Why do Immigrant Founders Overperform?
Immigrant entrepreneurs who set out to build a business in a foreign country strongly outperform. Here’s why!
In 2022, The National Foundation for American Policy found that more than half (319 of 582) of America’s unicorns were started by immigrants. In addition, the same study outlines that nearly two thirds of unicorns are founded or cofounded by immigrants or the children of immigrants. Below are the main factors that contribute to the overperformance of these exceptional immigrant founders.
But before we dive in, if you are a first or second generation immigrant founder in Europe with a startup at Pre-seed or Seed stage, we’d love to hear from you: contact@nolabel.ventures
1 Immigrant Founders have a Competitive Advantage
International Ties
Immigrant founders are able to overperform due to their international perspective and reach that give them a competitive advantage over native founders. A company that only caters to its domestic market can only go, and grow so far. Immigrant founders understand how important it is for the growth of their business to expand internationally. With access to an established international network, immigrant founders are going to have the upper hand when branching out to a foreign market.
Unique Market Opportunities
Another reason that immigrant entrepreneurs overperform is because they take advantage of their personal experience. Their situation allows them to identify unique market opportunities that would fly under a native entrepreneur’s radar. If the immigrant entrepreneur comes from a particular ethnic group, their community would be the best target audience for a product or service that isn’t available in the host country. Their situation and unique experiences might allow them to see the benefits of operating in an underserved market. They may even see a need for their business to fill back in their home country and then set out to open branches abroad.
2 The Immigrant Mindset
A Risk-Taker Mindset
Uprooting your life and moving to a different country is associated with risk. Anyone who has taken the big leap will tell you that there’s more to it than just getting to grips with a new language. The first year can be an administrative nightmare as you grow accustomed to the new institutional environment, culture, and order of doing business. However, people who migrate of their own volition are prepared to risk their livelihood for the prospect of a better life. Determined to maximise their income, immigrant founders are more willing to set out on the venture of setting up a business because they have already taken one of the biggest risks. Using analysis from SyndicateRoom’s Top 100 list, which identifies companies who have seen the largest increase in value over the last three years, we can see that while just 14% of UK residents are foreign-born, 49% of the UK’s fastest-growing companies have at least one foreign-born co-founder.
A Growth Mindset
An individual that has a ‘growth mindset’ believes that their talent and abilities aren’t inherent but can be developed through hard work and persistence. Making the decision to leave everything you know requires a great deal of confidence in your ability to adapt to change. While seemingly unsurmountable at first, immigrants overcome the adversity and grow as a result of doing so. Being equipped with this mindset means that immigrant founders adapt to any change that affects their business, continuously look to improve their product or service and pre-empt new market trends in order to remain competitive.
An Innovative Mindset
Immigrant founders tend to have weaker social embeddedness compared to native founders. The concept maintains that entrepreneurs build social networks that affect their business decisions. These social networks can grant an entrepreneur access to support and resources. This means that immigrant entrepreneurs are pushed to be more innovative and find solutions to make their venture work, instead of relying heavily on social capital and pre-established connections. Thinking outside the box and continuously seeking ways to improve is crucial for a start-up to remain competitive. In 2018, a study conducted by the National Foundation for American Policy revealed that 82% of America’s unicorns in 2018, had at least one immigrant helping the company grow and innovate by filling a key management or product development position.
3 The Western Tech Ecosystems
Immigrant founders are also able to overperform thanks to the quality of the western European and US tech ecosystems. Those ecosystems are able to attract the best brains from all over the world. Had those brains stayed in their native countries, their potential would have been restricted. For instance, the Silicon Valley tech ecosystem is mature and transparent enough to allow daring immigrant founders with amazing ideas but without access to the network to succeed. As a result, many immigrant founders have been able to thrive in the US. As tech ecosystems continue to mature in Western Europe, something very similar is happening.
Conclusion
It’s no surprise that immigrant founders overperform. Being in a position to uncover unique market opportunities and leverage their international ties, immigrant founders can tap into a niche and be prepared to trade it on the global market. The experience of moving to a foreign country has led these individuals to develop a mindset that is highly useful for entrepreneurship, with an emphasis on resilience and being resourceful. It allows them to remain hardworking, be adaptable to change and continuously strive for innovation
As a VC firm, we invest in immigrants. No Label Ventures is writing $150-250k checks in pre-Seed and Seed stage startups with at least one founder who is a first or second-generation immigrant from outside Western Europe. We are sector agnostic. If you are an underrepresented founder in Europe we’d love to hear from you. You can pitch us here: contact@nolabel.ventures