Our Take on the Final International Entrepreneur Rule

On Friday, the White House released an advance copy of its final International Entrepreneur Rule, which will allow qualifying foreign entrepreneurs to build their startups in the U.S. The final rule will be published in the Federal Register today and will become effective on July 17, 2017.

Engine has supported the Administration’s efforts to make it easier for the world’s brightest innovators to start and scale their companies here in the United States. Immigrants have had an extraordinary impact on America’s startup economy. According to recent analysis from the Partnership for a New American Economy, in 2014 the U.S. was home to almost 2.9 million immigrant entrepreneurs who generated over $65.5 billion in business income. Immigrants also helped to build some of America’s most successful technology companies: Google, Intel, Yahoo!, eBay, Facebook, LinkedIn, Tesla Motors, and Zipcar all have immigrant co-founders.

In October, we submitted comments with Tech:NYC applauding the proposed International Entrepreneur Rule and making a number of targeted recommendations to improve the rule. Below, we outline which of our suggested modifications were incorporated, as well as some of the other major changes that were made in the final rule:

  • Lowers initial capital investment threshold from $345,000 to $250,000: The proposed rule from the Department of Homeland Security (DHS) would have set the minimum investment amount to qualify for parole at $345,000. We argued in our comments that $345,000 was too high and would limit the extent to which foreign entrepreneurs could take advantage of the program. Instead, we encouraged DHS to lower the threshold to $250,000, an amount that takes into account differences in capital needs by industry and geography, and which we argue is supported by data and historical context. DHS recognized these concerns and lowered the threshold to $250,000 in the final rule.

  • Lowers the ownership threshold: In the proposed rule, DHS would have required any applicant to hold at least 15 percent of their company to qualify for parole and 10 percent to qualify for re-parole. We noted in our comments that the proposed ownership threshold was too high and would limit eligibility, especially in capital-intensive industries or for teams with multiple co-founders. We asked the agency to introduce additional flexibility in demonstrating that an applicant is “well-positioned to advance the entity’s business,” or to lower the ownership threshold. The final rule lowers the ownership threshold to 10 and 5 percent for initial and re-parole, respectively.

  • Modifies length of parole and re-parole periods: The proposed rule set the parole period at 5 years total, with an initial period of 2 years parole and the potential to qualify for a 3 year re-parole period. In our comments, we argued that the full parole period should be increased to 8 years, with 3 years for initial parole and 5 years for re-parole. We highlighted evidence that the amount of time it takes for a startup to successfully produce value for investors through an exit has increased significantly over the past two decades: in 1999, the average IPO came 4 years after founding, but in 2014, it was 11 years. Unfortunately, DHS did not choose to increase the full parole period. Instead, the final rule extends the initial parole period to 2.5 years (to allow more time for entrepreneurs to receive additional investments, generate revenue, or create jobs sufficient to meet the requirements for re-parole) but decreases the re-parole period to 2.5 years to maintain the 5 year parole period.

  • Lowers job creation threshold from 10 jobs to 5 jobs: In order to qualify for re-parole, the proposed rule required that an entrepreneur create at least ten jobs during the initial parole period. The final rule lowers the job creation requirement to five jobs.

  • Denotes successful crowdfunding campaign as an alternative criteria: In our comments, we proposed that DHS allow crowdfunding campaigns to count as qualified investments. We argued that a successful crowdfunding campaign, especially one that reaches the required capital investment threshold, is as much an indicator of a startup’s traction and potential for growth as similar investments from more traditional sources of seed capital. In its final rule, DHS chose not to designate crowdfunding as a qualified investment, but noted that “evidence of a successful donation-based or securities-based crowdfunding campaign could be provided under the rule’s alternative eligibility criteria.”

  • Provides additional evidence that can satisfy alternative investment criteria: The proposed rule included flexibility around the investment threshold, allowing applicants to show additional evidence to illustrate their company’s potential for growth if they did not meet the investment requirements. However, the proposal did not specify what alternative criteria would be considered sufficient. We argued in our comments that identifying a more bright-line set of alternatives that could be used by an applicant to demonstrate growth potential would be helpful in simplifying the process. DHS elected not to create this specific set of alternatives, but laid out a number of additional alternative factors that could be used by applicants who only partially satisfy the investment criteria. This list included a number of alternatives we proposed in our comments, such as acceptance into a reputable accelerator, positive revenue and/or job creation, or an advanced degree from an accredited American university.

Overall, we welcome the Administration’s final International Entrepreneur Rule. While it did not include all of our recommended modifications, we still believe it represents an important step towards making our immigration system work for the 21st century innovation economy. We are hopeful that the incoming Administration will support the implementation of this rule, and look forward to continuing to work with President-elect Trump and the 115th Congress to pass meaningful reforms to our immigration system that ensure that America remains a global leader in innovation.


Photo Credit: Tom Lohdan