Startup entrepreneur Henry Chen faces the same obstacles as many other fresh college graduates in his position — building a product, getting users, landing investors, and launching a business a world away from family.
But for Chen, those ordinary challenges are just the start. A native of Hefei, China, he came to the U.S. on a visa, and he has between one and 24 months to work on his startups in the U.S., depending on a verdict from Immigration Services.
After graduating from the University of Missouri in 2015, Chen received Optional Practical Training (OTP) parole — a 12-month extension of the F-1 visa that he used to attend college. His OTP expired in June and he’ll have to return to China if his request for another extension isn’t granted.
Fortunately for Chen, the Department of Homeland Security, under a directive from the White House, has proposed a new “entrepreneur rule” that grants a two- to five-year “parole” — the term of art in the immigration process — to encourage immigrants to build startups in the U.S.
“It will give me one better option to continue my business in the U.S., one of the top notch countries for startups,” said Chen.
Chen is the founder of two startups. He launched Toss Rock Inc. in 2015 to build an app for real estate agents showing homes to remote, long-distance buyers. In April, he founded Rubix Mind, a mobile game company, with a friend. Chen plans to apply for the entrepreneur parole, sometimes referred to as a “startup visa,” if he qualifies.
That’s a big if. To be considered, startups need to raise at least $345,000 from “qualified” U.S. investors or $100,000 in government grants. Startups have to be founded in the U.S. within the last three years. Founders must own at least 15 percent of the company, and demonstrate the company’s growth potential and “significant public benefit to the United States.”
If granted parole, immigrants can stay in the country for two years while they build their startups. During that period, they must maintain an income at least four times higher than the federal poverty line. After the initial two years, a founder can apply for three more years in the U.S. if the startup has raised an additional $500,000, created 10 full-time jobs, or reached $500,000 in revenue.
As of now, the “startup visa” is just a proposed rule, open to public comment until Oct. 17. Some experts like Tahmina Watson, an immigration attorney and author of The Startup Visa: Key to Job Growth and Economic Prosperity in America, argue the requirements to qualify for parole are too restrictive.
“In my comments, my top three requests will be to lower the following: First, lower the initial qualified investment from $345,000 to $250,000,” she said. “Second, lower the household income from 400 percent above federal poverty guidelines to no more than 200 percent. And lastly, at the time of the renewal, lower the job creation number from 10 to 5.”
The financing requirements are the biggest obstacle Chen faces.
“There is one thing I am struggling with,” he said. “I may receive capital from VCs in China, but that may not fit in this picture, and may bring more complications into my case. I understand how this rule may prevent money laundering and other scams, but on the other hand, it restricts foreign entrepreneurs’ freedom in business here.”
Because immigration reform failed in Congress, the White House had to exercise its authority with Homeland Security in order to create an option for entrepreneurs. The rule grants parole status to qualified startup founders, but it isn’t a visa. The temporary and mutable nature of that status could present other challenges for entrepreneurs trying to meet the funding requirements.
“The individual is not being granted any kind of status, but they are just being granted an admission to the U.S. that can be revoked at any time as a matter of discretion by DHS,” said immigration attorney Ian Wagreich. “This doesn’t provide very much comfort to the individuals who might be ‘qualified investors’ seeking to invest in a stable U.S. business, or to the applicant for the parole status. Why would an investor be interested in funding an investment for the applicant’s benefit if the applicant is going to be granted such a tenuous benefit that can be revoked at any time?”
Atul Khekade thinks the investment parameters are appropriate for foreign entrepreneurs. He is the founder of Airnetz, a technology-focused travel platform that operates Airnetz Charter (think Uber for helicopters and jets).
“Raising $100,000 and hiring two American workers is somewhat feasible,” he said. “Until now, we have always generated a sizable employment in the U.S. and will continue to do so after raising capital. For me or for emerging entrepreneurs in general, what we need the most is flexibility and support.”
But Khekade faces other barriers. Though his company has entities registered in the U.S., it is headquartered in India. This may disqualify him from the startup parole proposed by the DHS.
He says Airnetz is “undergoing some changes in our corporate structure and we may be refiling our entity in the U.S. under a different category.”
Khekade and his co-founder are interested in applying for the startup parole option. U.S. citizenship is attractive to business professionals for a number of reasons, but as entrepreneurs, they don’t fall into any clear work visa category.
“They are either for employees (H1/L1) or for someone with outstanding performance or achievement (like EB1 for Nobel Prize winner or a businessman who is already successful and earned a lot of money). Or there is EB5 which requires you to invest $1 million yourself,” he said. “I was interested in the entrepreneur-friendly visa for the U.S.”
The executive branch doesn’t have the authority to create a true visa for entrepreneurs and there isn’t a definitive step for founders when the parole period ends.
“Limiting one’s period of stay to two or five years without the possibility to extend the visa or make available other visas is shortsighted,” said Reaz Jafri, Head of Immigration at the Withers Bergman law firm. “Assuming a company is successful – profitable, created jobs — shouldn’t its founders be allowed to remain in the U.S. permanently if they want? If not, are we incentivizing them to take their business elsewhere?”
But, as Watson notes, the DHS expects successful entrepreneurs to qualify for other options by the end of their parole period. In other words, build a profitable business first, worry about a visa later.
“It is hoped that the startup entity will be successful enough to support a different non-immigrant or immigrant visa category at the end of his/her parole period,” she said. “In addition, the administration will release new policy updates on the immigrant visa category ‘national interest waiver’. The new policy guidance may provide an option of permanent residency in the U.S for entrepreneurs who continue to bring economic benefits to America by creating jobs and generating revenue. I expect to see developments in the next few months.”
In the meantime, Chen continues working on his startups, meeting with venture capitalists, and seeking grants, while he waits to hear back from Immigration Services.
“If there is no luck to maintain my immigration status at some time, yes, I will move my projects somewhere else,” he said. “Could be Hefei, or Shanghai, or anywhere in the world with open doors. No big deal, I am not picky on locations.”