Amr Awadallah, founder of AI startup Vectara, reacted with both a lack of surprise and significant dismay upon learning about the revised H-1B visa program, which now includes an application fee of $100,000 per visa.
The substantial increase in fees was not unexpected, but the scale of the change was concerning.
Awadallah stated that a $100,000 fee is unaffordable for his company. While the new fee applies only to new applications, he believes it will make international hiring prohibitive for many startups.
The H-1B visa program was established to enable companies to recruit skilled professionals globally for fields like IT and engineering. A recent announcement indicated that the application fee, usually covered by employers, would jump from its previous range of $2,000-$5,000 to $100,000 per application. This significant increase is expected to have a major impact on the new visa allocations in March.
Immigration has been a central theme for President Trump, who, since his 2016 campaign, has claimed that companies utilize the H-1B program to displace U.S. workers.
Opponents of the fee increase highlight the visa’s role in attracting individuals who later founded or led multi-billion dollar enterprises, such as Sundar Pichai of Google, Satya Nadella of Microsoft, and Elon Musk. The H-1B visa has historically been more attainable than the O-1 visa for extraordinary ability and faster to acquire than a green card.
Awadallah warned that the fee would severely affect the competitiveness and innovation of smaller startups compared to larger corporations. He believes that while major tech companies can absorb these costs, startups will be disadvantaged, potentially hindering long-term innovation.
Potential $5.5 Billion Annual Cost for the Tech Industry
Over 700,000 individuals reside in the U.S. on H-1B visas, accompanied by more than 500,000 dependents, including spouses (who are allowed to work) and children, as reported by fwd.us. Data from U.S. Citizenship and Immigration Services indicates that Indian nationals are the primary recipients of this visa, followed by China and other countries.
The annual cap for new H-1B visas is 85,000, with 20,000 reserved for recent U.S. university graduates. Due to high demand exceeding availability, visas are distributed through a random lottery in March. Tech companies have consistently advocated for an increase in these annual limits.
Critics claim that some companies use H-1B visa holders to substitute U.S. workers with lower-wage international employees. Conversely, others argue that the system exploits foreign workers because the visa’s tie to a specific employer limits job mobility and poses a deportation risk if employment is lost.
Over 700,000 individuals reside in the U.S. on H-1B visas, and they’ve brought with them more than 500,000 dependents, such as spouses and children.
Supporters of the visa fee increase suggest it could eliminate the lottery system, as the elevated costs might lead employers to reduce their application submissions.
Annually, approximately 55,000 of the 85,000 new H-1B visas are allocated to computer-related positions, according to data from DesignRush. While the previous cost for hiring these workers ranged from $200 million to $400 million, the new fee could escalate the annual expense for the tech industry to $5.5 billion for H-1B tech talent.
The proposed changes also include an increase in the minimum salary employers must offer H-1B recipients, a measure intended to prevent the undercutting of U.S. citizen wages.
However, several uncertainties remain. Immigration lawyer Sophie Alcorn, who advises startups, noted the lack of clarity regarding whether the $100,000 fee would be refunded if an application is rejected. Given that the price increase technically commenced on Friday, it is also uncertain if visa petitions currently being processed are subject to the new fee.
This situation is compelling a temporary pause on numerous H-1B petitions for aspiring founders, with further guidance awaited.
Concerns Over Impact on Future Talent
Founders in Silicon Valley explain their global search for talent by citing a shortage of technical skills within the U.S., particularly in areas like AI engineering.
Brian Sathianathan, co-founder and CTO of AI company Iterate, employs several individuals on H-1B visas and attributes the visa program to the success of his previous startup exit.
Sathianathan noted that in his previous successful venture, both his co-founder and head of engineering were H-1B visa holders. He believes such an outcome would be impossible with the current high application fees.
Other founders express concern that the fee increase conveys a message of unwelcoming foreign talent.
The impact will be severe on the competitiveness and innovation of smaller startups compared to the hyperscales, the big businesses.
Hemant Mohapatra, an India-based partner at Lightspeed Venture Partners and a former H-1B visa holder for about 15 years, suggested that high barriers for tech-worker visas could create an innovation gap within the U.S. startup ecosystem, given that a significant number of unicorn and decacorn companies are founded by immigrants.
He observed that many H-1B visa recipients eventually establish their own U.S. companies, and sometimes their children also become founders.
This pattern is reflected in the experience of Jeffrey Wang, co-founder of AI company Exa.ai. While some of his employees secured H-1B visas through prior employers, Wang’s own parents immigrated to the U.S. as H-1B recipients.
Wang expressed sadness upon hearing the news, stating a concern that individuals like his parents might no longer be able to immigrate to America under such conditions.
The Trump administration justified the visa alteration as a measure to safeguard national interests. However, Wang contends that attracting top global talent to the U.S. contributes to national security, noting that immigrants have been integral to nearly every significant engineering or scientific advancement in the country’s history.
Startups Seek Alternative Solutions
U.S. startups are currently seeking solutions, with some advocating for specific exemptions. The administration has indicated that exemptions could be considered in cases deemed to be in the national interest.
Concurrently, Casium, a business immigration service provider, reported a more than 50% rise in early-stage founders exploring O-1 visas (which do not permit spouses to work). More established companies are considering the EB-1A visa, typically for individuals at the pinnacle of their professions, which does allow spouses to work.
I feel like people like my parents wouldn’t be able to come to America anymore.
Jack Thorogood, CEO and founder of payroll company Native Teams, stated that his company has observed a 50% increase in U.S. companies investigating visa-free global hiring strategies, such as international remote work.
Native Teams, which serves over 3,000 companies across 85 countries, indicated that the cost of one H-1B hire could now equate to hiring up to 20 remote workers in various other nations.
Thorogood anticipates that U.S. startups will increasingly outsource talent or retain their workforce internationally, noting that overseas talent would not necessarily be more expensive.
Countries such as Canada, Germany, and the U.K. are already developing into significant tech hubs, attracting companies looking to establish international offices.
Oliver Kent-Braham, CEO and co-founder of the U.K.-based unicorn Marshmallow, suggested that if the U.S. implements barriers, countries like the U.K. should adjust their policies to attract global talent.
Daniel Wigdor, a Canadian founder of an AI venture studio and a professor at the University of Toronto, concurred that the visa fee modification is not beneficial for the U.S.
He commented that instead of competing for top global talent, the U.S. appears to be assessing how much companies are willing to pay to import them. This approach, while potentially appealing domestically, risks undermining America’s global leadership in technology.
