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.

Update on U.S. Visa Waivers for "International Entrepreneur"

Are you a foreign entrepreneur/innovator wanting to come work and grow your business in the U.S.?  The Visa Waiver for International Entrepreneurs is “almost” ready.

In August 2016, the U.S. Customs and Immigration Service, a division of the Department of Homeland Security, published a Proposed Rule that would enable the USCIS, on a discretionary basis, to admit foreign entrepreneurs of startup companies for temporary stays in the U.S. in order to grow their businesses.  Qualifying entrepreneurs would need to meet stringent requirements. The duration would be for an initial two years, with the possibility of renewal. 

The Proposed Rule was open to public comments until October 17, 2016.  After reviewing hundreds of comments, the USCIS issued a final International Entrepreneur Rule, with changes from the Proposed Rule.   This final Rule went to the Office of Management and Budget (OMB) for review on December 29, 2016.  The OMB’s Office of Information and Regulatory Affairs (OIRA) evaluates a final rule, typically within 90 days.  However, this OIRA review was completed very quickly by January 5, 2017, we think in anticipation of the expiration of the Obama Presidency on January 20, 2017.  Therefore we expect the final rule to be published shortly in the Federal Register.  It is likely that this Rule will be effective under the forthcoming Trump Administration.  However, pending actual publication, details of the final Rule remain confidential.

While President-Elect Trump might take steps to invalidate this “rule by executive penmanship,” we think President-Elect Trump will not object to this new rule.  His opposition to immigration has been focused on illegal immigrants, while he promotes entrepreneurship, jobs in America, tax-paying business operations and innovation.  Whatever its configuration, the new International Entrepreneur rule will be good for global startups as well as the American innovation eco-system.

Once we know more, we will keep you informed. 

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.