U.S.-Born and Immigrant Founder Teams Have Startup Edge

When immigrant and U.S.-born entrepreneurs team up, their startups perform better than those founded by either group alone, according to a new study.

An analysis of nearly 91,000 U.S. startups by researchers Timothy McQuade and Amir Kermani from UC Berkeley Haas and Zhao Jin of the Cheung Kong Graduate School of Business found that companies with mixed founder teams grow faster, employing 20% more people than U.S. native-only ventures three years after launch. They also raise larger funding rounds and are more likely to be acquired or go public.

The advantages appear to come from expanded access to talent pools, international funding sources, and international markets, the researchers say.

“By exploiting these broader networks, they get higher quality labor, higher quality sources of capital, and more product market access,” says McQuade, an associate professor and California Chancellor’s Chair of Real Estate and Land Economics at the Haas School.

“By exploiting these broader networks, they get higher quality labor, higher quality sources of capital, and more product market access.”

—Professor Timothy McQuade

Collaborative “secret sauce”

High-skilled immigration remains at the forefront of the policy debate in the United States—most recently with President Trump’s proposed overhaul of the H-1B visa program. While the economic consequences of high-skilled immigration are multifaceted and complex, there is significant evidence that immigrants play an important role in U.S. innovation and creation of new companies. For example, immigrants comprised 23% of the total workforce in STEM occupations. As of 2022 the four most valuable private, venture-backed U.S. companies had immigrant founders (SpaceX, Stripe, Instacart, Databricks), as did three of the most valuable public companies globally (Alphabet, Nvidia, Tesla).

At the same time, many immigrant founders collaborate with U.S.-born entrepreneurs when starting a company. The researchers were interested in whether such collaborations between immigrant and native entrepreneurs lead to greater startup success. “We wanted to understand whether mixed entrepreneurial teams could create synergies leading to higher employment, larger funding rounds, and more successful exits,” says McQuade.  

The researchers merged startup data from Crunchbase with data from Revelio Labs, which draws from LinkedIn profiles to provide detailed information on the employment, education, and skillsets of more than 850 million people in over 200 countries. Through Revelio, the researchers were able to identify individual founders of the startups in Crunchbase. Their sample consisted of nearly 135,000 entrepreneurs who founded almost 91,000 companies in the U.S. between 2000 and 2022.

Entrepreneurship trends

Their initial review of the data showed:

• Immigrant founders have grown from 12% of U.S.-based entrepreneurs in 2000 to 27% in 2022.  
• India, the U.K., and Canada are the top origin countries for entrepreneurs.
• Artificial intelligence, blockchain and cryptocurrency, and data and analytics are the top industries.  
• Mixed teams are common: About half of entrepreneurs from the U.K. and Canada and one-third of Indian immigrant entrepreneurs co-found a company with a U.S.-born partner.

Key findings about startups

The analysis found that ventures with mixed immigrant and U.S.-born founders:

• Employ 20% more people after three years than native-only startups, and 8% more than immigrant-only startups.
• Raise more money and pull 43% of their funding from foreign VCs, vs 8% for U.S. native-only startups.
• File 117% more patents than immigrant-only startups and 28% more than U.S. native-only startups, with greater global reach.

Three channels of influence

The benefits of having cofounders from different countries take different forms, but they all flow from the fact that these collaborations lead to expanded access to labor, capital, and markets.

For instance, when considering the employees of various startups, the researchers found that those founded by immigrant-native teams not only hire 27% more immigrant employees than U.S. native-only companies, but that these employees appear to be better at their jobs, as measured by the rate of internal and external promotions.

“And it’s not just that the migrants themselves are more productive,” says Kermani, the Kingsford Capital Management Chair in Finance at the Haas School. “What makes this secret sauce is very much the mixing of these teams: Each person brings to the table something that the other side doesn’t have.”

“It’s not just that the migrants themselves are more productive…What makes this secret sauce is very much the mixing of these teams: Each person brings to the table something that the other side doesn’t have.”

—Professor Amir Kermani

As Kermani explains, “I’m from Iran, and Tim is from the U.S., so if we started a company, we would have a higher likelihood of finding the best talent from Iran and the best talent from the U.S. By looking at a larger pool, we’re simply going to have better, higher-quality labor.”

The same logic plays out in the financing of startups and in their access to markets both within the U.S. and overseas. Not only are they filing more patents, but they are also much more likely to file patents in other countries, suggesting greater global market penetration.

Testing causality

The researchers also performed a check to determine whether the composition of founding teams drives their greater success, or whether it’s simply the result of higher-performing entrepreneurs seeking out diverse teams. This led them to analyze the composition of their university degree programs, finding that a smaller proportion of foreign-born students in a program reduced the chance that a U.S.-born entrepreneur joined with foreign passport holders. A second method of analysis showed an even stronger effect: mixed founder startups are 44% larger and 35 percentage points more likely to secure funding within three years than native U.S.-only startups.

Policy implications

The research also highlighted the critical role that institutions play in developing international partnerships. About 30% of the companies examined in the study were formed in universities, for example. In addition to admitting diverse classes, Kermani says universities can create opportunities for different groups to collaborate.

“This is not a zero-sum game, where the gains are only going to one group,” he says. “Together we can produce something much more than we would otherwise, and everyone is going to benefit from that.”

It may be easier to work with people who come from the same background, “But if there’s one thing to take from this work it’s that you should get out of your comfort zone. There are things other people have that you don’t have,” Kermani says. After all, he noted, the paper itself was co-authored by an American, an Iranian immigrant, and a Chinese citizen living in China.

The Takeaway

Blending immigrants’ global ties with U.S. expertise and networks creates a measurable edge—fueling faster growth, more capital, stronger innovation, and greater success than either group achieves alone.

Read the paper:

Native-Immigrant Entrepreneurial Synergies

By Zhao Jin, Amir Kermani, and Timothy McQuade

National Bureau of Economic Research Working Paper no. 33804