§ 291. Entrepreneurs’ Seed Capital Fund; authorization; limitations
(a) The Vermont Economic Development Authority shall cause to be formed a private investment
equity fund to be named “the Entrepreneurs’ Seed Capital Fund” or “the Fund” for the
purpose of increasing the amount of investment capital provided to new Vermont firms
or to existing Vermont firms for the purpose of expansion. The Authority may contract
with one or more persons for the operation of the Fund as Fund manager. Such contract
shall contain the terms and conditions pursuant to which the Fund shall be managed
to meet the Fund’s objective of providing seed capital to Vermont firms. The terms
of the contract shall require that, if the Fund manager does not meet the investment
criteria specified in the contract, the Fund manager may not be awarded the performance
fee.
(b) The Fund shall be formed as a limited partnership pursuant to Title 11 and shall be
subject to all the following:
(1) The Fund shall not invest in any firm in which any interest in that firm is held by
an investor of the Fund or by the spouse, children, or other relative of the investor.
(2) The Fund shall invest at least 40 percent of its total capital in initial investment
in firms that had in the 12 months preceding the date of the funding commitment annual
gross sales of less than $1,000,000.00 and may reserve the remainder of its capital
for follow-on investments in these businesses, as appropriate.
(3)(A) Before the Fund makes any investments, the Fund shall have and maintain a board of
five advisors who shall be appointed as follows: two shall be appointed by the Authority,
two shall be appointed by the Fund manager, and one shall be appointed jointly by
the Authority and the Fund manager.
(B) The appointing authorities shall coordinate their appointments to ensure that the
Board comprises advisors with diverse professional and personal backgrounds and experiences.
(C) The Board of Advisors shall represent solely the economic interest of the State with
respect to the management of the Fund and shall have no civil liability for the financial
performance of the Fund.
(D) The Board of Advisors shall be advised of investments made by the Fund and shall have
access to all information held by the Fund with respect to investments made by the
Fund.
(4) The Fund, within 120 days after the close of each fiscal year of its operations, shall
issue a report that includes an audited financial statement certified by an independent
certified public accountant. The report also shall include a compilation of the firm
data required by subsection (d) of this section. These data shall be reported in a
manner that does not disclose competitive or proprietary information, as determined
by the Authority. This report shall be distributed to the Governor and the Senate
Committee on Economic Development, Housing and General Affairs and the House Committee
on Commerce and Economic Development and made available to the public. The report
shall include a discussion of the Fund’s impact on the Vermont economy and employment.
(5) The Fund shall not make distributions of more than 75 percent of its net profit to
its investors during its first five years of operation.
(6) No person shall be allocated more than 20 percent of the available tax credits. For
the purposes of determining allocation, the attribution rules of Section 318 of the Internal Revenue Code in effect as of June 12, 2004 shall apply.
(7) The capitalization of the Fund is not limited under this section; however, only the
first $7,150,000.00 raised from Vermont taxpayers on or before January 1, 2020, shall
be eligible for partial tax credits as specified in 32 V.S.A. § 5830b.
(8) All investments and related business dealings using funds that qualify for partial
tax credits under 32 V.S.A. § 5830b shall be subject to the following restrictions:
(A) The investments shall be restricted to Vermont firms, which for the purposes of this
chapter means that their Vermont apportionment equals or exceeds 50 percent, using
the apportionment rules under 32 V.S.A. § 5833, and they maintain headquarters and a principal facility in Vermont. Any funds invested
in Vermont firms shall be used for the purpose of enhancing their Vermont operations.
Investment shall be restricted to firms that export the majority of their products
and services outside the State or add substantial value to products and materials
within the State. In its investments, the Fund shall give priority to new firms and
existing firms that are developing new products, and shall take into consideration
any impact on in-state competition and also whether the investment will encourage
economic activity that would not occur but for the Fund investment.
(B) Each Fund investment in any one firm, in any 12-month period shall be limited to a
maximum of ten percent of the Fund’s capitalization and, for the life of the Fund,
to a maximum of 20 percent of the Fund’s total capitalization.
(C) At least two-thirds of the monies invested by the Fund and qualifying for a tax credit
under 32 V.S.A. § 5830b shall at all times be invested in the form of equity or convertible securities unless
the Fund manager determines it is reasonable and necessary to pursue temporarily the
generally accepted business practice of earning interest on working funds deposited
in relatively secure accounts such as savings and money market funds.
(c) Any firm receiving monies from the Fund must report to the Fund manager the following
information regarding its activities in the State over the calendar year in which
the investment occurred:
(1) The total amount of private investment received.
(2) The total number of persons employed as of December 31.
(3) The total number of jobs created and retained, which also shall indicate for each
job the corresponding job classification, hourly wage and benefits, and whether it
is part-time or full-time.
(4) Total annual payroll.
(5) Total sales revenue.
(d) The Authority, in consultation with the Fund manager, shall establish reasonable standards
and procedures for evaluating potential recipients of Fund monies. The Authority shall
make available to the general public a report of all firms that receive Fund investments
and also indicate the date of the investment, the amount of the investment, and a
description of the firm’s intended use of the investment. This report shall be updated
at least quarterly.
(e) Information and materials submitted by a business receiving monies from the Fund shall
be available to the Auditor of Accounts in connection with the performance of duties
under 32 V.S.A. § 163; provided, however, that the Auditor of Accounts shall not disclose, directly or
indirectly, to any person any proprietary business information. (Added 2003, No. 164 (Adj. Sess.), § 6, eff. June 12, 2004; amended 2005, No. 184 (Adj. Sess.), § 17a; 2009, No. 54, § 25, eff. June 1, 2009; 2021, No. 74, § H.16.)