It’s H-1B Lottery Season. Do You Have A Ticket to Win?

By Lisa W. Liu

As an entrepreneur or startup founder, you may be wondering whether you are eligible for an H-1B visa—and the answer is likely yes.

In 2011, the Obama administration and U.S. Citizenship and Immigration Services re-interpreted immigration laws to stimulate the economy and create jobs, which resulted in H-1Bs becoming more available to entrepreneurs who own 51-100 percent of their startups.

Between March 1 and 16, applicants can register for the annual H-1B lottery. Entrepreneur H-1B hopefuls must meet the usual eligibility requirements; however, securing a spot is extremely competitive and presenting evidence of eligibility can be a challenge.

Here is what you need to know to prepare an application.

Bona fide employer-employee relationship

A valid employer-employee relationship requires that the employer has the “right to control” the applicant’s employment—when, where, and how they perform their jobs, including required job skills, when the job is performed, pay rate and whether the applicant can be terminated.

How then, do you show a valid employer-employee relationship in a startup majority-owned by the entrepreneur applicant? Here’s how.

• Establish a separate legal entity (not a sole proprietorship).
• Elect an independent board of directors empowered to determine the role of and can terminate the entrepreneur applicant.
• Engage an independent CEO who has the right to control the entrepreneur applicant’s employment.
• Establish provisions in the bylaws or investors’ rights agreement giving investors control over the entrepreneur applicant’s employment.
• Enter into an employment agreement allowing the company’s independent oversight over the entrepreneur applicant’s employment.

Employer’s ability to pay

A successful application shows that the company can pay the entrepreneur the local prevailing wage, and equity ownership does not count. This means that the startup needs enough capital, income, and/or assets to pay the entrepreneur.

For large companies, this is likely easy, but early-stage startups may need to be more creative.

A pre-revenue startup might show:

• Press releases or articles stating funding raised
• Executed term sheets showing closing of VC financing
• Bank statement showing cash injection from a friends-and-family round
• Business plans, executed customer contracts and other evidence showing viability and revenue potential

Specialty occupation position

H-1Bs are specialty occupation visas, meaning that the work performed by the entrepreneur must require the skills of someone holding at least a bachelor’s degree. Further, the entrepreneur must be spending all or nearly all of their time performing H-1B caliber work, not clerical or administrative tasks. To that end, it’s helpful to provide:

• A job description of the applicant’s role
• An organization chart identifying administrative staff
• Contracts showing that administrative and clerical work is outsourced

The H-1B lottery is notorious for its extremely low selection rate. In fiscal year 2022, the selection rate was 28.35 percent, a decrease from 45 percent the year prior. The selection rate will likely be even lower in 2023.

As such, entrepreneurs may consider exploring alternative visa options, including:

• E-2 treaty investor visas: Treaty investors hold citizenship in a country that has an existing treaty of commerce and navigation with the U.S. Applicants must show at least 50 percent ownership or possession of operational control of the company.
• International Entrepreneur Parole (IER): While this is not a visa, entrepreneurs granted parole under IER are allowed to enter the U.S. to work for their startups. To qualify, the entrepreneur must have an active role in a startup that was created in the last five years and they must hold at least a 10 percent equity stake. The entrepreneur must also be able to demonstrate that they 1) received $250,000 from U.S. accredited investors, 2) received $100,000 in government grants, or 3) are able to provide compelling evidence of potential for rapid growth or job creation.
• O-1 “extraordinary ability” visa: Entrepreneurs able to evidence extraordinary ability or contributions in sciences, education, business, athletics, motion pictures, and the arts who have received national or international acclaim for their work are eligible.

When evaluating options, working with an experienced attorney is always advised. A knowledgeable attorney can advise on which route makes the most sense for your specific needs, goals and experience and help prepare your case for submission. She will be able to guide the process to ensure your best chance for selection to achieve visa success.

Lisa W. Liu is a senior partner at The Mitzel Group, where her legal practice focuses on business and immigration issues. As an entrepreneur and former investment banker, she skillfully leverages finance expertise in conjunction with the law to position clients for growth and successful exit.

Illustration: Dom Guzman

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