IER
Immigration is the policy issue I care most about. Below is a letter I wrote on behalf of YC asking the Department of Homeland Security to reverse its decision to rescind the International Entrepreneur Rule:
Secretary Nielsen,
I’m writing on behalf of Y Combinator (YC) to encourage the Department of Homeland Security to reconsider its proposed rulemaking to rescind the International Entrepreneur Rule (IER).
YC is an early-stage fund that has invested in over 1,850 startups (including Airbnb, Dropbox, Stripe, Instacart, Twitch, and Reddit), who are now valued at over $103 billion. YC has been called “Silicon Valley Kingmaker” by The Wall Street Journal, “a Supernova” by Wired, “Silicon Valley’s Startup Machine” by The New York Times, “The world’s most powerful startup incubator” by Fast Company in a cover story, and The Atlantic noted that “YC is seen as a leader, and its influence extends beyond capital.”
Twice a year, we review tens of thousands of applications from all over the world and invite the promising startups to meet us in person to interview. Our acceptance rate from this selection process is less than 2%. Upon our investment, startup founders move to Silicon Valley for 3 months, during which we work intensively with them to get the company into the best possible shape and refine their pitch to experienced, accredited U.S. investors. The program culminates with each startup raising on average $2 million, which helps them to hire and scale.
We’ve now worked with over 4,100 founders. Our experience demonstrates that the U.S. has no monopoly on leading entrepreneurial talent: our founders have come from over 50 countries. In fact, of our top 100 U.S.-based companies by valuation, 51% were started by immigrant founders. Their startups have a combined valuation of over $31 billion and they’ve already created over 14,000 full-time jobs.
However, we shouldn’t be fooled by survivorship bias. From interacting with thousands of immigrant founders, we’ve also seen how the lack of a straightforward immigration path for early-stage founders has prevented startups from reaching their maximum potential and thus costing the U.S. many jobs. Founders unable to navigate the existing immigration system have either not obtained the investment necessary to make their companies grow, or they have started their companies in foreign countries, sending economic growth abroad. And, of those who do found companies in the U.S., only those who are fortunate to find an alternative immigration solution, often tenuous and not closely tied to their employment status, are allowed to stay.
The IER is therefore a necessary first step in providing a direct way for entrepreneurs who have a great idea and have shown enough potential to get funding from experienced U.S. investors to be able to work on their company in the U.S. It is far superior to the alternative option that the Department of Homeland Security proposes — a system with no realistic immigration option for most international founders who do not already come from circles of wealth.
In particular, the IER was built with early-stage founders in mind. It’s designed for international founders who want to start a company in the U.S., raise money from U.S. investors, and create jobs in the U.S. It gives a probationary period of 30 months to founders to enter the country solely for the purposes of building their startup. This 30-month period is a reasonable time to let the founders refine their idea, raise necessary capital, and show real progress in the business including the ability to create jobs. After this time, they’re able to apply for a 30-month extension to show more progress, or if the business is sufficiently well-established then the current U.S. immigration system provides good options to gain permanent status.
As a leading investor in startup companies, YC can confirm that it will invest in IER-founded companies. The DHS’s suggestion that IER status is too tenuous or uncertain to trigger investment is simply wrong. Moreover, YC works with hundreds of leading venture capitalists, and we know that those entities would likewise invest in companies with founders using IER status.
In short, the IER gives entrepreneurs a real chance to get things off the ground.
DHS’s Notice of Proposed Rulemaking to rescind the IER notes that foreign-born entrepreneurs have other options, specifically the EB-5 investor green card, E-2 treaty investor nonimmigrant visa, or EB-2 national interest waiver green card. But these are not options for early-stage startup founders.
- EB-5 requires $500,000 in personal investment into another entity, or $500,000 to $1 million in personal investment in one’s company with ability to show at least 10 jobs created. This is something most founders, U.S. born or not, simply cannot afford. We’re a country of equal opportunity after all, and to require founders to be personally rich to just get started should never be a requirement. The U.S. startup environment works so well because it pairs innovators with investment capital. Moreover, the EB-5 has a lengthy waiting period, making it not a viable option.
- E-2 requires funding from an investor of the founder’s country (not U.S.), but this is not a good fit if the startup is to build for the U.S. audience. IER, by contrast, is designed to encourage U.S. investment in the world’s leading entrepreneurs. Additionally, in some cases the visa is only good for 3 months, which makes it virtually useless to build a company. And it also excludes founders who hail from many entrepreneur-heavy countries, such as India, China and Brazil.
- EB-2-NIW is a non-sequitur. It takes 18 months to get, which separates the company from the founder during the most critical, highest risk phase of the venture - almost ensuring its death. Furthermore, national interest waiver presents a severe chicken-and-egg problem. A founder needs some time in the beginning of their startup to prove out its product to achieve the level of success qualifying “national interest.”
By rescinding the IER, we’re actively signaling to founders to go to other countries to start their companies and create jobs there. This pushes the forefront of innovation and job creation outside the U.S. and out of the reach of U.S. citizens, including their potential U.S. investors, to benefit from. This is a trend nobody wants to be known to have started.
We hope you’ll reconsider your position on rescinding the IER, which will help all of us accelerate the U.S. economy and create many American jobs.
Sincerely,
Adora Cheung
Partner, Y Combinator