Source: https://www.cga.ct.gov/2018/fc/2018SB-00541-R000634-FC.htm
Timestamp: 2019-01-23 02:51:55
Document Index: 561382929

Matched Legal Cases: ['§ 1', '§ 1', '§ 32', '§ 1', '§ 32', '§ 2', '§ 1', '§ 1', '§ 2', '§ 2', '§ 3', '§ 4', '§ 4', '§ 6', '§ 9', '§ 10']

AN ACT PROMOTING INNOVATION, ENTREPRENEURSHIP AND INTRAPRENEURSHIP IN THE STATE.
Substitute Senate Bill No. 541
Section 1. Section 32-39f of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2018):
(a) On or after June 2, 2016, Connecticut Innovations, Incorporated shall establish a subsidiary, to be known as CTNext. On and after July 1, 2018, CTNext shall be a body politic and corporate to be known as "CTNext". Such corporation is constituted a public instrumentality and political subdivision of the state and the exercise by the corporation of the powers conferred in this chapter shall be deemed and held to be the performance of an essential public and governmental function. CTNext shall not be deemed to be a department, institution or agency of the state.
(c) All initial appointments to the board of directors shall be made not later than September 1, 2016. [The chief executive officer of Connecticut Innovations, Incorporated shall schedule the first meeting of the board, which shall be held not later than October 15, 2016.] The chief executive officer of Connecticut Innovations, Incorporated shall be the chairperson of the board. The CTNext board shall meet at least quarterly, and at such other times as the chairperson deems necessary.
(e) The [chairperson shall, with the approval of the] members of the CTNext board of directors [, appoint] shall approve the appointment of an executive director of CTNext who shall be an employee of CTNext and paid a salary prescribed by the members. The executive director shall supervise the administrative affairs and technical activities of CTNext in accordance with the directives of the board.
Sec. 2. Section 32-39g of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2018):
(23) Make higher education entrepreneurship grants-in-aid recommended by the Higher Education Entrepreneurship Advisory Committee pursuant to section 32-39t; and
(24) Do all acts and things necessary or convenient to carry out the purposes of this section and the powers expressly granted by this section.
(b) CTNext shall:
(2) Create an informational Internet web site that (A) lists services, programs or events offered to entrepreneurs; (B) serves as an online community for entrepreneurs; (C) lists current research projects related to entrepreneurship and innovation being conducted by professors at institutions of higher education; (D) provides information concerning innovation and entrepreneurial programming available at institutions of higher education, including, but not limited to, engineering, computer science and bioscience; and (E) connects businesses seeking to buy Connecticut made products for their business inputs;
(3) Publicize such informational Internet web site and any workshops, seminars and conferences facilitated by CTNext;
(4) Advise the Governor, the General Assembly, the Commissioner of Economic and Community Development, the president of The University of Connecticut and the president of the Connecticut State Colleges and Universities on matters relating to science, engineering and technology that may have an impact on state policies, programs, employers and residents, and on job creation and retention;
(5) Designate innovation places pursuant to sections 32-39j to 32-39m, inclusive;
(6) Annually develop, update and implement a strategic state-wide innovation and entrepreneurship marketing plan for the promotion of Connecticut as an innovation and entrepreneurship hub. The executive director shall report, in accordance with the provisions of section 11-4a, to the joint standing committees of the General Assembly having cognizance of matters relating to commerce and finance, revenue and bonding, on or before February 1, 2017, and annually thereafter, concerning the content of such plan;
(7) Establish a program to provide growth grants-in-aid to businesses in this state for the purposes of facilitating the growth of start-up businesses that have transitioned to growth stage businesses. CTNext shall establish an application process for such grants-in-aid and shall prioritize such grants-in-aid for uses most likely to facilitate the growth of such businesses, including, but not limited to, sales assistance, marketing, strategy, organizational development, technology assistance, bid assistance, beta testing of products for new purchasers and prototype development. Such grants-in-aid shall not exceed twenty-five thousand dollars per applicant and shall be conditioned upon a one-third match from the applicant;
(8) Connect entrepreneurs in innovation places designated pursuant to section 32-39m with existing municipal and state resources to assist such entrepreneurs with regulatory compliance; [and]
(9) Adopt a comprehensive program evaluation and measurement process to ensure that CTNext's programs are administered appropriately and efficiently, comply with statutory requirements, are cost effective and are achieving the purposes set forth in section 32-39f, as amended by this act; [.]
(10) Develop and operate a state-wide service hub to deliver entrepreneurial support services to facilitate the implementation of any recommendations included in a report by the grant recipient under section 32-39q; and
(11) Implement the provisions of sections 3 and 4 of this act.
(c) On or after July 1, 2018, the executive director of CTNext shall hire five employees in addition to the employees employed prior to July 1, 2018. Each such new employee shall have experience as an entrepreneur and shall be responsible for CTNext outreach efforts to entrepreneurs and individuals. Such outreach shall aim to increase the level of communication between nodes within the innovation ecosystem and the number of such nodes, connect entrepreneurs and individuals who may be of assistance to entrepreneurs to the CTNext network, act as liaisons between the CTNext board of directors and institutions of higher education in the state, attend business or other events featuring entrepreneurs on behalf of CTNext and perform other responsibilities and duties as assigned by the executive director of CTNext or the CTNext board of directors. Any such new employee may serve as an entrepreneur-in-residence under section 3 of this act.
Sec. 3. (NEW) (Effective July 1, 2018) The executive director of CTNext shall establish and operate an Entrepreneurs-in-Residence program that shall replace and incorporate any similar program run by CTNext or Connecticut Innovations, Incorporated prior to July 1, 2018. Such program shall identify highly experienced entrepreneurs who have been involved in the successful creation of innovation-based start-up companies and early-state venture deals and shall retain their services to match them with entrepreneurs and companies in the CTNext network to provide advice and assistance. Such retention may be on a paid or volunteer basis, as agreed to by the entrepreneur-in-residence and the CTNext board of directors, except that an employee of CTNext serving as an entrepreneur-in-residence shall serve on a voluntary basis.
Sec. 4. (NEW) (Effective July 1, 2018) The executive director of CTNext shall establish:
(1) A proof of concept fund to provide grants of up to fifty thousand dollars to support commercialization activities that are relevant to key industries in the state and are based on research conducted at institutions of higher education in the state. Such grants shall be awarded on a competitive basis and any applicant for such grant shall demonstrate, in a form and manner prescribed by the executive director, such applicant's intent to commercialize aspects of such research. Such grants may be awarded directly to the applicant or to a company involved in such research or commercialization efforts; and
(2) A program to incentivize the formation of at least five new venture capital funds in the state. CTNext may invest up to eight million dollars per fund only if private investors invest at least one and one-half times the amount CTNext pledges to invest in the new fund. Any such fund shall be subject to the following requirements:
(A) All such amounts invested shall be invested in start-up companies located in the state and an investor shall have an office located in the state; and
(B) Any partner in a fund established under this subdivision may buy, after five years from the date of the establishment of the fund, CTNext's equity stake in the fund plus interest at an annual rate agreed upon by the partner and the executive director.
Sec. 5. Section 32-35 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2018):
(a) [There] On and after October 1, 1989, but prior to July 1, 2018, there is hereby created a body politic and corporate to be known as "Connecticut Innovations, Incorporated". Such corporation is constituted a public instrumentality and political subdivision of the state and the exercise by the corporation of the powers conferred in this chapter shall be deemed and held to be the performance of an essential public and governmental function. Connecticut Innovations, Incorporated shall not be construed to be a department, institution or agency of the state. On and after July 1, 2018, Connecticut Innovations, Incorporated shall be established as a subsidiary corporation of CTNext, established pursuant to section 32-39f, as amended by this act.
(b) The subsidiary corporation shall be governed by a board of seventeen directors. Nine members shall be appointed by the Governor, six of whom shall be knowledgeable, and have favorable reputations for skill, knowledge and experience, in the development of innovative start-up businesses, including, but not limited to, expertise in academic research, technology transfer and application, the development of technological invention and new enterprise development and three of whom shall be knowledgeable, and have favorable reputations for skill, knowledge and experience, in the field of financial lending or the development of commerce, trade and business. Four members shall be the Commissioner of Economic and Community Development, the president of the Connecticut State Colleges and Universities, the Treasurer and the Secretary of the Office of Policy and Management, who shall serve ex officio and shall have all of the powers and privileges of a member of the board of directors. Each ex-officio member may designate his deputy or any member of his staff to represent him at meetings of the corporation with full power to act and vote in his behalf. Four members shall be appointed as follows: One by the president pro tempore of the Senate, one by the minority leader of the Senate, one by the speaker of the House of Representatives and one by the minority leader of the House of Representatives. Each member appointed by the Governor shall serve at the pleasure of the Governor but no longer than the term of office of the Governor or until the member's successor is appointed and qualified, whichever is longer. Each member appointed by a member of the General Assembly shall serve in accordance with the provisions of section 4-1a. A director shall be eligible for reappointment. The Governor shall fill any vacancy for the unexpired term of a member appointed by the Governor. The appropriate legislative appointing authority shall fill any vacancy for the unexpired term of a member appointed by such authority.
(c) The Governor shall appoint a chairperson from among the board members. The directors shall annually elect one of their number as secretary. The board may elect such other officers of the board as it deems proper. Members shall receive no compensation for the performance of their duties hereunder but shall be reimbursed for necessary expenses incurred in the performance thereof.
(d) Each director of the subsidiary corporation before entering upon his duties shall take and subscribe the oath or affirmation required by article eleventh, section 1, of the Constitution. A record of each such oath or affirmation shall be filed in the office of the Secretary of the State. The board of directors of the subsidiary corporation shall adopt written procedures, in accordance with the provisions of section 1-121, for: (1) Adopting an annual budget and plan of operations, including a requirement of board approval before the budget or plan may take effect; (2) hiring, dismissing, promoting and compensating employees of the corporation including an affirmative action policy and a requirement of board approval before a position may be created or a vacancy filled; (3) purchasing, leasing or acquiring real and personal property and personal services, including a requirement of board approval for any nonbudgeted expenditure in excess of five thousand dollars; (4) contracting for financial, legal, bond underwriting and other professional services, including a requirement that the subsidiary corporation solicit proposals at least once every three years for each such service which it uses; (5) awarding loans, grants and other financial assistance, including eligibility criteria, the application process and the role played by the subsidiary corporation's staff and board of directors and the Department of Economic and Community Development and including deadlines for the approval or disapproval of applications for such assistance by the subsidiary corporation on and after July 1, 1996; and (6) the use of surplus funds to the extent authorized under this chapter, or other provisions of the general statutes.
(f) The subsidiary corporation shall have the authority to contract with the Department of Economic and Community Development for administrative or other services.
(h) The subsidiary corporation shall provide funding for the operation of the Connecticut Small Business Innovation Research Office in accordance with subdivision (18) of subsection (a) of section 32-39g, as amended by this act.
Sec. 6. Section 12-217bbb of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2018):
(d) In lieu of holding a tax credit auction under subsection (b) of this section, the commissioner, in consultation with the chief executive officer, may: [enter]
(1) Enter into an agreement with a taxpayer with accumulated credits to allow such taxpayer to utilize such credits in exchange for making an investment as provided under subsection (c) of this section. The requirements applicable to investments under said subsection (c) shall apply to investments made pursuant to an agreement under this subsection, except that the number of cents for each dollar of accumulated credit may be negotiated by the commissioner, in consultation with the Commissioner of Revenue Services, and the taxpayer; and
(2) Enter into an agreement with a taxpayer without accumulated credits to make an investment as provided under subsection (c) of this section.
(g) (1) On and after July 1, 2020, the credits allowed under this section may be claimed against the tax imposed under chapter 219 or, notwithstanding the limits imposed under section 12-217zz, this chapter, with respect to the following income years of the taxpayer: (A) With respect to the income year in which the taxpayer made the investment required under this section and the next succeeding income year, zero per cent; and (B) with respect to the second full income year succeeding the year in which the taxpayer made the investment required under this section, an amount and on a schedule for such second full income year and next succeeding income years as agreed to by the commissioner, in consultation with the Commissioner of Revenue Services, and the taxpayer that made the investment.
(2) Credits allowed under this section may be sold, assigned or otherwise transferred, in whole or in part.
Sec. 7. Section 32-235 of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2018):
(a) For the purposes described in subsection (b) of this section, the State Bond Commission shall have the power, from time to time to authorize the issuance of bonds of the state in one or more series and in principal amounts not exceeding in the aggregate one billion seven hundred fifty-five million three hundred thousand dollars, provided (1) one hundred forty million dollars of said authorization shall be effective July 1, 2011, and twenty million dollars of said authorization shall be made available for small business development; (2) two hundred eighty million dollars of said authorization shall be effective July 1, 2012, and forty million dollars of said authorization shall be made available for the Small Business Express program established pursuant to section 32-7g and not more than twenty million dollars of said authorization may be made available for businesses that commit to relocating one hundred or more jobs that are outside of the United States to the state; and (3) seventy-five million dollars of said authorization shall be effective July 1, 2018. Any amount of said authorizations that are made available for small business development or businesses that commit to relocating one hundred or more jobs that are outside of the United States to the state, but are not exhausted for such purpose by the first day of the fiscal year subsequent to the fiscal year in which such amount was made available, shall be used for the purposes described in subsection (b) of this section. For purposes of this subsection, a "small business" is one employing not more than one hundred employees.
(5) [to] To deposit two million dollars per year in each of the fiscal years ending June 30, 2019, to June 30, 2021, inclusive, in the CTNext Fund established pursuant to section 32-39i, which shall be used by CTNext for the purpose of providing higher education entrepreneurship grants-in-aid pursuant to section 32-39g, as amended by this act;
(7) [to] To provide (A) a grant-in-aid to the Connecticut Supplier Connection in an amount equal to two hundred fifty thousand dollars in each of the fiscal years ending June 30, 2017, to June 30, 2021, inclusive, and (B) a grant-in-aid to the Connecticut Procurement Technical Assistance Program in an amount equal to three hundred thousand dollars in each of the fiscal years ending June 30, 2017, to June 30, 2021, inclusive; [,]
(8) [to] To deposit four hundred fifty thousand dollars per year, in each of the fiscal years ending June 30, 2017, to June 30, 2021, inclusive, in the CTNext Fund established pursuant to section 32-39i, which shall be used by CTNext to provide four hundred fifty thousand dollars in each of the fiscal years ending June 30, 2017, to June 30, 2021, inclusive, for the purposes of growth grants-in-aid pursuant to section 32-39g;
(9) To deposit five million dollars in the CTNext Fund established pursuant to section 32-39i, which shall be used by CTNext to hire five additional employees over the next five years commencing July 1, 2018, and for other personnel expenses. Each such new employee shall have experience as an entrepreneur and to be responsible for CTNext outreach to entrepreneurs and individuals in accordance with the provisions of subsection (c) of section 32-39g, as amended by this act.
Sec. 8. (Effective July 1, 2018) (a) For the purposes described in subsection (b) of this section, the State Bond Commission shall have the power from time to time to authorize the issuance of bonds of the state in one or more series and in principal amounts not exceeding in the aggregate fifty-five million dollars.
(b) The proceeds of the sale of such bonds, to the extent of the amount stated in subsection (a) of this section, shall be used by CTNext for the purposes of section 4 of this act as follows: (1) Fifteen million dollars for the proof of concept fund established pursuant to subdivision (1) of said section; and (2) forty million dollars for the venture capital fund program established pursuant to subdivision (2) of said section.
Sec. 9. (NEW) (Effective July 1, 2018) (a) Notwithstanding any provision of the general statutes, the Insurance Commissioner, in consultation with the CTNext board of directors, shall establish an Insurtech Regulatory Sandbox initiative to facilitate the development of new technologies and types of insurance for start-up insurance companies that do not have the capital or labor resources to comply with the insurance requirements of the state. Such initiative shall begin to be implemented not later than January 1, 2019. Such initiative shall:
(1) Establish conditions for participating in the Sandbox and provide for an application process for new companies to be accepted into the Sandbox. The commissioner shall accept all applicants that meet such conditions, except that the commissioner may limit in the first two years of the initiative the number of companies allowed to participate in the Sandbox;
(2) Provide that the commissioner shall waive the requirement to be licensed in the state for participating companies;
(3) Establish a light regulatory framework of only the requirements the commissioner deems crucial to impose on participating companies to protect consumers;
(4) Designate an employee or employees to exclusively oversee and manage the administration of the Sandbox;
(5) Permit consumers in the state to purchase products offered by participating companies while ensuring that such consumers are aware that such products are offered under reduced regulatory oversight;
(6) Establish the maximum number of policyholders or named insureds or customers and the maximum amount of risk exposure each participating company may have. The commissioner may specify the demographics that each such company may serve, so as to protect consumers who are least able to make informed choices about insurance products and understand the relevant risks of a product offered by such company;
(7) Ensure the Sandbox is structured to match the pace of product offerings and the growth of participating companies, including allowing for more rapid product testing and product adjustments on a weekly or more frequent basis;
(8) Allow participating companies to remain in the Sandbox for an initial period of twelve months. The commissioner may establish conditions to allow for an extension of such period;
(9) Establish clear steps participating companies shall meet to demonstrate such company's product or service is viable and can be made available to the wider market; and
(10) Establish reporting requirements for participating companies.
(b) The commissioner may remove a participating company from the Sandbox at any time if the commissioner determines there is an unreasonable risk to policyholders or customers of such company.
(c) Not later than July first annually, the commissioner shall submit a report in accordance with the provisions of section 11-4a of the general statutes, to the joint standing committees of the General Assembly having cognizance of matters relating to insurance, commerce and finance, revenue and bonding, summarizing the number of participating companies in the initiative, any products or services such companies offer, any products or services that have been deemed to be viable or offered to the wider market, any participating companies that have established themselves in the state and become licensed insurance companies and any other information the commissioner deems relevant.
Sec. 10. (Effective July 1, 2018) (a) Not later than January 1, 2019, the executive director of CTNext shall submit legislative recommendations to the General Assembly for the establishment of a program or programs to incentivize the formation of state-based seed and preseed funds and ensure access to follow-on venture capital funding for start-up businesses in the state. Such program or programs shall seek to capitalize a fund of funds model with strong ties to the state employees retirement fund, other institutional investors or the state's large presence of hedge fund investors, and such recommendations shall include recommended levels of funding for each program.
(b) The CTNext board of directors and the chief executive officer of Connecticut Innovations, Incorporated shall conduct a study of the credit established pursuant to section 12-704d of the general statutes. The study shall include, but not be limited to, (1) an analysis of (A) the efficacy of the angel investor program in promoting the formation of new business ventures in the state, particularly with respect to the scale and magnitude of the number of such ventures created in proportion to the overall economy of the state, (B) the structure of the program and its impact on the state's entrepreneurial ecosystem, and (C) the economic value created per tax credit dollar expended, and (2) policy or legislative changes recommended by the board or the chief executive officer. Not later than January 1, 2019, such report shall be submitted in accordance with the provisions of section 11-4a of the general statutes to the joint standing committees of the General Assembly having cognizance of matters relating to commerce and finance, revenue and bonding.
(c) Not later than January 1, 2019, the CTNext board of directors, in consultation with the chief executive officer of Connecticut Innovations, Incorporated, shall make recommendations to the General Assembly for the establishment of an intrapreneurship program or programs to promote innovative activity within established companies in the state, such activity to be aimed at solving problems or addressing market opportunities identified by such companies and leading to the formation of new spin-off start-up businesses supported by such parent company.
(d) Not later than January 1, 2019, the Connecticut Technology Council, in consultation with the CTNext board of directors, a leading business association in the state selected by the council, the Commissioner of Economic and Community Development and the president of The University of Connecticut, shall submit a report, in accordance with the provisions of section 11-4a of the general statutes, to the General Assembly that makes recommendations for:
(1) Procedures to be implemented to identify emerging industries and emerging transitions in established industries that have the potential to produce economic growth in the state, such as the microbiome industry and the application of cyber-physical systems and dynamic data processing to manufacturing; and
(2) Procedures to be implemented to develop and implement strategies for the growth of the emerging industries identified pursuant to subdivision (1) of this subsection, ensure the success of established industries in the state to adapt to emerging transitions identified pursuant to subdivision (1) of this subsection and align state resources to support such efforts.
32-39g
12-217bbb
In Sections 4(2) and 9(a)(6), a technical change was made for consistency with standard drafting conventions and accuracy, respectively; and in Section 7(b)(9), "commencing July 1, 2018," was inserted for clarity.
79.5 million total
Insurance Dept.1
Sections 1 – 5 have no fiscal impact to the state by changing the organizational relationship between Connecticut Innovations (CI) and CTNext. The bill shifts CTNext to be the parent agency of CI, and CI the subsidiary of CTNext. The bill does require CTNext to hire five employees and implement new programs using General Obligation (GO) bond funds, the costs of which are described in sections 7 and 8, but otherwise makes no changes to the underlying programs in CTNext and CI.
Section 6 results in an uncertain revenue impact because: 1) it is uncertain how many, if any, additional businesses would choose to participate in the program, and 2) it is unclear how tax credits held by any such business would be impacted by such participation.
Section 7 obligates $5 million of funds previously authorized for the Manufacturing Assistance Act to hire five additional CTNext employees. This may change the rate of expenditure of the authorized GO bonds, with a commensurate change in future debt service payments.
Section 8 authorizes $55 million in GO bonding for additional programs within CTNext. To the extent that the authorized bonds are allocated by the State Bond Commission, the state would need to repay the principal amount of the bond plus associated fees and interest. If bonds were approved for use and issued in FY 19, the state could begin repayment of up to $2.75 million in FY 20. A later issuance date would not result in repayment cost in the biennium.
Section 9 of the bill requires the Insurance Commissioner, in consultation with the CTNext board of directors, to establish an Insurtech Regulatory Sandbox initiative by January 1, 2019, designate an employee to exclusively oversee and manage the administration of the Sandbox, and submit a report summarizing the results of the initiative annually. The Insurance Department will likely need to hire an Insurance Program Manager with a full year cost to the Insurance Fund of $169,423 for salary and fringe benefits. The FY 19 costs reflect a half year of salary and fringe benefits ($84,712).
Under current market conditions, the state would repay a $55 million bond over 20 years at an approximate total cost of $79.5 million (for principal and interest, including the initial $2.75 million payment described above), or approximately $3.98 million per year on average.
The ongoing fiscal impacts identified in the Insurance Fund above would continue into the future subject to inflation.
sSB 541
This bill makes organizational changes in Connecticut Innovations (CI), the state's quasi-public venture capital agency, and creates new programs to stimulate and sustain commercial innovation and the formation and growth of new businesses.
The organizational changes affect the relationship of CI and its subsidiary, CTNext. Under current law, CI mainly provides venture capital to new businesses bringing innovative new products and services to the market. CTNext focuses mainly on developing and maintaining the wider “ecosystem” that nurtures these activities, often connecting innovators with entrepreneurs and supporting their endeavors.
The bill reverses the relationship between these entities, making CTNext the parent corporation and CI the subsidiary. In doing so, it requires CTNext to hire five outreach staff and do more to develop and maintain the state's ecosystem. It also creates programs to (1) place experienced entrepreneurs in new businesses, (2) provide grants for determining a research project's commercial potential, and (3) capitalize Connecticut-based venture capital funds.
The bill also requires CTNext and several other entities, by January 1, 2019, to submit recommendations and studies to the legislature on various innovation and entrepreneurial issues, including the angel investor tax credit program's effectiveness and innovation and entrepreneurship in established companies.
Additionally, the bill authorizes a new program to stimulate innovation in the insurance industry. It requires the insurance commissioner to create a framework that reduces the regulatory requirements on new startup insurance companies that develop new insurance related products and services, but lack the means to comply with the state's insurance laws.
The bill also extends the stranded tax credit program to businesses that do not have unused research and development credits. Under current law, businesses may exchange unused credits for investments in their own corporate venture capital fund.
§§ 1, 2, 5, & 7 — ORGANIZATIONAL CHANGES
CI-CTNext Relationship (§§ 1& 5)
The bill reverses the relationship between CI and CTNext. Under current law, CI is the state's quasi-public venture capital agency that the legislature established in 1989 to, among other things, stimulate and encourage the research and development of new technologies and the growth of new technology-based businesses (CGS § 32-39). CTNext was established in 2016 as a CI subsidiary to foster innovation, support start-up and growth-stage businesses, and build entrepreneur communities.
The bill makes CTNext the parent agency and CI its subsidiary. In doing so, it makes CTNext a quasi-public state agency, transferring to it CI's status as a body politic and corporate and a public instrumentality and a state political subdivision created to perform an essential public function.
Expanded CTNext Mission (§§ 1 & 2)
The bill revamps and expands CTNext's statutory mission. Among other things, CTNext's current mission includes fostering innovation, start-up, and growth-stage businesses and building entrepreneurial communities. The bill instead requires CTNext to focus on the broader, macro-level ecosystem that supports innovation and entrepreneurial community building. It specifically requires CTNext to:
1. oversee the growth and continuous improvement of a statewide entrepreneurial ecosystem,
2. improve it by changing practices CTNext's board deems outdated,
3. maintain an active and conspicuous presence at ecosystem nodes and continuously increase their connections,
4. regularly reassess the ecosystem's health,
5. identify its changing needs,
6. adopt or adapt initiatives to meet those needs, and
7. regularly inform the legislature about the ecosystem's needs and recommend legislation the board deems necessary or desirable to address them.
The bill aligns CTNext's specific duties with these new, ecosystem-level purposes. It requires CTNext to develop and operate a state-wide hub to deliver entrepreneurial support services to help implement the recommendations of the statutorily required study assessing the state of innovation and entrepreneurship in Connecticut (CGS § 32-39q).
The bill also requires CTNext to address micro-level needs. Specifically, it must:
1. support the growth of start-up and early stage businesses;
2. promote entrepreneurship community building;
3. facilitate the development, growth, and evolution of innovation places and their mutually supportive interconnections, in addition to establishing these places, as current law requires; and
4. identify areas in which their practices and policies fail to realize the institutions' full potential to facilitate innovation and entrepreneurship, which CTNext must do in addition to facilitating innovation and entrepreneurship at institutions of higher education, as current law requires.
Lastly, the bill authorizes CTNext to do all things necessary and proper to fulfill its statutory mission.
Expanded CTNext Staffing Capacity (§§ 2 & 7)
The bill requires CTNext's executive director to hire, on or after July 1, 2018, five employees, who must be in addition to those CTNext employed before that date. Each new employee must be an experienced entrepreneur and conduct outreach to entrepreneurs and individuals.
The bill specifies the new employees' outreach objectives. They must:
1. increase the number of places that support innovation and entrepreneurship (i.e., nodes) and the level of communications between these nodes;
2. connect entrepreneurs and the people who can help them to the CTNext's network;
3. act as liaisons between the CTNext's board and the state's higher education institutions;
4. attend, on CTNext's behalf, business or other events that feature entrepreneurs; and
5. perform other duties and responsibilities the board or executive director assigns to them.
The new employees may serve as entrepreneurs-in-residence (see below).
The bill funds the new employees' positions by using $5 million of an existing bond authorization for the Department of Economic and Community Development's (DECD) Manufacturing Assistance Act Program. It requires DECD to deposit $5 million in the CTNext fund for this purpose.
CTNext Executive Director Appointment (§ 1)
The bill requires the board to approve the appointment of CTNext's executive director, but does not specify who makes the appointment. Under current law, the board's chairperson, with the board's approval, appoints the executive director.
Board Members' Conflict of Interest (§ 1)
The bill specifies that CTNext's board members must (1) abstain from deliberating, acting, or voting with respect to a person, firm, or corporation in which they have a financial interest or serve as a trustee, director, partner, or officer and (2) comply with the State Code of Ethics, as they must under current law. Current law allows members with these types of associations or financial interests to serve as long as they comply with the code, which includes abstaining from taking an official position on a matter if they have a substantial conflict of interest.
§§ 2-4, 6, 8, & 9 — PROGRAMMATIC INITIATIVES AND CHANGES
The bill establishes three new CTNext programs, authorizes bonds to fund two of them, and adds their implementation to CTNext's statutory duties (§ 2). The bill also (1) expands the existing stranded tax credit program and (2) creates a new program to support start-up insurance businesses.
Entrepreneurs-in-Residence (§ 3)
The bill requires CTNext's executive director to establish and operate an Entrepreneurs-in-Residence program, which must replace and incorporate any similar CTNext or CI program that existed before July 1, 2018. The program must match highly experienced entrepreneurs with entrepreneurs and businesses in CTNext's network to provide advice and assistance.
An entrepreneur satisfies this criterion if he or she has been involved in successfully creating innovation-based startups and early-state venture deals. The entrepreneur may serve on a paid or volunteer basis, as the entrepreneur-in-residence and the CTNext board agree. A CTNext employee may also serve as an entrepreneur-in-residence, but only on a volunteer basis.
Proof of Concept Fund (§§ 4 & 8)
The bill requires CTNext's executive director to establish a fund to support activities intended to evaluate commercial applications for academic-based research (i.e., proof of concept) that is relevant to the state's key industries. She must do this by providing grants of up to $50,000 to applicants who demonstrate their intent, in a form and manner she prescribes, to find commercial applications for the research. She must award the grants on a competitive basis to the applicant or a company involved in the applicant's research. The bill authorizes up to $15 million in general obligation (GO) bonds for the grants.
Venture Capital Fund Formation (§§ 4 & 7)
The bill also requires CTNext's executive director to encourage the formation of at least five new Connecticut-based venture capital funds and authorizes up to $40 million in GO bonds for this purpose. It allows CTNext to invest up to $8 million per fund if private investors also invest an amount that equals at least 150% of the CTNext's investment.
Any fund receiving a CTNext investment must:
1. invest all of its the funds—the CTNext and private capital—in Connecticut-based startups;
2. require its investors to have an office in Connecticut; and
3. allow, no sooner than five years after a fund's establishment, its partners to buy CTNext's equity stake plus interest at an annual rate agreed to by the fund's partners and the executive director.
Stranded Tax Credit Program Extended (§ 6)
The bill extends the stranded tax credit program to businesses with research and development corporation business tax credits they can otherwise use to reduce their taxes. Under current law, the program allows a business with credits it earned but cannot claim (usually because the credits' value exceeds the business's tax liability) to exchange them for making certain capital improvements or investments. The business must first enter into an agreement with the DECD commissioner to make this exchange.
The bill allows a business without accumulated credits to also enter into an agreement with the DECD commissioner to make investments in its corporate venture fund.
Insurtech Regulatory Sandbox Initiative (§ 9)
By January 1, 2019, the bill requires the insurance commissioner, in consultation with CTNext's board of directors, to establish and implement an initiative to help develop new technologies and types of insurance for start-up insurance companies that lack the capital and labor resources to comply with the state's insurance laws and regulations (i.e., Insurtech Regulatory Sandbox Initiative or Sandbox).
The initiative must have several components. It must:
1. establish the conditions new companies must meet to participate in the Sandbox;
2. accept all applicants that meet these conditions, unless the commissioner chooses to limit the number of participants, which she may do only for the Sandbox's first two years;
3. provide an application process for admission to the Sandbox;
4. waive the licensure requirements for its participating companies;
5. institute a regulatory framework that is the minimum the commissioner deems necessary to protect consumers;
6. designate an employee or employees to exclusively oversee and manage the Sandbox's administration;
7. allow Connecticut consumers to purchase the participating companies' products, but with the knowledge that they do so under reduced regulatory oversight;
8. establish the maximum number of policyholders or named insured or customers and the maximum amount of risk exposure for each participating start-up;
9. protect those consumers who are least able to make informed choices about insurance products and their relevant risk,
10. allow the commissioner to specify the demographic groups each company may serve;
11. ensure that the Sandbox can keep up with the pace of participating companies and their product offerings, which it may do by allowing them to test and adjust their products every week or more frequently;
12. allow a start-up to remain in the Sandbox for no more than one year, but authorize the commissioner to set conditions under which they can stay longer;
13. set clear steps for a start-up to demonstrate that its products and services are viable and ready for the wider market; and
14. impose reporting requirements on the participating start-ups.
The bill allows the commissioner to remove a start-up from the Sandbox whenever she determines there is an unreasonable risk to the start-up's customers or policyholders.
Starting July 1, 2019, the commissioner must annually report to the Insurance; Commerce; and Finance, Revenue and Bonding committees on the Sandbox, summarizing:
1. the number of participating start-ups,
2. the products and services they offer and the ones that were deemed viable and offered to the wider market,
3. participating companies that established themselves in Connecticut and were eventually licensed, and
§ 10 — POLICY RECOMMENDATIONS AND REPORTS
The bill requires CTNext, CI, and several other entities to submit recommendations and reports to the legislature on several innovation and entrepreneurship issues.
State-based Seed and Preseed Funds
By January 1, 2019, the bill requires CTNext's executive director to recommend to the legislature how the state can:
1. encourage the formation of state-based seed and preseed funds capitalized by other funds that (a) specialize in investing is such funds (i.e., fund of funds model) and (b) have strong ties to the state employees retirement fund, other institutional investors, or Connecticut-based hedge fund investors and
2. ensure that the state's business startups have access to follow-on venture capital funding.
The recommendations must include proposed funding levels for each program.
The bill requires CTNext's board of directors and CI's chief executive officer to study the angel investor tax credit program and report the results to the Commerce and Finance, Revenue and Bonding committees by January 1, 2019. The program provides a 25% personal income tax credit, up to $250,000, for people who invest at least $25,000 in a CI-approved business.
The study must analyze the program's effectiveness, recommend policy or legislative changes, and analyze:
1. the extent to which the program promotes the formation of new businesses in the state, particularly the scale and magnitude of the number of new business ventures in proportion to the state's overall economy;
2. the program's structure and its impact on the state's entrepreneurial ecosystem; and
3. the economic value created by the tax revenue the state forgoes due to the credit.
By January 1, 2019, CTNext's board, in consultation with CI's chief executive officer, must submit recommendations to the legislature to establish programs for promoting innovative activity within established businesses (i.e., intrapreneurship). The programs must (1) help these businesses solve problems or address market opportunities they identify and (2) support the formation of new spin-off businesses.
Emerging Industries and Transitions
By January 1, 2019, the bill also requires several entities to submit recommendations to the legislature pertaining to emerging industries and transitions. The recommendations must be prepared by the nonprofit Connecticut Technology Council in consultation with CTNext's board of directors, a leading Connecticut business association the council selects, DECD commissioner, and UConn president.
The recommendations must identify procedures for:
1. identifying emerging industries and emerging transitions in established industries that can produce economic growth in the state and
2. developing and implementing strategies to help (a) emerging industries grow and (b) established industries successfully adapt to emerging transitions.
The recommendations must also address how the state can align its resources to develop and implement these strategies.