I have also witnessed a contrary situation. Many foreign companies come to the US and seek out lawyers who speak the language of their country, but may not have an in-depth understanding of American business practices and highly technical legal requirements. Many of those business receive misguided, or outright incorrect, advice. Often, their business suffers as a result of their wrong choice of advisors.

Representing foreign companies seeking to establish a US beachhead is a complex but highly enjoyable part of my practice, and the practice of our firm. It is an art more than a science. But that is what makes it fun and rewarding every day.

For more information on services designed for foreign companies interested in doing business in the United States, click here.

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