ACA Supports Proposed “International Entrepreneur Rule” – and Offers Improvement Ideas

By David Verrill, Managing Director of Hub Investment Group 

Many angels have noticed the unique capabilities of entrepreneurs from outside the US to build great companies. Now, finally, so has the American federal government (noting that our colleague Canadians have been all over this for some time).  The Department of Homeland Security released rules that would allow more foreign born entrepreneurs to stay in the US longer to grow their companies.  One of the main requirements is for angels or VCs to invest in their companies.  The rules will become final after a review of comments to the first public draft. 

ACA sent a letter of support to the Department of Homeland Security today, October 17, 2016 and you’re welcome to review our comments. Excerpts of the letter are below.  Final rules may be published by year-end.

ACA supports the proposed rules and look forward to a final rule later this year, although we have some suggestions to improve the rules for even more impact.  Our comments today are in support of the nation’s startup entrepreneurs, including those born in other countries, those who create the majority of net new jobs in the country and many of the innovations that improve the quality of life throughout the world.  It is vital that promising startups continue to attract angel capital, for their own growth and for the American economy as a whole.  Angels recognize that foreign-born entrepreneurs and innovators are uniquely effective at building strong high growth businesses and appreciate the opportunity for more of these entrepreneurs to stay in the US longer to build companies that have the potential for significant public benefit.  We see in practice the data the proposed rule includes about the impact of international entrepreneurs.

As angel investors provide up to 90 percent of the outside equity for startup and early-stage companies, ACA believes it is important to point out that the need for having more international entrepreneurs in our country is truly a nation-wide need.  It is not limited just to Silicon Valley or other regions that are usually thought of as venture capital centers – we see it in the Midwest, Southeast and Mountain West, in addition to California, Boston and New York.  ACA members in many regions have experienced situations in which sophisticated angels were interested in investing in companies led by foreign born entrepreneurs, but the risk of those entrepreneurs having to leave the US made those deals untenable.

Our recommendations for improvement include:

  • Reducing the minimum size of investments from angels or VCs from $345,000 to $250,000 to $300,000
  • Removing requirements of investors to invest no less than $1 million in the previous five years, so that thousands of sophisticated and active individual angels could participate in these companies.
  • Allow approved immigrant entrepreneurs to stay longer than proposed, starting with an initial three year term
  • Provide more clarity that investor syndicates, especially those that invest through special purpose vehicles, can be investors
  • Recognize that entrepreneurs’ ownership get diluted in follow-on rounds and that entrepreneur compensation is  a combination of salary, benefits, and other rewards tied to the exit of the company.

We look forward to a final rule that leads to important economic impact in the United States.


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