US needs better solution to entice foreign-born entrepreneurs

Even with the implementation of the International Entrepreneur Rule, the US could still fall behind in attracting start-ups, says Uncork Capital's Jeff Clavier.

With funding easier to access, and other countries streamlining their immigration processes, Silicon Valley might find itself having a hard time enticing start-up founders to move to the US.

Speaking during a National Venture Capital Association (NVCA) and US Citizenship and Immigration Service (USCIS) panel last week, Uncork Capital founder and managing director Jeff Clavier said the US needs a better solution to encourage founders to set up their companies in the country.

“Silicon Valley has always been the go-to for entrepreneurs to build start-ups. But today, you can pretty much build the same thing if you were based in Europe or China or India,” Clavier said. “The amount of funding that those international companies are receiving is unprecedented. So it’s really a race to who is going to attract the best entrepreneurs.”

VC Venture
Jeff Clavier, Uncork Capital

Clavier, who immigrated to the US from France, said the pandemic made the process of funding companies outside of the US easier compared to a few years ago when US-based VCs would only invest locally in start-ups. Now, more start-ups outside the US have found a way to have a largely American customer base and team of investors while based away from the US. Clavier noted that some countries have in recent years reduced the processing times for work visas. Canada, for example, boasts a two-week application process. In comparison, it can take two months at best in the US.

Speakers during the NVCA panel said the US needs to work harder to entice foreign-born entrepreneurs. One of the ways, they said, is to go beyond the implementation of the International Entrepreneur Rule.

The IER currently allows individuals to apply for a temporary parole status, allowing them to work in the US for two-and-a-half years if they can prove their business provides significant public benefit and has the potential for rapid business growth and job generation. However, the USCIS did not specify a timeframe for applicants using the IER.

The rule was initially published in January 2017, days before president Obama left office, with implementation planned for July of that year. However, it was delayed under the Trump administration.

The NVCA led a lawsuit against the Department of Homeland Security in 2017 challenging the postponement of the program and won. The fight continued after the DHS, which oversees the USCIS, failed to follow the court’s order. The Biden administration relaunched the IER in May 2021.

Sophie Alcorn, founder of immigration law firm Alcorn Law, said during the panel that her firm is already preparing applications for the IER, but it is encountering some difficulties.

“We have many founders applying, but they are getting so stuck on proving that the money came from US investors. That is the most difficult part of this whole thing,” Alcorn said.

Under the IER, applicants must prove they have substantial ownership in a start-up that “has received significant investment of capital from certain qualified US investors with established records of successful investments” or awarded government grants for development.

The IER does not delegate the responsibility of vetting foreign-born founders to build successful businesses to VCs, however. Investors are trusted to see the potential of start-ups. Alcorn said one potential pain point for VCs is proving they are qualified investors under the rule, which may include more documentation.

Start-up visa

Although hailing the IER as an essential step forward, the NVCA and panel members said a designated visa for start-up founders would make it easier for foreign-born entrepreneurs to launch businesses in the US.

Currently, founders can apply for several visa categories, such as the O-1 for extraordinary ability, the H-1B and the E-2 investor’s visa, none of which are limited to start-up founders. Venture Capital Journal previously reported that the NVCA is asking the government to approve proposals for a start-up visa.

Alcorn pointed out that the current visa categories focus on past achievements, which can be a disadvantage to young entrepreneurs who are just starting a company, compared to other countries that bank on a start-up’s potential to create jobs. Unlike the IER, other countries’ start-up visas offer permanent residency and a path to citizenship.

“The US is only winning the start-up race because of the Silicon Valley economy and its network of venture capital,” Alcorn said. “Other countries are actually working for it. And at some point, we’re gonna actually have to pay attention and start competing to keep attracting start-ups to come here.”