Monday, September 19, 2016

DHS Proposes New Rule for International Entrepreneurs Seeking to Enter the U.S.

On August 26, 2016, the Department of Homeland Security (“DHS”) released a proposed rule which would allow it to use its existing discretionary statutory parole authority to enable eligible entrepreneurs of startup entities to gain temporary stays in the United States. In the past, this authority has been used to admit individuals on a discretionary case-by-case basis either for urgent humanitarian reasons or for significant public benefit to the U.S. The DHS is now considering extending this authority to admit entrepreneurs of startup enterprises whose stay in the U.S. could provide significant public benefit by directly managing their companies in the U.S. for rapid business growth and job creation. The approach will impact foreign-based and U.S.-based startups, business angels, venture capital and mature U.S. businesses that rely upon startups for new product development.

Why adopt a discretionary approach? For years, U.S. politicians have proposed special visas or “lawful permanent resident” status for foreigners who earn U.S. Ph.D.’s in sciences, technology, engineering and math. But immigration policy has become politicized. So the Obama administration is adopting a creative approach by administrative relief, without seeking new legislation. So this will not be a “visa,” but rather an administrative waiver of visa rules.

The good news, I believe, is that the DHS is adopting a more proactive role in encouraging foreign entrepreneurs to locate and grow their businesses in the U.S. Many locally established U.S. startups are affiliates of foreign startups. Such relationships reflect the role of the U.S. in global innovation. First, at the stages of product development and proof of concept, startups can serve as a supplement to larger corporate domestic R&D and for development of market-ready products (e.g., bio tech, fintech, adtech). Second, once proof of concept has been confirmed, the U.S. economy serves as a key location for marketing disruptive technologies and services. Third, American jobs are created by hiring of American local employees to localize, adapt, re-sign, market and sell foreign-originating technologies.

The bad news is that the restrictions on the qualifications to be granted an entrepreneur parole are stringent and prohibitive, likely limiting the number of qualified individuals to a very small pool. Perhaps DHS can be persuaded to be more competitive with other countries that offer entrepreneur visas with more assurance of successful implantation of foreign know-how and entrepreneurship.

Wary of taking away jobs and growth from homegrown U.S. businesses, the DHS has proposed some pretty tough restrictions on the qualifications of these applicants. To get the visa waiver, entrepreneurs must have:
  • a significant ownership interest in the startup (at least 15 percent) and have an active and central role to its operation 
  • a startup was which was formed in the United States within the past three years before the filing date of the application; and
  • a startup which has substantial and demonstrated potential for rapid business growth and job creation, as evidenced by: 
    • receiving significant investment of capital (at least $345,000) from certain qualified U.S. investors with established records of successful investments;
    • receiving significant awards or grants (at least $100,000) from certain federal, state or local government entities; or 
    • partially satisfying one or both of the above criteria in addition to other reliable and compelling evidence of the startup entity’s substantial potential for rapid growth and job creation.
  • No more than three individuals from the same startup can qualify for parole under this rule.
If approved, the applicant may stay in the U.S. for up to an initial period of two years and must then re-apply (under different qualifications, but just, if not more, stringent) for a renewal of up to three additional years. One benefit of approval is that the entrepreneur will be authorized to work immediately for the startup enterprise, without having to apply for employment authorization as well.

This notice is now published in the Federal Register for public comment until October 17, 2016, after which the USCIS (U. S. Citizenship and Immigration Services) will address comments received. (That’s just in time for the Presidential election in early November.)

We will be monitoring the situation and give you an update.