The Department of Homeland Security (DHS) recently released a proposed rule to allow foreign entrepreneurs to enter the United States and work at qualifying “start-up” companies under the President’s “parole” authority. Parole allows the President, through DHS, to permit certain individuals to temporarily enter the United States as parolees under fixed conditions.  It is often used for humanitarian purposes, such as entry for U.S. medical treatment when patients have no other visa options.  Because parole authority is held by the President, the proposed “entrepreneurial parole” rule does not require Congressional action.  However, the President’s immigration authority is limited, leaving entrepreneurial parole as a short-term fix for foreign entrepreneurs.

Entrepreneurial parole would allow a qualifying foreign entrepreneur, deemed an “International Entrepreneur”, to enter the United States to work at a qualifying start-up to engage in activities that are likely to “increase and enhance entrepreneurship, innovation, and job creation in the United States.”  To become effective, the rule must now be published in the Federal Register and undergo a 45 day notice and comment period.

A few major points from the proposed rule:

  • The start-up entity must have been formed within the three years before an application for entrepreneurial parole.
  • The International Entrepreneur must play a “central role in the operations and future growth of the entity” and own at least 15 percent of the entity.
  • Each start-up may only employ up to three International Entrepreneurs and non-parolee investors may only include U.S. citizens and green card holders (lawful permanent residents).
  • The applicant must prove that the start-up has “substantial potential for rapid growth and job creation” as established in one of two ways:
    • The entity “has received investments of capital totaling $345,000 or more from established U.S. investors with a history of substantial investment in successful start-up entities.” Such investments must come from established “U.S. investors (such as venture capital firms, angel investors, or start-up accelerators).” OR
    • The entity has received at least $100,000 in grants or awards from local, state or federal government entities that have “provided support for economic, research and development, or job creation purposes.”[1]
  • International Entrepreneurs would receive an initial two-year parole entry with the potential for a three-year renewal if they remain employed by a qualifying startup entity.
  • The International Entrepreneur’s spouse and children of would also be paroled into the U.S., with the spouse eligible for employment authorization and the children eligible to study.

Entrepreneurial parole is not a long-term solution.  Under the proposed rule, there are no plans beyond the five years of available parole.  That doesn’t preclude future Executive action to create additional extensions, nor does it keep an International Entrepreneur from applying for other visa classification, such as the H-1B visa,[2] during the five years of entrepreneurial parole.  However, International Entrepreneurs can have their status revoked without notice and the entire program can be easily terminated by a newly-elected President.

Although bipartisan immigration bills for skilled workers and entrepreneurs have circulated in Congress in recent years, it is unlikely that they will pass outside of broader comprehensive immigration reform.  In the meantime, the rule could be modified after the public comment period ends and is expected to become effective sometime in late 2016 or early 2017.  It will be interesting to watch whether entrepreneurial parole can effectively bring foreign entrepreneurs to the United States.

[1] Applicants that can only partially satisfying one or both of the criteria could possibly still qualify by submitting additional evidence of the entity’s “substantial potential for rapid growth and job creation.”

[2] H-1B visas are typically a poor option for start-ups within their first year or two of operations or for applicants with a controlling interest in the company applying for the visa due to the need to prove an employer-employee relationship with the ultimate visa holder and needing to show the company’s ability to pay the employee proposed salary which is controlled by regional prevailing wages for similar roles.  Further, H-1B visas are subject to an annual quota.  So many applications were submitted in recent years that a lottery system was implemented accepting only 30-40 percent of applications for adjudication.