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Scott Tobin  |  July 30, 2015
Have a Hot Technology Start-up? Thank Comrade Gorbachev–and Liberty

It has now been 25 years since Mikhail Gorbachev, with his Soviet Union crumbling, decided to open the emigration gates and allow 1.6 million Jews to leave for Israel, Germany and the United States.

This may be one of the most stunning and ironic immigration stories of the last 50 years.  Stunning, as a much-needed example of a victory of freedom over tyranny; ironic, in terms of the impact this previously captive population has had on the democratization of information around the world.

From that wave of refugees came entrepreneurs who created world-changing technology companies like PayPal, Google and WhatsApp, the messaging start-up bought by Facebook for a stunning $22 billion last year. The communist leader’s decision may have been the greatest contribution to capitalism in our lifetimes—and should serve as a lesson in the broader, economic benefits of liberty for U.S. policymakers considering changes to skilled-worker immigration laws.

As an investor who has spent the past two decades nurturing startups founded by entrepreneurs from nearly a dozen countries, I have witnessed first-hand the special drive of immigrant founders and their power to change huge markets. In 2012, 27% of new U.S. entrepreneurs were immigrants, and immigrants were almost twice as likely as native-born Americans to start a business, according to recent research from the Kauffman Foundation. Data from varying government sources reveals that entrepreneurship among immigrants is increasing, while decreasing among those born in the U.S.

In my business, venture capital, we run into people like South African Elon Musk, who famously has taken on the car, solar and space industries. Lesser-known, but just as prolific, is Amarjit Gill, a native of India who founded computer-storage company Maginatics—and three other tech outfits before that.

The Russian emigres who fled Communism in the 1990s are also prime examples of how entrepreneurs can help boost a country’s economic fortunes.  During this period Israel saw an influx of almost a million ex-Soviet Jewish immigrants, including 82,000 trained engineers. The Russian aliyah (immigration to Israel) fueled Israel’s emergence as a high-tech powerhouse with more venture-capital investment per person than anywhere in the world, and the largest number of Nasdaq-listed companies after the U.S. and China.

According to Eugene Kandel, the head of Israel’s National Economic Council–and a Russian émigré himself—many Russian-born techies now working in Israel are especially innovative because the Soviet state traditionally under-invested in computer hardware and other technology, even as the state was scrambling to develop weapons and related technology to win the Cold War. That left engineers to fend for themselves and develop creative workarounds in many businesses, which are now being leveraged for big profits at Israeli and Western startups.

Russian Maximillian Rafael’yevich Levchin landed in Chicago as a 16-year-old in 1991. He soon became known as Max and went on to help start PayPal, Yelp and, most recently, financial-technology company Affirm. The startup’s website boasts a staff photo typical of the multi-national nature of Silicon Valley startups.  Companies started by Max, often with other immigrant founders, have generated untold economic benefit and thousands of jobs.

The success of Soviet Jews in the U.S. and Israeli high-tech industry does “make for an exceptionally crisp example of what high-skilled émigrés will do for a country willing to open its doors and its immigration policy,” Levchin recently told me.

Indeed, venture-backed companies with at least one foreign-born founder are responsible for an increasing number of U.S. stock offerings and subsequent job creation, according to the National Venture Capital Association. Public, venture-backed companies in the U.S. with at least one immigrant founder are now worth roughly $900 billion.

In the 1970s and 80s, living on Long Island and being raised in an observant Jewish family, I wasn’t thinking about economic growth and IPOs when my family took up the cause of Jews stuck behind the Iron Curtain. My family and I took part in walk-a-thons and attended rallies because we believed in religious and political freedom. I recall the empty place settings my mother would put out at our Passover Seder in remembrance of the foreign Jews’ plight, and Bar and Bat Mitzvah events at which kids “twinned” with their then-Soviet counterparts to commemorate coming of age as Jews.

And, like hundreds of thousands of others from all over America, I boarded a bus to Washington to stand up and demand that the Kremlin “LET MY PEOPLE GO!”  A quarter-century ago, our collective voices reached Moscow and those people were let go.

Now it’s time for a new play on those ancient words to be heard by America’s politicians and judges: It’s time to let people in.  A society that truly believes in liberty must do this. And if we take that to heart and act accordingly, we might also get a few more Googles and Paypals in the process.

Scott Tobin is a general partner with Battery Ventures, a global venture capital firm with offices in Silicon Valley, San Francisco, Boston and Herzliya, Israel.

This article originally ran in Forbes

The information contained herein is based solely on the opinions of Scott Tobin and nothing should be construed as investment advice. This material is provided for informational purposes, and it is not, and may not be relied on in any manner as, legal, tax or investment advice or as an offer to sell or a solicitation of an offer to buy an interest in any fund or investment vehicle managed by Battery Ventures or any other Battery entity.

This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and is for educational purposes. The anecdotal examples throughout are intended for an audience of entrepreneurs in their attempt to build their businesses and not recommendations or endorsements of any particular business.

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