Entrepreneurs

Start-up community’s fight with the Trump administration over immigrant entrepreneurs intensifies

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President Donald Trump was elected on an anti-immigration platform that included building a wall between the southern border of the United States and Mexico. His polarizing stance on immigration has been met with particularly vehement resistance from the entrepreneurship sector.

That's because many top founders hail from abroad. Tesla and SpaceX chief Elon Musk is from South Africa, and Google co-founder Sergey Brin is from Russia, for example. And in 2016, 44 of the 87 start-ups in the United States valued at $1 billion or more were created by immigrants, according to a National Foundation for American Policy study.

On Tuesday, the National Venture Capital Association, along with a collection of entrepreneurs and start-ups, intensified that resistance by filing a lawsuit in federal court in Washington. The suit is an effort to defend foreign-born entrepreneurs' ability to live and work in the United States via former President Barack Obama's International Entrepreneur Rule.

"Immigrant entrepreneurs play a vital role in strengthening the U.S. economy, creating new jobs for Americans and pushing the boundaries of innovation. Rather than throw up roadblocks that prevent them from bringing their talent and ingenuity to our shores, we should welcome them with open arms," says Bobby Franklin, president and CEO of NVCA, in a statement.

At the end of his administration, Obama signed into law the International Entrepreneur Rule, allowing foreign-born entrepreneurs to be considered for two-and-a-half-year visas, with the potential for a second two-and-a-half-year extension.

Applicants for the visa would have to show that granting them legal status in the United States would "provide a significant public benefit" because "he or she is the entrepreneur of a new start-up entity in the United States that has significant potential for rapid growth and job creation," according to the congressional public record, the Federal Register. The rule would also require applicants to show investments of at least $250,000 from established U.S. investors. The rule was set to go into effect on July 17, 2017.

At the time, the Department of Homeland Security estimated that 2,940 entrepreneurs would be able to get legal status under the rule each year.

"A global race is underway to attract and retain talented entrepreneurs and we should be doing all we can to win." -Bobby Franklin, president and CEO, National Venture Capital Association

Then on July 11, the DHS announced that it was postponing the rule's effective date until March 14, 2018. It also said it would consider rescinding the rule entirely.

The NVCA's suit challenges the postponement. The lawsuit claims that because DHS did not seek public comment before announcing the delay, it violated the Administrative Procedure Act.

"A global race is underway to attract and retain talented entrepreneurs and we should be doing all we can to win. If we want to maintain our foothold as the global leader in innovation, the International Entrepreneur Rule must be allowed to proceed and we are committed to standing shoulder to shoulder with entrepreneurs and startups to seeing that through," Franklin says.

Indeed, a 2013 study from the NVCA showed that immigrant entrepreneurs are playing an increasingly significant role in entrepreneurship. One-third of U.S. venture-backed companies that went public between 2006 and 2012 had at least one immigrant founder. Before 2006 20 percent of such companies had at least one immigrant founder, and before 1980 only 7 percent of such companies had one immigrant founder.

And the rate at which immigrants are becoming new entrepreneurs (0.52 percent) is now double that of native-born Americans (0.26 percent), according to the 2017 Startup Activity National Report from the Kauffman Foundation.

"The United States economy as a whole thrives because this country has long been regarded as the world's leading incubator of new, innovative companies," said Melissa Crow, litigation director of the American Immigration Council, in a statement.

"The International Entrepreneur Rule is essential to ensuring that America remains at the forefront of emerging enterprise. Our lawsuit is intended to get this important initiative back on track," Crow says.

A representative for the Department of Homeland Security declined to comment. "As a matter of policy, we don't comment on pending litigation," the representative tells CNBC Make It.

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