Created during the Obama administration, the International Entrepreneur Rule gives the Department of Homeland Security the ability to allow foreign-born entrepreneurs to remain in the US for up to five years if they've created a company that has the potential for rapid growth and job creation, among other requirements.
The program was set to take effect on July 17, but on July 10, the Trump administration postponed it until March 14, 2018, with the reported intent of scrapping it altogether. The DHS said at the time it objected to the rule partly because the management of a foreign-entrepreneur program would consume resources needed for existing initiatives.
'The IER is a net job creator'The NVCA, which serves as the official mouthpiece for the VC community in Washington, DC, has asked a federal court to block the DHS from delaying the IER and require the department to begin accepting applications for the program.
The case saw its first day in court in late October. The NVCA asked the judge to expedite the ruling and put the IER into effect immediately. For this to be granted, the NVCA has to prove the delay is causing irreparable harm, which its lawyers argue comes in the form of decreased investment opportunities and increased costs for those impacted.
Farrah said he has yet to hear any coherent arguments against the IER from the government's attorneys. Rather, he thinks the current administration disapproves of the rule because it was crafted by their predecessors. Per Farrah's NVCA blog post summarizing the first hearing, the judge in the case questioned the reason behind the last-minute delay, to which the attorney responded that the DHS had undergone a leadership change, and the decision-making process lasted from January until July.
"They haven't given a very compelling public rationale," Farrah said. "Any way you slice it, the IER is a net job creator for the entire country. Just because it's something the Obama administration worked on doesn't mean the Trump administration should be reflexively opposed to it."
'This was a fight worth having'The NVCA was advocating for the IER before President Donald Trump was sworn in and began making good on his campaign promises to restrict immigration. After it became clear the IER would be blocked if no one stepped in, the organization decided to do something it had never done before: sue the government. The lawsuit is the NVCA's first ever, according to Farrah. He said the organization is not litigious but is instead acting to "defend a core interest of our members and startups."
"We took a hard look at where we needed to go," Farrah said. "Our sense was this was a fight worth having. The reality is immigrant entrepreneurship is something that is very closely intertwined with the startup ecosystem in this country."
According to a 2016 Harvard Business Review report, 25% of US entrepreneurs and 31% of VC-backed founders specifically are immigrants. In addition, 51% of US-based unicorns were launched by foreign-born entrepreneurs, per a 2016 National Foundation for American Policy report. Jyoti Bansal, the founder of Harness and AppDynamics—which sold for billions—is an oft-cited example. Bansal, who came to the US on an H1-B visa in 2000, told Forbes he had to wait seven years for a green card to be able to leave his job and begin building AppDynamics.
Close to 40% of all new companies have at least one immigrant entrepreneur connected to their creation, and 33% of VC-backed companies that went public between 2006 and 2012 had at least one foreign-born founder, per the HBR and NFAP reports. And perhaps the most apt statistic for those arguing in favor of the IER: A "startup visa" program with an annual quota of 75,000 could create up to 1.6 million jobs over 10 years, according to a Kauffman Foundation report from last year.
VCs, founders fight for immigrant entrepreneursMembers of the VC and tech world have a history of lobbying for something like a startup visa, emphasizing profitability and innovation in their pursuits.
In a 2009 blog post, Y Combinator's Paul Graham outlined why the government should change its stance on immigrant entrepreneurs. "The biggest constraint on the number of new startups that get created in the US is not tax policy or employment law or even Sarbanes-Oxley. It's that we won't let the people who want to start them into the country," he wrote.
Neeraj Agrawal of Battery Ventures had this to say, per an NVCA tweet: "The majority of investments I've made have at least one founder from another country, and those companies have created over 10,000 American jobs."
Xiao Wang and Doug Rand, two of the founders of Seattle-based Boundless, a startup that aims to simplify the immigration process, have been following the IER case closely. Rand worked on the rule itself as the assistant director for entrepreneurship at the White House Office of Science and Technology Policy under President Obama. Wang is a former Amazon employee who moved with his family to the US from China as a child. He worries about the impact of foregoing the IER.
"The part that I fear most about what is going on is not what is happening immediately but what happens 10, 20 years from now," Wang told PitchBook. "Unfortunately [Boundless] can't dictate changes to policy—we aren't the government. But at least we help people understand what are these trade-offs, what are these options. So they have all the information they need to make these tremendous life decisions."
"It is incredibly scary when things that are truly significant in your personal life are out of control," Wang said. "We have a tendency to think we have some modicum of influence or ability to drive different aspects of our life, and immigration is the one where you send this package off to this lockbox and then you wait for months or years."
'We need to be doing everything we can to make this country as competitive as we can.'
For his part, the NVCA's Farrah noted that while the US is hesitant to ease the immigration process for foreign-born entrepreneurs, other nations are welcoming them with open arms.
"It was already hard enough for these founders to come here and then the message that was sent has really been you aren't welcome to come here to make jobs," Farrah said. "What I worry about is that we are sending this message that we want to push people away to start companies in other locations."
Farrah has been in the executive role at NVCA for two years now. When he joined the NVCA, he said he was really struck by the venture capital community's dedication to comprehensive and fair immigration policy.
"They realize that we need to be doing everything we can to make this country as competitive as we can," he said. "Investors and startups are all in very close alignment on this issue."
The NVCA is waiting to hear whether the court will grant a summary judgment, meaning that if the IER is implemented and the government doesn't file an appeal, that would conclude the case. Farrah said this decision could come soon after the Thanksgiving holiday. Otherwise, the court battle will continue.
PitchBook and the NVCA have an ongoing partnership. Together, they produce a quarterly report: The PitchBook-NVCA Venture Monitor.