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DHS Publishes Final International Entrepreneur Rule, Effective July 17, 2017

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It is our pleasure to announce that USCIS has now published the Final International Entrepreneur Rule in the federal register. The final rule is estimated to benefit approximately 2,940 foreign entrepreneurs on an annual basis beginning July 17, 2017. The rule will make it easier for eligible start-up entrepreneurs to obtain temporary permission to enter the United States for a period of 30 months, or 2.5 years, through a process known as “parole,” for the purpose of starting or scaling their start-up business enterprise in the United States. The foreign entrepreneur’s stay may be extended for an additional 30 months to allow the entrepreneur to continue to oversee and grow their start-up company in the United States. The decision about whether to “parole” a foreign entrepreneur under this rule will be a discretionary determination made by the Secretary of Homeland Security on a case-by-case basis (INA Section 212(d)(5), 8 U.S.C. 1182(d)(5)).

The goal of this final rule is to encourage foreign entrepreneurs to create and develop start-up companies with high potential for success in the United States, and enhance economic growth through increased capital spending and job creation.  Under this rule “parole” will be granted to eligible entrepreneurs who can demonstrate that their company’s business operations are of significant public benefit to the United States by providing evidence of substantial and demonstrated potential for rapid business growth and job creation. Such demonstrated potential for rapid growth and job creation may be evidenced by: (1) significant capital investment from U.S. investors with established records of successful investments or (2) attainment of significant awards or grants from certain Federal, State, or local government entities.

The final rule will allow up to three entrepreneurs to seek “parole” per-start up entity, as well as their spouses and children. Entrepreneurs who qualify for “parole” may only work for their start-up business entity in the United States. Their spouses in turn will be eligible to apply for employment authorization once in the United States.

What are the requirements?

Under this new rule, DHS would be able to grant “parole” on discretionary basis to eligible entrepreneurs of startup companies who can demonstrate the following:

  • The entrepreneur must possess a substantial ownership interest in a start-up entity created within the past five years in the United States that has substantial potential for rapid growth and job creation.
  • The entrepreneur must have a central and active role in the start-up entity such that the applicant is well-positioned to substantially assist with the growth and success of the business.
  • The entrepreneur can prove that his or her stay will provide a significant public benefit to the United States based on the applicant’s role as an entrepreneur of the start-up entity by:
    • Showing that the start-up entity has received a significant investment of capital from certain qualified U.S. investors with established records of successful investments;
    • Showing that the start-up entity has received significant awards or grants for economic development, research and development, or job creation (or other types of grants or awards typically given to start-up entities) from federal, state or local government entities that regularly provide such awards or grants to start-up entities; or
    • Showing that they partially meet either or both of the previous two requirements and providing additional reliable and compelling evidence of the start-up entity’s substantial potential for rapid growth and job creation.

Significant U.S. Capital Investment or Government Funding:

The applicant can further validate, through reliable supporting evidence, the entity’s substantial potential for rapid growth and job creation.

Under the final rule, an applicant may be able to satisfy this criterion in one of several ways:

  1. Investments from established U.S. investors: The applicant may show that the entity has received significant investment of capital from certain qualified U.S. investors with established records of successful investments. An applicant would generally be able to meet this standard by demonstrating that the start-up entity has received investments of capital totaling $250,000 or more from established U.S. investors (such as venture capital firms, angel investors, or start-up accelerators) with a history of substantial investment in successful start-up entities.
  2. Government grants: The applicant may show that the start-up entity has received significant awards or grants from Federal, State or local government entities with expertise in economic development, research and development, or job creation. An applicant would generally be able to meet this standard by demonstrating that the start-up entity has received monetary awards or grants totaling $100,000 or more from government entities that typically provide such funding to U.S. businesses for economic, research and development, or job creation purposes.
  3. Alternative criteria: The final rule provides alternative criteria under which an applicant who partially meets one or more of the above criteria related to capital investment or government funding may be considered for parole under this rule if he or she provides additional reliable and compelling evidence that they would provide a significant public benefit to the United States. Such evidence must serve as a compelling validation of the entity’s substantial potential for rapid growth and job creation.

What counts as a qualified investment?

According to the final rule, a qualified investment is one that has been “made in good faith of lawfully derived capital that is a purchase from the start-up entity of equity or convertible debt” Proposed 8 CFR §212.19(a)(4).

An individual or organization may be considered a qualified investor if, during the preceding 5 years: (i) The individual or organization made investments in start-up entities in exchange for equity or convertible debt comprising a total within such 5-year period of no less than $600,000; and (ii) subsequent to such investment by such individual or organization, at least 2 such entities each created at least 5 qualified jobs or generated at least $500,000 in revenue with average annualized revenue growth of at least 20 percent.

Investments made by a corporation, LLC, partnership, or other entity in which the entrepreneur or his or her relatives has a direct or indirect ownership interest will not qualify. Additionally, investments made by the entrepreneur himself, his/her parent, spouse, sibling, or child will not qualify.

Minimum Investment Amount

Under the final rule, DHS has proposed a minimum investment amount of $250,000. Under the final rule, an applicant would generally be able to meet the investment standard by demonstrating that the start-up entity has received investments of capital totaling $250,000 or more from established U.S. investors (such as venture capital firms, angel investors, or start-up accelerators) with a history of substantial investment in successful start-up entities. The timeframe during which the qualifying investments must be received is 18 months immediately preceding the filing of an application for initial parole.

Which entrepreneurs qualify?

The final rule provides more guidance on what it means to be a qualifying “entrepreneur.” To demonstrate that you meet the definition of “entrepreneur” you must possess at least 10% ownership interest in the entity at the time of adjudication of the initial grant of parole, and you must have an active and central role in the operations and future growth of the startup entity such that your combined knowledge, skills, and experience will substantially assist in the growth of the business in the United States. Being a mere investor in the start-up entity will not qualify you for parole.

Which start-up companies will qualify?

To meet the definition of “start-up entity” the company 1) must be a qualifying United States business entity 2) must have been lawfully formed in the United States within 5 years immediately preceding the date of filing of the initial parole application 3) must have been conducting active lawful business since its founding and 4) demonstrate a substantial potential to increase jobs and business growth in the United States.

Start-up Entities that do not qualify

Start-up entities that will not qualify for this program include small businesses that have limited potential to provide jobs and create growth in the United States, created for the sole purpose of providing income to the entrepreneur and his or her family.

To read the complete final rule please click here.

For more information please contact our office.