StartUp Visa Rules Finalized

StartUp Visa Rules Finalized

A Startup Visa may be just the thing for Silicon Valley.  Actually, startups have sprouted from coast to coast in the United States.  A startup visa enables these young companies to have the world’s best and brightest on their team.  Everyone knows that the team is the most important factor contributing to a startup’s success.  Having an immigrant on the team can lead to huge successes.

immigrants create one in four tech startups

Innovative foreign-born entrepreneurs are super important to the U.S. economy.  Immigrants founded roughly one in four STEM startups between 2006 and 2012.  In June of 2013 publicly traded immigrant founded companies had a combined market cap of over $900 billion dollars.  The stock market is over 30% higher now than in June of 2013, so the immigrant founded businesses are worth over $1 trillion dollars today.

According to data released by the Department of Homeland Security’s (DHS) U.S. Citizenship and Immigration Services (USCIS),  only 2,940 entrepreneurs will qualify for startup visas each year. That number pales in comparison to the 85,000 annual H-1B visas. USCIS published its final rule for startup visas, also called entrepreneur visas, on January 17, 2017.  DHS issued the visas under its discretionary parole authority to enhance entrepreneurship, innovation and job creation in the United States.

The details of the startup visa limit the number of foreign born founders to only three per start up.  PayPal, for example, had six founders.  Only one was American.  Tech startups reflect the STEM education landscape, which is mostly foreign born.  50% of Google’s founders are foreign born (of course there were only 2).  The restrictions on the startup visa do not stop with the limits on how many of the founders are foreign born.

The startup visa provides a temporary stay of thirty months, with possible extension  of another 30 months.  This is one year less than the H-1B visa, which lasts up to six years.  Facebook did not go public until eight years after it was founded.  Snapchat only took five years.  And these are a bad example of a startup because of how wildly successful they have been from the start.  Most of these visa holders may be forced to return home before their startup can really take off.

The startup visa makes a number of assumptions as well.

The applicant must prove that the startup the foreign entrepreneur owns has a substantial potential for rapid growth and job creation.  The vast majority of startups do the exact opposite.  Amazon employs many people, but they grew their base by taking retail jobs from other companies.  Uber employees many drivers, which took market share from taxicabs.  Both these companies are working toward more automation.

Price Waterhouse Cooper estimates that by the 2030s upward of 40% of American workers may lose their jobs to robots.  What if the startup made these robots?  Would it qualify for the startup visa?  Probably not because to get the visa the applicant must prove that his or her stay will provide a significant public benefit to the U.S.  The applicant must also prove that the startup has received a significant investment of capital from qualified U.S. investors with established records of success.  So this hypothetical robot startup would attract a lot of capital because of its ability to disrupt almost 40% of the workforce, but run smack into the problem of being a significant detriment to the U.S workforce.

Meanwhile, the robot startup could have structured its corporate governance to provide for the founder to be an employee, then entered three H-1B visa applications for the founder for the various roles that he played at the company into the H-1B lottery that has approximately 33% chance of getting the work visa.  The company incurs three application fees of approximately $1,200 instead of just one fee for the startup visa.  However, the company may save on attorney fees because H-1B applications do not require the hoops that the startup visa does.  The startup benefits with an extra year of having the founder legally work in the United States, plus dual intent so founder can pursue the permanent residence process.

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Startup visa uncertain without Congressional action

Startup visa uncertain without Congressional action

Rumors have been circulating about a new type of visa being concocted by the Department of Homeland Security and related to Startup Visas.  As you know, most H-1B visas go to highly skilled foreign nationals for work in the STEM sector.  Many of these individuals go on to become some of the best innovators and entrepreneur in the America and the world at large.

The Obama administration is spearheading the effort to provide visa access to startups that fit specific criteria.

Foreign national entrepreneurs would need to meet certain conditions to be granted visas: Their U.S. startup must be less than three years old; they must hold at least a 15 percent stake in the company while also maintaining a “central and active role in its operations”; and the startup must have received at least $345,000 in funding from an investor and/or at least $100,000 in government grants to show “substantial potential for rapid growth and job creation.”

Tech firms also support the changes to establish the visa.  Mark Zuckerberg’s immigration-focused non-profit,, wants the funding requirement lowered to only $250,000 in funding.  However, since most startups burn money and end up drowned, perhaps that is overzealous.  One of the main Requests For Evidence (RFE) bases in rejected H-1B application specifically addresses an employer’s ability to pay for the foreign national’s salary.  Having a lower funding requirement may result in having an unemployed foreign national as a result of the startup’s failure (which happens to a very high percentage of startups).

Moreover, startup supporter or not Obama is a lame duck.  I’ll update this blog after election day, but there is a chance that Hillary does not win and Trump’s xenophobic drivel could spell doom for many potential immigrants.

Finally, Congress must pass the law.  The USCIS does not have the authority to create its own types of visas.  Until Congress acts (which it never does…see what they have done to the medical marijuana laws instead of acting), the administrative agencies can only carry into effect the laws already on the books.  With the election and Congress’ intransgence in mind, the current immigration laws are the best predictor of the next immigration laws.

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