Foreign-born entrepreneurs are responsible for some of the most iconic and important American companies, from Google and Facebook to AT&T and GE. And 40 percent of Fortune 500 companies were started in whole or in part by immigrants. Thanks to a new rule issued by the Obama White House, more immigrant entrepreneurs will have a chance to stay in the U.S. to grow their businesses and add to America’s rich history of foreign-born founders.
Last week, the White House announced it would issue a final version of the International Entrepreneur Rule (IER), which gives foreign-born entrepreneurs a chance to stay in the U.S. to grow their businesses, provided they can demonstrate that their company has potential for growth. Tech:NYC has been involved throughout the IER rulemaking process: in September, along with Expa, we hosted a roundtable event with several Tech:NYC members and the White House to provide feedback on the rule and, in October, we joined with Engine to submit comments on the rule (see our previous blog post on the topic here).
The IER would allow foreign-born entrepreneurs to remain in the U.S. for a period of 2.5 years if they can demonstrate certain criteria, including meeting certain investment thresholds (e.g., $250,000 by a qualified investor or government grants totaling $100,000). After that period expires, an entrepreneur would have a chance to apply for a second 2.5-year period.
We support this rule for obvious reasons: more good entrepreneurs means economic development and job growth all over the country, including here in New York. So we were encouraged that the final version, which takes effect on July 17, incorporated some of our recommended changes that we think will make the rule even more effective. Those changes are:
- Reduced fundraising requirement - The draft rule required program applicants to demonstrate that their company had raised at least $345,000. After receiving feedback that this amount was too high, the final rule reduces the fundraising amount to $250,000, consistent with the dollar amount recommended in our comments.
- Modified duration of stay - The draft rule would have allowed participants to stay for an initial period of 2 years, and a subsequent period of 3 years. The final version of the rule altered this duration slightly, allowing participants to stay for 2.5 years initially and an additional 2.5 years for the second period.
- Reduced participant ownership threshold - The draft rule required applicants to own at least 15 percent of their company at the time of application and 10 percent to remain for the second period of time. The final rule changes the participant’s minimum ownership requirement from 15 percent to 10 percent for the initial 2.5 year period, and from 10 percent to 5 percent for the second period. In our comments, we advocated for this reduced ownership threshold since a dilution of equity is not necessarily indicative of a founder’s reduced involvement and, in fact, may have more to do with the successful raising of capital.
- Reduced job creation requirement - Under the draft rule, participants seeking to stay beyond the first 2.5-year period would be required to demonstrate that they had created 10 jobs. The final version of the rule lowers that job creation requirement from 10 to 5.
We believe that these changes improve the rule and bring it more in line with the business realities of a start-up. We applaud the White House for its hard work on this rule and for significantly improving immigration policy at a difficult time to make progress on the issue. We look forward to the rule’s implementation in July.