senate Bill S1864

Creates the seed-NY investment fund

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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actions

  • 13 / Jan / 2011
    • REFERRED TO CORPORATIONS, AUTHORITIES AND COMMISSIONS
  • 04 / Jan / 2012
    • REFERRED TO CORPORATIONS, AUTHORITIES AND COMMISSIONS

Summary

Creates the seed-NY investment fund; authorizes the transfer of all assets and liabilities of the small business technology investment fund for the Seed-NY investment fund.

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Bill Details

Versions:
S1864
Legislative Cycle:
2011-2012
Current Committee:
Senate Corporations, Authorities And Commissions
Law Section:
New York State Urban Development Corporation Act
Laws Affected:
Add §44, UDC Act; add §3154-a, Pub Auth L
Versions Introduced in 2009-2010 Legislative Cycle:
S6887

Sponsor Memo

BILL NUMBER:S1864

TITLE OF BILL:
An act
to amend the New York state urban development corporation act and
the public authorities law, in relation to creating the seed-NY
investment fund

PURPOSE OR GENERAL IDEA OF BILL:
Authorizes the urban development corporation/empire state development
(ESD) to invest in regional equity funds to help finance the
commercialization of new technologies.

SUMMARY OF SPECIFIC PROVISIONS:
A new investment fund is created within the urban development
corporation/empire state that will make awards in regional equity
funds providing seed capital for early stage commercialization of
technologies. criteria and procedures for the awards are established
Funds will be competitively awarded to entities with a demonstrated
record for making syndicated equity-based seed-stage investments.
Individual investments would not exceed five hundred thousand
dollars, or seven hundred fifty thousand dollars in the case of a
biotechnology company, at anyone time and be matched by at least a
one-to-one basis with funds other than state monies. Allocations to
these companies would be in return for equity or debt securities or
royalties. Due to the high risk involved and the economic development
component attributed to these funds, the expected return on
investment would be less than that which would be expected for a
traditional venture capital fund in the private sector.

The corporation would require regional funds to file annual reports on
the use of funds and is required to summarize and evaluate these
reports for the legislature and the governor.

The assets of the the small business technology investment fund would
be liquidated to help finance the new fund.

EFFECTS OF PRESENT LAW WHICH THIS BILL WOULD ALTER:
Chapter 174 of the laws of 1968 is amended by adding a new section 44
and the public authorities law is amended by adding a new section
3154-a.

JUSTIFICATION:
There is a need for commercialization assistance in New York and
regional entities, aware of the strengths and potentials in their own
economies, are well-suited to determine how to optimize the
effectiveness of these awards. State-sponsored research has supported
the invention of numerous ideas and products that could greatly
benefit society, but many of these inventions are never
commercialized because New York universities, entrepreneurs at or
associated with these universities, and many small business owners in
New York State often do not have the resources or experience to
develop their scientific discoveries.

Such assistance is frequently not available from market sources, such
as venture capitalists and banks, at such an early stage of product


development. A program of state assistance is needed to enable the
successful commercialization of promising inventions and technologies.
This bill introduces the concept of "investing in investors" by
enabling the corporation to decentralize its investment program. The
State has many successful regional investment funds that can provide
such assistance, which increases the chances of success of new
ventures.

PRIOR LEGISLATIVE HISTORY:
None.

FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.

EFFECTIVE DATE:
Immediately.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  1864

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                            January 13, 2011
                               ___________

Introduced by Sen. ESPAILLAT -- read twice and ordered printed, and when
  printed  to be committed to the Committee on Corporations, Authorities
  and Commissions

AN ACT to amend the New York state urban development corporation act and
  the public authorities  law,  in  relation  to  creating  the  seed-NY
  investment fund

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Section 1 of chapter 174 of the laws of 1968,  constituting
the  New  York  state  urban  development corporation act, is amended by
adding a new section 44 to read as follows:
  S 44.  THE SEED-NY INVESTMENT FUND. 1. DEFINITIONS. FOR  THE  PURPOSES
OF  THIS SECTION, THE FOLLOWING WORDS AND TERMS SHALL HAVE THE FOLLOWING
MEANINGS UNLESS THE CONTEXT SHALL INDICATE ANOTHER OR DIFFERENT  MEANING
OR INTENT:
  (A)  "REGIONAL  INVESTMENT  FUND"  SHALL  MEAN  A LIMITED PARTNERSHIP,
LIMITED  LIABILITY  PARTNERSHIP,  A  LIMITED  LIABILITY  COMPANY  OR   A
NOT-FOR-PROFIT  FUND  UNDER  EXPERIENCED PROFESSIONAL MANAGEMENT THAT IS
FAMILIAR WITH SEED CAPITAL INVESTMENT,  APPROPRIATE  BUSINESS  PRACTICES
AND  TECHNOLOGY-ORIENTED  PRODUCTS  AND  SERVICES,  AND  FORMED  FOR THE
PURPOSE OF PROVIDING PRIVATE EQUITY  TO  TECHNOLOGY-BASED  COMPANIES  IN
THEIR  FORMATIVE  STAGES, ENCOMPASSES AT LEAST TWO COUNTIES, AND INVESTS
IN QUALIFIED ENTERPRISES LOCATED WITHIN NEW YORK STATE.
  (B) "QUALIFIED ENTERPRISE" SHALL MEAN:
  (I) A COMPANY OR A PROPOSED COMPANY THAT HAS OR WILL LOCATE ITS  PRIN-
CIPAL  PLACE  OF BUSINESS IN NEW YORK STATE, THAT IS, OR PROPOSES TO BE,
ENGAGED IN THIS STATE IN RESEARCH AND  DEVELOPMENT  OR  HIGH  TECHNOLOGY
MANUFACTURING,  AND  THAT  DEMONSTRATES  THE  POTENTIAL  FOR SUBSTANTIAL
GROWTH AND JOB DEVELOPMENT IN AN EMERGING TECHNOLOGY FIELD AS DEFINED IN
SECTION 3102-E OF THE PUBLIC AUTHORITIES LAW OR AS ADOPTED BY THE BOARD;
AND

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD06200-01-1

S. 1864                             2

  (II) IS FORMULATING, HAS FORMULATED, OR IS EXECUTING A DETAILED  BUSI-
NESS PLAN FOR PROOF-OF-CONCEPT OR INITIAL PRODUCT COMMERCIALIZATION.
  (C)  "SEED  CAPITAL"  SHALL  MEAN  FINANCIAL ASSISTANCE TO A QUALIFIED
ENTERPRISE, IN RETURN FOR EQUITY OR DEBT SECURITIES OR ROYALTIES.
  2. INVESTMENTS IN REGIONAL INVESTMENT FUNDS. (A) THE CORPORATION SHALL
MAKE INVESTMENTS TO ENCOURAGE AND FACILITATE THE CREATION  OR  EXPANSION
OF  REGIONAL  INVESTMENT  FUNDS THAT SERVE THE PURPOSES OF THIS SECTION.
THE BOARD OF DIRECTORS SHALL ADOPT  CRITERIA  AND  GUIDELINES  GOVERNING
SUCH INVESTMENTS, WHICH SHALL REQUIRE THAT:
  (I) THERE EXISTS A NEED FOR SEED CAPITAL IN THE REGION SERVED OR TO BE
SERVED BY A REGIONAL INVESTMENT FUND;
  (II)  SUPPORT FOR A REGIONAL INVESTMENT FUND EXISTS FROM LOCAL GOVERN-
MENTS, ECONOMIC DEVELOPMENT AGENCIES, AND  BUSINESS  COMMUNITIES  WITHIN
THE REGION OR AREA TO BE SERVICED BY SUCH FUND;
  (III)  THE  REGIONAL  INVESTMENT  FUND HAS THE CAPACITY TO PERFORM DUE
DILIGENCE IN MAKING INVESTMENT  DECISIONS,  AND  TO  PROVIDE  MANAGEMENT
EXPERTISE  AND  OTHER  VALUE-ADDED  SERVICES  TO ITS PORTFOLIO COMPANIES
WHICH SERVICES MAY INCLUDE ACCESS TO CAPITAL, BUSINESS EXPERTISE,  TECH-
NOLOGY COMMERCIALIZATION SERVICES AND A NETWORK OF RESOURCES IN ORDER TO
ADVANCE THE DEVELOPMENT OF NEW TECHNOLOGIES;
  (IV)  THE  REGIONAL  INVESTMENT  FUND ESTABLISHES CONFLICT-OF-INTEREST
PROVISIONS ACCEPTABLE TO THE CORPORATION;
  (V) TO THE MAXIMUM EXTENT FEASIBLE, THE REGIONAL INVESTMENT FUND  WILL
INVEST IN FIRMS WHICH HAVE THE GREATEST POTENTIAL FOR JOB CREATION;
  (VI) INVESTMENTS MADE BY THE CORPORATION IN A REGIONAL INVESTMENT FUND
SHALL  NOT  EXCEED  FIVE  MILLION  DOLLARS  AND, SHALL BE MATCHED BY THE
REGIONAL FUND ON AT LEAST A ONE-TO-ONE BASIS  WITH  MONIES,  OTHER  THAN
STATE MONIES, UNLESS THE BOARD FINDS THAT A REDUCED MATCHING REQUIREMENT
WILL FURTHER THE PURPOSES OF THIS SECTION; AND
  (VII)  INVESTMENTS  MADE  BY  A  REGIONAL INVESTMENT FUND THAT INCLUDE
FUNDS RECEIVED FROM THE CORPORATION SHALL BE MADE ONLY FOR THE FINANCING
AUTHORIZED BY SUBDIVISION 3 OF THIS SECTION.
  (B) (I) THE CORPORATION SHALL MAKE INVESTMENTS IN  QUALIFIED  REGIONAL
INVESTMENT FUNDS VIA THE ISSUANCE OF A REQUEST FOR PROPOSALS TO REGIONAL
AND  LOCAL  ECONOMIC  DEVELOPMENT  ORGANIZATIONS, TECHNOLOGY DEVELOPMENT
ORGANIZATIONS, RESEARCH UNIVERSITIES, AND INVESTMENT FUNDS THAT  PROVIDE
SMALL-SCALE INVESTMENTS IN HIGH-TECHNOLOGY COMPANIES IN NEW YORK STATE.
  (II)  IN  AWARDING FUNDS PURSUANT TO THIS SUBDIVISION, THE CORPORATION
SHALL ASSURE ADEQUATE GEOGRAPHIC DISTRIBUTION TO THE EXTENT FEASIBLE.
  3. REGIONAL INVESTMENT FUNDS. (A) REGIONAL INVESTMENT FUNDS  RECEIVING
INVESTMENTS FROM THE CORPORATION UNDER THIS ACT SHALL USE SUCH FUNDS AND
THE  REQUIRED  MATCHING  FUNDS  TO  PROVIDE  SEED  CAPITAL AND FOLLOW-ON
FINANCING TO QUALIFIED ENTERPRISES, PROVIDED THAT THE  REGIONAL  INVEST-
MENT FUND SHALL NOT:
  (I)  INVEST  AN AMOUNT IN ANY SINGLE QUALIFIED ENTERPRISE THAT EXCEEDS
FIFTY PERCENT OF THE TOTAL INVESTMENT FROM ALL OTHER SOURCES IN ANY SUCH
ENTERPRISE; OR
  (II) INVEST OVER FIVE HUNDRED THOUSAND DOLLARS IN ANY ONE COMPANY,  OR
SEVEN  HUNDRED  FIFTY  THOUSAND  DOLLARS  IN THE CASE OF A BIOTECHNOLOGY
COMPANY, AT ANY ONE TIME.
  (B) A REGIONAL INVESTMENT FUND, BEFORE APPROVING ANY  APPLICATION  FOR
FINANCIAL ASSISTANCE UNDER THIS SECTION, SHALL FIND THAT:
  (I) THE QUALIFIED ENTERPRISE AND ITS PRODUCT OR PROCESS HAVE A REASON-
ABLE CHANCE OF BEING COMMERCIALLY SUCCESSFUL;
  (II)  THE  EMPLOYMENT  CREATED OR MAINTAINED AS A RESULT OF THE FUND'S
INVESTMENT WILL BE IN NEW YORK STATE; AND

S. 1864                             3

  (III) PROVISIONS ARE IN PLACE FOR THE REPAYMENT OF THE  FUNDS  IF  THE
COMPANY RECEIVING ASSISTANCE LEAVES THE STATE.
  4.  REGIONAL  INVESTMENT FUND REPORTING. THE CORPORATION SHALL REQUIRE
ANY REGIONAL INVESTMENT FUND RECEIVING INVESTMENTS UNDER THIS SECTION TO
FILE A REPORT WITH THE CORPORATION BY  DECEMBER  1,  2012  AND  ANNUALLY
THEREAFTER.  SUCH REPORT SHALL INCLUDE:
  (A)  THE  TOTAL  AMOUNT  OF FUNDS COMMITTED TO THE REGIONAL INVESTMENT
FUND AND THE AMOUNT THAT HAS BEEN INVESTED;
  (B) THE NET ASSET VALUE OF THE FUND;
  (C) THE AMOUNT INVESTED IN EACH PORTFOLIO COMPANY FROM  THE  FUND  AND
FROM OTHER SOURCES;
  (D)  THE TYPE OF PRODUCT OR TECHNOLOGY BEING DEVELOPED BY EACH PORTFO-
LIO COMPANY;
  (E) THE LOCATION OF EACH PORTFOLIO COMPANY;
  (F) THE NUMBER OF JOBS PROJECTED TO BE CREATED AND RETAINED; AND
  (G) SUCH OTHER INFORMATION AS THE CORPORATION DEEMS NECESSARY.
  5. REPORT OF THE CORPORATION. THE  CORPORATION  SHALL  SUBMIT  TO  THE
GOVERNOR  AND  THE  LEGISLATURE  A SUMMARY AND EVALUATION OF THE REPORTS
SUBMITTED TO THE CORPORATION PURSUANT TO SUBDIVISION 4 OF  THIS  SECTION
AND AN EVALUATION OF THE PERFORMANCE OF THE REGIONAL INVESTMENT FUNDS ON
OR BEFORE FEBRUARY 1, 2013 AND ANNUALLY THEREAFTER.
  S  2.  The  public  authorities law is amended by adding a new section
3154-a to read as follows:
  S 3154-A. SMALL BUSINESS INVESTMENT FUND ASSETS AND LIABILITIES.    1.
ALL  OF  THE  ASSETS  AND  LIABILITIES  OF THE SMALL BUSINESS TECHNOLOGY
INVESTMENT FUND ESTABLISHED PURSUANT TO APPROPRIATIONS MADE  BY  VARIOUS
CHAPTERS OF THE LAW INCLUDING, BUT NOT LIMITED TO CHAPTER FIFTY-THREE OF
THE LAWS OF NINETEEN HUNDRED EIGHTY-ONE, CHAPTER FIFTY-THREE OF THE LAWS
OF  NINETEEN  HUNDRED  EIGHTY-FIVE,  CHAPTER  FIFTY-THREE OF THE LAWS OF
NINETEEN HUNDRED EIGHTY-SIX, CHAPTER FIFTY-THREE OF THE LAWS OF NINETEEN
HUNDRED EIGHTY-SEVEN,  CHAPTER  FIFTY-THREE  OF  THE  LAWS  OF  NINETEEN
HUNDRED  EIGHTY-EIGHT,  CHAPTER  FIFTY-THREE  OF  THE  LAWS  OF NINETEEN
HUNDRED EIGHTY-NINE, CHAPTER FIFTY-THREE OF THE LAWS OF NINETEEN HUNDRED
NINETY, CHAPTER FIFTY-THREE OF THE LAWS OF NINETEEN HUNDRED  NINETY-ONE,
CHAPTER  FIFTY-THREE OF THE LAWS OF NINETEEN HUNDRED NINETY-TWO, CHAPTER
FIFTY-THREE OF  THE  LAWS  OF  NINETEEN  HUNDRED  NINETY-THREE,  CHAPTER
FIFTY-THREE  OF  THE  LAWS  OF NINETEEN HUNDRED NINETY-FOUR, AND CHAPTER
FIFTY-THREE OF THE LAWS OF NINETEEN HUNDRED NINETY-FIVE, SHALL  BE  MADE
AVAILABLE  FOR  THE  SEED-NY  INVESTMENT  FUND  ESTABLISHED  PURSUANT TO
SECTION FORTY-FOUR OF THE NEW YORK STATE URBAN  DEVELOPMENT  CORPORATION
ACT.
  2.  THE  BOARD  SHALL PREPARE A PLAN, WITHIN NINETY DAYS FOLLOWING THE
EFFECTIVE DATE OF THIS SECTION, TO  LIQUIDATE  ALL  CURRENT  ASSETS  AND
LIABILITIES OF THE SMALL BUSINESS TECHNOLOGY INVESTMENT FUND.
  3.  THE  PUBLICLY-TRADED  ASSETS AND ANY WORKING CAPITAL SHALL BE MADE
FULLY AVAILABLE TO THE SEED-NY INVESTMENT FUND ESTABLISHED  PURSUANT  TO
SECTION  FORTY-FOUR  OF SECTION ONE OF THE NEW YORK STATE URBAN DEVELOP-
MENT CORPORATION ACT FOR ALLOCATION TO REGIONAL INVESTMENT FUNDS AS SOON
AS PRACTICABLE.
  4. THE BOARD SHALL ALSO TAKE WHATEVER ACTIONS ARE NECESSARY TO  LIQUI-
DATE  THE  REMAINING  ASSETS OF THE SMALL BUSINESS TECHNOLOGY INVESTMENT
FUND AS SOON AS PRACTICABLE, BUT NOT MORE THAN TWO YEARS  FOLLOWING  THE
EFFECTIVE DATE OF THIS SECTION.
  S 3. This act shall take effect immediately.

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