After the Trump administration announced it would rescind the International Entrepreneur rule, it left one less option for foreign nationals who wish to start a business in the United States. Although a judge has rebuked the administration for delaying the entrepreneur rule – ironically at the same time the White House sent out a press release announcing its commitment to entrepreneurship – the fate of the rule remains uncertain. Moreover, obtaining any type of high-skilled visa has grown more difficult in the past year. This raises an important question: What legal options are available for foreign-born entrepreneurs in America?
“It is amazing given how much evidence there is that immigrant-founded companies are a powerful, job-creating force in the American economy that we do not have a visa designed to let startup founders create and run their businesses,” notes Greg Siskind, an immigration attorney with Siskind Susser PC.
The Ewing Marion Kauffman Foundation found that “Immigrants are almost twice as likely as the native-born to become entrepreneurs.” A 2016 study from the National Foundation for American Policy concluded, “Immigrants have started more than half (44 of 87) of America’s startup companies valued at $1 billion or more.” The study cited such well-known companies as SpaceX, Uber and Stripe that had at least one immigrant founder.
In an interview, Siskind noted, “Startup founders are forced to roll the dice on visas that are not designed for business creators and are in short supply. Many are forced to delay their entrepreneurial ambitions for years while they wait in line for green cards working for other employers.”
Being sponsored for immigration by an employer or family member are the two most common ways immigrant entrepreneurs become “free” to start a business. Previously, I wrote about Jyoti Bansal, who waited 7 years in the green card backlog until he gained his own work authorization and eventual permanent residence that allowed him to start AppDynamics. The company grew to 900 employees and in 2017 was purchased by Cisco for an astounding $3.7 billion.
It is possible, though problematic, to start a business while in H-1B temporary status. If an individual attempts to found a company as the sole owner, then it may be challenging to gain approval for an H-1B temporary visa, even if one is available.
Michelle Zatlyn, born in Canada, was one of three founders of Cloudflare. While on an F-1 student visa, during her 12 months of Optional Practical Training (OPT), which provides work authorization, she was able to start the company with fellow Harvard Business School graduate Matthew Prince and Lee Holloway.
Since Michelle was not the only founder, it made the legal situation easier. Cloudflare filed and gained approval of an H-1B petition for Michelle as an employee, although at first the application was not approved. Today, Cloudflare, which provides security and other services to approximately 7 million websites and other Internet properties, is valued at $1 billion and employs more than 500 people.
Programs in Massachusetts, Colorado, Anchorage and St. Louis have established Global Entrepreneur in Residence programs that allow foreign-born business founders to obtain H-1B status through a university affiliation, which is helpful since universities are exempt from the annual limit on H-1B petitions. The entrepreneur is able to work on his or her business while also mentoring university students on their own startup ideas. To date, the Global EIR Coalition states that it has helped secure 47 visas for entrepreneurs, raised about $85 million and created 125 jobs. New York City has sponsored a separate, similar effort to facilitate startups.
An E-2 Treaty Investor visa is a plausible option for starting a business in the U.S., if one has sufficient capital and is from a country with which the United States has established an investment treaty. A major shortcoming is that countries such as China, India and Russia do not have an E-2 treaty with the U.S. Another problem is trying to gain permanent residence (a green card) after using an E-2 visa to establish your company in America.
“There is no easy transition from an E visa to a green card,” explained Cornell Law School Professor Stephen Yale-Loehr in an interview. “The nature of an E-2 investor is that they are running or managing their investment in the U.S. That usually means that they own the U.S. company they are managing. But that is inconsistent with the Labor Department’s labor certification regulations [part of the permanent residence process for most employment-based green cards], which assume that there won’t be a true test of the labor market if the beneficiary owns more than 5% of the company that sponsors the worker for the green card.”
If an entrepreneur can qualify for an O-1 “extraordinary ability” temporary visa it could make it easier for an individual to “self-petition” for the 1st preference of an employment-based green card and avoid the need for labor certification. But as attorneys will tell you, it is challenging to gain approval for an O-1 visa.
Another category that provides permanent residence is the employment-based 5th preference, also known as EB-5. But EB-5 usually requires an individual to invest $500,000 or more and create at least 10 jobs for U.S. workers within two years. “As a practical matter, EB-5 is not a viable green card option for most E-2 investors,” notes Professor Yale-Loehr. “Many E-2 investments don’t require that much investment and/or don’t create that many jobs (particularly so quickly).”
A lengthy article in Bender’s Immigration Bulletin lists more legal possibilities for foreign nationals to start a business in the U.S., with ironically one of the best being as a spouse of a temporary visa holder. The spouses of an L-1 visa holder (intracompany transferee) or certain H-1B visa holders can receive employment authorization that permits them to work practically anywhere in the United States, including as the founder of a company. (The regulation allowing H-1B spouses to work could be rescinded.)
Washington Post columnist Catherine Rampell wrote about Keerthi Ranjith, who was able to start a learning center in Virginia that employed 15 people after receiving a work permit through her husband’s H-1B status. Both Keerthi and her spouse have waited for years in the employment-based green card backlog.
One of these days, Congress will establish a startup visa that awards permanent residence to foreign nationals who start businesses and create jobs in the United States. A bill by Senators Jerry Moran (R-KS) and Mark Warner (D-VA) would do just that. According to an estimate by the Ewing Marion Kauffman Foundation, a startup visa bill could create 500,000 to 1.6 million jobs in the U.S. over 10 years. Until such a bill makes it through the legislative process, foreign nationals must travel one of the narrow paths allowed under current law if they want to achieve both their startup and American dream.
Original article appeared on Forbes.com