Posted by Carol Mahamedi
May 17, 2021 | 4-minute read (701 words)
The Biden administration has just announced it will revive the International Entrepreneur Rule, which could help pave the path for a new generation of immigrant-owned startup businesses in the U.S. The regulation, which lets certain foreign-born entrepreneurs stay in the U.S. for up to five years, was issued in the final days of the Obama administration but suspended by the Trump administration before applications could be accepted. The National Venture Capital Association and other parties had previously sued the Department of Homeland Security to get it reinstated.
Why the IER matters
According to New American Policy, a New York-based nonprofit immigration policy firm, over 40% of Fortune 500 companies were founded by immigrants or by the children of immigrants. In addition, a majority of today’s unicorns valued at over $1 billion reportedly have an immigrant co-founder.
However, these immigrant founders came to the U.S. through channels for family members, students, workers or refugees. There has never before been a visa designed specifically for startup founders. For example, Tesla and SpaceX’s Elon Musk came through a student pathway, eBay’s Pierre Omidyar came via a family member pathway, Houzz’s Adi Tatarko came through a worker pathway and Google’s Sergey Brin came via the refugee pathway.
The existing situation for immigrants seeking to launch a U.S. startup
Right now, immigrants who wish to start a business in the U.S. must retrofit their visas to meet their personal circumstances, but there is no guarantee that immigration authorities will approve them. Some are here under employer-sponsored H1-B visas or post-college extension F1-OPT visas and then apply for a green card in hopes of launching a company. Others apply for the E2 visa, which has a requirement that applicants personally invest in their startup.
Others may apply for an O1 visa, designated for "individuals who possess extraordinary abilities.” Most hoped for is a green card, which offers permanent U.S. residency and freedom of employment except for a few government jobs.
Who has authority over the IER?
The International Entrepreneur Rule is a federal regulation under the Department of Homeland Security. Its goal is to lay a path for high-potential entrepreneurs to stay in the U.S. in order to launch and grow new companies. Eligible entrepreneurs most prove they will offer a “significant public benefit” to the U.S.
U.S. Citizenship and Immigration Services is prepared for applications and will launch a PR campaign that includes outreach and information sessions. Regulations and applications can be found on its website.
To meet IER’s standard of significant public benefit, these conditions must be met:
- Entrepreneurs must hold at least a 10% ownership stake in the startup and play a central role in daily operations.
- The startup firm must have been created in the U.S. within the last five years.
- The startup must have “substantial and demonstrated potential for rapid business growth and job creation.” This must be evidenced through either a capital investment of at least $250,000 from qualified, experienced U.S. investors; awards or grants of at least $100,000 from government agencies; or “reliable and compelling evidence” of their viability, such as acceptance in a well-regarded startup accelerator.
How many jobs could IER create?
The Department of Homeland Security projects that once implemented, about 3,000 foreign entrepreneurs would qualify each year for the IER program, translating to about 100,000 jobs created over a decade. However, New American Economy estimates that IER may generate from about 135,240 to 429,714 new jobs within the next decade. The lower figure is based on an entrepreneur creating 5 new jobs over 2.5 years while the top figure is predicated on a strong emphasis on STEM positions.
America needs to attract international entrepreneurs
While the U.S. continues to be a hot spot for startup entrepreneurs, other countries are edging in. China, Japan, Israel and the UK are among those directly competing to lure entrepreneurs and have successfully capitalized on the Trump administration’s unfriendly stance on employment-related immigration. The IER represents a fresh job creation tool that the U.S. needs to continue its leadership role in global innovation.