Jun 23 2017
This week is Tech Summit week at the White House, where many top-level officials from leading technology companies are convening with the President and his team to discuss ways to modernize the government. Yet, amidst the talk of modernization, the White House had recently pulled the plug on a scrappy program that would have created thousands of jobs in the U.S.: Parole for Entrepreneurs. While the program technically is still on the books, its fate is appearing less and less vibrant as the days pass with only matter of time before its likely to be scrapped entirely.
Although far from the perfect, the Parole for Entrepreneurs program would have allowed foreign entrepreneurs who were ramping up business to stay in the U.S. to run their company. If they met goals of creating more jobs for U.S. workers, they would be eligible to renew for additional 2.5 years. (Read more about it here.)
On May 25, 2017, the final rule was pushed back to the Office of Management Budget (OMB) for further review by the Administration. The OMB regularly reviews draft regulations prior to it becoming a final rule and rolled out to the public in order to determine economic and other impacts to stakeholders, as well as consistently with furthering government policies.
On June 16, 2017, the OMB concluded its review of the Parole for Entrepreneur program.
During the course of OIRA’s review of a draft regulation, the Administrator may decide to send a letter to the agency that returns the rule for reconsideration. Such a return may occur if the quality of the agency’s analyses is inadequate, if the regulatory standards adopted are not justified by the analyses, if the rule is not consistent with the regulatory principles stated in EO 12866 or with the President’s policies and priorities, or if the rule is not compatible with other Executive Orders or statutes. Such a return does not necessarily imply that either OIRA or OMB is opposed to the draft rule. Rather, the return letter explains why OIRA believes that the rulemaking would benefit from further consideration by the agency.
It’s particularly telling that no “return letter” was issued to USCIS on any potential negative impact by the program. Having returned the rule back to the USCIS, time will tell if the program will be rolled out. Rumors indicate that the Trump Administration plans to scrap the program, but not without strong comment from at least four senators Republication Senators: Orrin Hatch (R-UT), Jeff Flake (R-AZ), John McCain (R-AZ) and Jerry Moran (R-KS).
In their June 20, 2017 letter, the four Senators site to Canada and France as welcoming foreign entrepreneurs to their countries. Canada’s Immigration and Citizenship bureau has already implemented a similar program. France also has implemented a similar program for startups call French Tech Ticket.
What’s particularly confounding about the Administration’s pullback is that the Parole for Entrepreneur program aims to promote and produce U.S. jobs, goals that are entirely consistent with the Administration’s stated policy. It’s no secret that small businesses are the bulwark of job creators in the U.S., according to the Small Business Administration. The reality is that while other countries may offer a friendly process to start up a company, there is only one Silicon Valley and it sits in the Bay Area and that’s where most Entrepreneurs want to be.
For this Administration to stay true to its stated policy, it must develop an even better program, and soon, if the current one is to be abandoned. What do you think? Is the Administration being fair to foreign entrepreneurs? We’d love to hear your opinion on this matter.
Jan 15 2017
Hurray for USCIS, who worked quickly to release the Final Rule for Parole for Entrepreneurs. The rule is officially published on January 17, 2017 and will go live in 180 days – July 17, 2017.
A few highlights and thoughts on the Final Rule before we dig into the common questions that I know are on your minds.
Overall, USCIS was quite thorough in reviewing over 763 comments (including mine) received over a 45-day comment period. It took USCIS about three months to review and issue the Final Rule. USCIS lowered the threshold private investment amount from USD $345,000 to USD $250,000 and expounded on the “alternative” criteria in greater detail. This was a sticky point on my comment so I’m glad USCIS indulged me.
In sum, the Parole option will be attractive but only for a small number of entrepreneurs. Many will not qualify because funding a startup can be tricky and very difficult. Funding a startup with “qualified” investors is even trickier. For the brave and lucky, it’s worth a shot. The fact that the Entrepreneur is required to depart the U.S. (if they are already here), and then reenter the U.S. is inconvenient, but a necessary procedure. Although USCIS declined to publish its applicant data (minus identifying information), it did take my comments under consideration. I suspect that the annual number of applications will exceed the estimated 2,940 applicants, but the number of applicants approved will be much lower.
Parole is but a salve until Congress commits to real meaningful immigration reform. For now, here are some frequently asked questions (FAQs) about Parole for Entrepreneurs. We’ll be hosting a webinar, open to all entrepreneurs, interested in learning more. Sign up here.
When will USCIS start accepting Parole Applications?
The rule goes into effect, and USCIS will begin accepting applications on Monday, July 17, 2017.
What Does Getting “Parole” Actually Mean for an Entrepreneur?
Parole is the legal immigration term that allows an individual to enter the U.S., with the permission of USCIS, without having to go through the official process of obtaining a visa from the Department of State while bypassing the requirements applicable to Inadmissible Aliens. Read about the difference between Parole and a Visa.
I’m Already in the U.S. in Another Nonimmigrant Status; Must I Depart the U.S. and Reenter Seeking Parole?
Yes, you must depart the U.S. USCIS had indicated the rules for Parole require applicants to depart and then reenter. Although USCIS is aware of the “Parole in Place” option, it declined to allow “Parole in Place” for Entrepreneurs.
What Are the Limitations for Using Parole?
Yes. When entering the U.S. on Parole, an individual is not officially “admitted” to the U.S. There is no “status” issued. A Parole entry is a legal way to enter the U.S. but it is not considered an official admission to the U.S. The individual must either renew their parole period prior to its expiration, or depart the U.S. before the parole period ends. In this sense, travel is somewhat restricted during the parole period. Entrepreneurs should not depart the U.S. in the middle of the parole period unless they are willing to reapply for Parole in order to reenter the U.S.
How Does an Entrepreneur Qualify for Parole?
The Final Rule outlines some changes from the Proposed Rule (released September 2016). The update criteria are:
- Startup Entity must be formed within the last five (5) years
- Entrepreneur must own as least 10% of the startup
- Entrepreneur must play an active/central role in the startup’s operations (mere passive investor is not sufficient)
- No more than three (3) entrepreneurs for any one startup may apply for Parole
- The startup must have received significant funding from either:
- A qualified Investor(s) of USD $250,000 or more, within 18 months immediately prior to application; or
- Government grant of USD $100,000 or more, within 18 months immediately prior to application; or
- Alternative criteria that the company will provide a significant public benefit to the U.S.
What “Alternative Criteria” Can Be Used to Qualify for Parole?
USCIS has indicated a number of factors, including, but not limited to:
- The number of users or customers;
- The revenue generated by the start-up entity;
- The social impact of the start-up entity;
- The national scope of the start-up entity;
- The positive effects on the start-up entity’s locality or region;
- The success using alternative funding platforms, including crowdfunding platforms;
- The applicant’s academic degrees;
- The applicant’s prior success in operating start-up entities as demonstrated by patented innovations, annual revenue, job creation, or other factors; or,
- The selection of the start-up entity to participate in one or more established and reputable start-up accelerators or incubators.
Can You Renew Parole for Entrepreneurs?
Yes, but the total amount of time allotted for one entrepreneur is a total of five (5) years, from the date the first parole period was initially issued. Any time that is spent outside the U.S. is counted as well.
What Are the Criteria to Renew a Parole for an Entrepreneur?
In addition to submitting the appropriate documentation and application fees timely, entrepreneurs must satisfy these criteria:
- The entrepreneur must continue to operate the startup in an active role
- The entrepreneur must own at least 5% of the startup
- The startup must have sustained growth during the Parole period, via
- Having received additional investments or grants (additional USD $500,000)
- Generate revenue at least USD $500,000
- Created at least five (5) full-time jobs in the U.S.
- Or alternatively, provided a substantial benefit to U.S.
Can Family Members Apply for Parole as Dependents?
Yes. Spouses and unmarried children under 21 years may accompany the Entrepreneur to the U.S. on Parole. Spouses and children must also submit in advance of entering the U.S., their own applications for Parole.
May Family Members Work While on Parole?
After entry into the U.S., spouses may apply for a work permit but children are not eligible to apply for a work permit.
What Happens When Your Parole Ends?
Entrepreneurs may extend their parole period for an additional 2.5 years (30 months). After that period, they must depart the U.S. Entrepreneurs may apply for a non-immigrant work visa, such as an E-2, E-3, H-1B, O-1 or TN, if eligible. A departure is most certainly required at some point in the future.
What Documents Are Needed to Submit a Parole Application as an Entrepreneur?
USCIS has designated a new form, Form I-941, Application for Entrepreneur Parole. (This form should not be confused with IRS Form I-941, Employer’s Quarterly Federal Tax Returns.) Although a draft form was released in September 2016, due to the recent updates in the Final Rule, the new form has not yet been finalized. Once the form is finalized, it will be available online at USCIS Forms under Form I-941.
Additional, supporting documentation regarding each criteria will be needed along with an application fee of $1,200 and biometrics fee of $85.
Additional fees and forms will apply for dependent spouses and children.
What If I Have More Questions?
We’re hosting a webinar very soon to answer additional questions on Parole for Entrepreneurs. Click here to sign up for more information on how to attend the free webinar.
Nov 29 2016
For our start-up founders today, we have a treat! Our post is this awesome interview with Steven Hoffman, a serial entrepreneur, investor, and the Captain and Chairman of Founders Space, ranked one of the Top 10 incubators by Inc. Magazine and the number 1 accelerator for foreign startups by Forbes Magazine.
Q: Steve, you travel the world and have met start-up founders from all over. Aside from the passion to take huge risks on their ventures, what are a few similarities you have observed between these founders that have crossed cultural boundaries and contributed to their overall success?
Startup founders in practically every country tend to be enthusiastic, young at heart, and open to new things. They believe they can make a difference. They are also optimistic–sometimes to a fault. They believe in their ideas and their ability to do whatever it takes to succeed. Whenever you generalize, you run the risk of stereotyping, but the differences are sometimes more interesting than the similarities. Startup founders in China tend to be born entrepreneurs. They see an opportunity and lunge at it, while Europeans tend to be more cautious and analytical. While Chinese want the quickest path to riches, Europeans tend to move more slowly and think carefully about every aspect, sometimes to their own detriment. Americans tend to be the most idealistic and dreamy. Americans love to think anything is possible. In Taiwan, they have the opposite problem. They tend to think small, believing they have a better chance of succeeding if their idea isn’t too big. Koreans are in the middle. And most Japanese still prefer to work for big companies than take the risk.
Q: What are some worldwide trends in entrepreneurship that you think the U.S. hasn’t seen yet, but would benefit from the trends?
QR codes are huge in China. Everyone uses them to promote their businesses, make purchases, and share events and information. I used to think QR codes were silly, but now I’m a believer. They are a major driver of commerce and information sharing.
Payment and commerce through chat applications is another big opportunity that Asia has taken the lead on. The US is just realizing the potential but has a long way to go.
Cleantech is moving faster outside the US than inside. Our government isn’t nearly as supportive as those of other countries.
Q: Founders Space is rated as one of the Top 10 incubators in the U.S. as ranked by Forbes. Your organization provides a variety of resources to founders. If you were to focus on just the videos posted on your website as a starting point, which video is the most popular with founders and why do you think it is so popular?
My most popular video is Hunting Unicorns: http://www.foundersspace.com/investing/. Startups love the practical advice. Every entrepreneur wants to know exactly what smart investors are looking for in a startup.
Q: There is this myth that it’s easy for founders to raise capital from investors if they simply come to the Bay Area and do a few pitches or demo their product/service. There are multiple workshops, incubators and programs targeting and tailored to founders. For founders who experience multiple rounds of rejections from investors, it can be demoralizing. Under these circumstances, successful founders who have exited from their companies have advised these founders to “bootstrap it” and refine the product/service until there is enough traction to attract new investors. Would you agree with this advice? What additional motivational tips would you give to these founders?
My biggest tip is not to waste time trying to raise money before you’ve figured out your business. If you have the data to back up your assumptions and prove that there’s a real business, it’s not hard to raise capital. The problem is that most founders don’t have much more than an idea or an app with very few users. That’s not enough to get funded, and it’s better to hold off until you have something solid.
Q: For foreign founders coming to the U.S., sometimes a difference in culture may contribute to unknowingly offending certain cultural norms in the U.S. For example, speaking too quickly during a pitch with a heavy foreign accent might unnecessary create confusion, making it difficult for investors to understand what was being presented. What are some effective resources foreign founders may find helpful in becoming aware of and managing some of these cultural challenges?
I tell all foreign startup founders to speak slowly, especially if they have an accent. Also, the problem isn’t usually the accent. The problem is that their pitches tend to be convoluted. They need to simplify their pitches and focus on clearly explaining their product. This sounds easy, but it’s not. Explaining something as complex as a new business idea in simple, clear language can be a challenge, and we work with our overseas entrepreneurs to help them surmount this challenge.
Q: How do investors view a previously failed attempt at a startup by a founder currently pitching to them?
It used to be a real stigma. But now it’s just accepted as a fact of doing business. Most startups fail. That’s part of the process. Of course, it’s always better to have a success story, but failure isn’t looked down upon like it used to be. Most investors actually like to see entrepreneurs who have had past experience, even if that experience wasn’t successful.
Thanks to Steve for his words of wisdom and taking a Visa Pit Stop with us! If you enjoyed this article, please share it with your friends and subscribe to our blog!
Nov 22 2016
For the past couple of weeks since the presidential election, many foreign founders have asked what’s going to happen to the Parole for Entrepreneurs that is currently under review by USCIS. You’ll recall that USCIS announced in late August a Parole for Entrepreneurs that would allow eligible foreign founders who have secured at least $345,000 from private venture capital firms or $100,000 from a government source to request permission to stay in the U.S. to operate their startup. The public comment period closed on October 17, 2016.
While we all know it’s a wait and see approach at this point, let’s lay out the options:
Hypothetical #1: Revise the Regulation:
What would revising the regulation look like and how long would it take? If USCIS were to take into consideration new directives from its new boss, it’s theoretically possible that USCIS could substantively revise the regulations as it was initially released back in September 1, 2016. In that event, USCIS could reissue a second proposal for public comment and endure another round of public comment, for either 45 or 60 days, regarding the revised proposal. After USCIS reviews all comments, it could then issue a final regulation at some point in the future. We’re talking at least another six months after January 20, 2017 before a revised regulation.
Hypothetical #2: Block the Regulation:
Another scenario could be if President-Elect Trump decided that Parole for Entrepreneurs was an unconstitutional action by now President Obama, then President-Elect Trump could block the regulation entirely by redirecting the priorities that USCIS should undertake. This could happen because the President has the powers to enforce existing laws of the U.S. In this case, USCIS is overseen by the Department of Homeland Security, which is headed by a Secretary who is appointed by the President. As of the time of publication of this article, the Department of Homeland Security has yet to be appointed by President-Elect Trump. Thus, if the Parole for Entrepreneurs regulation is blocked, then we the public likely won’t see any updates on the regulation becoming a final rule.
Hypothetical #3: Pass the Regulation:
As I stated in my earlier analysis, President-Elect Trump is an entrepreneur himself. He may very well allow the proposed regulation to become final and go into effect. If this were to happen, how quickly could the rule go into effect? Best case scenario, USCIS would need to issue a final rule sometime in the near future and the rule could go into effect 60 days from the final rule. Theoretically, the rule could be implemented as soon as Q1 of 2017. The rule itself, as proposed, has fairly stringent guidelines, targets only a small subset (approximate 2940 entrepreneurs) whose ultimate goals are to create U.S. jobs in order to continue to be eligible for work authorization. It’s really a drop in the bucket.
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Nov 09 2016
There’s been a lot of forceful soundbites from Donald Trump on immigration during his Presidential campaign but it’s yet to be determined how much of that rhetoric will transform into actual policy.
From a logistical perspective, the Department of Homeland Security, who issues immigration benefits and enforces immigration rules, may be faced with changing course on how they evaluate immigration cases. It’s not uncommon for Presidents to issue guidance and directives to federal agencies, including the Department of Homeland Security, on what priorities to focus. While a President can issue executive orders, executive orders that unilaterally alter existing federal regulations might be challenged in court as an abuse of power.
- Immigration laws require Congressional approval to amend
- Immigration regulations issued from federal agencies require public notice and comment before being finalized as regulations. Any regulatory reversals would also require public notice and comment before being finalized.
As of today, November 9th, here’s what we do know in terms of where Trump stands on immigration that would significantly impact U.S. employers and foreign entrepreneurs based on his August 31, 2016 10-Point Speech on Immigration. (Keeping in mind that these policies were largely crafted by conservative-leaning immigration reform groups.)
NAFTA and TN Visas
Trump has lambasted NAFTA as a terrible trade agreement that hurts the U.S. and has promised to renegotiate better terms for the U.S. or otherwise withdraw if those new terms aren’t met.
Under the North American Free Trade Agreement entered into by Canada, Mexico and the U.S., in 1994, a new professional visa category (TN visa) was created to enable Canadians and Mexicans to enter the U.S. and fulfill certain occupational work here. The Agreements allows for any party to withdraw under Article 2205, by providing written notice six months in advance to all parties.
Impact to Employers: If the U.S. pulls out of NAFTA, it is possible employers may have to find alternative work options for TN employees in the U.S. (and for U.S. employees working in Canada or Mexico in TN status). The timeline could be as early as 2017Q3 but more will be revealed….
As I previously indicated here, Trump wants to impose new requirements for all immigration-related visas, particular for the H-1B, by requiring employers to first test the labor market by 1) attempting to fill any open positions with U.S. workers first before hiring foreign workers and 2) by requiring employers to pay a certain prevailing wage level. This is consistent with the 10th point of his 10-Point Ideal discussed in his August 31, 2016 speech:
We will reform legal immigration to serve the best interests of America and its workers
…The time has come for a new immigration commission to develop a new set of reforms to our legal immigration system in order to achieve the following goals:
- To keep immigration levels, measured by population share, within historical norms
- To select immigrants based on their likelihood of success in U.S. society, and their ability to be financially self-sufficient. We need a system that serves our needs – remember, it’s America First.
- To choose immigrants based on merit, skill and proficiency
- And to establish new immigration controls to boost wages and to ensure that open jobs are offered to American workers first.
Employers currently already must meet prevailing wage standards in order to be approved for an H-1B visa for an employee. While this new labor market test would be an added requirement, it must first jump through a few hurdles. It’s unknown exactly how the labor market test will be structured, but if it’s anything like the current process for PERM, the Department of Labor may have to get involved in evaluating the sufficiency of each employer’s labor market test. In this scenario, we’re talking months of delay due to increased backlogs and more work for any federal agency will likely mean more funding will have to be diverted to fund those operations.
It would be interesting to see, logistically, how these new requirements would be implemented; either via federal regulatory change (requiring public notice and comment) or congressional amendment to the Immigration and Nationality Act.
Impact to Employers: If Congress gets involved and passes an amendment to the law, then employers may have to follow these new requirements very quickly. New requirement to meet certain wage requirements may actually end up producing a law that would pay foreign workers more than actual U.S. workers! Additionally, the requirement to advertise for U.S. workers before being able to apply for the H-1B petition may delay innovation and corporate expansion. As a result, multinational companies may consider offshoring jobs if the burden to hire qualified workers in the U.S. is too high.
Update 11/10/2016: H-4 Spousal EADs
Part of President Obama’s Execution Action involved enabling spouses of certain H-1B visa workers to apply for work authorization. H-4 spouses, as they are called, could receive employment authorization documents (EADs) that would enable them to work for any U.S. employers of their choosing. At that time, USCIS had proposed a change in regulations, made the rule available for public notice and comment, reviewed the comments and then issued a final rule as required by the Administrative Procedures Act. In May 26, 2015, the rule went into effect.
President-Elect Trump has stated he would “cancel every unconstitutional executive action, memorandum and order issued by President Obama” within his first 100 days in office. If he orders USCIS to reverse course on EADs for H-4 spouses, then USCIS would have to follow the same procedures it did two years ago in notifying the public, requesting comment, reviewing comment and therefore issuing a final rule. This may take time and likely any rule eliminated the EAD category for H-4 spouses may likely be prospective and not retroactive.
Impact to Employers: Workers who hold an EAD based on their qualified H-4 status may possible lose the ability to continue to work after their EAD expires. Employers may have to evaluate staffing needs in the next six – eight months, in preparation for this potential outcome.
Trump has not been shy about wanting to reverse much of President Obama’s executive actions, including the Deferred Action for Childhood Arrivals (DACA) program that enabled eligible undocumented children who entered the U.S. before their 16th birthday to apply for work authorization.
It would be within a new President’s powers to reverse the previous Executive Action as quickly as January 20, 2017, when the new President is sworn into office.
Impact to Employers: Employers who currently employ DACA workers may find themselves short-staffed as early as late January 2017 if DACA is rescinded by President-Elect Trump. This is particularly alarming, as U.S. Citizenship & Immigration Service has received more than 1.54 million applications since the inception of the DACA program in 2012 and has approved more than 1.45 applications since then. It’s unclear how many U.S. employers would be impacted by this policy change but data will likely reveal itself in the upcoming months.
Startup Visa for Entrepreneurs
President-Elect Trump has voiced little about a start-up visa for entrepreneurs. As a serial entrepreneur himself, one would imagine he would appreciate the values and benefits that entrepreneurship carries with it. Not so, as it appears at odds with his stance on isolation and populism. Further, even if entrepreneurs were allowed to enter the U.S. via a special visa, if the entrepreneur stems from a country that has been historically (or is now) affected by terrorism, that that entrepreneur might now be subject to aggressive “vetting” despite their efforts, desires or ability to create U.S. jobs.
As an aside, the U.S. Citizenship & Immigration Service had announced on September 1, 2016, the Parole for Entrepreneurs as a means to allow certain eligible, high-growth entrepreneurs to enter the U.S. to operate their business. Comments had closed on October 17, 2016 and it’s still up in the air whether USCIS can review the public comments quickly enough to enact a final rule for the regulation to go into effect before January 20, 2017. If the regulation were to go into effect that quickly (although unlikely), the regulation could still be reversed in the future, but not without first having to go through various administrative hurdles.
Impact to Entrepreneurs: We won’t know if the Parole for Entrepreneurs will go into effect, only to be later reversed, or if it will go into effect at all. We also won’t know if the President-Elect will push forward a startup visa bill for Congress to pass that would jump-start innovation. We’ll have to have wait and see what the next administration brings.
As a general aside, the rhetoric from Trump about deporting millions of undocumented immigrants in the U.S. is not typically a topic that is discussed on this website. However, it’s important to understand that a policy of this magnitude and impact would require significant taxpayer funding; funding that would need to be appropriated by Congress to support and execute. It’s yet to be seen if the U.S. has room in its budget to finance this policy endeavor.
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Oct 06 2016
Submitted to USCIS on October 6, 2016.
I am Ann Cun, Business Immigration Attorney and founder of Accel Visa Attorneys, PC based in the Bay Area. I have worked with numerous startup founders in helping them navigate alternatives to the H-1B, such as E-2s, O-1s, L-1s and EB-1A visas. I have also volunteered actively with FWD.us with regards to shaping the dialogue on immigration reform and am a long time member of the American Immigration Lawyers Association. My comments represent my own views as a practitioner. They are based on years of anecdotal evidence, my impressions of the immigration bar’s collective experience with USCIS and the lack of meaningful immigration policies towards expanding foreign entrepreneurship in the U.S.
I applaud the efforts set forth in the Proposal by USCIS and offer the following five points for the Service’s consideration during this comment period:
1. Unintended Consequences: Disparate Impact on Women and Minority Founders. It is evident the Service considered multiple research studies on entrepreneurship, including those published by the Kaufmann Foundation. The Kaufmann Foundation 2012 study (See FN 66) categorizes high-growth entrepreneurship into three types: professional-user, end-user and hybrid model. In short, professional-user entrepreneurs receive external financing (private equity, VC and bank loans) at a higher percentage than end-user entrepreneurs. Professional-user Entrepreneurs also have higher rates of advanced degrees, and greater years of work experience, leading to a larger network from which to build. Professional-user Entrepreneurs are overwhelmingly white 87% and male 78.5%. The study shows that Professional-user Entrepreneurs report a higher percentage of revenue over time, greater revenues, higher numbers of full-time and part-time employees, as compared to their End-User Entrepreneur counterparts, who are comprised of a higher percentage of women and minorities, receive less external capital, and start their companies with personal funds at higher rate. Therefore, it is not surprising that with higher education, more experience, and a greater likelihood of receiving external funding, that the data resulting from Professional-user entrepreneurs results in higher revenue and hiring. If the Service were to extrapolate revenue and job creation as the deciding indicia for determining “potential for rapid growth”, the Service would be without fault to do so, as these two indicia appear neutral, on its face.
However, additional studies by the Kaufmann Foundation, American Immigration Council, Small Business Administration, and the Minority Business Development Agency point out that immigrant and native women and minorities face disproportionate obstacles when it comes to obtaining external financing of their enterprises, including obstacles such as bias and discrimination. (See also my article.)
Although addressing the biases that exist at all levels of business financing (whether government or private equity/venture capital) is beyond the scope of this comment, the reality that immigrant women and minorities face when attempting to procure private capital financing is real. By prefacing eligibility solely on financing success procured from limited U.S. sources imposes unnecessary barriers for entry into this promising program. If the Service relaxed the financing threshold to also include additional (alternative) funding sources, so long as source of funds can be established (see my recommendations at #2 below), it would widen the eligibility pool.
2. Revised Alternative Third Criterion for Parole. The Proposal indicates that if an applicant partially meets either the private or public financing threshold, he/she may provide alternative documentation to demonstrate “‘reliable and compelling’ evidence of the entity’s substantial potential for rapid growth and job creation”. The Service should seriously reconsider this alternative criteria and divest it entirely from the need to partially satisfy the other two criteria. Instead, a revised third criterion could allow for reliable and compelling evidence of any of the following, or satisfaction of two or more of the following:
a) Other reliable alternative funding sources, either from abroad or from within the U.S., evidence of source of funding required
b) Participation in a leading accelerator or incubator abroad, as established by press or foreign government support or backing
c) Evidence of substantial revenues already earned, whether in the U.S. or abroad, that exceeds the Income-Related Conditions for Parole.
d) Scope of the business and whether it is in the national interest (e.g. public benefit corporations, focused in a STEM field, etc.)
e) Evidence of intent or engagement with U.S. entities for the duration of the initial parole period.d
3. Data Be Publicly Available. Although the proposal is silent on the issue, to further shape policy and to ensure transparency, making available important data from the Parole for Entrepreneurs Program is critical. Data should include the number of applications submitted, rates of issuance of RFEs, rates of denials/approvals, processing times initially and after RFE response received, along with industry types, financing amounts received at the time of filing, along with applicant demographics, at annual intervals with the goal of gauging program outreach and efficacy.
4. Impact of Parole on Non-Immigrant Intent. The language of the proposal is unclear regarding the nature of the long-term impact the parole period would have on a foreign entrepreneur’s ability to obtain a non-immigrant visa abroad. Will the five years spent in the U.S. impinge on the foreign entrepreneurs’ ability to overcome non-immigrant intent with the Department of State when applying for non-immigrant visas that do not permit dual intent?
5. Delays in processing times. The proposal provides for no avenue to expedite an application. Bear in mind that existing USCIS customers are experiencing lengthy delays on applications and petitions submitted to USCIS; wait times that exceed six months. (Examples include Form I-539 Applications that have been pending for over six months with no ability to expedite via premium processing and H-1B petitions submitted in the most recent fiscal year’s lottery that are still pending despite commencement into this current fiscal year.) What steps will USCIS take to ensure the Parole for Entrepreneur Program allocates proper resources to avoid exacerbating the backlog of existing applications/petitions? Will USCIS dedicate one Service Center to process parole applications for entrepreneurs? How many new staff members will the Service hire, if any, to accommodate the increase this new program?
Thank you for your consideration.
Sep 21 2016
One of the commonly asked questions is whether an F-1 student may start a company in the U.S.
On the one hand, USCIS rules say that F-1 students may not engage in employment “during the first academic year.” Technically, to qualify for a work permit, the F-1 student would need to have completed a full academic year of coursework. The most common work permit would allow the F-1 student 12 months of employment, renewable for an additional 24 months if the degree was in a STEM field and certain other criteria are met.
On the other hand, USCIS also says that you may be eligible to start a company (so long as the work permit has been procured), if the company is “directly related to your major area of study.” (Students in English language training programs are not eligible.)
Um…. it’s a fuzzy gray area. When folks ask if an F-1 student start a company in the U.S., there’s actually two components to this questions.
What Constitutes Work?
The first issue is whether the activities of starting up a company constitute work. U.S. immigration law defines employment very generously. Employment means “any service or labor performed by an employee for an employer within the United States.” The law doesn’t require payment of wages, per se. So, if one were to startup a company while on F-1 status, one would think that it would be considered “employment”. However, the nature of the activities may actually be exempted. USCIS has historically allowed certain activities to be considered “non-work” activities, such as
- Preparing the paperwork to form a company (incorporate)
- Conducting market research
- Hold and attend meetings
- Raise funding through meetings
- Conduct presentations
- Attend conferences to network
- Serve as a board member at a company
Getting Permission to Work
The second issue is about obtaining legal permission to work. Under limited circumstances, an F-1 student could apply for a work permit, with endorsement from their school. Once that permit has been issued, the student may perform more active, day-to-day activities for the company (and get paid). So long as the work the student will be performing is “directly to her/his degree field”, then the student has a finite amount of time to get their business up and running so the company is in a position to help sponsor a work visa.
So there you have it, very straightforward, right?
Sep 15 2016
The recent announcement by USCIS for International Entrepreneurs spotlighted a nuanced concept that is relatively unknown to most: Parole. The proposed rule for International Entrepreneurs would allow foreign nationals to enter and stay in the U.S. for an initial 2-year period (with the possibility of renewing for an additional 3 years).
Under formal admission rules, in order to temporarily work in the U.S., foreign nationals must satisfy the eligibility requirements outlined in immigration regulations. Once the eligibility has been met, and if they are outside the U.S., the foreign national may then apply for a visa at a local consulate or embassy. The visa allows the foreign national to enter the U.S. S/he is then issued an immigration status upon entry to the U.S. that is consistent with the type of visa that was issued in their passport. (Example: if the visa was H-1B then upon entry, the foreign national’s official immigration status is “H-1B” and would be reflected on her/his I-94 arrival departure record.) This process constitutes a “formal” admission into the U.S.
The proposed rule to grant foreign entrepreneurs parole, rather a separate temporary visa status, is based on the fact that USCIS has a lot of discretionary powers. While the grant of parole to enter the U.S. is legal, it does not constitute a formal admission into to the U.S. Furthermore, unlike what we normally associate in layman’s terms with a criminal being released from prison early, USCIS granting parole has nothing to do with criminal matters. In practical terms, parolees are allowed to enter the U.S. under a completely different set of rules outlined by USCIS. It’s legal because Congress gave USCIS discretionary powers. There is a downside to parole though. You are at the complete mercy of USCIS. Any violation or failure to satisfy the eligibility requirements upon renewal and you’re required to leave the U.S.
As an entrepreneur paroled into the U.S., the “PE-1” designation indicates you’re a parolee, it is not immigration status. Absent specific changes to immigration laws, once the parole period is exhausted, you won’t be able to “change” your status because technically, you were never admitted to the U.S. with status. To acquire status, one would have to depart the U.S. and be formally admitted under a valid status type.
This is USCIS’ roundabout way of acknowledging that foreign entrepreneurs can play a critical role in promoting job creation in the U.S., but realizing that it can’t change the laws on its own, not without Congress working together.
Sep 14 2016
USCIS’ recent proposed rule to allow International Entrepreneurs to jump-start their start-up venture places a steep minimum capital funding of $345,000. If the proposal is ultimately accepted and promulgated as a final rule (which we won’t know for a few months anyway), then any foreign entrepreneur wanting to start their venture would need to meet a minimum private financing amount of $345,000 or more. The other alternative would be to procure financing of $100,000 from a government funding source. Seems pretty straightforward right?
When I first wrote about this development, I commented that this proposal was truly reserved for the 1% of entrepreneurs in the U.S. While there are some nice soundbites, the proposal makes private capital funding a deciding factor, overlooking an important fact that women and minorities are at a greater disadvantage of accessing capital. If you can’t access capital, you would have a difficult time qualifying for the International Entrepreneur Parole proposed by USCIS.
According to the American Immigration Council, immigrant women entrepreneurship had increased more than 40% from 2000 to 2010. Yet, immigrant women still face significant challenges in obtaining access to capital including gender bias and discrimination according to a 2011 report.
Of the immigrant women interviewed, many faced gender bias and difficulties securing start-up capital. Many women also reported that banks were hesitant to provide start-up funds due to the small size of their businesses.
The U.S. Small Business Administration commissioned a follow-up report in 2013 arriving at similar results in finding that women and minority-owned businesses encountered far greater obstacles in securing capital.
Studies indicate that women entrepreneurs have less access to financial capital or make less use of it than male entrepreneurs. … On the equity side, women typically have limited social interaction with venture capital firms, and are under-represented among fast-growth and high-tech businesses. They also rely more on informal funding methods and self-financing.
On the other end of the spectrum are minority-owned businesses who are disproportionately impacted by lack of access to capital, according to a 2012 report by the Kaufman Foundation.
MBEs [Minority-Business Enterprises] rely more heavily on financial institutions for loans than all other borrowing sources combined. However, when compared to white-owned firms, MBEs typically encounter higher borrowing costs, receive smaller loans and see their loan applications rejected more often. Black- and Latino-owned MBEs are the most likely to experience such negative results. Although lower owner net worth, credit ratings, firm age, size and other risk factors account for some of the differences in access to credit, studies consistently show that black- and Latino-owned firms with identical firm and owner traits (other than race) and credit histories gain less access to bank credit than matched white-owned firms.
The Minority Business Development Agency, a division within the U.S. Department of Commerce issued similar results in an earlier report in 2010.
A review of national and regional studies over several decades indicates that limited financial, human, and social capital as well as racial discrimination are primarily responsible for the disparities in minority business performance. Inadequate access to financial capital continues to be a particularly important constraint limiting the growth of minority-owned businesses. The latest nationally representative data on the financing of minority firms indicates large disparities in access to financial capital. Minority-owned businesses are found to pay higher interest rates on loans. They are also more likely to be denied credit, and are less likely to apply for loans because they fear their applications will be denied. Further, minority-owned firms are found to have less than half the average amount of recent equity investments and loans than non-minority firms even among firms with $500,000 or more in annual gross receipts, and also invest substantially less capital at startup and in the first few years of existence than non-minority firms.
According to the National Minority Supplier Development Council, minority businesses contribute to over $400 billion in revenue in the U.S. , employing over 2.2 million people. “The lack of access to capital also trickles down to bank loans and lines of credit.”
Moreover, it’s unclear how this proposed rule aligns with President Obama’s objective to increase access to capital to greater entrepreneurs, including minorities and women. While the proposal offers an additional, alternate criterion for “partially satisfying” some of the funding, this alternate criterion is so vague as to make it appear more like an afterthought. Revising the alternate criterion by making it clearer, by enumerating what those factors might be, would go a long way towards transparency.
In addition, I would also urge USCIS to propose a rule that would enable F-1 students who seek to start their own companies more time with their Optional Practical Training (OPT), irrespective of capital funding amounts, as a supplemental program, in order to encourage entrepreneurship in the U.S.
Sep 02 2016
On August 26, 2016, the United States Citizenship & Immigration Service (the federal agency that processes all immigration applications and petitions), announced it was creating a new rule for foreign entrepreneurs. The proposed rule would theoretically allow entrepreneurs to accelerate their start-up in the U.S. The proposed rule was published in the Federal Register on August 31, 2016, where you can leave your comments with USCIS here. You can even read all the comments flowing in from the public here.
The proposed rule aims to allow foreign entrepreneurs who have raised a minimum of $345,000USD in capital funding (or $100,000USD government funding) to work on their start-ups in the U.S. initially for a two-year period. The rule will allow for a renewal of that work authorization three additional years if certain criteria are met.
Let’s be frank here. This proposed rule targets the 1% of entrepreneurs in a position for rapid-growth. (USCIS thinks that approximately 2940 entrepreneurs could be benefit by this proposed regulation.) While it’s a small concession to the many lobbying groups and the general public calling for a true Start-Up Visa, this proposed rule is not the catch-all category to allow any “wantrapreneur” to stay or come to the U.S. It’s meant for the entrepreneur who has demonstrated a viable and soon-to-be profitable business model. It’s a start but certainly not perfect.
Who can blame the USCIS with this new strategy? I mean, until Mom and Dad (aka Senate and House) can get their act together, the kids (aka USCIS) will be left to their own devices, unfortunately. Though, with a proposed price tag of $1,480 for each application, I don’t feel too bad for USCIS.
The bigger question is what’s going to happen to this initiative when we get a new president?