Cross-posted from with permission from Munly
I originally wrote this for a lawyer who’s a H1-B specialist and also understands the benefits that an E2 visa can offer but was not familiar with how startups or “lean startups” work. It’s essentially a quick primer/dummies guide with references and background. The E2 requirement is usually quoted as $100k which is usually more than what a seed or angel round usually raises but the E2 visa is another option while we wait endlessly for action on the startup visa (www.startupvisa.com). Feel free to send or cut and paste this if it’ll help brief your lawyer on such challenges, whichever visa you end up pursuing
As this is my non profit and not my personal blog (I don’t really have one), you probably followed this link from somewhere. As this doesn’t relate to the foundation, it’s not linked anywhere from our page. However free to link, cut and paste etc if you find it helpful.
Basically there’s two phases to any software startup that’s building a product as opposed to selling services, being a body shop or working on govt contracts. Everyone follows a similar if not the same pattern
1) The initial phase aka pre-revenue or pre-funding which I’m in where a small technical team is essentially holed up in an apartment or room somewhere and working purely on the product. The only expenses are food, room and board keeping the burn rate as low as possible to increase the runway to create a “minimum viable product” as fast and as best possible. We are usually working off of some minimum “seed funding”, savings or credit cards or all of the above. Usually this amount is $100k or less, usually less which is why the E2 visa isn’t usually an option. When you say things can be done on $50k, then that is actually potentially in the realm of possibility for some seed or angel funded startups although most are working at the $20-30k level
Y Combinator is the leading and most high profile incubator in this area – http://ycombinator.com/ and they seed fund at $18k rounds.
2) Post funding, or with revenue and users. At this point the startup has gained some traction and potentially has some VC funding or has grown enough that an office is worth spending on. Even then there are a lot of problems despite them having created jobs and recieving funding already. They may have a few hundred k or a million in the bank and possibly a San Francisco office (not a worthwhile expense in my case).
The key takeaway quote from the second video in the article is this. “Rapportive co-founder, Martin Kleppmann, who came to the U.S. from Germany, told Brokaw “In our case — we got a beautiful letter from the immigration service asking to prove that we had enough warehouse space to store our software inventory. We don’t even have boxes of software, it’s all on the Internet.”
As far as the E2 visa goes it’s the same two problems at the seed stage. The most significant expenses placed at risk are ALWAYS the money the founders pay themselves, and there will be no office or warehouse leases and likely not any business transactions other than costs of setting up and creating/registering a website etc. The risk portion comes from the product possibly being not deliverable at all, or there are many more unforeseen technical problems involved, hence the runway and risk of not enough funding. There are new and usually unique problems with almost any software endeavour, especially products and it carries with it a high risk of failure and blown out timelines and expenses. The entrepreneur is already taking a risk working on something new and unproven vs something established with market demand and existing customers. This is not standardised assembly line work. Immigration needs to understand these things. An office is usually the last thing on our minds as often we can accomplish what we need with a virtual workplace anyhow depending on the operation and size of business.
Lastly here are some additional links that you don’t have to read but may give you a bit more background.
– One of the Instagram founders who was invited to the whitehouse still has similar problems despite his success. http://money.cnn.com/2012/01/25/technology/instagram_white_house/index.htm
Key takeaway quote. “”A lot of the regulations were created before we got into this age where folks can start companies cheaply and bootstrap and get things started,” he says. “Nowadays companies start with fewer people and less investments, so it’s a matter of finding out what regulations can be updated to match that reality.”
– Starting up in America. A 24 minute documentary with founders who are further along than I but many facing even worse problems. http://www.youtube.com/watch?v=5Nz4N2K64o8
– Lastly, the 4 minute cliffs notes version of visa problems for entrepreneurs, this is how I found you via the sidebar on youtube. EDIT, link fixed: http://www.youtube.com/watch?v=FLCYfhZEFb8