Biden Resurrects U.S. Immigration Entrepreneur Parole for Foreign Startup Founders
Finally we have a U.S. immigration option for international founders and their startups that is modern and in keeping with current business models, typical funding, and more. Entrepreneurs have the Biden Administration to thank for taking the clear step to support international entrepreneurs and the benefits they bring to the U.S., by resurrected the 2017 Obama era International Entrepreneur Rule (IER). This entrepreneur parole does not provide a typical non-immigrant visa but instead grants entry into the U.S. to foreign-born entrepreneurs, who can prove that through their qualifying startup, they will provide a significant public benefit to the U.S. in the form of prospective job creation and growth.
There are many nuances to this rule that anyone considering this type of application should be very familiar with in order to properly plan for the short, medium, and long term immigration implications as a founder or a U.S. startup. The typical U.S. immigration journey for startup founders requires stepping from one lily pad to the next until one eventually reaches what is often the ultimate goal of exiting the boggy marsh altogether with U.S. Green Card or Citizenship in hand.
History and nuance of this U.S. Immigration option for foreign founders and startups
Although this program has its flaws, such as parole not being an actual grant of immigrant status (as discussed below), and not providing a clear pathway to long-term residency, it is still very welcome. As many international entrepreneurs know, the antiquated U.S. immigration system does not provide any clear option for talented foreign founders to develop modern startups. Founders typically have to jump from one immigration status to another whether on F-1 OPT, O-1, H-1B, or if possible and if lucky can look to country-specific options such as an E-2. But this journey is arduous especially for those who are first-time entrepreneurs and it often stifles innovation as the world’s most talented folks try to figure out what is allowable and what is not in testing and pursuing their business ideas given the constraints of current immigration status that they might hold.
This entrepreneurial parole rule does provide some clarity in this otherwise murky area. The parole for founders and their startups is also much more in tune with current business realities and allows entrepreneurs to avoid straying too far from their real-world business objectives and necessary decisions just to try and fit into immigration options not truly meant for modern startup purposes. Since the passage of immigration options such as the O-1, H-1B, L-1, and others, current business models, funding, and more have gone through an entire sea change.
As provided by the USCIS and specifically acting USCIS Director, Tracy Renaud, in a press release on May 10, 2021:
“Immigrants in the United States have a long history of entrepreneurship, hard work, and creativity, and their contributions to this nation are incredibly valuable,” said Acting USCIS Director Tracy Renaud. “The International Entrepreneur parole program goes hand-in-hand with our nation’s spirit of welcoming entrepreneurship and USCIS encourages those who are eligible to take advantage of the program.”
A Quick History of the Entrepreneur Parole Rule: Created by Obama, Reviled by Trump, and Resurrected by Biden
In 2017, right before the end of the Obama administration, the International Entrepreneur Rule was passed after proper notice and comment submitted to the Department of Homeland Security. Along with various immigration industry leaders, I submitted detailed suggestions to make the rules more flexible and in line with current start-up equity and business realities. The result was passage of an exciting new option that was lightyears ahead of other immigration options.
Then, unfortunately, the Trump administration went on to issue a notice proposing to end the International Entrepreneur Rule although this parole rule was never actually terminated. This did however have the effect of completely chilling the utilization of the parole option. As reported by the Wall Street Journal:
“An official with USCIS, which runs the program, said they received just 30 applications for the program between 2017 and 2019, and just one was approved.”
Fast forward to May 11, 2021, when the Biden Administration withdrew Trump’s proposed rule to remove the International Entrepreneur Parole Program. This was a clear sign of the Biden Administration's support of international entrepreneurs and although the entrepreneurial parole does not go as far as we might like in granting a clear pathway to residency in the U.S., it is a massive step in the right direction. Whether this will be the extent to which the Biden Administration pushes reforms for international entrepreneurs is still not clear but for an economy in need of a continued uptick in employment and growth, since the COVID-19 pandemic, this program is certainly welcome.
It is estimated that roughly 3,000 foreign entrepreneurs will be applying for this parole program each year.
Can I use the parol rule to apply for U.S. immigration status as a founder of my startup today?
Yes! But as discussed in this article be aware that there is an important nuance and distinction between parole and non-immigrant status. Setting that aside for a moment, at this time the United States Citizenship and Immigration Services (USCIS) is actively promoting the program and accepting applications filed using Form I-941. The USCIS also updated their website for this program on 5/12/2021 and they are hosting International Entrepreneur Parole Rule webinars on this topic as an expected surge of interest will be upcoming.
As provided on the USCIS website, the Department of Homeland Security is utilizing its parole power to “grant a period of authorized stay, on a case-by-case basis, to foreign entrepreneurs who demonstrate that their stay in the United States would provide a significant public benefit through their business venture and that they merit a favorable exercise of discretion.”
What is the difference between being ‘Paroled’ into the U.S. and having nonimmigrant status such as an O-1 or H-1B?
This is important to understand. There is a distinction to be made between immigration status and parole when considering this option against other options like the O-1 visa which actually grants non-immigrant visa status and not merely a temporary period of authorized stay in the U.S.
The International Entrepreneur Rule provides parole into the U.S. which is a temporary allowed period of authorized stay in the U.S. for persons who can show that they will provide “significant public benefit” to the U.S. during their period of parole. Parole is not the same as valid non-immigrant status in the U.S. that you might hold if you are on an H-1B, O-1, L-1, E-2, or in another status type. With parole, it is not possible to change status from an F-1, O-1, H-1B, or similar nonimmigrant status directly to the Entrepreneur Parole. Instead, after an I-941 application is approved by the USCIS the entrepreneur has to leave the U.S. to be paroled into the U.S. The same is true if a founder later wants to change from parole to a non-immigrant status such as an O-1 or H-1B. In that case the entrepreneur will have to leave the U.S. to apply for a visa to re-enter. Again, parole is not a status and therefore a visa is not required.
Lastly, the Department of Homeland Security can also terminate the parole granted under this program at any time.
How long can I stay in the U.S. via the Entrepreneurial Parole Rule?
This parole allows foreign entrepreneurs with qualifying startups, as described below, to stay in the U.S. for up to five years, via two 2.5 year (30 month) stints. There are very specific criteria that need to be satisfied for the initial parole period and then the subsequent allowable period of 2.5 more years.
Significant Public Benefit Parole Power
The power being utilized by the Department of Homeland Security for this parole program comes from the discretionary authority to grant entries into the U.S. for urgent humanitarian reasons or significant public benefit that the applicants for entry would provide. This specific entrepreneur rule is based on the ‘significant public benefits’ prong of parole.
The idea here is that certain entrepreneurs, through their qualifying startups, have the potential to create jobs and growth in the U.S. economy, through their innovative startups. The rule itself provides that “significant public benefit” is proven by:
...the receipt of (1) significant capital investment from U.S. investors with established records of successful investments or (2) significant awards or grants from certain Federal, State, or local government entities.
The rule does also directly indicate that there is a third option available for those who are unable to entirely satisfy the significant investment or grant criteria but can show “additional reliable and compelling evidence of their entities' significant potential for rapid growth and job creation.”
Next, let’s take a deep dive into the criteria outlined in the rules to evidence significant public benefit.
What are the criteria a founder and startup need to meet to qualify for immigration benefits under the Entrepreneurial Parole program?
The requirements needed to qualify for the International Entrepreneur Rule by a founder or up to three founders of a U.S. startup are clearly defined in the rules found at 8 CFR 212.29 entitled ‘Parole for Entrepreneurs.’ Understanding these details is critically important. A misinterpretation of one issue such as the total amount of equity you must own over time, or who can count as a Qualified Investor for parole purposes, can end your chances at this program or can end any extended time you may otherwise be eligible for after your initial 2.5-year entry. Failing to abide by the rules may also raise other bars to future entries into the U.S. and could impact other future immigration and visa applications.
So let’s take a deep look at the requirements that an entrepreneur and startup must show to be eligible for the entrepreneurial startup parole program:
A. Formation of a ‘New’ Start-Up Entity
The regulations define this as a business that has been formed within the 5 years immediately preceding the date of the filing of the initial parole application to the USCIS. It is worth pointing out that for purposes of the ‘Qualified Investment’ criteria considered below, the rules at section 212.19 (2) provide that a business entity is qualifying if it was formed within the 5 years immediately preceding the receipt of the relevant grant(s), award(s), or investment(s).
B. The Applicant is a Qualified ‘Entrepreneur’
To apply you have to show that you are qualified as an ‘Entrepreneur’ which requires showing that you are “well-positioned to advance the entity's business.” Proving this comes down to showing that you:
Possess at least a 10% interest in the entity at the time of adjudication of the initial 2.5-year grant of parole, and that you then still possesses at least a 5 percent ownership interest in the start-up entity at the time of adjudication of a subsequent period of re-parole (the second allowable period of 2.5 years); and
You have an active and central role in the operations in a manner that you impact the future growth of the entity. This can be shown through specific skills, experiences, knowledge that clearly will help the entity in growing the business in the U.S.
So, as an important note to point out about ownership, the rules do take into account that equity stakes may decrease over time and for that reason do allow entrepreneurs to reduce his or her ownership interest in the start-up entity as time goes on. It is however important to keep in mind that at all times the entrepreneur must maintain at least a five (5) percent ownership stake in the entity to abide by the rules. Also, a 5% equity stake must be shown during the application for the second 2.5 year period of parole, also known as the re-parole process.
C. Significant U.S. Capital Investment or Government Funding
This criterion is set in order to prove that the business has substantial potential for rapid growth and job creation in the U.S. In order to assist in satisfying this requirement, the rules lay out three different methods by which this can be proven. The first two, specifically detailed milestones include showing that the startup received, within 18 months immediately preceding the filing of an I-941 application, an investment of $250,000 from qualified investors, or $100,000 through one or more qualified government awards or grants.
Let’s look at each of these as well as a catch-all third option in more detail:
(1) Investments from established U.S. investors to prove potential for growth and job creation
Here the entrepreneur can show that the U.S. startup entity has received ‘significant investment of capital’ which is listed as being met via a total investment of $250,000 or more from established qualified U.S. investors, in the preceding 18 months. These established U.S. investors may include accelerator programs, angel investors, and VC firms who can show a history of such investments in other successful startups.
The obvious question that follows is who will be deemed a ‘Qualified Investor’? The regulations clarify this point and provide that a Qualified Investor for entrepreneurial parole purposes includes:
(i) Individual or organizations that have made investments in start-up entities in exchange for equity, convertible debt or other security convertibles into equity commonly used in financing transactions within their respective industries, comprising a total in 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.
To break this down, the key factors to be a ‘Qualified Investor’ for entrepreneurial parole include showing that the VC, angel, or other investor have:
Made investments totaling at least $600,000 over the last 5 years; and
That the investments have generated at least:
5 qualified jobs, or
$500,000 in revenues with at least 20% annualized growth
An individual seeking to operate and grow his or her start-up entity in the United States would generally need to demonstrate the following to be considered for a discretionary grant of parole under this final rule:
(2) Government grants to prove potential for growth and job creation
As provided in the immigration parole rule, the entrepreneur can also satisfy the requirement to show expected growth by evidencing “significant awards or grants from Federal, State or local government entities with expertise in economic development, research and development, or job creation.”
The rules specifically provide that an entrepreneur would satisfy this criterion by showing that the startup entity has received monetary awards or grants totaling $100,000 or more from government sources that typically fund businesses specifically for economic, research and development, or job creation purposes.
(3) Alternative criteria to show significant public benefit to the U.S. as an entrepreneur
In the rules, a third hybrid type approach is allowed in which an entrepreneur can show that one of the two above criteria (investment from Qualified Investors or Government grants) have partially been met and that the applicant can provide other reliable and compelling evidence to prove significant public benefit to the United States.
How long can I remain in the U.S. as a founder on the entrepreneurial parole?
The initial parole period may last up to 30 months, or 2.5 years. Then an entrepreneur would need to file a second application in order to obtain the available second 30 month period of time. To be eligible for the second grant of entrepreneurial parole the entrepreneur must demonstrate that the startup entity has shown significant growth since the initial grant of 2.5 years of parole and that the startup continues to have substantial potential for rapid growth and job creation. The next section delves into this in detail.
Do the requirements differ for my second parole period to obtain 2.5 more year as a founder?
Yes. Although similar there are very clear additional milestones that must be reached by the founder or founders and his or her startup. The USCIS will want to see that the entrepreneur has delivered on some of the promised growth potential. In order to do this the applicant must show:
A. Continuation of the Start-Up Entity
It must be shown that the startup entity continues to qualify under the initial parole requirements. The rule does provide that this standard can be met by showing that the entity:
(a) has been lawfully operating in the United States during the period of parole; and
(b) continues to have substantial potential for rapid growth and job creation
B. The Applicant Continues to Be a Qualified ‘Entrepreneur’
As mentioned above the rule does take into consideration that equity interests may decline as the startup grows and takes on additional investment. It is provided in the rule that this prong can be met by showing that the entrepreneur:
(a) still possesses at least 5 percent ownership interest when the re-parole is being adjudicated; and
(b) the entrepreneur and his or her skills and experience are still needed to enable business growth.
C. Significant U.S. Investment, Revenue, or Job Creation
The entrepreneur and related startup is required, during the re-parole application to show that the startup continues to have the potential for rapid growth and job creation. The rules provide several methods by which this can be shown:
(a) $500,000 in Additional Investment of Grants
It can be shown that during the initial parole period the startup received additional investment of capital through qualified inventors, significant awards or grants from U.S. government entities, or by satisfying the same catch-all of showing partial satisfaction of the additional investments of capital or government awards and grants along with additional trustworthy evidence of continued growth potential.
To show the additional funding requirement, the rule provides the threshold of an additional $500,000 in qualifying funding that was obtained during the initial 2.5 year parole period. If grants or government awards are being used these must again be from U.S. federal, state or local government entities with expertise in economic development, research, or job creation.
(b) $500,000 in Revenue with at least 20% annualized growth
It is also possible to prove continued potential for growth and job creation by showing a level of $500,000 of annual revenue which has growth by over 20% each year during the initial 2.5 year parole period.
(c) At least 5 full-time U.S. jobs
During the initial parole period of 2.5 years the startup can show that it created at least five full-time U.S. jobs. Note that a job is defined as a position requiring 35 hours per week or more and the position/job needs to have been open and filled for at least 1 year by one or more employees over that time period.
Also, the qualifying employees filling the job cannot be an independent contractor or family of any of the entrepreneurs but instead must be a U.S. Citizen, Green Card holder, or other immigrants lawfully authorized to be employed in the U.S.
(d) Catch-all combination of evidence
It is again possible at the re-parole stage to show partial satisfaction of the above three options along with other trustworthy evidence that the startup continues to provide a significant public benefit.
It is worth noting that the rule does reference a favorable exercise of discretion where an entrepreneur generally meets the above criteria after their initial parole.
Can my co-founders and I all obtain Entrepreneurial Parole through the same startup?
The rule limits parole benefits to three entrepreneurs per qualifying start-up. Remember there are other options that are not as directly applicable but may have to be considered for additional founders. This might include the over underutilized O-1 visa for example. So for a larger co-founding team there may be a combination of solutions that need to be implemented.
Can my spouse work in the U.S. if I get entrepreneurial parole through my startup?
Yes! This is a major advantage over several non-immigrant status types. Note that although the paroled entrepreneur need not apply for a separate work authorization, the spouse does have to submit an employment authorization request to be eligible to work.
It is worth noting as well that entrepreneurs granted parole will be eligible only to work with their startup.
Is there an income or financial support requirement under this Entrepreneurial Parole Program for Founders and startups?
Yes. The regulations require that the parole application must be able to show at all times that their household income is greater than 400 percent of the federal poverty line for his or her household size. The USCIS poverty line data can be found here. As an example, for a single household, the federal poverty line is set at $17,420. 400% of this, or $69,680 must be evidence as income at all times.
Will the investment and revenue requirement change over time?
Yes, the rule provides specific guidance that every 3 years the amounts will be adjusted by the consumer Price Index and will change every fiscal year.
Article Written on May 13, 2021 by: Hendrik Pretorius