• Entrepreneur Tips from Steven Hoffman, Founders Space Chairman

    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!

  • Will President-Elect Trump Revise, Block or Pass Parole for Entrepreneurs?

    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.

    Want more updates on a Trump immigration landscape? Subscribe to our blog and share with your followers!

  • Comment on USCIS Proposal for Entrepreneur Parole

    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.

  • F-1 Students Starting Companies; Risk or Reward?

    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
    • Litigate

    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?

  • Difference Between Visa and Parole

    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.

  • USCIS Proposal Overlooks Minorities and Women

    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.

  • Finding the Right Immigration Attorneys

    Finding the right immigration law firm depends primarily on your company’s size and needs.  The common mistakes most employers make is confusing needs and wants.  Below are common needs based on the company’s stage of development.

    StartUp Companies.  At the early stages of development, finding an immigration provider that can help prepare an H-1B or answering your questions about a foreign student’s OPT options is critical.  But the attorneys should also be skilled in guiding you through this growth stage because your internal resources for navigating the immigration minefield is limited.  The ideal provider should assist with

    Providing basic Immigration 101 training to your HR team or Recruiters

    Being creative with alternatives to an H-1B in the event your desired employee candidate missed out on the H-1B lottery or wasn’t selected.

    Helping to develop compliance programs with your HR.

    Your immigration counsel should be willing and able to provide a high level of service, to get your company on the right track for growth.  This includes direct contact with employees and candidates.

    Small/Medium-Sized Businesses.  At this stage of growth, the employee count is usually in the low hundreds but growth is either steady or fast.  This means your HR is actively working on expanding its internal offerings and a Recruiting Team is entrenched in that relationship with HR.  Your immigration counsel should serve as your partner to help you scale, attract and retain employees.  They should

    Work with your recruiters to develop recruiting tactics that distinguishes your company from your competitors.

    Help your HR department develop immigration policies that align with your company’s vision (and make it attractive to employees)

    Review and revise existing immigration compliance programs to ensure legal compliance

    Provide fast turnaround on immigration cases.  Nothing says awesome like on-boarding a newly transferred recruit in a week!

    Providing cutting-edge technology to reduce inefficiencies.  At this stage of growth, direct attorney to employee contact may have to be reassessed in order to scale efficiently.

    Large Enterprises.  At this stage of growth, most companies are seeking Immigration Attorneys to provide them with optimized servicing, not white-glove service.  Because thousands of employees are being relocated from one unit to another, or hundreds of candidates are hired monthly, the volume alone requires the vendor to already have efficient systems in place to manage the workload.  With the exception of high-level executives, most employees will probably not receive direct and detailed contact from attorneys.  The Immigration Partners would

    Work with your recruiters to communicate relocation status of transferees and recruits.

    Carry out and reinforce immigration policies through widespread information dissemination to employees.

    Review and revise existing immigration compliance programs to ensure legal compliance

    Provide automated systems to ensure fast on-boarding of employees and processing of immigration cases.  This usually means providing a platform for employees to update data, check status, and understand how the immigration policy is being executed.

    The favorite topic of many companies, regardless of what stage of growth they are in, is SCALING. But scaling when you’re a 2-person company and scaling when you’re a 20,000-person company require vastly different approaches.  Remember those points and you’ll secure the right partner any day!