Last Wednesday, the Department of Homeland Security (“DHS”) announced a proposal that would allow foreign entrepreneurs to enter the United States to operate high-growth, job-creating startup enterprises. As with other business immigration options, the International Entrepreneur Rule grants immigration benefits to foreign entrepreneurs whose presence in the U.S. contributes to investment in U.S. business and the creation of American jobs. This article provides an overview of several important aspects of the proposed rule.
The Entrepreneur. The proposed rule anticipates that the successful applicant is someone who could appear on Shark Tank — an entrepreneur with a growing startup. The entrepreneur must own at least 15% of the startup and must take an active and central role in the business’s operation and growth. The entrepreneur’s knowledge, skills, or experience must substantially assist the startup in conducting and growing its U.S. business; neither a passive investor nor a non-equity employee would qualify.
The Startup. Although the proposed rule uses the term “startup,” the U.S. business entity may have been established within the three years preceding the entrepreneur’s petition. The startup must demonstrate substantial potential for rapid growth and job creation. Additionally, the startup must offer goods or services and cannot be a mere investment vehicle. Otherwise, there is no limitation on the industry in which the business may operate.
The Sharks. Unlike business immigration visas that require the applicant to invest his own money in the business, the proposed rule requires the entrepreneur to show the startup has attracted substantial investment from American investors. This requirement may be satisfied in one of three ways. First, the entrepreneur can show the startup has attracted at least $345,000 in financing from American investors within the past year. The investors must be “sharks” — American venture capital firms, angel investors, or startup accelerators with a record of making successful similar investments on a regular basis over the preceding five years.
Alternatively, the entrepreneur must obtain at least $100,000 in awards or grants from Federal, State, or local government entities with expertise in economic development, job creation, or research and development. If the entrepreneur is able to only partially satisfy either of the two preceding funding requirements, the application can be supplemented with other evidence of the startup’s potential for rapid growth and job creation.
Limited Duration. Even if the startup is successful, the maximum time an entrepreneur would be allowed to remain in the U.S. is only five years. An entrepreneur could work in the U.S. startup for an initial two-year period, with the possibility of a single three-year extension.
Qualifying for the extension requires the entrepreneur to maintain an active and central role in the operation and growth of the startup, including maintaining at least a 10% ownership in the startup.
The entrepreneur must also prove that the startup experienced significant growth during the entrepreneur’s initial two-year period and that growth and job creation will continue during the three-year extension. This requirement may be satisfied by showing that during the initial period the entity received at least an additional $500,000 from the “sharks” discussed in the previous section.
Alternatively, the entrepreneur could show the startup generated at least $500,000 in annual revenue and revenue growth of at least 20% per year during the initial two-year period. Or the entrepreneur could show the startup created at least ten full-time American jobs during the initial period.
At all times, the entrepreneur’s presence in the U.S. would be at the discretion of DHS, and that discretion would last only as long as the startup is operating, growing, and creating a substantial benefit for U.S. workers and the U.S. economy.
Not a Visa; Not a Path to Permanent Residency. The proposed rule would not create a visa; instead, it would allow DHS to “parole” entrepreneurs into the U.S. despite the entrepreneur’s lack of a visa. The entrepreneur would receive documentation that would allow entry into the U.S. and employment with the startup entity.
Nor would the proposed rule provide a new path to permanent residency or citizenship. Entrepreneurs would be able to apply for a different immigrant status if they met all relevant qualifications, but presence in the U.S. under the proposed rule would not provide an independent basis for permanent residency.
Family Members. The entrepreneur’s spouse and minor children will be able to reside in the U.S. for the duration of the entrepreneur’s stay, and the spouse will be eligible to apply for a work permit.
Unanswered Questions. The proposed rule presents practical and legal questions. First, the relatively short duration of the entrepreneur’s permitted stay in the U.S., as well as the lack of a path to permanent residency, would seem to discourage applicants. The prospect of working on a thriving startup in the U.S. loses some of its appeal considering the strict five-year time limit.
Additionally, requiring the startup to already be established and funded by the time the entrepreneur applies presents a chicken-and-egg dilemma. To qualify, the applicant would need either (1) to already have an immigration status that allowed him to do business in the U.S., which would seem to negate the need for the proposed rule, or (2) a partner in the U.S. to operate the business and attract funding before the entrepreneur could enter the U.S., which would seem to negate the need to bring the entrepreneur to the U.S.
Finally, it will be interesting to see if the proposed rule is challenged in court. DHS issued the proposed rule pursuant to its discretionary rule-making authority; the proposed rule will be implemented without congressional hearing or approval. DHS has discretion to parole foreigners on a case-by-case basis, but some may consider the rule an unconstitutional incursion into the realm of the legislative branch.
The proposed rule is still open to public comment and not yet final. Making immigration or investment decisions based on a non-final rule is inadvisable.
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