International Entrepreneurs: Welcome to America (Visa Waiver / Parole)

We promised you a final update. Here it is.

The Final Rule on the U.S. International Entrepreneur Visa Waiver (Parole) was published this past Tuesday, January 17, 2017. Applications can be submitted on July 17, 2017 and anytime thereafter. Get ready! Bring on your STEM, IoT, SaaS, cybersecurity, DRaaS, fintech, blockchain, edutech, healthtech, Big Data and Cloud Computing!

Summary.  Under the new Rule, the USCIS may authorize a foreign “entrepreneur” to work in the U.S. for a U.S. “startup entity."

• The entity must have been formed not more than five years before the filing date of the application.
• The entrepreneur must own a “substantial percentage” of equity in the “startup entity,” being 10% at the time of the application and being diluted to not less than 5% after subsequent additional funding. 
• “Qualified” U.S. investors must have made a minimum “qualified investment” of $250,000 in acceptable securities (convertible debt, equity or contracts for such securities). The investment must have been made within 18 months before the foreign entrepreneur’s application.
• If qualified, the foreign entrepreneur can remain for up to five years, divided between two periods of up to 30 months each.

This is good news for U.S. startups and high-growth innovative companies and U.S. private equity investors.

Implications for Foreign Startups Coming to America. Foreign startups might use the rule too by converting to American startups! Globalizing foreign startups could take their teams to the U.S. for some functions but not others. Maybe this Rule could be a tool for globalizing high-growth companies that already have begun their development and growth abroad, but want to have the leadership located in the U.S. The Rule supports foreign entrepreneurs despite:

• the original location of some business operations and assets outside the U.S., such as R&D, product testing, marketing, sales or administrative support; 
• the conversion of a foreign startup to a U.S. startup (through a little gymnastic flip using tax-free corporate restructuring); and
• the existence of some foreign capital investment. 

Since the Rule was not intended for such scenarios, the Trump Administration might interpret the policy basis to focus on U.S. job creation. Foreign startups that contemplate using this visa approach might wish to limit the relative importance or the growth of foreign jobs.

Comparative Benefits. As with any innovative governmental program, the International Entrepreneur Visa Waiver (Parole) Rule is not an “open floodgate.” The USCIS estimates that only a total of 2,940 entrepreneurs will be able to qualify in this initial year of the Final Rule.

Given this focus and orientation on growing local American startups, this Rule may be more difficult to comply with, both initially and upon renewal, than a H1-B, L1-A, L1-B or E-1 or E-2 visa for foreign high-growth companies coming to the United States.