Finally! The DHS Rule on International Entrepreneurs Is Long Overdue…

In 2010, Amit Aharoni, ai Stanford Business School graduate and an Israeli citizen, launched CruiseWise.com, an online cruise booking company, with $1.65 million in venture capital. CruiseWise hired nine Americans in one year and was was ranked by Business Insider among the “20 Hot Silicon Valley Startups You Need to Watch.” 

Related: 3 Ways Entrepreneurs Can Protect Employees From Trump’s Immigration Executive Order

CruiseWise sponsored Aharoni for an H-1B visa for “specialty occupation” workers. But, in a stunning decision, U.S. Citizenship and Immigration Services (USCIS) denied the petition, claiming that Aharoni’s job of CEO did not require a degree. Aharoni had to move to Canada and struggle to run CruiseWise by Skype from a friend’s living room. When the story hit the press, USCIS approved the petition. Since then,CruiseWise has been acquired by CruiseCritic, a TripAdvisor brand.

The problem

Immigration, by its nature, is entrepreneurial. Immigrants transcend borders and take significant risks. Immigrant-entrepreneurs have created countless jobs and contributed profoundly to the U.S. economy. Statistics lead to conservative estimates that a visa for entrepreneurs could generate a minimum of 500,000 to 1.6 million jobs over the next decade. Unfortunately, though, U.S. immigration law turns a cold shoulder to entrepreneurs.

While F-1 STEM graduates can start a business during post-graduation “practical training,” they are limited to three years’ time. The H-1B visa also is now beyond reach due to the lottery, to restrictions on self-employment and to the Trump Administration’s singular focus on alleged abuse, which we have not seen in our practice.

The International Entrepreneur Rule 

In a welcome change, on January 17, 2017, the Department of Homeland Security (DHS, USCIS’s parent agency) published the “International Entrepreneur Rule,” which takes effect this coming July 17. This rule allows DHS to temporarily “parole” U,S, entrepreneurs whose startups provide a “significant public benefit” through a strong potential for rapid growth and job creation.  

The rule is based on the demonstrated job-creation rate of immigrant-based businesses and establishes criteria to identify entrepreneurs who are likely to launch successful businesses.

Related: Entrepreneurs Are Being Deported — And They Might Be at the Center of America’s Coming Immigration Fight

What is “parole”?

A noncitizen who is paroled into the United States is physically allowed to enter but is not legally “admitted.” A parolee does not get or need a visa, hold a lawful visa status or become eligible for a green card. Rather, DHS (through an adjudicator at USCIS or a border inspector) can parole noncitizens into the country on a case-by-case basis for “humanitarian reasons” or “significant public benefit.” The rule spells out which entrepreneurs should be granted parole for significant public benefit.

The nuts and bolts of the rule: The devil is in the details.

The rule establishes daunting standards for entrepreneurial parole. For starters, a startup cannot be more than three years old at the time of application. The entrepreneur must own at least 15 percent of the company, play an active and central role and maintain an income that’s 400 percent above the poverty level (currently $12,060 for a single person). Parole status is limited to three people per startup.

At its core, the rule requires proof that the startup has “substantial potential for rapid growth and job creation” as shown by one of the following (to be CPI-adjusted):

Capital Investment. This can be equity or convertible debt and must total at least $345,000 and have come from “established” U.S. investors (e.g., VC firms, angel investors, individuals or accelerators) in the year before application. (This dollar amount is based on the 2015 average of angel investments in startups). Further, each investor must have invested a total of $1 million in startups in the previous five years, including investments in each of at least three calendar years. Finally, at least two of the investors’ recipient firms must each have employed five U.S. workers or generated $500,000, with a 20 percent growth rate. Investments by the entrepreneur do not count.