Will there ever be a Startup Visa?

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Earlier this summer, the Department of Homeland Security (DHS) announced it would begin the process to formally terminate the International Entrepreneur Parole Program.[1]  Created during the Obama administration, the program would have allowed certain foreign national entrepreneurs to come to the United States to develop and oversee startup businesses. The program was set to take effect in July 2017, but that never really happened.  Now with Homeland Security’s announcement, the question becomes:  will there ever be a startup visa?

I ask this question from the Bay Area, where the startup ecosystem is simply extraordinary.  Between the world-class universities, culture of venture capital, and iconic companies, the Bay Area attracts students and entrepreneurs from all over the world. They come with ideas, networks, and huge amounts of talent.  Surely there is a way to leverage all this energy and ambition to the benefit of the U.S. economy, U.S. workers, and international talent.

Some Facts to Consider

There are concrete facts supporting the need for a startup visa.  Immigrants have founded more than half of America’s startup companies valued at US$1 billion or more.  Among these companies, immigrant founders have created on average 760 jobs per company in the United States.  The collective value of the 44 immigrant-founded companies is $168 billion.[2]

Hello Congress?

Congress is aware of these facts.  For the last decade, bipartisan legislation has been introduced repeatedly to create a startup visa.[3]  Most recently, on September 28, 2017, U.S. Senators Jerry Moran (Republican from Kansas) and Mark Warner (Democrat from Virginia) along with Senators Roy Blunt (Republican from Missouri) and Amy Klobuchar (Democrat from Minnesota) reintroduced the Startup Act (S.1877), which, among other things, creates an Entrepreneur Visa for foreign nationals so they can “remain in the United States legally to promote new ideas, fuel economic growth, and create good-paying American jobs.”[4]

Under the proposed Startup Act, a foreign national could apply for conditional permanent residence as an Alien Entrepreneur if s/he meets the following:

  • Holds either valid H-1B (high-skilled worker) or F-1 (international student) status at the time s/he files his or her application;
  • Registers a new business entity within one year of obtaining the entrepreneur visa;
  • Employs at least two full-time employees who are not the foreign national’s relatives within the first year of being on the entrepreneur visa and five full-time employees over the following three years; and
  • Invests or raises capital investment of at least $100,000 for such business in the first year.

After four years, if these conditions have been met and the business continues to operate, the entrepreneur can obtain unconditional permanent residence.   The Startup Act sets an annual limit of 75,000 entrepreneur visas per year.

Is the Startup Act likely to pass? Unfortunately, Congress has been unable to pass any kind of immigration legislation for the past decade.  Since 2007, after congressional efforts to pass comprehensive immigration reform failed miserably,[5] even attempts to pass piece-meal legislation have repeatedly been met with resistance.

The Executive Branch’s Initiatives

The Obama Administration Creates the International Entrepreneur Parole Program

A year after the Senate’s last attempt to pass comprehensive immigration reform fizzled out, former President Obama took office.  His administration understood that Congress was too divided on immigration to produce any legislative solutions.  And so, in the following eight years, he introduced a number of executive orders and agency rules dealing with specific immigration issues, such as Deferred Action for Childhood Arrivals (DACA), employment authorization for dependent spouses of H-1B (H-4 EAD), and additional Optional Practical Training for international students in the STEM fields.

In particular, towards the end of his second term, President Obama created the International Entrepreneur Parole Program.[6]  Under this program, a foreign national could qualify as an International Entrepreneur if s/he:

  • Started a company in the previous five years;
  • Held at least a ten percent ownership share;
  • Actively participated in running the startup (so as to avoid passive investors); and
  • Showed proof of at least $250,000 in funding from qualified investors ($100,000 if the funding came as awards or grants from local, state or federal government entities).[7]

These requirements are far more stringent than the Startup Act in terms of funding amounts, source of funding, and participation in the business. And, the program doesn’t offer permanent residence. Rather, it grants “parole” status, which is a weird legal concept for allowing a foreign national to enter the U.S. where there is no statutory basis for entry but where there is a public benefit in doing so. For example, parole status may be granted to individuals who do not belong to any state and therefore have no passports or who need admission urgently for humanitarian reasons.

The International Entrepreneur Parole Program was set to take effect in July 2017.  However, the Trump administration has delayed implementation of the program and, although US Citizenship and Immigration Services, or USCIS, started accepting applications in March 2018 (after a court order), it’s unlikely that any applications actually have been approved.

The Trump Administration’s Buy American, Hire American Executive Order

The new administration’s approach to US immigration is best understood by looking at its Executive Order titled “Buy American, Hire American” (BAHA for short).[8]  Issued on April 18, 2017, BAHA’s primary directive is to reevaluate all existing immigration programs with a view to how they can protect the economic interests of U.S. workers and prevent fraud and abuse of the immigration system.  Reading BAHA, it’s clear that the tone of this administration when it comes to immigration is hostile and restrictive.

In keeping with the mandate of BAHA, DHS is proposing to end the International Entrepreneur Parole Program because the agency believes that 1) the program lacks sufficient protections for U.S. workers and investors, 2) is not the right way to attract and retain international entrepreneurs, and 3) is something Congress should create (not the president).[9]  The Obama Administration had relied on the president’s authority to allow individuals into the United States temporarily where there is “significant public benefit” in order to create the International Entrepreneur Parole Program.  The Trump Administration believes this is not an appropriate exercise of presidential authority.

In announcing its intention to eliminate the program, USCIS noted that the immigration statute already provides for visa classifications that allow certain entrepreneurs to start businesses and work in the United States, such as the E-2 nonimmigrant classification and the EB-5 immigrant classification (also known as the million dollar green card).  Yet if the existing immigration statute had sufficed for purposes of attracting and retaining talented international entrepreneurs, why would the Obama administration have gone to such lengths to develop a detailed program? The examples given by USCIS are weak.  The E-2 visa is limited because it only is available to nationals of countries with which the U.S. has a treaty, foreclosing eligibility for nationals of India, China, Brazil, Russia and several other countries with large pools of talent and investment capital.  The EB-5 million dollar green card also is restrictive because of the significant amount of money it requires.  Most startups don’t have $1 million in their early days.

More importantly, the repeal of the International Entrepreneur Parole Program is unfortunate because the rigorous requirements of the program undoubtedly would have benefited the U.S. economy. Contrary to the current administration’s view, startups with this level of funding actually create jobs for U.S. workers and positively benefit the local economy because of all the expenses associated with running and growing a business.

Prognosis

Given the abysmal track record of Congress when it comes to actually passing immigration legislation and the new administration’s unwelcoming view on immigration, the disconnect between the U.S. government and the reality of the enormous international talent that has fueled so many of the startups in the U.S. becomes even more bewildering.  For now, sadly, the likelihood of any type of startup visa seems very, very small.

 

Nadia Yakoob is managing attorney at Nadia Yakoob & Associates and regular contributor to SCET. For questions about this article, please contact Nadia directly.

 

[1] https://www.uscis.gov/humanitarian/humanitarian-parole/dhs-proposes-remove-international-entrepreneur-rule

[2] https://www.nafsa.org/_/File/_/ie_julaug16_frontlines.pdf.

[3] Startup Act of 2011 (S. 1965, 2011); Startup Act 2.0 (S. 3217, 2012); Startup Act 3.0 (S.310, 2013); Startup Act 3.0 (H.R. 714, 2013); Startup Act (S. 181, 2015); Startup Act (H.R. 962, 2015); and Startup Act (S.1877, 2017).

[4] https://www.warner.senate.gov/public/index.cfm/2017/9/sens-warner-moran-reintroduce-the-bipartisan-start-up-actinternational

[5] http://www.cnn.com/2007/POLITICS/06/28/immigration.congress/index.html

[6] https://www.uscis.gov/humanitarian/humanitarian-parole/international-entrepreneur-parole;

[7] https://www.federalregister.gov/documents/2017/01/17/2017-00481/international-entrepreneur-rule

[8] https://www.uscis.gov/legal-resources/buy-american-hire-american-putting-american-workers-first

[9] https://www.uscis.gov/humanitarian/humanitarian-parole/dhs-proposes-remove-international-entrepreneur-rule

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