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How can I apply for EB-5 based investment in a venture capital or angel fund?

I have the opportunity to invest $1 million in a venture capital fund that invests in early-stage technology companies. Would this be enough for me to quality for an EB-5 green card? The fund would potentially invest the $1 million in more than 20 startups, which would be creating jobs though the fund itself. How can I structure this investment to qualify for EB-5?

Answers

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    Bernard P Wolfsdorf

    Immigration Attorney
    Answered on

    There are a few fund models that have been accepted, but the investment has to be clearly earmarked for a specific project or its likely to be denied.

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    A Olusanjo Omoniyi

    Immigration Attorney
    Answered on

    EB-5 investment through a venture capital or angel fund is feasible and acceptable. Also, the potential investment of $1 million in the proposed 20 startups is legitimate. In this type of circumstance, setting up a holding company is usually a preferable process while the startups will be organized as either as doing business as (dbas) under the holding company. The holding company must, however, produce the required jobs in accordance to the EB-5 standard. Generally, EB-5-based investment through venture capital or angel funding process may take two forms: the loan-based model or the debt financing model. Either model is commonly used in the technology or real estate industry, typically in any of the three financing stages: capital for the early stage, capital for the expansion stage, and capital for the growth stage. There are various means of dealing with venture capital financing for EB-5 purposes. Please be aware that the most important thing is documentation, because most VC investments are either debt or equity investments. One of the cardinal rules of EB-5 is that investors are required to document that the source(s) of their funds is lawful. VC financing is no exception. Also, there are restrictions on the origin of all funds, including VC funding, so be ready to comply with them. There is more information and for better guidance on this question, consult an EB-5 attorney and/or VC expert before you proceed.

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    Daniel A Zeft

    Immigration Attorney
    Answered on

    An investment in such a venture capital fund could potentially be the basis of an EB-5 case if the required number of jobs are created within the required time frame. The specific details of this venture capital fund are needed to determine whether such an EB-5 case could be developed.

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    Fredrick W Voigtmann

    Immigration Attorney
    Answered on

    There may be a way to structure the investment to qualify for EB-5, but it is complicated and requires more detail than your email provides. It is possible to invest in a fund, either through a regional center, where you can get credit for indirect job creation, or even theoretically, through a direct EB-5 investment, as long as the startups are wholly-owned subsidiaries of a single new commercial enterprise. That way, the jobs created in the startup entities could be considered direct job creation. An experienced EB-5 immigration attorney would be able to guide you through the requirements and steps necessary to first determine if your proposed structure complies with EB-5 and second, if it does not, to provide you with advice about how to restructure your proposal so that it makes sense financially, but also meets the EB-5 legal requirements.

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    Charles Foster

    Immigration Attorney
    Answered on

    Generally speaking, a passive investment in the stock market, for example, would not, in and of itself, qualify. Your question with respect to investing in a fund that invests in early-stage technology companies could conceivably raise a number of questions. Since you are investing $1 million there is no issue regarding the targeted economic area (TEA). There would be questions of whether or not you are investing in the fund itself versus the various early-stage technology companies. Since there is no regional center, does your investment create an additional 10 direct jobs as a result of your investment? If you are investing in the fund, that may not be the case. There would be a certain risk in seeking to qualify on this basis, and a safer option may be to invest in a regional center project with prior approval notices, although obviously such projects may not produce the financial return like the investment in the capital fund you have described.

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    Phuong Le

    Immigration Attorney
    Answered on

    Unless you have all 20 startups identified and described in your business plan, I would advise against using this type of portfolio or fund structure (and even then, it has its own set of logistical challenges).

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    Mark AM Catam, Esq

    Immigration Attorney
    Answered on

    The investment can be structured as portfolio investment. However, this would require careful strategy and planning to make sure it meets immigration compliance. You should seek the advice of an expert attorney in this EB-5 arena.

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    Belma Chinchoy

    Immigration Attorney
    Answered on

    This is not a suitable deal for EB-5.

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    BoBi Ahn

    Immigration Attorney
    Answered on

    You would have to show that the money invested by you (the EB-5 investor) in the VC or angel fund is directly connected to the requisite jobs created. This may be tricky, but not impossible.

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    Stephen Berman

    Immigration Attorney
    Answered on

    If you are not directly employing 10 people, no, it will not work.

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