Analysis

Immigrant-Run Startups In Jeopardy During Pandemic

By Suzanne Monyak
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Law360 (May 22, 2020, 6:08 PM EDT) -- The U.S. economy, which has been battered by the coronavirus pandemic, could suffer further job losses if immigrant startup founders encounter business disruptions that could jeopardize their visa status and force them to leave the country.

Under current economic conditions, foreign entrepreneurs with soon-expiring visas could have a hard time qualifying for extensions, and those hoping to get new visas to bring their business ideas to the U.S. may face additional hurdles as the Trump administration tightens immigration policy. U.S. Citizenship and Immigration Services has resisted calls to extend deadlines for soon-expiring visas, even while suspending faster service and proposing higher application fees.

"I think it would be tragic," Susan Cohen, chair of Mintz Levin Cohn Ferris Glovsky and Popeo PC's immigration practice, said of the prospect of losing those startups. "The country needs the contributions of foreign innovators and entrepreneurs as much as we need the contributions of our native population."

For one Brooklyn-based engineer, a client of New Jersey immigration firm Lepore Taylor Fox LLP who didn't want to use his full name for fear of endangering his visa status, a visa extension could spare him from having to soon travel to his native Italy, which has been hit particularly hard by the novel coronavirus.

The engineer, who holds two master's degrees in engineering, has worked on some of New York's most prestigious infrastructure projects and now has a job offer to serve as a U.S. representative for an Italian engineering firm, in addition to running two engineering ventures of his own. But first he needs to pass New York's licensing exam for engineers.

The exam, originally scheduled for April, was pushed to October as the COVID-19 outbreak made larger group gatherings unsafe — but that's two months after his work authorization under a postgraduate work program called Optional Practical Training runs out.

"First of all, I can't travel, and second of all, my visa expires in August, so I'm going to have to find a way to keep it going until at least October," he told Law360.

"I came here in the U.S. honestly with a goal, and the goal was to take my license, do the work and be able to create and add value here through my experience and background," he continued. "I just wanted to have a chance here."

Meanwhile, another startup founder from South America who also requested anonymity to protect the status of his visa application found himself stuck abroad on a business trip when the coronavirus lockdowns began and is now hoping to get back into the U.S.

A graduate of a top-tier U.S. engineering school who co-founded a construction technology startup, he had his OPT cut short when he was unable to book a return flight. Now he's applying for an O-1 visa, reserved for individuals with extraordinary abilities, to bring his patented technology to the U.S. market.

"If I get rejected from the O visa, which I hope is not going to be the case, it will be much harder to bring my business back into the U.S.," he told Law360.

The border closures and international travel restrictions have also prevented companies from bringing in foreign talent from abroad.

Tom Alcock, a British citizen who co-founded Code Red, a staffing and consulting firm that helps startups boost their cybersecurity, said his company's newly hired executive, set to manage its new Denver office, is stuck in England by the border restrictions. Until the new hire is able to arrive, the company can't staff up its Denver office, Alcock said.

"Now we can't employ American talent, local talent within Denver," Alcock said. "We can't scale."

As the COVID-19 pandemic  pushes the U.S. unemployment rate past 30 million, the Trump administration has continued its crackdown on immigration in the name of protecting U.S. workers.

Soon after President Donald Trump took office, the administration moved to end an immigrant entrepreneurship program that was created under former President Barack Obama, which would have allowed thousands of foreign entrepreneurs to grow their businesses in the U.S. In the wake of the pandemic, the president has now suspended some foreigners from moving to the U.S. on new green cards and nearly shut down asylum at the border.

While studies show that immigration typically stimulates the economy and startups in particular are obvious examples of job creators, the U.S. immigration system isn't designed to encourage foreign citizens to start their businesses here.

Many visas, like the H-1B, require an individual to be employed by a U.S. company to get a visa. And while L visas can allow established companies to send foreigners to the U.S. to open offices, and E treaty visas can sometimes help entrepreneurs if their business is structured in a certain way, there are fewer paths for young people with new ideas.

"We desperately need a startup visa," said Cohen, the Mintz Levin attorney.

According to a 2019 report by New American Economy, a bipartisan immigration research nonprofit founded by Michael Bloomberg, 3.2 million immigrants owned their own businesses in 2017, and one in five entrepreneurs was foreign-born. These businesses employed more than 8 million American citizens, according to the report.

The Center for American Entrepreneurship has found that more than 18% of Fortune 500 companies were founded by at least one immigrant.

"These startups are job-creation engines," said Mitch Wexler, managing partner of Fragomen, Del Rey, Bernsen & Loewy LLP's Southern California offices.

The pandemic has further aggravated existing challenges for young foreign-born entrepreneurs, attorneys said.

According to David J. Wilks, a partner at Hodgson Russ LLP in New York, entrepreneurs hoping to apply for what's known as a "new office" L visa, which gives them a one-year visa to open a U.S. office of a foreign company, will likely run into logistical issues as a result of the pandemic.

Applicants are required to lease physical office space in the U.S. and provide detailed business plans to get approved, which can be difficult in areas where real estate viewings are limited and economic conditions are unknown. Entrepreneurs also have to show that they spend less than half of their time on day-to-day operations.

"That's hard at any time of the year," Wilks said. "But if you look at adding COVID into the mix, it becomes even more hard because now you have an economy that's not doing as well and you have to put together a business plan that shows that within a year, you're going to be up and running and raring to go."

Those who have already secured those one-year visas for new U.S. offices are not in the clear, either.

Fragomen's Wexler said he has startup clients putting operations on hold and trying to get out of leases during the pandemic.

"The business plan that you may have composed three or four months ago, the realities of executing on that today may be very, very different," he said.

It's unclear if USCIS will be more forgiving when deciding whether or not to extend visas for foreign entrepreneurs based on how their businesses have fared.

"Frankly, our clients are freaking out," said Rosanna M. Fox, a partner at Lepore Taylor Fox LLP who represents startups in immigration matters. "We don't know what's going to happen tomorrow, but on top of that, there's uncertainty as to what's going to happen with my business, what's going to happen with my visa."

Filomena Lepore Taylor, another partner at the firm, said, "If there's no leniency accorded to the extension of that status, a lot of entrepreneurs will be going home."

When asking if the agency might consider flexibility measures to help foreign-owned startups, a USCIS spokesperson said it "will continue to monitor the coronavirus pandemic; consider stakeholder recommendations; assess various options in coordination with DHS as the situation evolves."

If the U.S. loses these foreign startups, it could alter the country's entrepreneurial culture in the long term and cause the U.S. to lose out on critical businesses, attorneys said.

For example, Code Red, the cybersecurity startup, has pivoted to meet the new demands of the pandemic by helping companies guard against hackers as operations move online, according to Alcock, who came to the U.S. on an E-2 treaty investor visa. The cybersecurity company is now working with videoconferencing services, which have become critical for universities and courts during the pandemic, as well as education technology companies to help parents teach their children from home.

Trump is mulling additional restrictions on nonimmigrant visas, and the administration has said that OPT, the postgraduate work program, may be on the chopping block. As a result, the U.S. could see more companies move operations abroad, such as to Canada, which has sought to attract tech companies with its points-based merit immigration system.

"The sooner we have an entrepreneur visa that allows for this innovation to not be lost by our country, I think the more opportunity that our country will have to continue and thrive and grow and be a leader in technology and innovation," Wilks said.

--Editing by Breda Lund.

For a reprint of this article, please contact reprints@law360.com.

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