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Parole for Entrepreneurs: is the O-1 Visa the Better Option?

In light of the new changes in immigration law, including the newly effective International Entrepreneur Rule, we would like to analyze what the actual requirements of the new rule are and, somewhat disappointingly, whether it may still be easier to qualify for an O-1 extraordinary ability visa instead.

On December 14, 2017, USCIS announced that it was finally taking steps to implement the International Entrepreneur Rule (IER) in accordance with a recent court decision. The same day, USCIS published guidance on how to submit IER applications, namely the application Form I-941, Application for Entrepreneur Parole, as well as the form's Instructions.

However, USCIS announced that the Department of Homeland Security (DHS) is simultaneously working on issuing a notice of proposed rule-making (NPRM) in order to remove the IER altogether, of which it is stated to be in the final stages. This most likely means that few entrepreneurs will be able to benefit from the IER rule before it is rescinded. In addition, it remains to be seen how the pending or approved parole applications will be treated once the rule is canceled.

This brings us to the main question of whether or not it makes sense to even apply under the Entrepreneur Parole program or if it may just be easier to qualify for the ever-present O-1 visa.

The International Entrepreneur Rule Fails to Live Up to Expectations

Major Challenges of IER

Current Edition of Instructions as of December 1st aren't in Accordance with the Final IER 

Interestingly, the instructions posted on USCIS website show the requirements for parole as they appeared in the DHS proposed rule-making rather than they originally had in the Final Rule.

There are a number of unfortunate variations, such that the rule's language still lists $345,000 as the amount of minimum investment as opposed to $250,000, the time-frame for investment is explained to be twelve months as opposed to eighteen, the ownership interest requirement is 15% instead of 10%, the business entity is to have been formed within the last three years as as lowered from what was supposed to be five...the list goes on.

The current edition of the instructions concerning Form I-941 is therefore not in accordance with the law (see 82 FR 5238) and state requirements and are more restrictive than those in the Final Rule. While it is most likely a mere oversight on the part of USCIS and is hoped to be updated in response to public comments to comply with the Final Rule, the IER requirements themselves, as well as the suggested documentary examples, pose significant challenges.

Proof that the Entrepreneur must Play a Central and Active Role in the Startup and its Future Growth

On its face, the requirement does not seem to be that difficult to meet. However, in addition to showing that the entrepreneur plays a central and active role in the startup entity, one must show his or her role in the future growth of the entity.

In other words, the entrepreneur must demonstrate that his or her knowledge, skills, or experience would substantially assist the entity in conducting and growing its business in the United States.

USCIS suggests the following evidence:

  • Letters from relevant government agencies, qualified investors, or established business associations with knowledge of the entity’s research, products or services and/or your knowledge, skills or experience that would advance the entity’s business;
  • Newspaper articles or other similar evidence that you or your entity has received significant attention or recognition;
  • Evidence that you or your entity has been invited to participate in reputable start-up accelerators;
  • Evidence of playing an active and central role in the success of prior start-up entities;
  • Degrees or other evidence of knowledge, skills, or experience that would significantly advance the entity’s business;
  • Evidence of intellectual property of the start-up entity, such as a patent, that was obtained by you or as a result of your efforts and expertise;
  • Position description of your role in the operations of the company; and
  • Any other reliable evidence indicating that you perform a central and active role in the start-up entity.

This suggested documentation focuses on evidence of how the entrepreneur is well-positioned to advance the start-up entity. The list of documentation suggests that the entrepreneur cannot merely rely on education and a current active role in the business, but rather has to prove that by virtue of past accomplishments or current entity’s success that the individual will substantially assist the entity's growth as a business in the U.S.

Proof that the Investment was Obtained from a Qualified Investor

Somewhat surprisingly, this may be the most difficult requirement to meet as it requires the presenting of substantial documentation from the investors. Obtaining such documentation may be challenging, to say the least, as many reputable investors would most likely disagree with providing documentation listed by USCIS as suggested evidence. Examples are displayed in the list below:

  • U.S. Organizational documents (such as articles of incorporation, bylaws, articles of organization, operating agreement, certificate of partnership, partnership agreement, etc.)
  • Evidence of ownership to show that it is majority owned and controlled, directly and indirectly, by U.S. citizens or lawful permanent residents of the United States, such as an ownership structure chart.
  • To satisfy the past investment requirement, the investment organization may provide evidence such as: Bank records, wire transfers, debt agreements, equity purchase agreements, equity certificates, equity ledgers, or capitalization table.
  • To satisfy the job creation or revenue generation requirement, such evidence may include such records as: tax and/or payroll records, I-9 records, or audited financial statements.

Proof that the Qualified Investment came from Lawfully Derived Capital

Another challenge is to prove that the funds invested in the start-up entity came from a lawful source, to which USCIS suggest the following evidence: copies of the investor’s bank records, tax records, employment history, wage records, or evidence of assets or property.

These records must clearly demonstrate the trail of lawfully derived capital from a qualified investor into your start-up entity.

Is Additional Evidence of Significant Public Benefit Required?

To qualify under the IER, the entrepreneur needs to demonstrate that the parole would provide a significant public benefit due to a significant potential for rapid growth and job creation. In the final rule, DHS states that such potential would be indicated by the evidence of capital investment as discussed above or by alternative criteria if the investment requirements are not met.

In other words, the final rule does not seem to suggest that IN ADDITION to satisfying all the requirements, the entrepreneur needs supplementary evidence of significant potential for rapid growth and job creation. It seems that by virtue of satisfying all the requirements, the entrepreneur is already showing that the parole provides a significant public benefit.

However, the instructions to Form I-941 suggest that in addition to meeting the investment, grant or award criteria discussed above, the entrepreneur should submit additional supporting evidence concerning the start-up entity’s business and its substantial potential for rapid growth and job creation (as well as your day-to-day role in the business), listing suggested evidence such as:

  • Letters from relevant government agencies, qualified investors, or established business associations with knowledge of the entity’s research, products or services and/or your knowledge, skills or experience that would advance your entity’s business;
  • Newspaper articles or other similar evidence that you or your entity has received significant attention or recognition;
  • Evidence or participation participate in, are is currently  participating in, or have graduated from one or more established and reputable start-up accelerators;
  • Patents or other documents indicating that you and/or your entity are focused on developing new technologies or cutting-edge research;
  • Evidence that you have played an active and central role in the success of prior start-up entities, such as letters from relevant government agencies, qualified investors, or established business associations with knowledge of your prior start-up entities;
  • Degrees or other documentation indicating that you have knowledge, skills, or experience that would significantly advance your entity’s business;
  • Tax and/or payroll records, I-9 records, or other documents indicating that your entity has created a significant number of qualified jobs prior to filing the request for parole; and
  • Any other reliable evidence indicating your entity’s potential for growth and/or your ability to advance your entity’s business in the United States.

O-1 Visa vs IER

In light of the above-described challenges and complex documentary requirements for the IER rule, let’s discuss whether O-1 visa could be a better option for entrepreneurs.

Evidentiary Criteria for O-1A

Evidence that the beneficiary has received a major, internationally-recognized award, such as a Nobel Prize, or evidence of at least (3) three of the following: 

  • Receipt of nationally or internationally recognized prizes or awards for excellence in the field of endeavor

NOTE: For entrepreneurs, evidence of awards could also include venture capital funding, grants, investments from accredited angel investors that the entity has received due to Beneficiary’s work. It seems that without such strict definitions as in IER rule on who can be considered a qualified investor or how much capital counts as an award, this criterion is more flexible to apply than the corresponding IER rule.

  • Membership in associations in the field for which classification is sought which require outstanding achievements, as judged by recognized national or international experts in the field

NOTE: Such evidence may include acceptance to Y-combinator, 500 Startups or other prestigious startup accelerators or incubator programs that have rigorous procedures for startup acceptance.

  • Published material in professional or major trade publications, newspapers or other major media about the beneficiary and the beneficiary’s work in the field for which classification is sought

NOTE: Newspaper publications or major trade publications can serve to show that the beneficiary’s work has received a lot of attention in the media.

  • Original scientific, scholarly, or business-related contributions of major significance in the field

NOTE: This criterion may include evidence of pioneering new technology developed, evidence of patents, widespread usage and recognition of the company’s products, significant web traffic, etc.

  • Authorship of scholarly articles in professional journals or other major media in the field for which classification is sought
  • A high salary or other remuneration for services as evidenced by contracts or other reliable evidence

NOTE: This criterion can include evidence of significant compensation, much higher than average in your industry or evidence that the entity has raised substantial funding.

  • Participation on a panel, or individually, as a judge of the work of others in the same or in a field of specialization allied to that field for which classification is sought

NOTE: Entrepreneurs are frequently invited to judge startup competitions or provide advice and mentorship as part of incubator/accelerator programs. Such evidence may be used for the purposes of this criterion.

  • Employment in a critical or essential capacity for organizations and establishments that have a distinguished reputation

NOTE: This criterion can include evidence of Beneficiary serving in the top executive roles for the company, such as CEO, CMO, CFO or CTO, etc. and the evidence above to show the distinguished reputation of the business.

  • If the criteria do not readily apply to the beneficiary’s occupation, the petitioner may submit comparable evidence in order to establish the beneficiary’s eligibility.

Looking at the requirements for IER and O-1 Visa side by side, it is easy to note the resemblance of IER to many O-1 requirements. By evaluating the facts of each case, it may be possible to determine whether the entrepreneur could satisfy O-1 visa requirements rather than vying for Parole for Entrepreneurs, which is a far less desirable option, especially considering the possibility of its rescission.

For an evaluation of your case in respect to the eligibility criteria for IER or O-1 Visa, schedule a consultation.