Fate of visa program for startups in limbo

Photo: Gabrielle Lurie, Freelance / Special To The Chronicle

 


Venture capitalists are among those hoping the Trump administration backs down on its move to rescind the International Entrepreneur Rule, an Obama-era holdover that allows foreign entrepreneurs with third-party financial backing special immigration status to build and scale their startups.


Venture capitalists are among those hoping the Trump administration backs down on its efforts to rescind the International Entrepreneur Rule, an Obama-era order that offers special immigration status to foreign entrepreneurs with third-party financial backing to build and scale their startups.

The rule was promulgated days before President Donald Trump’s inauguration.

Supporters say it made up for a lacking visa category for company founders with ideas strong enough to attract funding. Successful applicants needed to have at least a 10 percent ownership stake in an entity, generate either $250,000 from qualified investors or $100,000 in government grants, pay a filing fee and document “significant public benefit” such as revenue generation or patent awards.

They then could be given temporary legal status for 30 months. Those who demonstrate business growth and U.S. job creation can petition to stay up to five years.

The Obama administration estimated about 2,500 entrepreneurs would apply, but perhaps due to confusion about its implementation few did.

A day before the rule was to take effect last July — and just six days before U.S. Citizenship and Immigration Services, a division of the Department of Homeland Security, was to start taking applications — the Trump administration delayed it until mid-March.

In a lawsuit, the National Venture Capital Association along with co-plaintiffs Atma Krishna, Anand Krishna, Omni Labs and Peak Labs successfully argued that DHS violated the Administrative Procedure Act by not seek public comment for the delay. The U.S. District Court in Washington, D.C., in December ruled in their favor.

The Krishna brothers, U.K. citizens, had attracted $120,000 in investment for their “LotusPay” business payment platform while participating in the competitive Silicon Valley incubator Y Combinator. They were hoping to use the IER to continue developing their platform in the United States.

Omni Labs, which developed a data visualization and analytics platform for online advertising and marketing, was generating positive cash flow. But two of its founders, Indian citizens Nishant Srivastava and Vikram Tiwari, had been unable to get U.S. visas and were hoping to qualify under the entrepreneur program. They are working out of Canada.

Peak Labs, which does business as Occasion, has raised some $1.5 million for its digital tools supporting event management and calendaring applications and boasts more than 3,500 businesses and 500,000 individuals as customers. Its chief architect, Pelle ten Cates, a citizen of the Netherlands, likewise hoped to qualify for the new program.

On May 9, the plaintiffs went back to court, filing a motion that contended the Trump administration was dragging its feet. Twenty days later, DHS published its formal proposal to ax the program.

“The department believes that it represents an overly broad interpretation of parole authority, lacks sufficient protection for U.S. workers and investors, and is not the appropriate vehicle for attracting and retaining international entrepreneurs,” the agency said in a news release.

The Federation for American Immigration Reform, which lobbies for stricter immigration laws, said Obama overstepped on something that should have been decided by Congress.

“Without express legislative permission, the Executive Branch may not create new avenues for immigrating to the United States,” FAIR said in a statement. “But the Entrepreneur Parole program appears to be exactly that — the Executive Branch attempting to change laws without congressional authorization.”

Public comment on the proposal ended Thursday with at least 1,570 comments, meaning the ball is now in the Trump administration’s court.

Robert Loughran, an Austin-based partner at immigration law firm Foster LLP, likened the program to a “Shark Tank” scenario where only the most promising entrepreneurs get financial backing and immigration status.

“We’ve been contacted by a number of venture capital firms, universities and individual entrepreneurs who are sort of monitoring this process,” he said. “They’re all pretty discouraged at this point.”

“The support is there. The problem is purely politics, which is you can’t give the other guy a win,” Loughran said. “Nothing has moved on the immigration front in a dozen years.”

While the stay would max out at five years, successful entrepreneurs could be building building a case for another type of legal status, he said.

“If you give us a couple of years of someone being in status then yes, we will likely be able to transition them to another status,” he said. “Because when you’re starting out with a 28-year-old entrepreneur with an idea, it’s that first step that is the largest leap.”

While there are other visa classifications, such as the EB-5 investment visa for foreigners able to invest at least $500,000 in job creating businesses or the E-2 classification for investors from treaty countries, this was the only program developed for business startups, said Washington, D.C., lawyer Paul Hughes, who represents the plaintiffs.

“That is this policy, and so to me this seems to be absolutely at the heartland of what this administration should be embracing,” Hughes said. “And so I just remain bewildered at their contrary approach.”

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By |2018-07-02T20:15:15+00:00June 29th, 2018|Client News|