New Proposals Designed to Attract and Retain Foreign National Entrepreneurs
The Startup Visa Act of 2011 is designed to attract and keep foreign-born startup founders with venture capital and strong entrepreneurial spirits in the United States rather than sending them overseas. The Startup Visa Act was first introduced in the Senate on February 24, 2010, and again on March 14, 2011. The original Act was amended and reintroduced in the Senate by Sen. John Kerry (D-MA), Sen. Richard Lugar (R-IN) and Sen. Mark Udall (D-CO) under the title of Startup Visa Act of 2011 – Senate Bill 565.1 As of 2012, the Startup Visa Act of 2011 is awaiting review with the Judiciary committee and the Immigration subcommittees of the Senate and the House. Currently, there are only a few immigrant visa categories offering permanent residency options to foreign nationals, and none of them really fit the bill for entrepreneurs. These options include:
- Employment-Based First Preference (EB-1) Category: Reserved for “Outstanding Professors and Researchers,” “Multinational Executives or Managers” or immigrants with “Extraordinary Ability.” This category was not designed for startup entrepreneurs, as it requires either an existing record of high achievement, or an affiliation with an existing enterprise outside of the U.S.
- Employment-Based Second Preference (EB-2) and Employment-Based Third Preference (EB-3) Categories: The EB-2 category is reserved for immigrants holding an advanced degree, and the EB-3 is reserved for professional and skilled/unskilled immigrant workers, neither of which are viable options for entrepreneurs given that these categories require a U.S. entity to sponsor the individual.
- Employment-Based Fifth preference (EB-5) Category: Reserved for immigrant investors who contribute at least $1 million (or $500,000 in high unemployment or rural areas) and create ten or more full-time jobs for qualifying U.S. workers. This option is also not feasible for startup entrepreneurs who often have new and innovative concepts that require venture capital as well as additional time than is currently allowable under this category to create the requisite 10 jobs.
The Startup Visa Act proposes new ways for the U.S. to attract and retain innovative and bright entrepreneurs who could qualify for the Startup Visa under one of the following scenarios:
An immigrant entrepreneur living outside of the U.S. who finds a qualified U.S. investor (venture capitalist, super angel or government entity) that agrees to financially sponsor the entrepreneurial venture with a minimum investment of $100,000. After two years, the business must have created five new jobs and raised not less than $500,000 in additional capital investment, or have generated not less than $500,000 in revenue.
An immigrant entrepreneur currently in the U.S. who is either on an unexpired H-1B visa, or has completed a graduate-level degree in science, technology, engineering, math, computer science or other relevant academic discipline from an accredited United States college, university, or other institution of higher education who also meets the following requirements: annual income of not less than roughly $30,000; or assets of not less than roughly $60,000; and has found a qualified U.S. investor (venture capitalist, super angel or government entity) that will financially back the entrepreneurial venture with a minimum investment of $20,000. Within two years, the business must have created three new jobs and raised not less than $100,000 in additional capital investment, or have generated not less than $100,000 in revenue.
An immigrant entrepreneurs living outside the U.S. who has a controlling interest in a company outside of the U.S. that has generated, during the most recent 12-month period, not less than $100,000 in revenue from sales in the U.S. Within two years, the business must have created three new jobs and raised not less than $100,000 in additional capital investment or have generated not less than $100,000 in revenue.
Entrepreneurs who qualify based on one of the options listed above would be granted conditional residency in the U.S. for a two-year period, after which, if the startup venture meets the statutory requirements, they could petition to remove the conditions on their permanent residence status.
The Startup Visa Act of 2011 does not propose to add new immigrant visa numbers to the 140,000 annual cap currently available. Rather, it proposes to allocate visa numbers unused from the EB-5 category, which is limited to 9,940 annually.
This amended bill also includes provisions designed to prevent possible fraud and abuse, and, unlike its predecessor, lowers the investment threshold to a more realistic level of $100,000 — an amount more in line with initial investments in the average startup venture.
This current version of the bill has won broad support among many groups including the U.S. Chamber of Commerce's Center for Entrepreneurship, the Silicon Valley Leadership Group, the American Bar Association, the National Venture Capital Association and the Partnership for a New American Economy, as well as major players in venture capital and angel investing who have faced reductions in U.S.-based startup activity since the economic downturn, such as Y Combinator’s Paul Graham and Foundry Group’s Brad Feld.
Despite critics’ arguments that the Startup Visa program would be too small to have a significant economic impact, the current bill does propose high rewards for the U.S. economy at large, with the added benefit of being low risk to the current immigration system.©2014 Greenberg Traurig, LLP. All rights reserved.