Your startup has no cash. Can you still get an E-2 visa?

As a practice, we work with a lot of founders. We’ve specialized in aiding startups and the founders who help them get to the immigration outcome they’re seeking. The path isn’t always what they come in asking about, though. Administrations change enforcement priorities, interpretation of laws shift, etc., and certain paths become more workable than others (you don’t need to know that, that’s our job to stay on top of).

We’re having a lot of conversations with founders about the E-2 visa these days. Founders don’t ask about it as often as they should, though. Yes, the E-2 requires a “substantial investment” in a U.S.-based business to qualify… but cash isn’t the only way to satisfy that requirement.

What the government actually means by investment

The rulebook for an E-2 (9 FAM 402.9-6) is clear that capital isn't only cash. Intangible property can qualify, and intellectual property is intangible property. To qualify using intellectual/intangible property: 

• The value has to be something an officer can reasonably pin down
• The asset needs to be at material risk if the business fails, and 
• Whatever you commit has to stay committed (with no immediate path to pull it back out).

So the code you wrote, the designs, the architecture, the product itself… if you assigned it to the company and you can't walk it back, you've put something real at risk. That's an investment in the sense the law means, even if your bank statement doesn't show it.

The place almost everyone trips

Proving the number is the hard part (the failure mode is also very predictable).

A founder will tell me he worked two thousand hours at $150/hr., so the intellectual property is worth $300K. I understand why that math is tempting. It's also the weakest thing you can hand an officer, because nobody actually paid it. An hourly rate you assigned to your own time is a number you made up, and the officer reading it knows that as well as you do. 

The question an officer actually cares about is “What does the market say the IP is worth?”.

The stronger answer is evidence that someone other than you put a price on the asset. Established market value sits at the top. The value of the contracts the intellectual property actually generates sits near it. A qualified expert's opinion on market value is the third road.

Letting the market set the price

Take a company that raises a seed round. An investor puts in a million dollars and takes ten percent of the company. If ten percent costs one million, the whole company is worth $10MM the moment the round closes. The founders, still holding 90%, are sitting on $9MM of value on paper.

What did that investor think they were buying? Not the office, and not a customer list that barely exists yet. At that stage they were mostly buying what the founder(s) had already built… the product and the code that turned a rough idea into something an investor would fund. And the founders built all of it before a dollar of outside money ever arrived. The founder put the intellectual property into the company first, and the market came along afterward and priced it.

Where I have to slow you down

I'd be doing you a disservice if I let that sound simpler than it is. A funding round prices the whole company, not the intellectual property on its own. Investors are also paying for the team and the early traction, and for how big the thing might get one day. Tell an officer the intellectual property alone is worth $10MM and they won't believe you (and they'd be right not to).

A good valuation expert handles exactly that problem through an allocation. They start from what the founders' stake is worth, then carve out the portion of that value that traces specifically to the intellectual property the founders contributed before anyone else showed up. The expert shows the method and the arithmetic behind a defensible figure. 

What I'd actually tell you to do

A few things I find myself saying to founders in this spot, in roughly the order that matters.

• The intellectual property only counts if it belongs to the company, in writing, before you file. I've watched founders assume the assignment happened because they meant for it to happen. Assume the opposite until the paper exists… without it, there's no investment to point at.
• Don't build your case on your own hours at your own rate. It's the one piece of evidence an officer has been trained to discount, and leading with it tells them you don't have anything stronger.
• Reach for real market evidence, and bring in a valuation expert who does this for a living. The quality of the evidence is the quality of your odds. (If you're pre-revenue and pre-raise, that changes our strategy. There might still be a path… it's just a different conversation.)
• Get the assignment, the valuation, and the risk-and-commitment picture straight before the filing, not after an officer asks.

Every case turns on its own facts, and the officer deciding yours has a lot of room to weigh them. What I can tell you is that building something real before anyone wrote you a check is not the weak position it might feel like. 

If that's where you are, start a conversation with an immigration lawyer before you file. The earlier we see it, the more we can do with it.