CS/CS/HB 83

1
A bill to be entitled
2An act relating to venture capital investments; creating
3s. 288.9621, F.S.; providing a short title; creating s.
4288.9622, F.S.; providing legislative findings and intent;
5creating s. 288.9623, F.S.; providing definitions;
6creating s. 288.9624, F.S.; requiring Enterprise Florida,
7Inc., to facilitate creation of the Florida Opportunity
8Fund; specifying criteria of the fund; providing for
9appointment of an appointment committee; providing for
10selection of a board of directors of the fund by
11Enterprise Florida, Inc.; specifying criteria; providing
12for terms and requirements of the directors; providing
13purposes of the fund; providing duties and
14responsibilities of the fund; authorizing the fund to
15negotiate all contract terms; providing for reimbursement
16for travel and other direct expenses; providing for powers
17of the fund; providing investment requirements for the
18fund; requiring the board of directors to issue an annual
19report on the activities of the fund; providing report
20requirements; creating s. 288.9625, F.S.; creating the
21Institute for the Commercialization of Public Research;
22providing that the institute is a not-for-profit
23corporation; providing that the purpose of the institute
24is to commercialize the products of public research;
25providing for membership of the board of directors;
26requiring the institute to provide data to certain
27entities; providing responsibilities of the institute;
28prohibiting the institute from having any interest in any
29product supported by the institute; prohibiting the
30institute from charging fees for services rendered to
31certain entities; requiring an annual report to the
32Governor and Legislature; providing report requirements;
33amending s. 1004.226, F.S.; providing that the 21st
34Century Technology, Research, and Scholarship Enhancement
35Act includes the commercialization of products and
36services developed from the research and development
37conducted at state universities; establishing the State
38University Research Commercialization Assistance Grants
39Program; requiring the Florida Technology, Research, and
40Scholarship Board to review and approve State University
41Research Commercialization Assistance Grants; requiring
42board members to refrain from having any direct interest
43or derive any benefit from a project receiving a grant
44under the program; providing guidelines for a state
45university to receive funding; providing for use of funds;
46requiring private match; requiring the board to
47periodically solicit proposals from state universities;
48providing criteria for application evaluation; providing
49for contracts with state universities; specifying content;
50requiring that the board's annual report to the Governor
51and Legislature include information on grants awarded and
52repaid; requiring the Office of Program Policy Analysis
53and Government Accountability to conduct an interim review
54and evaluation of the Florida Capital Formation Act;
55providing appropriations; providing an effective date.
56
57Be It Enacted by the Legislature of the State of Florida:
58
59     Section 1.  Sections 288.9621, 288.9622, 288.9623,
60288.9624, and 288.9625, Florida Statutes, are created to read:
61     288.9621  Short title.--Sections 288.9621-288.9625 may be
62cited as the "Florida Capital Formation Act."
63     288.9622  Findings and intent.--
64     (1)  The Legislature finds and declares that there is a
65need to increase the availability of seed capital and early
66stage venture equity capital for emerging companies in the
67state, including, without limitation, enterprises in life
68sciences, information technology, advanced manufacturing
69processes, aviation and aerospace, and homeland security and
70defense, as well as other strategic technologies.
71     (2)  It is the intent of the Legislature that ss. 288.9621-
72288.9625 serve to mobilize private investment in a broad variety
73of venture capital partnerships in diversified industries and
74geographies; retain private-sector investment criteria focused
75on rate of return; use the services of highly qualified managers
76in the venture capital industry regardless of location;
77facilitate the organization of the Florida Opportunity Fund as a
78fund-of-funds investor in seed and early stage venture capital
79and angel funds; and precipitate capital investment and
80extensions of credit to and in the Florida Opportunity Fund.
81     (3)  It is the intent of the Legislature to mobilize
82venture equity capital for investment in such a manner as to
83result in a significant potential to create new businesses and
84jobs in this state that are based on high growth potential
85technologies, products, or services and that will further
86diversify the economy of this state.
87     (4)  It is the intent of the Legislature that an institute
88be created to mentor, market, and attract capital to such
89commercialization ventures throughout the state.
90     288.9623  Definitions.--As used in ss. 288.9621-288.9625:
91     (1)  "Board" means the board of directors of the Florida
92Opportunity Fund.
93     (2)  "Fund" means the Florida Opportunity Fund.
94     288.9624  Florida Opportunity Fund; creation; duties.--
95     (1)(a)  Enterprise Florida, Inc., shall facilitate the
96creation of the Florida Opportunity Fund, a private, not-for-
97profit corporation organized and operated under chapter 617.
98Enterprise Florida, Inc., shall be the fund's sole shareholder
99or member. The fund is not a public corporation or
100instrumentality of the state. The fund shall manage its business
101affairs and conduct business consistent with its organizational
102documents and the purposes set forth in this section.
103Notwithstanding the powers granted under chapter 617, the
104corporation may not amend, modify, or repeal a bylaw or article
105of incorporation without the express written consent of
106Enterprise Florida, Inc.
107     (b)  The vice chair of Enterprise Florida, Inc., shall
108select from among its sitting board of directors a five-person
109appointment committee. The appointment committee shall select
110five initial members of a board of directors for the fund.
111     (c)  The persons elected to the initial board of directors
112by the appointment committee shall include persons who have
113expertise in the area of the selection and supervision of early
114stage investment managers or in the fiduciary management of
115investment funds and other areas of expertise as considered
116appropriate by the appointment committee.
117     (d)  After election of the initial board of directors,
118vacancies on the board shall be filled by vote of the board of
119directors of Enterprise Florida, Inc., and board members shall
120serve terms as provided in the fund's organizational documents.
121     (e)  Members of the board are subject to any restrictions
122on conflicts of interest specified in the organizational
123documents and may not have an interest in any venture capital
124investment selected by the fund under ss. 288.9621-288.9624.
125     (f)  Members of the board shall serve without compensation,
126but members, the president of the board, and other board
127employees may be reimbursed for all reasonable, necessary, and
128actual expenses as determined and approved by the board pursuant
129to s. 112.061.
130     (g)  The fund shall have all powers granted under its
131organizational documents and shall indemnify members to the
132broadest extent permissible under the laws of this state.
133     (2)  Upon organization, the board shall conduct a national
134solicitation for investment plan proposals from qualified
135venture capital investment managers for the raising and
136investing of capital by the Florida Opportunity Fund. Any
137proposed investment plan must address the applicant's level of
138experience, quality of management, investment philosophy and
139process, provability of success in fundraising, prior investment
140fund results, and plan for achieving the purposes of ss.
141288.9621-288.9624. The board shall select only venture capital
142investment managers having demonstrated expertise in the
143management of and investment in companies.
144     (3)  The board is responsible for negotiating the terms of
145a contract with the Florida Opportunity Fund investment manager;
146executing the contract with the selected venture capital
147investment fund manager on behalf of the Florida Opportunity
148Fund; managing the business affairs of the Florida Opportunity
149Fund, such as accounting, audit, insurance, and related
150requirements; soliciting and negotiating the terms of,
151contracting for, and receiving investment capital and loan
152proceeds with the assistance of the investment manager;
153receiving investment returns; paying investors and debtors; and
154reinvesting the investment returns in the fund in order to
155provide additional venture capital investments designed to
156result in a significant potential to create new businesses and
157jobs in this state and further diversify the economy of this
158state.
159     (4)  For the purpose of mobilizing investment in a broad
160variety of Florida-based, new technology companies and
161generating a return sufficient to continue reinvestment, the
162fund shall:
163     (a)  Invest directly only in seed and early stage venture
164capital funds that have experienced managers or management teams
165with demonstrated experience, expertise, and a successful
166history in the investment of venture capital funds, focusing on
167opportunities in this state. The fund may not make direct
168investments in individual businesses. While not precluded from
169investing in venture capital funds that have investments outside
170this state, the fund must require a venture capital fund to show
171a record of successful investment in this state, to be based in
172this state, or to have an office in this state staffed with a
173full-time, professional venture investment executive in order to
174be eligible for investment.
175     (b)  Negotiate for investment capital or loan proceeds from
176private, institutional, or banking sources.
177     (c)  Negotiate any and all terms and conditions for its
178investments.
179     (d)  Invest only in funds that have raised capital from
180other sources so that the amount invested in an entity in this
181state is at least twice the amount invested by the fund.
182Investments must be made in Florida-based companies, including,
183but not limited to, enterprises in life sciences, information
184technology, advanced manufacturing processes, aviation and
185aerospace, and homeland security and defense, as well as other
186strategic technologies.
187     (5)  By December 1 of each year, the board shall issue an
188annual report concerning the activities conducted by the fund to
189the Governor, the President of the Senate, and the Speaker of
190the House of Representatives. The annual report, at a minimum,
191must include:
192     (a)  An accounting of the amount of investments disbursed
193by the fund and the progress of the fund.
194     (b)  A description of the benefits to this state resulting
195from the fund, including the number of businesses created,
196associated industries started, the number of jobs created, and
197the growth of related research projects.
198     (c)  Independently audited financial statements, including
199statements that show receipts and expenditures during the
200preceding fiscal year for personnel, administration, and
201operational costs of the fund.
202     288.9625  Institute for the Commercialization of Public
203Research.--There is established the Institute for the
204Commercialization of Public Research.
205     (1)  The institute shall be a not-for-profit corporation
206registered, incorporated, and operated in accordance with
207chapter 617.
208     (2)  The purpose of the institute is to assist in the
209commercialization of products developed by the research and
210development activities of universities and colleges, research
211institutes, and publicly supported organizations within the
212state. The institute shall operate to fulfill its purpose and in
213the best interests of the state. The institute:
214     (a)  Shall be a corporation primarily acting as an
215instrumentality of the state pursuant to s. 768.28(2), for the
216purposes of sovereign immunity;
217     (b)  Is not an agency within the meaning of s. 20.03(11);
218     (c)  Is subject to the open records and meetings
219requirements of s. 24, Art. I of the State Constitution, chapter
220119, and s. 286.011;
221     (d)  Is not subject to the provisions of chapter 287;
222     (e)  Shall be governed by the code of ethics for public
223officers and employees as set forth in part III of chapter 112;
224     (f)  Is not authorized to create corporate subsidiaries;
225     (g)  Shall support existing commercialization efforts at
226state universities; and
227     (h)  Shall not supplant, replace, or direct existing
228technology transfer operations or other commercialization
229programs, including incubators and accelerators.
230     (3)  The articles of incorporation of the institute must be
231approved in a written agreement with Enterprise Florida, Inc.
232The agreement and the articles of incorporation shall:
233     (a)  Provide that the institute shall provide equal
234employment opportunities for all persons regardless of race,
235color, religion, gender, national origin, age, handicap, or
236marital status;
237     (b)  Provide that the institute is subject to the public
238records and meeting requirements of s. 24, Art. I of the State
239Constitution;
240     (c)  Provide that all officers, directors, and employees of
241the institute shall be governed by the code of ethics for public
242officers and employees as set forth in part III of chapter 112;
243     (d)  Provide that members of the board of directors of the
244institute are responsible for the prudent use of all public and
245private funds and that they will ensure that the use of funds is
246in accordance with all applicable laws, bylaws, and contractual
247requirements; and
248     (e)  Provide that the fiscal year of the institute is from
249July 1 to June 30.
250     (4)  The affairs of the institute shall be managed by a
251board of directors who shall serve without compensation. Each
252director shall have only one vote. The chair of the board of
253directors shall be selected by a majority vote of the directors,
254a quorum being present. The board of directors shall consist of
255the following five members:
256     (a)  The chair of Enterprise Florida, Inc., or the chair's
257designee.
258     (b)  The president of the university where the institute is
259located or the president's designee unless multiple universities
260jointly sponsor the institute, in which case the presidents of
261the sponsoring universities shall agree upon a designee.
262     (c)  Three directors appointed by the Governor to 3-year
263staggered terms, to which the directors may be reappointed.
264     (5)  The board of directors shall provide a copy of the
265institute's annual report to the Governor, the President of the
266Senate, the Speaker of the House of Representatives, Enterprise
267Florida, Inc., and the president of the university at which the
268institute is located.
269     (6)  Enterprise Florida, Inc., the president and the board
270of trustees of the university where the institute is located,
271the Auditor General, and the Office of Program Policy Analysis
272and Government Accountability may require and receive from the
273institute or its independent auditor any detail or supplemental
274data relative to the operation of the institute.
275     (7)  Enterprise Florida, Inc., shall issue a request for
276proposals to state universities requesting proposals to fulfill
277the purposes of the institute as described in this section and
278provide for its physical location in a major metropolitan area
279in the southern part of the state having extensive commercial
280air service to facilitate access by venture capital providers.
281Enterprise Florida, Inc., shall review the proposals in a
282committee appointed by its board of directors which shall make a
283recommendation for final selection. Final approval of the
284selected proposal must be by the board of directors of
285Enterprise Florida, Inc., at one of its duly noticed meetings.
286     (8)(a)  To be eligible for assistance, the company or
287organization attempting to commercialize its product must be
288accepted by the institute before receiving the institute's
289assistance.
290     (b)  The institute shall receive recommendations from any
291publicly supported organization that a company that is
292commercializing the research, technology, or patents from a
293qualifying publicly supported organization should be accepted
294into the institute.
295     (c)  The institute shall thereafter review the business
296plans and technology information of each such recommended
297company. If accepted, the institute shall mentor the company,
298develop marketing information on the company, and use its
299resources to attract capital investment into the company, as
300well as bring other resources to the company which may foster
301its effective management, growth, capitalization, technology
302protection, or marketing or business success.
303     (9)  The institute shall:
304     (a)  Maintain a centralized location to showcase companies
305and their technologies and products;
306     (b)  Develop an efficient process to inventory and
307publicize companies and products that have been accepted by the
308institute for commercialization;
309     (c)  Routinely communicate with private investors and
310venture capital organizations regarding the investment
311opportunities in its showcased companies;
312     (d)  Facilitate meetings between prospective investors and
313eligible organizations in the institute;
314     (e)  Hire full-time staff who understand relevant
315technologies needed to market companies to the angel investors
316and venture capital investment community; and
317     (f)  Develop cooperative relationships with publicly
318supported organizations all of which work together to provide
319resources or special knowledge that is likely to be helpful to
320institute companies.
321     (10)  The institute shall not develop or accrue any
322ownership, royalty, patent, or other such rights over or
323interest in companies or products in the institute and shall
324maintain the secrecy of proprietary information.
325     (11)  The institute shall not charge for services rendered
326to state universities and affiliated organizations, community
327colleges, or state agencies.
328     (12)  By December 1 of each year, the institute shall issue
329an annual report concerning its activities to the Governor, the
330President of the Senate, and the Speaker of the House of
331Representatives. The report shall include the following:
332     (a)  Information on any assistance and activities provided
333by the institute to assist publicly supported universities,
334colleges, research institutes, and other publicly supported
335organizations in the state.
336     (b)  A description of the benefits to this state resulting
337from the institute, including the number of businesses created,
338associated industries started, the number of jobs created, and
339the growth of related projects.
340     (c)  Independently audited financial statements, including
341statements that show receipts and expenditures during the
342preceding fiscal year for personnel, administration, and
343operational costs of the institute.
344     Section 2.  Subsection (4) of section 1004.226, Florida
345Statutes, is amended, subsection (7) is renumbered as subsection
346(8) and amended, and a new subsection (7) is added to that
347section, to read:
348     1004.226  The 21st Century Technology, Research, and
349Scholarship Enhancement Act.--
350     (4)  FLORIDA TECHNOLOGY, RESEARCH, AND SCHOLARSHIP
351BOARD.--The Florida Technology, Research, and Scholarship Board
352is created within the Board of Governors of the State University
353System to guide the establishment of Centers of Excellence, and
354the attraction of world class scholars, and the
355commercialization of products and services developed from the
356research and development conducted at state universities.
357     (a)  The board shall consist of 11 members. Five members
358shall be appointed by the Governor, one of whom the Governor
359shall appoint as chair of the board, one of whom must be a
360member of the board of directors of Enterprise Florida, Inc.,
361and one of whom must be a member of the Board of Governors of
362the State University System. Three members shall be appointed by
363the President of the Senate, and three members shall be
364appointed by the Speaker of the House of Representatives.
365Appointed members must be representative of business leaders,
366industrial researchers, academic researchers, scientists, and
367leaders in the emerging and advanced technology sector.
368Appointed members may not serve for more than 4 years, and any
369vacancy that occurs during these appointees' terms shall be
370filled in the same manner as the original appointment. A
371majority of members constitutes a quorum.
372     (b)  Members of the board shall serve without compensation,
373but are entitled to receive reimbursement for per diem and
374travel expenses in accordance with s. 112.061 while in the
375performance of their duties.
376     (c)  The Board of Governors shall provide staff support for
377the activities of the board and per diem and travel expenses for
378board members.
379     (d)  The board is charged with recommending criteria to the
380Board of Governors for the 21st Century World Class Scholars
381Program and with providing guidance to the Board of Governors
382regarding the implementation and administration of the Centers
383of Excellence Program.
384     (e)  The board shall recommend to the Board of Governors
385the qualifications, standards, and requirements for approval of
386investments in Centers of Excellence under this act. The board
387may form committees of its members and is encouraged to consult
388with Enterprise Florida, Inc., the Florida Research Consortium,
389Bio-Florida, IT Florida, the Florida Aviation Aerospace
390Alliance, and any other entity whose input may be helpful in
391determining the requirements and standards for the program.
392     (f)  The board shall review and approve State University
393Research Commercialization Assistance Grants under subsection
394(7). The board is encouraged to consult with Enterprise Florida,
395Inc.; entities with prior experience in early stage business
396investment; and any other entity whose input may be helpful in
397evaluating grant proposals.
398     (g)  Members of the board must agree to refrain from having
399any direct interest in any contract, franchise, privilege, or
400other benefit arising from a state university project receiving
401a State University Research Commercialization Assistance Grant
402during the term of his or her appointment and for 2 years after
403the termination of such appointment. It is a misdemeanor of the
404first degree, punishable as provided in s. 775.082 or s.775.083,
405for a person to serve on the board in violation of this
406paragraph or to accept a direct interest in any contract,
407franchise, privilege, or other benefit granted by the grant
408recipients within 2 years after the termination of his or her
409service on the board.
410     (7)  STATE UNIVERSITY RESEARCH COMMERCIALIZATION ASSISTANCE
411GRANT PROGRAM.--The State University Research Commercialization
412Assistance Grant Program is established to promote the
413commercialization of university research products for the
414purpose of enhancing the state's economy and the state's public
415universities. All Phase Two and Phase Three grants established
416by this program require $1 in private investment for each $1 in
417state funding provided. A state university may apply for early
418stage capital funding for the purpose of developing products and
419services resulting from university research. An application may
420include joint participation in the development of products and
421services by a cooperating university. Grant funds awarded under
422this subsection may be used by the university for a variety of
423premarketing activities, including, but not limited to, securing
424patents, establishing startup companies, developing license
425agreements, attracting private investment, and supporting other
426activities that are necessary to establish commercially viable
427ventures for the marketing and sale of products resulting from
428university research. Funds may not be used for research or
429development.
430     (a)  State University Research Commercialization Assistance
431Grants may be provided under the following categories:
432     1.  Phase One grants, which may not exceed $50,000 per
433project, shall be available to assist with early market
434research, independent evaluation, consultation, and other
435initial activities that may be required to develop an initial
436business model for a university research product that has the
437potential for commercialization.
438     2.  Phase Two grants, which may not exceed $100,000 per
439project, shall be available to assist with the development of a
440complete business plan for the commercialization of a university
441research product.
442     3.  Phase Three grants, which may not exceed $250,000 per
443project, shall be available for the implementation and execution
444of a completed business plan for a university research product.
445     (b)  Based on the availability of funds, the board shall
446periodically solicit proposals from state universities for State
447University Research Commercialization Assistance Grants. The
448board shall establish guidelines prescribing the criteria and
449format for the submission of grant applications by state
450universities. Any state university, upon approval of its board
451of trustees, may submit a request to the board for a grant to
452facilitate the commercialization of a university research
453product or the commercialization of a patent held by a state
454agency under a cooperative agreement between the state agency
455and the university. A state university need not receive prior
456stage grants to be eligible for Phase Two or Phase Three grants.
457When evaluating the applications submitted for funding, the
458board shall consider the following criteria:
459     1.  The potential return to the university which may be
460reasonably assumed based on the business case presented in
461support of the proposed project.
462     2.  The potential for the creation of high-wage jobs
463resulting from the success of the proposed project.
464     3.  The potential of the proposed project to address
465pressing needs of the residents of the state.
466     4.  The potential of the proposed project to enhance the
467economic competitiveness of the state and the university.
468     5.  The technical, financial, organizational, and marketing
469feasibility of the project and its business plan.
470     6.  The potential of the proposed project to create other
471related business enterprises.
472
473Each proposed project shall be evaluated on its individual
474merits.
475     (c)  The board shall negotiate and execute contracts with
476state universities governing the terms of State University
477Research Commercial Assistance Grants. The board may not execute
478the contract unless the contract is approved by the affirmative
479vote of at least six of the 11 members of the board. Each
480contract, at a minimum, must contain provisions that:
481     1.  Specify the procedures and schedules that govern the
482disbursement of funds under this section and specify the
483conditions or deliverables that the state university must
484satisfy before the release of each disbursement.
485     2.  Require the state university to submit a business plan
486in a form and manner prescribed by the board.
487     3.  Require the state university to submit data to the
488board concerning the activities and performance of projects
489funded pursuant to this section and to provide to the board an
490annual accounting of the expenditure of funds disbursed under
491this subsection.
492     4.  Require the state university to negotiate repayment to
493the General Revenue Fund of the amount of the grant awarded to a
494project when the project generates sufficient revenues to
495sustain a profitable operation.
496     5.  Require the state university to expend 95 percent of
497grant proceeds for described uses in the approved grant
498application and not otherwise reduce grant proceeds with
499facilities charges or fees by the university.
500     (d)  Upon verification by the Board of Governors that a
501state university has executed a contract with the board for a
502State University Research Commercialization Assistance Grant,
503the Board of Governors shall release grant funds to the
504university.
505     (8)(7)  ANNUAL REPORT.--The board, in cooperation with the
506Board of Governors of the State University System and the state
507universities or research centers receiving investments under
508this act, shall issue an annual report by December 31 each year
509of the activities conducted, including the accomplishments and
510overall economic benefits to the state, the number of 21st
511Century World Class Scholars attracted, the number of Centers of
512Excellence created or expanded, the success of collaborations
513with related industries, the number and amount of State
514University Research Commercialization Assistance Grants awarded
515and repaid, and the success of these programs. The annual report
516shall be presented to the Governor, the President of the Senate,
517and the Speaker of the House of Representatives. The annual
518report must include a copy of an independent audit of the board
519and a review of the progress of programs administered by the
520board.
521     Section 3.  Prior to the 2012 Regular Session of the
522Legislature, the Office of Program Policy Analysis and
523Government Accountability shall conduct a review and evaluation
524of the effectiveness and viability of the Florida Capital
525Formation Act. The office shall specifically evaluate the total
526capital investment in the state, private sector investment, rate
527of return, creation of new business and jobs, debt incurred, and
528industries impacted. The office shall also recommend outcome
529measures for further evaluation of the program. The office shall
530submit a report of its findings and recommendations to the
531Governor, the President of the Senate, and the Speaker of the
532House of Representatives no later than January 1, 2012.
533     Section 4.  The nonrecurring sum of $31 million is
534appropriated from the General Revenue Fund to Enterprise
535Florida, Inc., for the 2007-2008 fiscal year. Of these funds,
536$500,000 shall be for the purpose of initiating activities
537necessary to implement the responsibilities of the Florida
538Opportunity Fund under this act, and $29.5 million is provided
539for the purpose of making investments under s. 288.9624, Florida
540Statutes. In addition, $100,000 of these funds are provided to
541Enterprise Florida, Inc., for the purpose of startup costs
542associated with the Institute for the Commercialization of
543Public Research under s. 288.9625, Florida Statutes, and
544$900,000 shall be provided to the institute for its operational
545expenses.
546     Section 5.  The nonrecurring sum of $4 million is
547appropriated to the Board of Governors of the State University
548System from the General Revenue Fund solely for the State
549University Research Commercialization Assistance Grant Program
550created by this act. Funds must be disbursed by the Board of
551Governors pursuant to grant agreements and contracts by the
552Florida Technology, Research, and Scholarship Board.
553     Section 6.  This act shall take effect July 1, 2007.


CODING: Words stricken are deletions; words underlined are additions.