The E-2 investor visa is a great visa for entrepreneurs who are nationals of treaty countries that wish to invest their personal funds to start or buy a business in the United States. Many businesses across various industries can qualify as an E-2 business if the applicant can demonstrate that the business has the potential to grow and hire U.S. employees. Many of our clients have businesses in the software and technology industries, where angel investment and crowdfunding are common methods of financing used to start up business operations. Thus, clients often ask “Can I count my Kickstarter campaign as part of my E-2 investment?” or “Can I use investor funding for my E-2 visa?” The answer to these questions largely depends on the purpose of the funds and at what stage the business is in. This post will shed some light on the complex area of crowdfunding and seed funding in the E-2 context.
Crowdfunding in the E-2 Context
The E-2 investor visa requires that the applicants demonstrate that they meet a specific set of requirements. Put simply, applicants must show that (1) they are from a treaty country, (2) they have invested a substantial amount of their personal funds in the business, (3) the investment amount comes from a legitimate source, (4) the business is real and operating (4) the business will not be a marginal enterprise, and (5) the applicants are in a position to develop and direct the enterprise. (For an expanded explanation of the E-2 visa requirements, please click here). If you plan to use a crowdfunding service to help fund the operations of your potential E-2 company, it is important that you contact a qualified business immigration attorney prior to accepting crowdsourced funds or commencing operations.
Crowdfunding is a popular source of alternative financing that raises money from a large pool of individuals, each giving small amounts, typically through an online platform. Kickstarter is perhaps the most popular website for crowdfunding activities. While the E-2 investor visa and crowdfunding financing are not necessary incompatible, it is very important to recognize that the E-2 application should not assume that funds raised through a successful Kickstarter campaign are sufficient to commence operations or be used as the source of the E-2 investment. To qualify for the E-2 investor visa, you must demonstrate that you invested a substantial amount of your personal funds to start a real and active company (that is, a company that is producing or about to produce a product or service for profit). If you apply with a business plan stating that you plan to raise funds to start operations and that the Kickstarter funds will be the E-2 investment, the application will likely be denied as you cannot show that you spent your own money to start a real company that is beyond the stage of merely speculative existence.
While crowdfunding financing is not an acceptable source of investment funds for an E-2 visa, it can be used to support other aspects of your E-2 application. Crowdfunding can be used to demonstrate an interest in your company’s products or services. For example, if E-2 applicant has spent upwards of $100,000 of his/her own funds to incorporate a company, hire employees, buy necessary equipment and start the product design and development, the applicant can point to the number of participants on a Kickstarter campaign to show that there is a viable market for the company’s products and people are willing to pay for them. In this case, the Kickstarter campaign is similar to your customers preordering your products. As long as you can demonstrate that you spent a substantial amount of your personal funds to start the company, and your company does not need financing to be operational, crowdfunding activities can be used to strengthen parts of the E-2 application.
Angel Investment in the E-2 Context
Another common method of raising capital to start up a company is using seed or angel investment. Seed funding often contemplates a form of securities offering in which the investor invests capital in exchange for an ownership stake in the company. Like crowdfunding, angel investment can be used to strengthen aspects of your E-2 application and may be used to demonstrate the source of the investment funds in certain limited circumstances.
If you intend to demonstrate that source of investment funds comes from an angel investor, it is important to show that the funds are unconditionally controlled by you. Therefore, you can take a personal loan from an investment firm (or any other legitimate source) as long as you can demonstrate that the funds are not secured by the business. Unfortunately, the standard angel investment model of “startup-funds-for-equity” will not work for an E-2 investor application, as the investment funds are required to originate from the applicant’s personally controlled funds.
Similar to crowdfunding, angel investments can be used to strengthen other aspects of the E-2 application. For example, a software company that was founded using a substantial amount of personal funds to start up operations and hire employees can point to the company’s acceptance into a venture capital business incubator to demonstrate that the company is a real, viable and growing enterprise.
Angel Investment & E-2 Employee Visas
If you have a company that has been funded with angel investment and it is still majority owned by treaty country nationals, one option you could consider is an E-2 employee visa. For an E-2 employee application the employee must have the same treaty country nationality as the E-2 company and the employee must be coming to the U.S. to perform a supervisory/executive or specialized knowledge role for the company. If the company has not yet been registered as an E-2 company at a Consulate, you will still need to demonstrate that the company meets all the E-2 requirements, including showing a substantial investment. However, when the application is for an E-2 employee, you do not need to show that the investment is from your own personal funds.
As with all visas, it is important to work with a qualified immigration attorney when considering applying for an E-2 visa.
To find out more about the new rules or other investor visas, contact Scott Legal, P.C.
Ian E. Scott, Esq. is the Founder of Scott Legal, P.C. He can be reached at 212-223-2964 or by email at firstname.lastname@example.org.
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