The fatal flaw in the president’s proposal for foreign entrepreneurs
(This post originally appeared on The Washington Post)
Would you invest more than $345,000 in a company partly owned by a foreign-born immigrant who’s temporarily resident in the U.S. because he might be allowed to stay? Would that same entrepreneur take that risk? That’s what the president’s hoping.
Mike Galarza is one of those people. The Mexican-born immigrant has been living in the U.S. since 2009 when he came over as an intern through a J1 visa. Originally, he hoped to build a company in Mexico with “the best U.S. business strategies and practices, “ he told me. Instead, he was so inspired by the U.S. business culture that he saw another opportunity: finding a better way to help businesses manage payments and expenses. So he stayed in the U.S. and built aEntryess, a fast-growing tech company that automates payables and receivables processing for small and mid-sized businesses.
But there’s a problem: his status is still temporary. He has to apply for a new visa every single year. He’s done this four times already, visiting the U.S. Embassy in Mexico each time to renew and each time there’s a chance that his petition can be declined. “It’s a huge risk for my company,” he says.
On Aug. 26, the Obama administration proposed new visa rules for foreign born entrepreneurs like Galarza in the hopes of getting them to stay in the U.S. and not take the technical skills they learned here back to their home countries.
The president’s “start-up visa” targets those immigrant entrepreneurs who own at least 15 percent of their company and have an “active and central role” in the company’s operations. If so they can apply for “parole” to stay in this country for two years which can then be extended another three years if certain conditions are met. To do so, the entrepreneur’s company must have raised at least $345,000 from qualified U.S. investors or received $100,000 in grants from select government agencies. Other “reliable and compelling evidence” of the venture’s ability to grow and add jobs may also meet the criteria.
The rule is open for comments for the next 45 days. The president hopes to see it in action before he leaves office next January 20th. More than 3,000 entrepreneurs are expected to apply each year.
At first, the proposal kind of seems like a no-brainer, doesn’t it? We all know this country’s immigration laws are chaotic. Large companies are often accused of rigging the current H1B visa system to their own advantage–and to the detriment of smaller tech companies who desperately need more talent. We’re aware that many foreign-born nationals get their education here and then take this knowledge back home to start-up their own companies which then compete with companies in the United States.
Immigration reform has been a hot button this election year mainly over the debate to allow people into this country who may be a drain on resources. But no one argues that allowing foreign-born entrepreneurs to stay because these are the people that this country has been built on–individuals that are likely to grow their companies, provide more work, create wealth and contribute to our economy.
Critics say the proposal favors those who can pay to stay. They contend that this is just a political gesture for votes and these start-up entrepreneurs don’t contribute a great deal to the country’s overall economic output. And they may be right. But that’s not the real flaw. There’s an even bigger flaw to the president’s proposal. And it’s fatal.
The White House is calling the proposal the Immigration Entrepreneur Rule. The key word here is: “rule.” The proposal is interpreting a section of the Immigration and Naturalization Act allowing immigrants to stay in the U.S. if, on a case-by-case basis, there’s “urgent humanitarian reasons” or “significant public benefit.” Do entrepreneurs who can potentially provide jobs and economic value fall under the definition of “significant public benefit?” The White House is hoping so.
But hope is not law. And this is a rule interpretation, not a law. Smart entrepreneurs, wherever they’re from, always evaluate the risks. And they know what’s going to happen. There is no congressional approval. There is no bi-partisan immigration reform ready to be passed. Hillary Clinton will support it but Donald Trump will not and both will have genuine reasons why. There will be debates in Washington. There will be opposing views. Someone will inevitably contest the rule and sue, with the appeals process throwing everything in limbo until the decision reaches (hopefully) the Supreme Court.
“It shows the intention and efforts of the current administration to act on the well needed immigration overhaul,” says Galarza. “Yet they are short measures leaving too many doors open.”
So imagine you’re thinking of making the leap, starting up a business in the U.S., putting your life savings into the venture, moving your family here and enduring all the bureaucracy that even American-born entrepreneurs must suffer– and then multiply that because you’re not American born. Or imagine you’re an American investor being asked to sink your money into this venture, great as it may be. And you’re doing so under the “hope” that the president’s “rule” will still apply a year or two from now.
And then consider all the things that may otherwise happen to throw this into jeopardy. Will foreign entrepreneurs be willing to take this risk? Unfortunately, I don’t think so.