the startup ENTREPRENEUR rule (ser)
On January 17, 2017, the USCIS released a long-awaited final rule allowing entrepreneurs to enter the U.S. to “operate and grow” their startup entities. The rule is effective July 17, 2017. The USCIS is hopeful that the Startup Entrepreneur Rule (SER) will encourage entrepreneurs to create and develop businesses in the United States, with the specific aim of increasing innovation, advancing research and development, and creating jobs for U.S. workers.
The SER is unlike other non-immigrant visas (H-1B, O-1, E-2, etc) in that it is not actually a “visa”. It is, in fact, a rule that gives the Department of Homeland Security discretion to “parole” an individual into the United States. Parole is essentially permission to enter the United States for a period of time. Parole is not considered “admission”, but the distinction is only important in the context of changing to another status. For example, if you are admitted to the United States on a B-1 (visitor) visa, you would be authorized to change your status from B-1 to H-1B or other type of visa. When you are paroled into the U.S. you cannot change your status while in the U.S. Instead you would have to leave the U.S. to apply for a visa from abroad. Otherwise, a person paroled into the United States under SER generally has the same rights and privileges as one who enters on a non-immigrant visa, such as an H-1B, B-1/B-2, etc.
BASIC OVERVIEW OF REQUIREMENTS
According to the text of the SER, a person may be paroled into the United States if they demonstrate the following:
- Formation of a Startup Entity. The applicant will have to show that they have formed a new entity in the United States that has lawfully done business since its creation and has substantial potential for rapid growth and job creation. According to the text of the regulation “an entity may be considered recently formed if it was created within the 5 years immediately preceding the date of the filing of the initial parole application.”
- The Applicant is an Entrepreneur. This element requires that the applicant be an entrepreneur of the startup and well-positioned to advance the entity’s business. The general evidence needed to satisfy this criteria is: a) proof of at least 10% ownership in the startup and b) proof of an active and central role in the operations and future growth of the entity, such that his or her knowledge, skills, or experience would substantially assist the entity in conducting and growing its business in the U.S. We are unsure how this rule will be implemented but it’s safe to assume that an applicant for this rule must present corporate papers, pay-stubs, a CV, support letter and other material proving that he or she is an owner of the startup.
- Proof of Significant US Capital Investment or Govt. Funding. The entrepreneur must show evidence of an investment of:
- A) at least $250,000 USD from a qualified U.S. investor with established records of successful investments. This type of investor generally includes venture capital firms, angel investors, startup incubators, etc. OR
- B) a government award or grant of at least $100,000 USD given by a Federal, State or local govt. entity with expertise in economic development, R&D or job creation.
Alternative Criteria: The regulations also allow for an applicant approval if they only partially meet the criteria above so long as they can prove that they would be a significant public benefit to the U.S.
Duration of Status:
An applicant who is approved under the SER will be paroled into the United States for an initial period of up to 30 months. The entrepreneur may reapply at the end of the term and receive an additional 30 month parole. The total duration for the rule is 5 years.
Extension of Status:
At the end of the initial 30 month period the applicant may request an additional 30 months so long as they meet the following criteria:
- The entity continues to be a startup as defined above;
- The applicant continues to be an entrepreneur and owns at least 5% of the entity. This implies that the entrepreneur may sell up to 5% of his or her stake during the initial period;
- There has been significant U.S. investment, revenue and/or job creation.
- Investment: show investment of at least $500,000 USD
- Revenue: show that the entity reached at least $500,000 in annual revenue with an average annualized growth rate of at least 20% during the initial 30 month period
- Job creation: show that the entity has created at least 5 full-time jobs for U.S. workers over the initial 30 month period.
Both the spouse and children of the entrepreneur will be authorized to enter the country along with the principal applicant. The spouse is eligible and may apply for employment authorization.
3 Entrepreneur Maximum
The regulations only allow up to 3 entrepreneurs per startup entity. The same is true for re-application.
Inability to Change Status
Applicants entering under this rule cannot change status to a different visa in the United States. They are not barred from applying for a new visa but must do so at a consular post abroad.
The estimated total filing fee for the principal applicant will be $1,285 USD. This fee includes the application form fee for Form I-941 of $1,200 and a biometric filing fee of $85.