Sec. 2. Definitions
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In this Act: The term approved State program means a State program that is approved by the Secretary in accordance with the standards established under section 3(b)(1). The term covered investment means an equity investment in a startup using amounts made available to carry out the covered programs. The term covered programs means the Program and the program carried out under section 4. The term equity investment — means an investment for an ownership interest in an entity, the financial return with respect to which is principally aligned with the financial return of the plurality of ownership interests in the entity; and includes a debt instrument that can be converted to an equity ownership interest in an entity based on future events.
The term exit , with respect to a startup in which there is a covered investment, means— the acquisition of the startup; after an initial public offering with respect to the startup, the sale of a share of the startup that was obtained through the covered investment; or the voluntary purchase of ownership interests by the startup, investors, or existing shareholders. The term Federal contribution means a contribution made— by a participating State to, or for the account of, an approved State program; and with Federal funds allocated to the participating State by the Secretary.
The term follow-on investment means a subsequent equity investment in a startup in which there was originally a separate and distinct equity investment under— a program carried out under the State Small Business Credit Initiative Act of 2010 ( 12 U.S.C. 5701 et seq.); or the Program. The term market rate management fee and profit interest means the usual and customary compensation structure paid to fund managers for fund investment management services under agreements with private sector limited partners.
The term participating State means a State that participates in the Program after having satisfied the approval criteria under section 3(c). The term Program means the Innovation and Startups Equity Investment Program established under section 3(a). The term qualifying area means an area of the United States outside of the major venture capital centers, as determined in the rule making conducted by the Secretary under section 3(e). The terms rule and rule making have the meanings given those terms in section 551 of title 5, United States Code.
The term Secretary means the Secretary of the Treasury. The term startup means a business entity that— has been in existence for less than 10 years; has the intention or potential to— significantly scale with respect to revenue and job creation; develop innovative products or services; and deliver high returns on investment; and is headquartered in a qualifying area. The term State means— a State of the United States; and the District of Columbia. The Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands shall collectively be considered to be 1 State for the purposes of this Act.
The term State program means a program established by a State to provide equity investment in startups or venture capital funds that are headquartered in qualifying areas, without regard to whether those qualifying areas are located in the State. The term venture capital fund has the meaning given the term in section 275.203(l)–1 of title 17, Code of Federal Regulations, or any successor regulation.
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