Tech Groups Weigh in on Obama's Foreign Entrepreneur Plan

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By Michaela Ross

Oct. 19 — Tech leaders and advocacy groups weighed in with recommendations to tweak a new U.S. Department of Homeland Security (DHS) proposed rule that would make it easier for foreign entrepreneurs to launch startups in the U.S.

The tech community has long touted the need for a startup visa—which exists in countries like the U.K. and Canada—for foreign-born talent to launch companies in the U.S. While a parole system proposed by the department in August was broadly welcomed by entrepreneurs, industry groups and venture capitalists, certain parameters could be tailored to more realistically reflect the needs of international founders and their investors, according to filings submitted during the public comment window that closed the week of Oct. 17.

Increasing the maximum parole period for founders from five to eight years, reducing the initial investment requirements to $250,000 and creating a clearer pathway for permanent residency for entrepreneurs were among the recommendations from a coalition of 23 tech groups, entrepreneurs and leaders, including the Consumer Technology Association and FWD.us, an immigration advocacy group founded by tech luminaries including Mark Zuckerberg and Bill Gates.

“Our goal is to match the needs of 21st century entrepreneurs,” Todd Schulte, president of FWD.us, told Bloomberg BNA. “We're making sure it's going to spur entrepreneurship and be workable in today's economy.”

Ease of Requirements

Under the department's current draft rule language, foreign founders could apply for an initial two-year parole status if they own at least 15 percent of a business that’s received at least $345,000 in investment capital or $100,000 in government grants. They could extend the parole another three years by proving the startup has created at least 10 jobs for U.S. workers, won $500,000 in additional investment and has at least $500,000 in annual revenue with average annualized revenue growth of at least 20 percent, the proposal says.

An extended parole window is more in line with the length of time needed for a modern business to become profitable, hence attracting investors in the first place, the coalition's filings wrote. And creating a clearer pathway for permanent residency would boosts investor confidence that the startup would have the stability of an in-country founder, they wrote. A job creation requirement of three to five positions is also a more realistic benchmark for early-stage companies, the coalition said.

The Obama administration should also be flexible in what it accepts as a qualified investor in a foreigner's startup, the groups said. This would allow angel and early stage investors to back new companies that currently may not qualify under the draft proposal, according to a public comment filing by Kevin Laws, chief operating officer of AngelList, an online portal for angel investors in the tech sector. The department should consider allowing these investors as well as legitimate foreign investors to fund ventures even though they may not have the same legal documentation or record keeping the draft language is requiring, Laws wrote.

“It’s possible to meet the spirit while still not overwhelming founders and investors with paperwork requests,” Laws said of the rule's language in a statement to Bloomberg BNA.

Laws also stated that lowering the initial investment requirements to $250,000 would more accurately reflect the capital needs for entrepreneurs located outside of high-cost tech hubs like Silicon Valley or New York.

In a separate filing, the Information Technology and Innovation Foundation (ITIF), a nonpartisan technology think tank, said the department should look beyond the metrics of job creation and capital attraction and consider exemptions for entrepreneurs that invest in sectors like manufacturing, software publishing and internet publishing where a significant share of output is exported.

“If an entrepreneur moves to the United States and starts a company that sells a not insignificant portion of its output overseas, that creates net new jobs, not only in the firm, but at other firms through the multiplier effect of the firm's and its employees' spending,” the foundation's filing wrote.

The department expects to finalize the rule by the end of Obama's term, officials said in August. The rule comes as part of the president's 2014 executive action that encompassed a broad range of immigration reforms.

Immigrants: Stoking Silicon Valley Tech

Immigrants have long fueled Silicon Valley’s tech machine, accounting for almost 45 percent of startup founders in 2012, according to a Ewing Marion Kauffman Foundation study. Tech giants such as Alphabet's Google Inc., Tesla Motors Inc. and EBay Inc. have foreign-born founders. There are currently 2.9 million foreign-born entrepreneurs in the United States generating over $65 billion in business income, according to data from FWD.us.

Tech sector advocacy groups have been wary that any executive action for foreign entrepreneurs could be rolled back by a future administration. Congressional legislation on immigration reform is what's really needed, Gary Shapiro, president and chief executive officer of the Consumer Technology Association, said in a statement.

In an August 31 speech on immigration, Republican presidential nominee Donald J. Trump said he would toss out Obama's executive actions on immigration if he was elected. Democratic presidential candidate Hillary Clinton's June tech and telecommunication's policy agenda stated she would support a startup visa.

To contact the reporter on this story: Michaela Ross in Washington at mross@bna.com

To contact the editor responsible for this story: Keith Perine at kperine@bna.com

For More Information

The Department of Homeland Security's proposal for immigrant entrepreneurs is available at http://src.bna.com/iaG

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