By Hendrik Pretorius, immigration attorney and CA Bar Certified Legal Specialist at ImmiPartnerwho guides founders and businesses through the US immigration system.
Foreign founders have renewed their optimism through an Obama-era immigration solution known as the Entrepreneur Parole that allows them to travel to the US to actively participate in running their funded high-growth US startups. This entrepreneurship immigration permit, known as the International Entrepreneur Rule, allows up to three overseas co-founders to enter the United States to bring significant public benefit to the United States through business growth and job creation. The founder parole is expected to collect around 3,000 parole applications for entrepreneurs annually.
Originally passed in 2017, the rule has had a tumultuous ride through the Trump administration and has now been revived under the Biden administration. The Trump administration attempted to officially lift the rule in 2018, resulting in only 30 filing attempts and approval from 2017 to 2019. However, in May 2021, the Biden administration finally got that founder parole program back on track by pulling back on the Trump attempt at removing and promoting applicants.
This entrepreneurship immigration solution is a major development for overseas founders who typically struggle to integrate with outdated Visa solutions like O-1, E-2, L-1 or H-1B that modern startups don’t suit modern startups and models Financing Practices. The US angel and venture capital investing community will also benefit from the fact that key international startup founders have a realistic option to stay in the US for up to five years, split between two 30-month probation grants to implement the strong growth Business potential of these innovative companies.
A look at the probation requirements for critical entrepreneurs for startup founders
The probation rules are based on the concept that founders provide the US with “significant public benefit” if they are allowed to enter on probation.
To demonstrate significant public benefit, the rule sets specific criteria to be met for the initial 30 month probation period and then additional milestones must be demonstrated in relation to the second 30 month probation period. These are some of the key requirements:
The foundation must have been established within five years immediately prior to the date of the founder’s application for probation. At the time of renewed probation, it must be shown that the startup is still in operation and still has the potential for high growth and job creation in the future.
Start-up capital participation
At the start of probation, the founder must prove that he holds at least 10% of the shares in the startup. This amount of ownership may then decrease over time, but it can never go below 5%.
Active role of the founder
The founder must prove during the initial and subsequent probationary period that he plays an active role in the startup based on his experience, skills or knowledge that are necessary for the growth and success of the startup.
For the initial parole application, the startup must demonstrate that it has raised $ 250,000 in funding from “qualified investors” or $ 100,000 through qualified government grants or awards.
Essentially, the rule uses the due diligence carried out by skilled investors and government agencies to hedge the growth potential of the founder’s startup. It’s worth noting that flexibility is built into some of the requirements. For example, founders whose startups have not yet reached these investment thresholds can submit an application by providing other reliable evidence of the considerable benefits of the startup for the USA.
Qualified investor or government agency
If the funding is from investors, proof that the investor has made at least $ 600,000 in investments in the past five years, and that those investments created at least five skilled jobs, or at least $ 500,000 in revenue with annual growth of at least 20 % generated.
If a founder claims a government award or funding, it must be proven that the agency typically awards such funding or prizes to startups with the aim of promoting economic development, research or job creation.
What does it mean to be released in the USA?
Most people entering the United States are admitted after an officer verifies a visa on a passport, e.g. B. H-1B, O-1, E-2 or another classification. Probation is different as it is a temporary grant of an approved stay for a period of time with a travel slide rather than a typical nonimmigrant visa.
Although in this case parole allows a paroled founder and their spouse and children to enter the U.S. and work for the founder and spouse (a crucial benefit not normally granted by non-immigrant status types) , this is under a special granting of the approved stay.
Additionally, it is not possible for an entrepreneur to transition from a nonimmigrant status such as F-1 or H-1B to this probation in the US or vice versa. Instead, the founder must travel to the United States from abroad after approval of the I-941 parole application.
A probation permit is also less secure in the long term, as the probation granted under this program can be terminated at any time by the Department of Homeland Security.
International founders and their startups need a solid immigration team and plan
This entrepreneurship is an incredibly exciting development, especially for tech startups, their investors, US innovation, and the economy. Even so, it is incredibly important for all parties to understand all the nuances of this rule in order to present the strongest application from the start and develop a realistic long-term immigration plan.
This probation rule does not provide a path to permanent residence (green card) in the USA, so every entrepreneur and every paroled founder must think ahead and plan for the time after the permitted five years of probation. This could include, for example, preparing a case for an O-1 application for extraordinary skills or planning an EB1A skills-based green card or more.