How VCs can protect key startup employees from immigration action

In the past year, my company, Phone2Action, has received two “requests for evidence” (RFEs) from the U.S. Citizenship and Immigration Services (USCIS) asking us to justify our foreign employees. We have two team members working here on H-1B visas and two in Optional Practical Training (OPT), an employment authorization for foreign students on F-1 visas. As a Chilean who immigrated to the U.S., I find the RFEs disheartening. They stress out talented employees, consume resources, and scare STEM professionals away from U.S. startups.

I believe venture capital investors could play an important role in protecting immigrant founders and employees. They certainly have an incentive. The Kauffman Foundation reported in 2016 that more than half of America’s “unicorn” companies have an immigrant cofounder. And 43 percent of 2017’s Fortune 500 companies were founded by an immigrant or child of an immigrant, according to the Center for American Entrepreneurship.

The U.S. tech ecosystem depends on immigrants whose divergent experiences and ideas have revitalized U.S. innovation for centuries. An every-startup-for-itself approach to foreign talent will not work in the current climate. We need to build networks of talent to mitigate risks, and no one is better positioned to do this than VCs.

An H-1B crash course

OPT and H-1B are among the most important pipelines for bringing foreign STEM talent to the United States. OPT enables foreign students in the U.S. to work for up to one year after graduation and extend their employment authorization for 24 months if they studied in a STEM field. H-1B enables a total of 85,000 foreign nationals to work in the U.S.

H-1B visa holders can work in the U.S. for up to six years, during which time their employer typically sponsors them for permanent residency. Those on OPT need to have their employers petition for H-1B during the annual lottery, because that’s their only realistic shot at staying in the U.S. long term.

Essentially, in the annual lottery, our immigration system blindly selects about one-third of the foreign professionals that apply for H-1B. Those who are lucky to get through the lottery still risk a denial of the H-1B petition by USCIS if their company responds insufficiently to an RFE. Thus, startups with foreign founders and staff are exposed to an unpredictable immigration system. VCs have incentives to mitigate the risks.

Portfolio defense

Uncertainty in the H-1B system has scared off applicants. However, VCs can take a networked approach to addressing RFEs, validating job positions, and hiring foreign talent.

I must thank Greg McCall, Phone2Action’s counsel at Perkins Coie LLP, for helping us think through the tactics outlined below. His wise counsel has helped Phone2Action’s team navigate the lottery and RFE minefield. I hope it can serve you too.

Crowd-source RFE data. The most valuable protection VCs can offer to H-1B employees (besides an immigration lawyer) is the collective experience of their portfolio. If an approach to responding to an RFE was successful for one startup, it may well work for others.

For example, USCIS decided it will no longer accept “computer programmer” as a profession requiring a specialized degree, which is a requirement of H-1B. Thus, USCIS could send an RFE to a company with an H-1B working as a programmer and deny the visa.

Companies have reclassified such employees as “engineers,” who command a higher minimum wage in H1-B’s tiered salary system. While this can work, companies must be mindful about the experience level of the employee. To USCIS, a junior engineer requires supervision, the absence of which is grounds to deny a visa.

Responding to RFEs is complicated, which is why crowdsourcing experiences is a smart idea. Very simply, if a company receives an RFE, the VC should contact other portfolio companies to see if a) they have received similar RFEs, which are made with a template), b) how they responded, and c) whether the response succeeded, and if not, why.

They’re doing it too. One way to counter an RFE is to show that the position under question is common. For example, let’s say USCIS sends an RFE questioning the need for a “marketing technologist,” an emerging role. The startup might defend its employee by showing that other startups have marketing technologists too. The VC can help find those companies within their portfolio or a network of investors.

Even better, the VC might use her position to help startups name and describe H-1B roles in such a way that if an RFE comes in, the firms effectively can say, “Every company like us has hired someone like this.

Multiple petition approaches. USCIS prohibits multiple petitions by affiliated companies for the same person and prohibits collaboration to “game the system” to increase chances of success in the H-1B lottery. However, there are things short of real collaboration that VCs can do to help their portfolio companies have a higher chance of success.

According to McCall, if Company A wants to hire someone that Companies B, C, and D would happily hire too, if successful in the lottery, there is no prohibition on all four petitioning for the same person (four lottery tickets are better than one). Each must have a bona fide opening and hire the person if selected.

Once someone is through the lottery, there is no prohibition on changing employers. While companies cannot plan this together, a VC could encourage four portfolio companies to sponsor the same employee, assuming there is a bona fide position to be assumed.

Plan B

Despite a VC’s best efforts, a startup may lose a founder or valuable employee due to the immigration process. If ultimately getting that person back into the U.S. is critical, employers may look to Canada as a viable plan B.

Obtaining work authorization in Canada is much easier than in the U.S. system, and foreign workers can gain Canadian citizenship relatively quickly, which opens other options for working in the U.S., such as the TN visa (as long as the White House doesn’t blow up NAFTA).

A longer-term plan B is to build an ecosystem that welcomes talent to the U.S. If USCIS raised the H-1B cap, gave startups preference over IT outsourcing firms, and weighed applicants based on company needs and talent shortages, maybe H-1B would serve American entrepreneurship rather than strangle it.

Such a transformation would require collaboration in the tech community. VCs must work in concert to overcome an immigration system that puts bureaucracy and ideology over innovation and economic vitality.

Ximena Hartsock is cofounder and President of Phone2Action, a civic technology platform focused on digital activism. She was previously a member of the executive cabinet of former Washington, D.C. Mayor Adrian Fenty and the Deputy Chief for Teaching and Learning at Washington DC Public Schools.