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Aug. 30 — Tech entrepreneurs and venture capitalists will be listening closely to Donald Trump’s Aug. 31 speech on immigration policy to measure his support for an Obama administration proposal to make it easier for immigrant entrepreneurs to launch startups in the U.S.
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 Google Inc., Tesla Motors Inc. and EBay Inc. have foreign-born founders.
The U.S. Department of Homeland Security expects to finalize a proposed rule (RIN:1615-AC04) offering foreign-born founders a route to stay in the U.S. by the end of Obama's term, the agency announced Aug. 26 (21 ECLR 34, 8/31/16).
But for the tech sector, the Republican presidential nominee's shifting stance on immigration only underscores the fact that the rule could be rolled back by a future administration or Congress. As it is under the proposed rule, foreign entrepreneurs under parole status could still have their permission to stay revoked without an administrative or judicial review, tech startup organizations, immigration attorneys and venture capitalist groups said.
Given those factors, investors and founders need legislation creating a startup visa that would help quell risks of entrepreneur deportation and drive innovation, the groups said.
“We need Congress to pass immigration reform in 2017 — that’s the ballgame right there,” Todd Schulte, president of FWD.us, an immigration advocacy group founded by tech luminaries including Mark Zuckerberg and Bill Gates, told Bloomberg BNA. “You need legislation because ultimately it’s permanent.”
More than 40 percent of Fortune 500 companies were founded by immigrants or their children, according to a 2011 report from the Partnership for a New American Economy.
Immigrants are “long on ambition and short on things to lose,” PayPal Holdings Inc. cofounder Max Levchin, an immigrant from the former USSR, said during the White House’s press call announcing the new rule Aug. 26.
The new route for foreign-born entrepreneurs was welcomed by tech groups, entrepreneurs and investors. Unlike the U.K. and Canada, for example, the U.S. doesn't have a visa tailored for startup founders. The Obama administration’s rule seems geared toward tech-centric businesses, because it mandates criteria for success that reflect what a fast-growing company with substantial investment backing looks like, Evan Engstrom, executive director at Engine, an advocacy group for tech startups, told Bloomberg BNA.
Founders can apply for an initial two-year parole status under the proposal 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 can extend the parole another 3 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 under the draft rule.
But startup founders and investors have reason to fear the new rule could be tossed out by a future administration or voided by Congress, said Craig Montuori, partner at Venture Politics who has represented a variety of venture capital and angel investors trying to invest in immigrant startups.
“It’s all about managing risk in the startup community, and regulation without supporting legislation has a higher level of risk,” Montuori told Bloomberg BNA.
An entrepreneur’s parole status, or temporary permission to be in the U.S. from Homeland Security, could also be taken at any time and there would be no administrative judicial review process, making it a risky option for entrepreneurs and investors where a deportation could put the brakes on a business launch, said Angelo Paparelli, a partner in the immigration practice at Seyfarth Shaw LLP.
“Unlike a green card or work visa — both of which are considered a legal “status” in the United States — parole can be automatically revoked by immigration officials without mandatory notice to the parolee,” Paparelli wrote in a blog post.
The draft rule also does not offer a pathway for permanent residency – otherwise known as a green card – after the five-year window, although the White House said in a post Aug. 26 that such a proposal is forthcoming.
These soft spots in the proposed rule have led some in the startup and tech sector to worry about what would happen to the planned route for immigrant entrepreneurs in a Trump administration. The GOP presidential nominee has advocated a ban on immigrants from countries “compromised” by terrorism, and has called for restrictions on the H-1B visa program for high-skilled workers, many of whom are employed in the tech sector. Trump’s campaign didn’t immediately respond to a Bloomberg BNA e-mail request for comment.
“Thanks to Trump and the xenophobes that are supporting him, we have gone backwards in time as far as immigration goes,” Vivek Wadhwa, author of the book “The Immigrant Exodus” and a professor at Carnegie Mellon University, told Bloomberg BNA.
“Now, rather than talking about the economic benefits of bringing hard working people from all over the world we talk about building walls and excluding people of certain religions and backgrounds,” Wadhwa, an immigrant who launched two software companies, said.
What is need to spur innovation by tech immigrant entrepreneurs is legislation for a startup visa, Wadhwa said. Similar bills have been introduced seven times since 2010 by both Republican and Democratic members of Congress, but have often been stalled because they’re caught up in the larger immigration debate, Engstrom said.
Trump’s rhetoric about his plans for immigration reform have softened since mid-August, and it is unclear if he supports the Obama Administration’s new rule. Trump’s campaign said he plans to outline his stance in his Aug. 31 speech.
In a policy agenda released in June, Democratic presidential candidate Hillary Clinton said she supported a startup visa, and wanted to “staple” a green card to science, technology, engineering or mathematics masters and PhDs from accredited institutions, allowing highly-skilled international students to gain U.S. residency (21 ECLR 27, 7/13/16).
“We want to make sure Clinton continues to flesh out what her high-skilled plan looks like,” Schulte told Bloomberg BNA.
In the meantime, if the administration’s rule is finalized this year, tech entrepreneurs and investors will have to weigh the risks of applying for the pathway with the threat that it might be overturned.
“A lot of investors will say ‘I would invest in you, but I won’t because of the fact that you’re an immigrant or unless you have a longer term visa path that you can rely on,'” Montuori told Bloomberg BNA. “It’s an immense risk to have a permanent ban from the U.S.”
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The Department of Homeland Security's proposal for immigrant entrepreneurs is here: http://src.bna.com/iaG
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