While this rule is applicable on a case-by-case basis, eligible entrepreneurs may receive an initial authorized stay or ‘parole’ of up to 2.5 years which can be extended for the same period based on benchmarks such as funding, job creation and prescribed revenue recognition.
Introduced by former president Barack Obama in 2017, suspended by his successor Donald Trump and later reintroduced by the Joe Biden administration in 2021, the IER targets immigrant entrepreneurs looking to build businesses in the country.
On 12 July, the US Citizenship and Immigration Services released extensive insights into the qualifications and evidence for the entrepreneur visa that were not available before. Mint dives into the updated details to understand what this means for startup founders in India.
What are the requirements to be eligible under the entrepreneur rule?
The rule mandates entrepreneurs to be either living abroad or already within the US. Spouses of these entrepreneurs could also apply for employment authorization after being paroled. However, it does not apply to children.
Startup entities must have been formed in the US in the past five years and should be able to demonstrate potential for rapid growth and employment opportunities by showcasing at least $264,147 in investments from qualifying investors.
They are required to have at least $105,659 in qualified government awards or grants or alternative evidence. Up to three entrepreneurs per startup can be eligible for parole provided they own at least 10% of the company at the time of the initial application under IER. These founders must have an active role in the startup’s operations, as dictated by the US Citizenship and Immigration Services’ official website.
How does this benefit Indian startup founders?
Indian founders who are looking to set up businesses in the US may benefit from access to robust funding opportunities. The country, which is home to the largest startup ecosystem, thrives on a well-developed venture capital system that serves as the industry’s backbone.
While the rule is largely sector-agnostic, segments such as technology, software, fintech and e-commerce may see more traction based on the ticket size involved, said Rahul Charkha, partner at Economic Laws Practice.
Indian startup founders will also have greater access to a more diverse consumer base, which will be crucial to capturing higher revenues. Additionally, the US offers strong protections for intellectual property, extensive support networks through incubators and accelerators, and access to a highly skilled talent pool and advanced technology infrastructure, Charkha said while also adding that entrepreneurs stand to benefit from a stable regulatory environment that will foster growth and innovation.
Are there imminent challenges for Indian founders looking to set up biz in the US?
While this gives Indian founders access to the world’s wealthiest market, the IER still presents a mixed bag for entrepreneurs as stringent eligibility criteria make it a challenge for many startups to qualify under the guidelines that the rule presents.
Some of the imminent challenges include receiving capital from qualified investors within the stipulated time frame, navigating through complex legal and regulatory law, high tax rates compliances, risk of inheritance tax, securing competitive funding, and adapting to the competitive market and business culture.
Entrepreneurs’ benefits may also involve a complex set of procedures owing to higher exchange rates, expensive resources and a complicated intellectual property law amid heightened competition.
While the rule underscores the country’s ambitions to attract talent and entrepreneurs from around the globe, the US tax system can be tricky. Entrepreneurs may have to expose their Indian assets and income to taxation, which could complicate other aspects of residing and conducting business operations there.
Charkha added that the temporary nature of the programme leaves a note of uncertainty as building a successful startup takes time, and the lack of a clear path to permanent residency can be a deterrent for founders seeking long-term stability.
Could this impact the sentiment of startup founders looking to flip back to India?
Experts and lawyers have been divided on this as it largely depends on the startup’s level of exposure and the way it is structured in relation to the US markets.
With increased competition that may push US-based Indian startup founders to innovate on a global scale, the International Entrepreneur visa may have a quiet but significant impact on those claiming to want to flip their ventures back to India, Russell Stamets, partner at Circle of Counsels said. “No entrepreneur would, with a cold eye, choose a complex, business-unfriendly startup regime over a market that has created the wealthiest and most innovative companies in the world.”
This comes against the backdrop of several startups such as Meesho, RazorPay and Zepto, looking to flip their base to India after successful relocations of companies such as Groww and PhonePe.
These startup founders consider several factors such as the primary consumer base, IPO ambitions, and long-term stability. For instance, companies in the US require at least $300 million in revenue to tap the public markets versus $100 million in India.
Indian founders may also consider factors such as leveraging cost-effective and skilled labour to achieve operational efficiencies and concerns about uncertainties related to permanent residency and visa eligibility. These considerations could potentially deter them from making long-term decisions to relocate their base to the US.