Dominic Williams

Occasionally useful posts about RIAs, Web scale computing & miscellanea

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New UK “prospective entrepreneur” Tier 1 visa. Much ado?

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The UK is trying hard to be more enterprise-friendly and is loosening bureaucracy and introducing legislation designed to spur growth. Some legislation coming into effect 6 April 2011 is designed specifically with the tech startup sector in mind, and has some similar aims to the Startup Visa Act 2011 proposed by John Kerry in the US (see http://www.startupvisa.com)

John Kerry’s Startup Visa Act 2011 is someway off becoming law and getting something like this out of the door before the Yanks has created much excitement. Like many London-based entrepreneurs I’ve been investigating the benefits.

The general impression a lot of articles give is this will make it easier to bring in overseas talent (with the often cited benefit being able to bring in foreign talent for key engineering roles such as CTO). I too was really excited but digging deeper though I don’t think the first impressions were right.

As I understand it, the key points about the legislation are:

  • A new “Prospective Entrepreneur” visa will become available, which in principle enables a foreign “entrepreneur” to enter the UK for six months to finalize a funding deal for their venture, so long as their visa application is supported by accredited prospective investors who agree to reach a final funding decision within that timeframe. At the end of that six months, the entrepreneur must meet the criteria to transfer to a standard Tier 1 Entrepreneur visa.
  • Whereas before an entrepreneur was required to invest at least £200,000 of their own money in a UK venture to receive a Tier 1 Entrepreneur visa, this is now possible if an FSA registered venture capitalist, an endorsed entrepreneurial seed funding competition, or a UK Government Department to invest £50,000 in the UK venture on their behalf.
  • A single investment can enable an entrepreneurial team of 2, such as a CEO and CTO, to apply for a Tier 1 visa

For reference, the details are here:
http://www.ukvisas.gov.uk/en/howtoapply/infs/inf2visitors#567687282
http://www.ukba.homeoffice.gov.uk/sitecontent/applicationforms/pbs/tier1entrepreneurguidance11.pdf

The first thing that should be apparent, is that this primarily appears to be aimed at foreign entrepreneurs wishing to come to the UK, rather than helping frustrated UK tech entrepreneurs who want to bring in talent from abroad. Secondly, since entrepreneurs from inside the EU can already come to the UK to setup businesses, and american entrepreneurs are unlikely to want to leave the West Coast, this is aimed at quite a narrow community e.g. Indian and Russian (inc. old Soviet sates) entrepreneurs.

Where I believe many may have become excited, is in wording that suggests that the new rules can be bent to the needs of existing tech startups. Personally, I believe this looks tenuous – and I will explain why – but here is how it might work if you wanted to quickly bring a CTO to London:

  • Get an accredited investor to promise £50,000 funding contingent upon the CTO joining your company (thus the foreign talent you bring in will trigger the investment)
  • Provide the CTO with autonomous “access” to those funds as part of their R&D budget
  • Make sure they get the obligatory english language qualifications, and pay them a decent salary so they pass the maintenance test

Hopefully this should get them into the UK, but one should take careful note of the statement in the guide: “The Tier 1 (Entrepreneur) category is for those investing in the United Kingdom by setting up or taking over, and being actively involved in the running of one or more businesses in the United Kingdom”. I can easily imagine that the relevant agencies will contest that a foreign CTO, for example, joining a startup meets this criteria.

The ROI has to be compared to the existing conventional route of bringing someone in on a Tier 2 “skilled worker” visa. This is the route my company has just committed to. The requirements are as follows:-

  • You must pass the “resident labour market test” to prove you were not able to fill your vacancy here, which includes advertising the job for at least a month (unless it is categorized under the Shortage Occupations List, which is currently changing, but includes for example software engineers specializing in animation in the video games industry)
  • Your company must acquire a Tier 2 Sponsor License, which it can apply for if it adheres to various requirements and practices
  • Once you have a license, you must apply to the Border Agency for “certificates of sponsorship” for each of your prospective hires
  • Assuming you get your certificates, these must then be given to your prospective hires
  • Finally, your prospective hires may use the certificates to apply for Tier 2 visas (for which, of course, there are minimum requirements such as english language qualifications and salary)
  • Your prospective hires may or may not get their visas, depending upon the number of points they score and the governmental monthly limit then in force, which will be 4200 visas in April 2011, and only 1500 per month thereafter (points are awarded for things like salary and educational background).

The process takes a minimum of 2-3 months, and since you must compete under the points system for one of the 1500 visas going there is no guaranteed timeframe in which you will be able to bring your talent over despite the effort (in large part because in London plenty of talented foreigners are imported for financial jobs, and because those with high salaries are prioritized). However, at least you can bring in a team and the application itself should not be open to contest.

In summary, in practice both processes are still a nightmares if you want to bring in talent from outside the EU. Neither can be completed quickly: In relation to the Prospective Entrepreneur visa, the specified classes of UK investors generally don’t move quickly, and that will likely hold even if they only need to agree to “sponsorship” and can back off investment later. For that reason in practice you are probably better off using Tier 2, since there is no ambiguity about what is possible, you will not become beholden to an outside investor (assuming you have one), and the timeframes are likely similar.

So what’s to be excited about? If you want to bring in star talent to your tech startup you are looking at a 2-3 month process. Time you wanted them to be doing their thing, and when they could be tempted by other jobs!

As for the UK getting one over on the US with its yet-to-be-passed Startup Visa Act, I’m really not so sure. The US act will only require the involvement of a “qualified” investor. This means that you will be able to deal with business angels who can move more quickly and anyway US venture capitalists are less risk adverse, move more quickly and the West Coast on balance is a better environment too.

If we really want to get one over on the US, we should make it really easy for UK tech entrepreneurs to import talent. There is a massive shortage of truly experienced and talented engineers on the market in the UK as everywhere, and addressing this area would give a real boost.

As a simple suggestion, why not allow high tech startups to bring in foreign stars and then apply for their Tier 2 visas while they are here (subject of course to anti abuse criteria). Silicon Valley has been built on immigration, so let’s at least make it easier to bring talented people in. That’s a guaranteed way to boost the tech sector. Simple practical solutions like that wouldn’t require massive legislative adjustment but would be fantastic.

Written by dominicwilliams

March 20, 2011 at 7:21 pm

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