To amend the Small Business Investment Act of 1958 to establish a program for the Small Business Administration to provide financing to support early-stage small businesses in targeted industries, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Early-Stage 
Investment Act of 2009''.

SEC. 2. SMALL BUSINESS EARLY-STAGE INVESTMENT PROGRAM.

    Title III of the Small Business Investment Act of 1958 (15 U.S.C. 
681 et seq.) is amended by adding at the end the following:

        ``PART D--SMALL BUSINESS EARLY-STAGE INVESTMENT PROGRAM

``SEC. 399A. ESTABLISHMENT OF PROGRAM.

    ``The Administrator shall establish and carry out an early-stage 
investment program (hereinafter referred to in this part as the 
`program') to provide equity investment financing to support early-
stage small businesses in targeted industries in accordance with this 
part.

``SEC. 399B. ADMINISTRATION OF PROGRAM.

    ``The program shall be administered by the Administrator acting 
through the Associate Administrator described under section 201.

``SEC. 399C. APPLICATIONS.

    ``(a) In General.--Any incorporated body, limited liability 
company, or limited partnership organized and chartered or otherwise 
existing under Federal or State law for the purpose of performing the 
functions and conducting the activities contemplated under the program 
and any small business investment company may submit to the 
Administrator an application to participate in the program.
    ``(b) Requirements for Application.--An application to participate 
in the program shall include the following:
            ``(1) A business plan describing how the applicant intends 
        to make successful venture capital investments in early-stage 
        small businesses in targeted industries.
            ``(2) Information regarding the relevant venture capital 
        investment qualifications and backgrounds of the individuals 
        responsible for the management of the applicant.
            ``(3) A description of the extent to which the applicant 
        meets the selection criteria under section 399D.
    ``(c) Applications From Small Business Investment Companies.--The 
Administrator shall establish an abbreviated application process for 
small business investment companies that have received a license under 
section 301 and that are applying to participate in the program. Such 
abbreviated process shall incorporate a presumption that such small 
business investment companies satisfactorily meet the selection 
criteria under paragraphs (3) and (5) of section 399D(b).

``SEC. 399D. SELECTION OF PARTICIPATING INVESTMENT COMPANIES.

    ``(a) In General.--Not later than 90 days after the date on which 
the Administrator receives an application from an applicant under 
section 399C, the Administrator shall make a final determination to 
approve or disapprove such applicant to participate in the program and 
shall transmit such determination to the applicant in writing.
    ``(b) Selection Criteria.--In making a determination under 
subsection (a), the Administrator shall consider each of the following:
            ``(1) The likelihood that the applicant will meet the goals 
        specified in the business plan of the applicant.
            ``(2) The likelihood that the investments of the applicant 
        will create or preserve jobs, both directly and indirectly.
            ``(3) The character and fitness of the management of the 
        applicant.
            ``(4) The experience and background of the management of 
        the applicant.
            ``(5) The extent to which the applicant will concentrate 
        investment activities on early-stage small businesses in 
        targeted industries.
            ``(6) The likelihood that the applicant will achieve 
        profitability.
            ``(7) The experience of the management of the applicant 
        with respect to establishing a profitable investment track 
        record.

``SEC. 399E. GRANTS.

    ``(a) In General.--The Administrator may make one or more grants to 
a participating investment company.
    ``(b) Grant Amounts.--
            ``(1) Non-federal capital.--A grant made to a participating 
        investment company under the program may not be in an amount 
        that exceeds the amount of the capital of such company that is 
        not from a Federal source and that is available for investment 
        on or before the date on which a grant is drawn upon. Such 
        capital may include legally binding commitments with respect to 
        capital for investment.
            ``(2) Limitation on aggregate amount.--The aggregate amount 
        of all grants made to a participating investment company under 
        the program may not exceed $100,000,000.
    ``(c) Grant Process.--In making a grant under the program, the 
Administrator shall commit a grant amount to a participating investment 
company and the amount of each such commitment shall remain available 
to be drawn upon by such company--
            ``(1) for new-named investments during the 5-year period 
        beginning on the date on which each such commitment is first 
        drawn upon; and
            ``(2) for follow-on investments and management fees during 
        the 10-year period beginning on the date on which each such 
        commitment is first drawn upon, with not more than 2 additional 
        1-year periods available at the discretion of the 
        Administrator.

``SEC. 399F. INVESTMENTS IN EARLY-STAGE SMALL BUSINESSES IN TARGETED 
              INDUSTRIES.

    ``(a) In General.--As a condition of receiving a grant under the 
program, a participating investment company shall make all of the 
investments of such company in small business concerns, of which at 
least 50 percent shall be early-stage small businesses in targeted 
industries.
    ``(b) Evaluation of Compliance.--With respect to a grant amount 
committed to a participating investment company under section 399E, the 
Administrator shall evaluate the compliance of such company with the 
requirements under this section if such company has drawn upon 50 
percent of such commitment.

``SEC. 399G. PRO RATA INVESTMENT SHARES.

    ``Each investment made by a participating investment company under 
the program shall be treated as comprised of capital from grants under 
the program according to the ratio that capital from grants under the 
program bears to all capital available to such company for investment.

``SEC. 399H. GRANT INTEREST.

    ``(a) Grant Interest.--
            ``(1) In general.--As a condition of receiving a grant 
        under the program, a participating investment company shall 
        convey a grant interest to the Administrator in accordance with 
        paragraph (2).
            ``(2) Effect of conveyance.--The grant interest conveyed 
        under paragraph (1) shall have all the rights and attributes of 
        other investors attributable to their interests in the 
        participating investment company, but shall not denote control 
        or voting rights to the Administrator. The grant interest shall 
        entitle the Administrator to a pro rata portion of any 
        distributions made by the participating investment company 
        equal to the percentage of capital in the participating 
        investment company that the grant comprises. The Administrator 
        shall receive distributions from the participating investment 
        company at the same times and in the same amounts as any other 
        investor in the company with a similar interest. The investment 
        company shall make allocations of income, gain, loss, 
        deduction, and credit to the Administrator with respect to the 
        grant interest as if the Administrator were an investor.
    ``(b) Manager Profits.--As a condition of receiving a grant under 
the program, the manager profits interest payable to the managers of a 
participating investment company under the program shall not exceed 20 
percent of profits, exclusive of any profits that may accrue as a 
result of the capital contributions of any such managers with respect 
to such company. Any excess of this amount, less taxes payable thereon, 
shall be returned by the managers and paid to the investors and the 
Administrator in proportion to the capital contributions and grants 
paid in. No manager profits interest (other than a tax distribution) 
shall be paid prior to the repayment to the investors and the 
Administrator of all contributed capital and grants made.
    ``(c) Distribution Requirements.--As a condition of receiving a 
grant under the program, a participating investment company shall make 
all distributions to all investors in cash and shall make distributions 
within a reasonable time after exiting investments, including following 
a public offering or market sale of underlying investments.

``SEC. 399I. FUND.

    ``There is hereby created within the Treasury a separate fund for 
grants which shall be available to the Administrator subject to annual 
appropriations as a revolving fund to be used for the purposes of the 
program. All amounts received by the Administrator, including any 
moneys, property, or assets derived by the Administrator from 
operations in connection with the program, shall be deposited in the 
fund. All expenses and payments, excluding administrative expenses, 
pursuant to the operations of the Administrator under the program shall 
be paid from the fund.

``SEC. 399J. APPLICATION OF OTHER SECTIONS.

    ``To the extent not inconsistent with requirements under this part, 
the Administrator may apply sections 309, 311, 312, 313, and 314 to 
activities under this part and an officer, director, employee, agent, 
or other participant in a participating investment company shall be 
subject to the requirements under such sections.

``SEC. 399K. DEFINITIONS.

    ``In this part, the following definitions apply:
            ``(1) Early-stage small business in a targeted industry.--
        The term `early-stage small business in a targeted industry' 
        means a small business concern that--
                    ``(A) is domiciled in a State;
                    ``(B) has not generated gross annual sales revenues 
                exceeding $15,000,000 in any of the previous 3 years; 
                and
                    ``(C) is engaged primarily in researching, 
                developing, manufacturing, producing, or bringing to 
                market goods, products, or services with respect to any 
                of the following business sectors:
                            ``(i) Agricultural technology.
                            ``(ii) Energy technology.
                            ``(iii) Environmental technology.
                            ``(iv) Life science.
                            ``(v) Information technology.
                            ``(vi) Digital media.
                            ``(vii) Clean technology.
                            ``(viii) Defense technology.
                            ``(ix) Photonics technology.
            ``(2) Participating investment company.--The term 
        `participating investment company' means an applicant approved 
        under section 399D to participate in the program.
            ``(3) Small business concern.--The term `small business 
        concern' has the same meaning given such term under section 
        3(a) of the Small Business Act (15 U.S.C. 632(a)).

``SEC. 399L. AUTHORIZATION OF APPROPRIATIONS.

    ``There is authorized to be appropriated to carry out the program 
$200,000,000 for the first full fiscal year beginning after the date of 
the enactment of this part.''.

SEC. 3. PROHIBITIONS ON EARMARKS.

    None of the funds appropriated for the program established under 
part D of title III of the Small Business Investment Act of 1958, as 
added by this Act, may be used for a Congressional earmark as defined 
in clause 9(d) of rule XXI of the Rules of the House of 
Representatives.

SEC. 4. REGULATIONS.

    Except as otherwise provided in this Act or in amendments made by 
this Act, after an opportunity for notice and comment, but not later 
than 180 days after the date of the enactment of this Act, the 
Administrator shall issue


              

 regulations to carry out this Act and the amendments made by this Act.

            Passed the House of Representatives November 18, 2009.

            Attest:

                                            LORRAINE C. MILLER,

                                                                 Clerk.

Summary: Small Business Early-Stage Investment Act of 2009 - Amends the Small Business Investment Act of 1958 to direct the Administrator of the Small Business Administration (SBA) to establish and carry out a program to provide equity investment financing to support early-stage small businesses in the following targeted industries: (1) agricultural technology, (2) energy technology, (3) environmental technology, (4) life science, (5) information technology, (6) digital media, (7) clean technology, (8) defense technology. And (9) photonics technology. Directs the Administrator to make grants to participating investment companies under the program and limits to $100 million the aggregate amount of all grants made to a participating investment company under the program. Requires, as a condition of receiving a grant under the program, all of the investments of participating investment companies to be in small businesses, and at least 50 to be in early-stage small businesses in the targeted industries. Directs the Administrator to monitory participant compliance with such requirements. Establishes a separate Treasury fund for such grants. Authorizes appropriations. Prohibits funds appropriated for such purpose from being used for a congressional earmark.