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Does Having a H1B-Visa Founder Preclude Venture Investment?

Q:  Does having an H1B founder (among other non-H1B founders) inherently prevent a startup from being funded? For example, what if a U.S. citizen creates the company which receives funding, and then applies for the H1B founder to join as a regular employee and then issue a founder-sized portion of the company stock?

One possible problem is that the founder will be working on the idea in their spare time while employed, but at least in the state of California this isn’t a problem if the H1B founder’s work isn’t related and he does it on is own time and resources. Are there other issues? I’m just trying to figure out the general "gotchas" of an H1B founder (who is sufficiently skilled and productive to make it worthwhile to have on board).

A:  (Jason)  I am not an immigration lawyer, so the "gotcha" part of your question isn’t something that I can answer, be I can provide the VC perspective.  The answer is "no."  Having a H1B co-founder is not inherently a problem to get funded.  So long as the co-founder can work full time and provide comparable contributions to the company, then VCs shouldn’t care. 

A couple things to consider:

1.  Timing of grant.  If the grant is only going to occur upon the issuance of the H1B visa, then you should consider the timing issues of your grants being made at a different time than the other founders (and potentially at a higher price);

2.  Timing of the visa application.  It seems like the U.S. is running out of H1B visas earlier and earlier every year.  You should take this into consideration when forming the company and sponsoring the application.  Short answer:  get this done early in the year before the visas are exhausted.

Good luck with your venture.

April 14th, 2008 by     Categories: Uncategorized    
  • Matt

    It's absolutely not a problem. You don't have to be continued being employed elsewhere, btw. You can raise some money for your startup, and have the startup be your employer for H1-B purposes. You just need to able to demonstrate that the company is real (actual offices, financing, business activity, etc.).

  • Matt

    It's absolutely not a problem. You don't have to continue being employed elsewhere, btw. You can raise some money for your startup, and have the startup be your employer for H1-B purposes. You just need to able to demonstrate that the company is real (actual offices, financing, business activity, etc.).

  • Ajay

    Jason, H1B quota is not a problem here since this will be a transfer application and not a fresh H1B. Transfer applications don't get under any quota.

  • Rather not say

    I have a lot of experience with this, having done it several times myself. Proving the company is 'real' to the USCIS can be tricky, because they don't consider companies with cash but no revenue to be viable. Luckily it never usually gets to that stage of analysis for a simple H1B (although green cards are a whole different matter). Just make sure you have an office address,letterhead, phone numbers, a bank account and good lawyers. The USCIS will often pick up on little details that show the business is being run out of someones backyard.

    The hardest part is in the early stages, prior to transferring the H1B visa, because technically the visa holder can have no involvement in the company i.e. cannot attend meetings or talk about the opportunity without violating their status.

    One approach I used successfully was to get my accountant to create an LLC. The LLC held my shares in the new startup. My immigration attorney then applied for a part-time concurrent H1B to work for that LLC as a board member a couple of hours a week, in parallel with myexisting H1B visa, allowing me to be involved from day one (you can start work the moment the visa is filed). When the startup was funded, they then filed a H1B transfer for me.

    Good luck!

  • http://berislav.lopac.net Berislav Lopac

    Does all this mean that a foreign owner of a US company who wishes to sit on its board has to have a working permit?

  • Peter

    I think it is important to emphasize that a green card can be much tougher for a startup. There is a need to prove ability to pay, and this can be both difficult and expensive to make happen. (Involves reviewed financial statements, for starters) If you are planning to go that route, you probably should ask around and get a strong immigration attorney.