IIB 
111TH CONGRESS 
1ST SESSION H. R. 3738 
IN THE SENATE OF THE UNITED STATES 
NOVEMBER 19, 2009 
Received; read twice and referred to the Committee on Small Business and 
Entrepreneurship 
AN ACT 
To amend the Small Business Investment Act of 1958 to 
establish a program for the Small Business Administra-
tion to provide financing to support early-stage small 
businesses in targeted industries, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
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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 PRO-
GRAM. 
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 tar-
geted industries in accordance with this part. 
‘‘SEC. 399B. ADMINISTRATION OF PROGRAM. 
‘‘The program shall be administered by the Adminis-
trator acting through the Associate Administrator de-
scribed 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 con-
ducting the activities contemplated under the program and 
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any small business investment company may submit to the 
Administrator an application to participate in the pro-
gram. 
‘‘(b) REQUIREMENTS FOR APPLICATION.—An appli-
cation to participate in the program shall include the fol-
lowing: 
‘‘(1) A business plan describing how the appli-
cant intends to make successful venture capital in-
vestments 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 INVEST-
MENT COMPANIES.—The Administrator shall establish an 
abbreviated application process for small business invest-
ment 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 satisfac-
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torily 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 determina-
tion 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 appli-
cant. 
‘‘(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 manage-
ment of the applicant. 
‘‘(4) The experience and background of the 
management of the applicant. 
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‘‘(5) The extent to which the applicant will con-
centrate 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 in-
vestment 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 in-
vestment on or before the date on which a grant is 
drawn upon. Such capital may include legally bind-
ing commitments with respect to capital for invest-
ment. 
‘‘(2) LIMITATION ON AGGREGATE AMOUNT.— 
The aggregate amount of all grants made to a par-
ticipating investment company under the program 
may not exceed $100,000,000. 
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‘‘(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 avail-
able at the discretion of the Administrator. 
‘‘SEC. 399F. INVESTMENTS IN EARLY-STAGE SMALL BUSI-
NESSES IN TARGETED INDUSTRIES. 
‘‘(a) IN GENERAL.—As a condition of receiving a 
grant under the program, a participating investment com-
pany 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 indus-
tries. 
‘‘(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 require-
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ments 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 invest-
ment company under the program shall be treated as com-
prised 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 invest-
ment. 
‘‘SEC. 399H. GRANT INTEREST. 
‘‘(a) GRANT INTEREST.— 
‘‘(1) IN GENERAL.—As a condition of receiving 
a grant under the program, a participating invest-
ment company shall convey a grant interest to the 
Administrator in accordance with paragraph (2). 
‘‘(2) EFFECT OF CONVEYANCE.—The grant in-
terest conveyed under paragraph (1) shall have all 
the rights and attributes of other investors attrib-
utable to their interests in the participating invest-
ment company, but shall not denote control or vot-
ing rights to the Administrator. The grant interest 
shall entitle the Administrator to a pro rata portion 
of any distributions made by the participating in-
vestment company equal to the percentage of capital 
in the participating investment company that the 
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grant comprises. The Administrator shall receive dis-
tributions from the participating investment com-
pany at the same times and in the same amounts as 
any other investor in the company with a similar in-
terest. The investment company shall make alloca-
tions 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 receiv-
ing a grant under the program, the manager profits inter-
est 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 man-
agers 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 in-
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vestors in cash and shall make distributions within a rea-
sonable 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 sepa-
rate fund for grants which shall be available to the Admin-
istrator 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, exclud-
ing 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 partici-
pant in a participating investment company shall be sub-
ject to the requirements under such sections. 
‘‘SEC. 399K. DEFINITIONS. 
‘‘In this part, the following definitions apply: 
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‘‘(1) EARLY-STAGE SMALL BUSINESS IN A TAR-
GETED
INDUSTRY.—The term ‘early-stage small 
business in a targeted industry’ means a small busi-
ness 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 bring-
ing 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 par-
ticipate in the program. 
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‘‘(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 be-
ginning after the date of the enactment of this part.’’. 
SEC. 3. PROHIBITIONS ON EARMARKS. 
None of the funds appropriated for the program es-
tablished 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 amend-
ments 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 
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