Trump proposal to kill foreign entrepreneur program hits startups

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Yahoo News
Alex Modon, left, and Vikram Tiwari, co-founders of Omni Labs, Inc., in San Francisco on April 13, 2018. (Photo: Eric Kayne for Yahoo News)
Alex Modon, left, and Vikram Tiwari, co-founders of Omni Labs, Inc., in San Francisco on April 13, 2018. (Photo: Eric Kayne for Yahoo News)

Alex Modon knew the difficulties of getting a tech startup off the ground, but there was one complication he wasn’t prepared for: the U.S. immigration policy under President Trump.

Before they founded Omni Labs, Inc. in June 2015, Modon and his co-founders, Vikram Tiwari and Nishant Srivastava, had worked in the tech industry for a number of years and were well acquainted with the challenges of “startup life.”

But even in the competitive and crowded field of data-driven marketing, Omni, an automated ad data analysis platform for businesses, quickly emerged as a rising star. According to court filings, Omni’s customer base grew from five to 140 businesses in just eight months last year, and by September 2017, the largely self-funded startup already boasted a positive cash flow. Since then, Modon told Yahoo News, the San Francisco-based startup has continued to grow, both in customers and revenue.

“All the things that are supposed to be really hard are clicking and are actually going really well,” he said, but that just adds to the frustration caused by U.S. immigration policy. Though Omni was the collaborative brainchild of its three co-founders, only the U.S.-born Modon is now allowed to live and work in the country where the business is based. Last year, unable to obtain U.S. work visas for Tiwari or Srivastava, both citizens of India, Omni resorted to opening a secondary office in Vancouver — a costly endeavor that Modon said has presented a variety of logistical challenges.

Now the company finds itself in limbo amid the Trump administration’s effort to kill an Obama-era regulation that sought to grant a limited stay in the U.S. to certain qualifying entrepreneurs, like Modon’s co-founders.

The regulation, known as the International Entrepreneur Rule, was first proposed in 2016 after multiple attempts to pass legislation that would create a so-called startup visa had failed in Congress. Unlike many other countries, the U.S. does not offer any sort of visa or work permit specifically for foreign entrepreneurs looking to build new businesses here.

After months of consultation with legal experts, tech industry leaders, and the public, the final version of the International Entrepreneur Rule (IER) was published by Obama’s Department of Homeland Security just three days before Donald Trump was inaugurated.

It wasn’t totally clear what would happen to the rule under President Trump, said Doug Rand, former assistant director for entrepreneurship in the Obama White House, who helped craft the regulation.

“On the one hand, this administration hasn’t exactly championed making immigration easier. But on the other hand, what could be more ‘merit-based’ than the International Entrepreneur Rule?” Rand asked, referring to Trump’s repeated calls for “merit-based immigration,” including during his State of the Union address.

In fact, the Trump administration’s approach to this rule illustrates the clash between the pro-business and anti-immigrant values on which Trump campaigned for president.

The IER officially became a government regulation before Trump took office, but implementation was delayed until July 17, 2017, to give DHS’s U.S. Citizenship and Immigration Services time to get the program up and running. On July 11, DHS and USCIS — which had since been placed under the leadership of immigration hardliners John Kelly and Frank Cissna, respectively — issued yet another rule  “temporarily delaying the effective date of the International Entrepreneur Final Rule” from July 17, 2017 to March 14, 2018.” Despite the description of the delay as temporary, the announcement made clear that DHS ultimately intended to revoke the rule and planned to use this postponement to do so.

Entrepreneurs who’d been waiting to submit their applications through the IER since January suddenly saw their plans evaporate. In September, Omni, along with a handful of other startups and individual entrepreneurs joined the National Venture Capital Association (NVCA) in a lawsuit against DHS challenging the legality of the delay — and won. On Dec. 1, 2017, a U.S. District court judge in Washington, D.C., ordered that the delay be vacated and that DHS finally begin accepting applications for parole under the International Entrepreneur Rule.

“In our history, we’ve never sued the federal government before,” said Jeff Farrah, vice president of government affairs for the NVCA. But their victory in court was only partial.

Before the judge had even issued his ruling, DHS announced its intention to formally rescind the IER as part of the Trump Administration’s Unified Regulatory Agenda. A proposed rule titled “Rescission of the International Entrepreneur Rule” was then submitted to the Office of Management and Budget’s Office of Information and Regulatory Affairs, where it has more or less languished since Nov. 17, 2017.

As a candidate, Trump promised to parlay his lifetime of business experience into making “great deals” that would create jobs and bolster the economy. But his hardline views on immigration drew the ire of some in the business world, particularly the tech industry. Though his pledges to crack down on illegal immigration made the most noise, Trump made clear that he also intended to go after legal avenues of immigration — such as H-1B visas for highly skilled foreign workers, relied on heavily by U.S. tech companies.

Last year, when industry leaders from Silicon Valley descended on the White House for meetings with Trump and administration officials, one of the key issues on their agenda was immigration. According to reports from the meetings at the time, some Silicon valley execs who raised the issue of the IER said they felt somewhat assured that administration officials, including then economic adviser Gary Cohn, understood their concerns about the need to allow entrepreneurs and highly skilled foreigners to work in the U.S.

“It is very entrepreneurial, it is very free market-oriented, and so I think any Republican who is serious about business would have to take this rule seriously,” said Leon Rodriguez, the former director of USCIS under President Barack Obama who oversaw the creation of the International Entrepreneur Rule.

The version of the IER that was published in the waning hours of Obama’s presidency would grant parole (immigration language that essentially means permission to stay in the country) of up to two and a half years for foreign entrepreneurs who have significant ownership (at least 10 percent) and a central role in the operations of a startup that was founded in the United States within the last five years. Applicants must also show that their company has “substantial and demonstrated potential for rapid business growth and job creation” — meaning they must have either garnered investments of at least  $250,000 from qualified American investors or received $100,000 worth of federal, state or local grants.

Entrepreneurs who met the qualifications for parole under the IER would be eligible to seek an extension of up to two and a half more years if they continued to show that they are providing a “significant public benefit” to the country. All told, the program stood to offer no more than a total of five years in the U.S. for the estimated 3,000 entrepreneurs who were expected to qualify.

“It’s a relatively modest rule because parole is a relatively modest benefit,” said Rodriguez. “It’s completely provisional. It can be revoked at any time; there’s no path to a green card, there’s no path to citizenship, so it’s a relatively modest thing that was being done.”

But not too modest for anti-immigration groups to target. For groups such as the Federation for American Immigration Reform, or FAIR, Trump’s election presented a unique opportunity. Suddenly, views that were once largely eschewed by mainstream Republicans were being embraced by the president, who proceeded to install immigration hardliners in key roles at the White House as well as in the Department of Justice and Homeland Security.

“We do have allies all over the administration,” particularly at USCIS, said RJ Hauman, FAIR’s director of government affairs. “The International Entrepreneur Parole Rule is exactly the kind of unauthorized regulation that infringes on the primacy of Congress in setting immigration policy and threatens the integrity of our immigration laws, so there is little surprise that the Trump administration is moving to rescind it.”

Hauman was reiterating the argument made against the IER by the Immigration Reform Law Institute (IRLI), FAIR’s legal arm, as well as Republican senators Chuck Grassley, Michael Lee, David Vitter, and Jeff Sessions, now Trump’s attorney general.

Their view, articulated in letters submitted to DHS before and after the rule was finalized, is that the Obama administration was acting beyond its authority to grant parole by offering it to a specific category of immigrants — essentially creating a de-facto visa program, something only Congress has the authority to do. That was the same argument used against other Obama administration policies, such as the Deferred Action for Childhood Arrivals program, or DACA.

In its official proposal to rescind the International Entrepreneur Rule, Trump’s Department of Homeland Security stated that it must review the IER in light of the new president’s executive order on Border Security and Immigration Enforcement, which explicitly requires the limited use of parole authority as part of the administration’s policy to “end the abuse of parole.”

“The charitable view of their objection was that this is a separation of powers issue, and parole authority is not a backdoor way for the executive branch to create a visa,” said Doug Rand, who is now the co-founder of Boundless, a startup that provides assistance with spousal visa applications. “This is a pretty arcane legalistic argument, though, and it’s hard to argue against the evidence that this policy would create a lot of good jobs for American workers.”

Supporters of the rule on both sides of the aisle cast doubt on the issue of parole authority as the basis for getting rid of the program, given the president’s stated commitment to job creation and merit-based immigration.

“There would be, in my mind, no particular reason to roll back this international entrepreneur rule,” said Douglas Holtz-Eakin, the former director of the Congressional Budget Office under George W. Bush, who also served on the Council of Economic Advisers for President George H.W. Bush. “It’s sensible; it gets the right kind of immigration into the United States — there’s no question about it.”

Holtz-Eakin, who is now president of the conservative-leaning American Action Forum, was one of 1,470 Republican and Democratic economists who  sent an open letter to Trump and congressional leaders last April, expressing their support for immigration as key source of U.S. economic advantage.

“They’re a tremendous source of dynamic growth potential,” Holtz-Eakin said of immigrants. He said the “general Trump administration aversion to immigration” was the likely motivation for rescinding the IER. 

“They have the clear view that, somehow, [immigration] is harmful to the United States and its economy and I just don’t think that’s true,” he said. “While it might be politically popular to run against immigrants, I don’t think it’s in the long-run interest of the U.S. in any way.”

Paul Hughes, an attorney at Mayer-Brown who provided pro-bono representation to Omni and other startups in their lawsuit against DHS, said he too found it difficult to understand the administration’s resistance to a program that “would seem to be the definition of merit-based immigration.”

Groups like FAIR and Numbers USA, another organization that seeks to reduce both illegal and legal immigration to U.S., have long been among the more vocal advocates of a merit-based immigration system.

“We ought to look objectively at what the needs of our society and our economy are and find the people who best meet those needs,” said Ira Mehlman, a spokesman for FAIR U.S.

Rosemary Jenks, director of government relations at Numbers USA, added that the opposition to the IER has less to do with the substance of the rule and who it would benefit than the way it was created.

But while she insisted that the “biggest problem we have is that Congress, not the administration, creates immigration laws,” ultimately, Jenks said, “what we do want to do is reduce the overall numbers of immigrants coming in.”

“If Congress is going to create a program for entrepreneurs, they need to take those visas from somewhere else and reduce the overall numbers,” she said. “We’re not in the business of advocating for additional categories of immigrants.”

Jenks said Numbers USA, like FAIR, has seen new opportunities for influence under President Trump, pointing to proposals from the White House and members of Congress to eliminate things like “chain migration” and the diversity visa lottery program as evidence that their position on reducing immigration numbers is being embraced by key figures in the federal government.

“At least that conversation is happening, which it wasn’t before President Trump took office,” she said.

Both Jenks and Hauman said they’re confident that the Trump administration will follow through on its plan to rescind the International Entrepreneur Rule. At the same time, the NVCA’s Jeff Farrah said his own meetings and conversations with members of the administration have left him hopeful, at least, about the rule’s future.

“The message that IER will help grow the economy and build new startups in places off the coast that are desperately in need of new job creation has certainly resonated with some individuals within the administration,” said Farrah. “I think there are people who look at this as being very much in line with the president’s goal of trying to push for new economic opportunities in places that have felt left behind over the years.”

Though, as Farrah noted, “currently the rule is in place; it’s the law of the land,” the uncertainty surrounding the program’s future has left those who submitted applications in an uncomfortable holding pattern.

Carter Langston, deputy chief of media relations for USCIS, told Yahoo News that so far, the agency “has received approximately 10 applications for the IER program, but has not yet issued any final decisions” and could not say when applicants could expect to receive a response.

A disclaimer at the top of the International Entrepreneur Rule page of the USCIS website makes clear that, while DHS is implementing the program in compliance with the December court ruling, the agency “is also in the final stages of publishing a notice of proposed rulemaking seeking to remove the IER.”

Asked whether this warning, displayed prominently above information about applying for the program — which costs $1,200, plus an $85 biometric services fee — is intended to discourage prospective applicants, Langston stated that “the information on our website is to inform potential IER applicants that DHS has announced plans to rescind the rule through the Notice of Proposed Rulemaking process.”

Omni is among the startups waiting anxiously for a response to their application.

In the months since their lawsuit was filed last September, the company’s leadership has dwindled from three co-founders to two, with Srivastava returning home to India and pursue a more stable job opportunity there. Tiwari, meanwhile, remains based in Vancouver — a fact that, Modon argues, has stymied the company’s ability to expand. Omni now has a total of eight employees, most of them in San Francisco. “It’s mainly just Vik in Vancouver,” said Modon.

“There’s a ton of benefits that you get from just being in one consolidated environment. I think [that’s] especially true in the startup stage,” said Modon. “We’re certainly slower to make more strategic decisions, [and] we haven’t had the ability to hire nearly as well here because we don’t have as much resources the management side.”

Alex Modon, left, and Vikram Tiwari, co-founders of Omni Labs, Inc., on April 13, 2018, in San Francisco. (Photo: Eric Kayne for Yahoo News)
Alex Modon, left, and Vikram Tiwari, co-founders of Omni Labs, Inc., on April 13, 2018, in San Francisco. (Photo: Eric Kayne for Yahoo News)

Modon and Tiwari’s long-distance partnership has also created a roadblock to fundraising, as networking and physical introductions are crucial to soliciting investments.

While San Francisco is the ideal home for Omni, Modon said he and Tiwari have not ruled out the possibility of moving their operations entirely to Canada if necessary.

“We’d love to do it here, but I think, ultimately, when it comes down to it, a company is just a collection of a few people,” he said. “You kind of move where you need to make that happen.”

An accomplished software developer and certified technology expert on Google’s Cloud platforms, Tiwari leads various community developer groups and is regularly invited to speak at tech conferences across the U.S., such as the Windy City Devfest hosted by Google in Chicago this February and another coming up in Raleigh, North Carolina in October.

In addition to the initial success of Omni, Tiwari figured that his expertise and demonstrated qualifications would make the immigration aspect of building a startup in the U.S. “a really easy process.”

Tiwari said “it’s frustrating to understand why” it’s been so hard to get permission to live and work in the same country as the company he created, especially since “everything is based upon merit.”

“What else can we do?” he asked.

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