Florida Senate - 2011 SB 1730 By Senator Altman 24-01320C-11 20111730__ 1 A bill to be entitled 2 An act relating to the Technology Seed Capital Fund; 3 providing definitions; providing for the creation of 4 the Technology Seed Capital Fund by the Institute for 5 the Commercialization of Public Research; providing 6 for the creation of a fund management committee by the 7 board of directors of the institute; forbidding 8 members of the committee from investing in a company 9 for a specified period after an investment in a 10 company is approved; specifying responsibilities of 11 the institute and the fund management committee with 12 respect to the fund; specifying the requirements for 13 an investment management plan proposal from interested 14 applicants for the investment manager position; 15 specifying the authority of the investment manager for 16 the fund; specifying qualifications for investments of 17 the fund; requiring that proposed investments be 18 matched by the private sector before the fund invests; 19 requiring that the company be domiciled in the state 20 and operate in one of the targeted industry clusters; 21 requiring that the company have certain positions and 22 abilities; limiting the amount of individual 23 investments of the fund; requiring earnings from the 24 fund to be reinvested; limiting the administrative 25 costs of the fund; requiring the institute to submit 26 an annual report to the Governor and Legislature 27 relating to the activities of the fund; providing an 28 appropriation; providing an effective date. 29 30 WHEREAS, consistent access to significant risk capital at 31 all stages of development is integral to the creation and growth 32 of small technology companies, and the maturation of these 33 companies into the leading companies of tomorrow will facilitate 34 the diversification of Florida’s economy, and 35 WHEREAS, young companies have little to no collateral with 36 which to secure traditional loans and limited assets and track 37 records with which to attract financing from private equity 38 firms, and 39 WHEREAS, this state is not the natural home of the venture 40 capital industry, and as a result, companies in this state are 41 severely disadvantaged in their efforts to attract venture 42 capital investment, and 43 WHEREAS, a lack of seed-stage funding exists in this state 44 despite the fact that the leaders of this state have recognized 45 the venture capital challenge and in recent years have taken 46 significant action to help address it, in particular through the 47 creation of the Florida Opportunity Fund and the Florida Growth 48 Fund, and 49 WHEREAS, to date very little capital is available to 50 companies in this state in the crucial seed stage, and 51 WHEREAS, the 2010-2015 Roadmap to Florida’s Future called 52 for the creation of a new mechanism for seed-stage funding to 53 address the state’s seed stage capital gap as part of a 54 comprehensive strategy to promote high-tech, high-wage, 55 innovation-driven growth, and 56 WHEREAS, broad-based support exists among the state’s 57 economic development, business, and academic leaders for the 58 creation of a Florida Technology Seed Capital Fund, and 59 WHEREAS, it is recommended that the state make a $25 60 million investment to establish a Technology Seed Capital Fund, 61 NOW, THEREFORE, 62 63 Be It Enacted by the Legislature of the State of Florida: 64 65 Section 1. Technology Seed Capital Fund; creation; duties.— 66 (1) DEFINITIONS.—As used in this section, the term: 67 (a) “Fund” means the Technology Seed Capital Fund. 68 (b) “Institute” means the Institute for the 69 Commercialization of Public Research. 70 (2) TECHNOLOGY SEED CAPITAL FUND.— 71 (a) The institute shall facilitate the creation of the 72 fund. This fund shall be a private, nonprofit corporation 73 organized and operated under chapter 617, Florida Statutes. The 74 institute shall be the fund’s sole shareholder or member. The 75 fund is not a public corporation or instrumentality of the 76 state. The fund shall manage its business affairs and conduct 77 business consistent with its organizational documents and the 78 purposes set forth in this section. Notwithstanding the powers 79 granted under chapter 617, Florida Statutes, the fund may not 80 amend, modify, or repeal a bylaw or article of incorporation 81 without the express written consent of the institute. 82 (b) The board of directors of the institute shall direct 83 its venture advisory board to elect or appoint a five-person 84 fund management committee. Members of the committee shall serve 85 without compensation, but are entitled to reimbursement for all 86 reasonable, necessary, and actual expenses authorized under s. 87 112.061, Florida Statutes, and as determined and approved by the 88 board of directors of the institute. Members of the committee 89 may not invest in any company receiving funding from the fund 90 for 6 months after an investment in the company by the fund is 91 formally approved. The staff of the institute shall provide 92 administrative support and assistance to the fund management 93 committee upon request. 94 (3) FUND MANAGEMENT COMMITTEE RESPONSIBILITIES.— 95 (a) Upon organization, the fund management committee shall 96 conduct a national solicitation for proposals for investment 97 management plans from interested parties. The investment 98 management plan must address the applicant’s level of 99 experience, quality of management, investment philosophy and 100 process, proof of success in fund management and fundraising, 101 prior investment fund results, and plan for achieving the 102 purposes of this section. 103 (b) The fund management committee is responsible for 104 negotiating the terms of the contract with an investment manager 105 for the fund and for recommending the execution of the contract. 106 (c) The fund management committee must consult with the 107 board of directors of the institute before recommending the 108 pursuit of any investment management plan proposal or the hiring 109 of an investment manager for the fund. 110 (4) RESPONSIBILITIES OF THE INSTITUTE.—The board of 111 directors of the institute shall be responsible for managing the 112 business affairs of the fund, such as accounting, audit, 113 insurance, and related requirements; soliciting and negotiating 114 the terms of, contracting for, and receiving investment capital 115 and proceeds with the assistance of the investment manager; 116 receiving investment returns; paying investors and debtors; and 117 reinvesting the investment returns in the fund in order to 118 provide additional seed capital to facilitate the creation of 119 new businesses and jobs in this state and further diversify the 120 economy of this state. 121 (5) FUND MANAGER.—For the purpose of mobilizing investment 122 in Florida-based, new technology companies and generating a 123 return sufficient to continue reinvestment, the investment 124 manager of the fund may: 125 (a) Deploy the fund to make direct investments in 126 individual businesses; 127 (b) Negotiate any and all terms and conditions for 128 investments of the fund; 129 (c) Track progress of the companies in the fund’s 130 portfolio; and 131 (d) Increase the visibility of the companies in the fund’s 132 portfolio to help raise additional capital from private or 133 corporate sources. 134 (6) INVESTMENTS BY THE FUND.— 135 (a) The fund may not invest in a company unless: 136 1. The fund’s proposed investment in a company is matched 137 at least 1 to 1 by the private sector before the fund invests; 138 2. The company is domiciled in this state and is operating 139 in one of the state’s targeted industries as identified pursuant 140 to s. 288.106(2), Florida Statutes, which include, but are not 141 limited to, life sciences, information technology, energy, clean 142 technology, advanced manufacturing processes, aviation and 143 aerospace, and homeland security and defense; and 144 3. The fund determines that the company has strong 145 intellectual property positions, a capable management team, 146 readily identifiable paths to market or commercialization, the 147 ability to obtain other sources of capital to leverage the 148 state’s investment, and the potential to attract additional or 149 follow-on funding. 150 (b) Individual seed investments by the fund may range from 151 $30,000 to $300,000. 152 (c) Any earnings from the fund must be returned to the fund 153 to be reinvested consistent with the purposes of this act. 154 (7) ADMINISTRATIVE COSTS OF THE FUND.—The annual 155 administrative costs of the fund may not exceed 5 percent of the 156 total program appropriation, except that the fund may pay its 157 investment manager a carried interest. 158 (8) ANNUAL REPORT.—By December 1 of each year, the 159 institute shall issue an annual report concerning the 160 investments of the fund to the Governor, the President of the 161 Senate, and the Speaker of the House of Representatives. The 162 annual report, at a minimum, must include: 163 (a) An accounting of the amount of investments disbursed by 164 the fund and the progress of the fund. 165 (b) A description of the benefits to this state resulting 166 from the fund, including the number of businesses created, 167 additional capital raised, associated industries started, the 168 number of jobs created, and the growth of related research 169 projects. 170 (c) Independently audited financial statements, including 171 statements that show receipts and expenditures during the 172 preceding fiscal year for the personnel, administration, and 173 operational costs of the fund. Any returns on the investments of 174 the fund shall be retained by the institute and reinvested in a 175 manner consistent with the mandates of this section. 176 Section 2. The sum of $25 million in nonrecurring funds 177 from the General Revenue Fund is appropriated to the Institute 178 for the Commercialization of Public Research solely for purposes 179 of creating and administering the Technology Seed Capital Fund, 180 pursuant to this act. 181 Section 3. This act shall take effect July 1, 2011.