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Entrepreneur visa: The rule and why it’s necessary

Friday, September 23, 2016

Last month, we published a post here, in Spotlight, advocating for an entrepreneur visa. Several days later, the Department of Homeland Security (DHS) published the White House's International Entrepreneur Rule, an executive order that proposes to grant visas for up to two years to foreign-born entrepreneurs who start U.S. businesses.

In order to qualify for the visa, the entrepreneur must:
  • Own at least 15 percent of a U.S.-based startup;
  • Play a central operational role and demonstrate their company's growth potential;
  • Have raised either $345,000 from private investors or $100,000 from government sources.
If a business shows annual revenue growth of at least 10 percent, generates at least $500,000 in revenues and creates at least 10 full-time jobs, the foreign-born business builder could apply for a 3-year extension of the visa.

While it has been clear for some time that immigrants are a driving force behind new business growth in the United States, a study, published in August by the Harvard Business School, quantified the effects immigration has on entrepreneurship in the U.S. Looking at census employment data from 1992 to 2011, the longitudinal study included information on more than 200 million Americans.

The results demonstrated that, while immigrants make up about 15 percent of the country’s population, they create more than 25 percent of businesses in the U.S. Interestingly, this is just the current rate of business creation on a curve that’s been growing steadily since 1990. Since 1995 the rate of business-building by immigrants has grown from 17 percent to 28 percent of total start-ups in the U.S. While only about 15 percent of the United States’ population were immigrants during the period, almost a quarter of immigrants were entrepreneurs.

Given the impact that that foreign-born entrepreneurs have on the U.S. economy, lack of a start-up visa until now was nonsensical. By offering no security to holders of student or H-1B visas that they’d be here to see their projects through, the United States has, in effect, been discouraging a significant source of fuel for its economy.
While it is definitely a step in the right direction, the new entrepreneur rule, once implemented, will still be likely insufficient to encourage entrepreneurship to its fullest potential. Most IPO-track start-ups require at least 7 years between start-up and exit. Under the new plan, a foreign-born business owner will be lucky to get 5 years – with no guarantee that she will be able to stay for even that long.
Until the U.S. can offer some security to foreign-born business owners who want to build their start-ups in the United States, we are simply discouraging entrepreneurship by talented individuals who want to contribute to the U.S. economy.

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