I 

111TH CONGRESS 

1ST SESSION H. R. 3684 

To amend the Small Business Investment Act of 1958 to improve the New 

Markets Venture Capital Program and to establish an Angel Investment 

Program, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

SEPTEMBER 30, 2009 

Mr. SESTAK introduced the following bill; which was referred to the 

Committee on Small Business 

A BILL 

To amend the Small Business Investment Act of 1958 to 

improve the New Markets Venture Capital Program and 

to establish an Angel Investment Program, and for other 

purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘American Small Business Innovation Act’’. 

6 (b) TABLE OF CONTENTS.—The table of contents for 

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

TITLE I—NEW MARKETS VENTURE CAPITAL PROGRAM 


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Sec. 101. Expansion of New Markets Venture Capital Program. 

Sec. 102. Improved nationwide distribution. 

Sec. 103. Increased investment in small manufacturers. 

Sec. 104. Updating definition of low-income geographic area. 

Sec. 105. Study on availability of equity capital. 

Sec. 106. Expanding operational assistance to conditionally approved companies. 

Sec. 107. Streamlined application for New Markets Venture Capital Program. 

Sec. 108. Elimination of matching requirement. 

Sec. 109. Simplified formula for operational assistance grants. 

Sec. 110. Authorization of appropriations. 

TITLE II—ANGEL INVESTMENT PROGRAM 

Sec. 201. Establishment of Angel Investment Program. 

1 TITLE I—NEW MARKETS 

2 VENTURE CAPITAL PROGRAM 

3 SEC. 101. EXPANSION OF NEW MARKETS VENTURE CAPITAL 

4 PROGRAM. 

5 (a) ADMINISTRATION PARTICIPATION REQUIRED.— 

6 Section 353 of the Small Business Investment Act of 1958 

7 (15 U.S.C. 689b) is amended by striking ‘‘under which 

8 the Administrator may’’ and inserting ‘‘under which the 

9 Administrator shall’’. 

10 (b) REPORT TO CONGRESS.—Not later than 1 year 

11 after the date of the enactment of this Act, the Adminis12 trator of the Small Business Administration shall submit 

13 to Congress a report evaluating the success of the expan14 sion of the New Markets Venture Capital Program under 

15 this section. 


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1 SEC. 102. IMPROVED NATIONWIDE DISTRIBUTION. 

2 Section 354 of the Small Business Investment Act 

3 of 1958 (15 U.S.C. 689c) is amended by adding at the 

4 end the following: 

5 ‘‘(f) GEOGRAPHIC EXPANSION.—From among com6 panies submitting applications under subsection (b), the 

7 Administrator shall consider the selection criteria and na8 tionwide distribution under subsection (c) and shall, to the 

9 maximum extent practicable, approve at least one com10 pany from each geographic region of the Small Business 

11 Administration.’’. 

12 SEC. 103. INCREASED INVESTMENT IN SMALL MANUFAC13 TURERS. 

14 Section 354(d)(1) of the Small Business Investment 

15 Act of 1958 (15 U.S.C. 689c(d)(1)) is amended— 

16 (1) by striking ‘‘Each’’ and inserting the fol17 lowing: 

18 ‘‘(A) IN GENERAL.—Except as provided in 

19 subparagraph (B), each’’; and 

20 (2) by adding at the end the following: 

21 ‘‘(B) SMALL MANUFACTURER INVESTMENT

22 CAPITAL REQUIREMENTS.—Each conditionally 

23 approved company engaged primarily in devel24 opment of and investment in small manufactur25 ers shall raise not less than $3,000,000 of pri26 vate capital or binding capital commitments 


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1 from one or more investors (other than agencies 

2 or departments of the Federal Government) 

3 who meet criteria established by the Adminis4 trator.’’. 

5 SEC. 104. UPDATING DEFINITION OF LOW-INCOME GEO6 GRAPHIC AREA. 

7 Section 351 of the Small Business Investment Act 

8 of 1958 (15 U.S.C. 689) is amended— 

9 (1) by striking paragraphs (2) and (3); 

10 (2) by inserting after paragraph (1) the fol11 lowing: 

12 ‘‘(2) LOW-INCOME GEOGRAPHIC AREA.—The 

13 term ‘low-income geographic area’ has the same 

14 meaning given the term ‘low-income community’ in 

15 section 45D(e) of the Internal Revenue Code of 

16 1986 (26 U.S.C. 45D(e)).’’; and 

17 (3) by redesignating paragraphs (4) through 

18 (8) as paragraphs (3) through (7), respectively. 

19 SEC. 105. STUDY ON AVAILABILITY OF EQUITY CAPITAL. 

20 (a) STUDY REQUIRED.—Before the expiration of the 

21 180-day period that begins on the date of the enactment 

22 of this Act, the Chief Counsel for Advocacy of the Small 

23 Business Administration shall conduct a study on the 

24 availability of equity capital in low-income urban and rural 

25 areas. 


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1 (b) REPORT.—Not later than 90 days after the com2 pletion of the study under subsection (a), the Adminis3 trator of the Small Business Administration shall submit 

4 to Congress a report containing the findings of the study 

5 required under subsection (a) and any recommendations 

6 of the Administrator based on such study. 

7 SEC. 106. EXPANDING OPERATIONAL ASSISTANCE TO CON8 DITIONALLY APPROVED COMPANIES. 

9 (a) OPERATIONAL ASSISTANCE GRANTS TO CONDI10 TIONALLY APPROVED COMPANIES.—Section 358(a) of the 

11 Small Business Investment Act of 1958 (15 U.S.C. 

12 689g(a)) is amended by adding at the end the following: 

13 ‘‘(6) GRANTS TO CONDITIONALLY APPROVED

14 COMPANIES.— 

15 ‘‘(A) IN GENERAL.—Subject to subpara16 graphs (B), (C), and (D), upon the request of 

17 a company conditionally approved under section 

18 354(c), the Administrator shall make a grant to 

19 the company under this subsection. 

20 ‘‘(B) REPAYMENT BY COMPANIES NOT AP21 PROVED.—If a company receives a grant under 

22 this paragraph and does not enter into a par23 ticipation agreement for final approval, the 

24 company shall repay the amount of the grant to 

25 the Administrator. 


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1 ‘‘(C) DEDUCTION FROM GRANT TO AP2 PROVED COMPANY.—If a company receives a 

3 grant under this paragraph and receives final 

4 approval under section 354(e), the Adminis5 trator shall deduct the amount of the grant 

6 under this paragraph from the total grant 

7 amount that the company receives for oper8 ational assistance. 

9 ‘‘(D) AMOUNT OF GRANT.—No company 

10 may receive a grant of more than $50,000 

11 under this paragraph.’’. 

12 (b) LIMITATION ON TIME FOR FINAL APPROVAL.— 

13 Section 354(d) of the Small Business Investment Act of 

14 1958 (15 U.S.C. 689c(d)) is amended in the matter pre15 ceding paragraph (1) by striking ‘‘a period of time, not 

16 to exceed 2 years,’’ and inserting ‘‘2 years’’. 

17 (c) EXPANDED DEFINITION OF OPERATIONAL AS18 SISTANCE.—Section 351(4) of the Small Business Invest19 ment Act of 1958, as so redesignated by section 104 of 

20 this Act, is amended by inserting before the period at the 

21 end the following: ‘‘, including assistance on how to imple22 ment energy efficiency and sustainable practices that re23 duce the use of non-renewable resources or minimize envi24 ronmental impact and reduce overall costs and increase 

25 health of employees’’. 


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1 SEC. 107. STREAMLINED APPLICATION FOR NEW MARKETS 

2 VENTURE CAPITAL PROGRAM. 

3 Not later than 60 days after the date of the enact4 ment of this Act, the Administrator of the Small Business 

5 Administration shall prescribe standard documents for the 

6 final New Markets Venture Capital company approval ap7 plication under section 354(e) of the Small Business In8 vestment Act of 1958 (15 U.S.C. 689c(e)). The Adminis9 trator shall assure that the standard documents shall be 

10 designed to substantially reduce the cost burden of the ap11 plication process on the companies involved. 

12 SEC. 108. ELIMINATION OF MATCHING REQUIREMENT. 

13 Section 354(d)(2)(A)(i) of the Small Business Invest14 ment Act of 1958 (15 U.S.C. 689c(d)(2)(A)(i)) is amend15 ed— 

16 (1) in subclause (I) by adding ‘‘and’’ at the 

17 end; 

18 (2) in subclause (II) by striking ‘‘and’’ at the 

19 end; and 

20 (3) by striking subclause (III). 

21 SEC. 109. SIMPLIFIED FORMULA FOR OPERATIONAL AS22 SISTANCE GRANTS. 

23 Section 358(a)(4)(A) of the Small Business Invest24 ment Act of 1958 (15 U.S.C. 689g(a)(4)(A)) is amend25 ed— 


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1 (1) by striking ‘‘shall be equal to’’ and all that 

2 follows through the period at the end and by insert3 ing ‘‘shall be equal to the lesser of—’’; and 

4 (2) by adding at the end the following: 

5 ‘‘(i) 10 percent of the resources (in 

6 cash or in kind) raised by the company 

7 under section 354(d)(2); or 

8 ‘‘(ii) $1,000,000.’’. 

9 SEC. 110. AUTHORIZATION OF APPROPRIATIONS. 

10 Section 368(a) of the Small Business Investment Act 

11 of 1958 (15 U.S.C. 689q(a)) is amended by striking ‘‘fis12 cal years 2001 through 2006’’ and inserting ‘‘fiscal years 

13 2010 through 2012’’. 

14 TITLE II—ANGEL INVESTMENT 

15 PROGRAM 

16 SEC. 201. ESTABLISHMENT OF ANGEL INVESTMENT PRO17 GRAM. 

18 Title III of the Small Business Investment Act of 

19 1958 (15 U.S.C. 681 et seq.) is amended by adding at 

20 the end the following: 

21 ‘‘PART D—ANGEL INVESTMENT PROGRAM 

22 ‘‘SEC. 399A. OFFICE OF ANGEL INVESTMENT. 

23 ‘‘(a) ESTABLISHMENT.—There is established, in the 

24 Small Business Investment Division of the Small Business 

25 Administration, the Office of Angel Investment. 


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1 ‘‘(b) DIRECTOR.—The head of the Office of Angel In2 vestment is the Director of Angel Investment. 

3 ‘‘(c) DUTIES.—Subject to the direction of the Admin4 istrator, the Director shall perform the following func5 tions: 

6 ‘‘(1) Provide support for the development of 

7 angel investment opportunities for small business 

8 concerns. 

9 ‘‘(2) Administer the Angel Investment Program 

10 under section 399C. 

11 ‘‘(3) Administer the Federal Angel Network 

12 under section 399D. 

13 ‘‘(4) Administer the grant program for the de14 velopment of angel groups under section 399E. 

15 ‘‘(5) Perform such other duties consistent with 

16 this section as the Administrator shall prescribe. 

17 ‘‘SEC. 399B. DEFINITIONS. 

18 ‘‘In this part: 

19 ‘‘(1) The term ‘angel group’ means a group in20 cluding 10 or more angel investors organized for the 

21 purpose of making investments in local or regional 

22 small business concerns that— 

23 ‘‘(A) consists primarily of angel investors; 

24 ‘‘(B) requires angel investors to be accred25 ited investors; and 


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1 ‘‘(C) actively involves the angel investors in 

2 evaluating and making decisions about making 

3 investments. 

4 ‘‘(2) The term ‘angel investor’ means an indi5 vidual who— 

6 ‘‘(A) qualifies as an accredited investor (as 

7 that term is defined under section 230.501 of 

8 title 17, Code of Federal Regulations); and 

9 ‘‘(B) provides capital to or makes invest10 ments in a small business concern. 

11 ‘‘(3) The term ‘small business concern owned 

12 and controlled by veterans’ has the meaning given 

13 that term under section 3(q)(3) of the Small Busi14 ness Act (15 U.S.C. 632(q)(3)). 

15 ‘‘(4) The term ‘small business concern owned 

16 and controlled by women’ has the meaning given 

17 that term under section 8(d)(3)(D) of the Small 

18 Business Act (15 U.S.C. 637(d)(3)(D)). 

19 ‘‘(5) The term ‘socially and economically dis20 advantaged small business concern’ has the meaning 

21 given that term under section 8(a)(4)(A) of the 

22 Small Business Act (15 U.S.C. 637(a)(4)(A)). 

23 ‘‘SEC. 399C. ANGEL INVESTMENT PROGRAM. 

24 ‘‘(a) IN GENERAL.—The Director of Angel Invest25 ment shall establish and carry out a program, to be known 


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1 as the Angel Investment Program, to provide financing to 

2 approved angel groups for the purpose of providing ven3 ture capital investment in small business concerns in the 

4 communities of such groups. 

5 ‘‘(b) ELIGIBILITY.—To be eligible to receive financ6 ing under this section, an angel group shall— 

7 ‘‘(1) have demonstrated experience making in8 vestments in local or regional small business con9 cerns; 

10 ‘‘(2) have established protocols and a due dili11 gence process for determining its investment strat12 egy; 

13 ‘‘(3) have an established code of ethics; and 

14 ‘‘(4) submit an application to the Director at 

15 such time and containing such information and as16 surances as the Director may require. 

17 ‘‘(c) USE OF FUNDS.—An angel group that receives 

18 financing under this section shall use the amounts received 

19 to make investments in small business concerns— 

20 ‘‘(1) that have been in existence for less than 

21 5 years as of the date on which the investment is 

22 made; 

23 ‘‘(2) that have fewer than 75 employees as of 

24 the date on which the investment is made; 


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1 ‘‘(3) more than 50 percent of the employees of 

2 which perform substantially all of their services in 

3 the United States as of the date on which the invest4 ment is made; and 

5 ‘‘(4) within the geographic area determined by 

6 the Director under subsection (e). 

7 ‘‘(d) LIMITATION ON AMOUNT.—No angel group re8 ceiving financing under this section shall receive more 

9 than $2,000,000. 

10 ‘‘(e) LIMITATION ON GEOGRAPHIC AREA.—For each 

11 angel group receiving financing under this section, the Di12 rector shall determine the geographic area in which a 

13 small business concern must be located to receive an in14 vestment from that angel group. 

15 ‘‘(f) PRIORITY IN PROVIDING FINANCING.—In pro16 viding financing under this section, the Director shall give 

17 priority to angel groups that invest in small business con18 cerns owned and controlled by veterans, small business 

19 concerns owned and controlled by women, and socially and 

20 economically disadvantaged small business concerns. 

21 ‘‘(g) NATIONWIDE DISTRIBUTION OF FINANCING.— 

22 In providing financing under this section, the Director 

23 shall, to the extent practicable, provide financing to angel 

24 groups that are located in a variety of geographic areas. 


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1 ‘‘(h) MATCHING REQUIREMENT.—As a condition of 

2 receiving financing under this section, the Director shall 

3 require that for each small business concern in which the 

4 angel group receiving such financing invests, the angel 

5 group shall invest an amount from a source other than 

6 the Federal Government that is equal to or greater than 

7 the amount of the financing provided under this section 

8 that the angel group invests in that small business con9 cern. 

10 ‘‘(i) REPAYMENT OF FINANCING.—As a condition of 

11 receiving financing under this section, the Director shall 

12 require an angel group to repay the Director for any in13 vestment on which the angel group makes a profit an 

14 amount equal to the percentage of the returns that is 

15 equal to the percentage of the total amount invested by 

16 the angel group that consisted of financing received under 

17 this section. 

18 ‘‘(j) ANGEL INVESTMENT FUND.— 

19 ‘‘(1) ESTABLISHMENT.—There is established in 

20 the Treasury a fund to be known as the Angel In21 vestment Fund. 

22 ‘‘(2) DEPOSIT OF CERTAIN AMOUNTS.— 

23 Amounts collected under subsection (i) shall be de24 posited in such fund. 


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1 ‘‘(3) USE OF DEPOSITS.—Deposits in such fund 

2 shall be available for the purpose of providing fi3 nancing under this section in the amounts specified 

4 in annual appropriations Acts without regard to fis5 cal year limitations. 

6 ‘‘(k) AUTHORIZATION OF APPROPRIATIONS.—There 

7 is authorized to be appropriated to carry out this section— 

8 ‘‘(1) $10,000,000 for fiscal year 2010; 

9 ‘‘(2) $20,000,000 for fiscal year 2011; and 

10 ‘‘(3) $20,000,000 for fiscal year 2012. 

11 ‘‘SEC. 399D. FEDERAL ANGEL NETWORK. 

12 ‘‘(a) IN GENERAL.—Subject to the succeeding provi13 sions of this section, the Director of Angel Investment 

14 shall establish and maintain a searchable database, to be 

15 known as the Federal Angel Network, to assist small busi16 ness concerns in identifying angel investors. 

17 ‘‘(b) NETWORK CONTENTS.—The Federal Angel Net18 work shall include— 

19 ‘‘(1) a list of the names and addresses of angel 

20 groups and angel investors; 

21 ‘‘(2) information about the types of investments 

22 each angel group or angel investor has made; and 

23 ‘‘(3) information about other public and private 

24 resources and registries that provide information 

25 about angel groups or angel investors. 


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1 ‘‘(c) COLLECTION OF INFORMATION.— 

2 ‘‘(1) IN GENERAL.—The Director shall collect 

3 the information to be contained in the Federal Angel 

4 Network and shall ensure that such information is 

5 updated regularly. 

6 ‘‘(2) REQUEST FOR EXCLUSION OF INFORMA7 TION.—The Director shall not include information 

8 concerning an angel investor if that investor contacts 

9 the Director to request that such information be ex10 cluded from the Network. 

11 ‘‘(d) AVAILABILITY.—The Director shall make the 

12 Federal Angel Network available on the Internet website 

13 of the Administration and shall do so in a manner that 

14 permits others to download, distribute, and use the infor15 mation contained in the Federal Angel Network. 

16 ‘‘(e) AUTHORIZATION OF APPROPRIATIONS.—There 

17 is authorized to be appropriated to carry out this section 

18 $1,000,000, to remain available until expended. 

19 ‘‘SEC. 399E. GRANT PROGRAM FOR DEVELOPMENT OF 

20 ANGEL GROUPS. 

21 ‘‘(a) IN GENERAL.—The Director of Angel Invest22 ment shall establish and carry out a grant program to 

23 make grants to eligible entities for the development of new 

24 or existing angel groups and to increase awareness and 

25 education about angel investing. 


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1 ‘‘(b) ELIGIBLE ENTITIES.—In this section, the term 

2 ‘eligible entity’ means— 

3 ‘‘(1) a State or unit of local government; 

4 ‘‘(2) a nonprofit organization; 

5 ‘‘(3) a State mutual benefit corporation; 

6 ‘‘(4) a Small Business Development Center es7 tablished pursuant to section 21 of the Small Busi8 ness Act (15 U.S.C. 648); or 

9 ‘‘(5) a women’s business center established pur10 suant to section 29 of the Small Business Act (15 

11 U.S.C. 656). 

12 ‘‘(c) MATCHING REQUIREMENT.—The Administrator 

13 shall require, as a condition of any grant made under this 

14 section, that the eligible entity receiving the grant provide 

15 from resources (in cash or in kind), other than those pro16 vided by the Administrator or any other Federal source, 

17 a matching contribution equal to 50 percent of the amount 

18 of the grant. 

19 ‘‘(d) APPLICATION.—To receive a grant under this 

20 section, an eligible entity shall submit an application that 

21 contains— 

22 ‘‘(1) a proposal describing how the grant would 

23 be used; and 

24 ‘‘(2) any other information or assurances as the 

25 Director may require. 


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1 ‘‘(e) REPORT.—Not later than 3 years after the date 

2 on which an eligible entity receives a grant under this sec3 tion, such eligible entity shall submit a report to the Ad4 ministrator describing the use of grant funds and evalu5 ating the success of the angel group developed using the 

6 grant funds. 

7 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—There 

8 is authorized to be appropriated to carry out this section 

9 $1,500,000, for each of fiscal years 2010 through 2012.’’. 

Æ 


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