Incubator Network and Startup Success Act

II 116TH CONGRESS 2D SESSION S. 3329 To establish an incubator network and startup success program, and for other purposes. IN THE SENATE OF THE UNITED STATES FEBRUARY 25, 2020 Ms. HASSAN (for herself and Mr. HAWLEY) introduced the following bill; which was read twice and referred to the Committee on Commerce, Science, and Transportation A BILL To establish an incubator network and startup success program, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Incubator Network and 4 Startup Success Act’’. 5 SEC. 2. DEFINITIONS. 6 In this Act: 7 (1) STARTUP INCUBATOR.—The term ‘‘startup 8 incubator’’ means a business or a nonprofit organi- 9 zation that— 10 VerDate Sep 11 2014 23:55 Feb 25, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S3329.IS S3329 pamtmann on DSKBC07HB2PROD with BILLS 2 •S 3329 IS (A) provides resources and services de- 1 signed to accelerate the growth and success of 2 businesses, which may include— 3 (i) physical workspace and facilities, 4 including affordable or shared office space; 5 (ii) access to capital, business edu- 6 cation, and counseling; 7 (iii) networking and mentorship op- 8 portunities; 9 (iv) access to advanced tools and 10 other technology; and 11 (v) other services intended to aid in 12 developing a business; and 13 (B) serves businesses, of which not less 14 than 90 percent are startups. 15 (2) STARTUP INCUBATOR NETWORK.—The term 16 ‘‘startup incubator network’’ means a group of start- 17 up incubators with an agreement to— 18 (A) share resources among network mem- 19 bers, which may include— 20 (i) reciprocal facility privileges to an 21 incubator member of a network member; 22 and 23 VerDate Sep 11 2014 23:55 Feb 25, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S3329.IS S3329 pamtmann on DSKBC07HB2PROD with BILLS 3 •S 3329 IS (ii) common access to capital raising, 1 business education, and networking pro- 2 grams; 3 (B) share information and best practices 4 among network members; 5 (C) designate not less than 1 employee of 6 a network member to be the official point of 7 contact for the network members; and 8 (D) establish a public website for the start- 9 up incubator network. 10 (3) CATEGORY 1 STARTUP INCUBATOR NET- 11 WORK.—The term ‘‘category 1 startup incubator 12 network’’ means a startup incubator network with a 13 good faith estimate that not less than 50 percent of 14 the incubator members of the startup incubator net- 15 work have disadvantaged entrepreneur ownership. 16 (4) CATEGORY 2 STARTUP INCUBATOR NET- 17 WORK.—The term ‘‘category 2 startup incubator 18 network’’ means a startup incubator network with a 19 good faith estimate that not less than 25 percent 20 and less than 50 percent of the incubator members 21 of the startup incubator network have disadvantaged 22 entrepreneur ownership. 23 (5) CATEGORY 3 STARTUP INCUBATOR NET- 24 WORK.—The term ‘‘category 3 startup incubator 25 VerDate Sep 11 2014 23:55 Feb 25, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S3329.IS S3329 pamtmann on DSKBC07HB2PROD with BILLS 4 •S 3329 IS network’’ means a startup incubator network with a 1 good faith estimate that less than 25 percent of the 2 incubator members of the startup incubator network 3 have disadvantaged entrepreneur ownership. 4 (6) DIRECTOR.—The term ‘‘Director’’ means 5 the Director of the Office of Innovation and Entre- 6 preneurship of the Department of Commerce. 7 (7) DISADVANTAGED ENTREPRENEUR.—The 8 term ‘‘disadvantaged entrepreneur’’ means an entre- 9 preneur who is— 10 (A) a socially disadvantaged individual or 11 an economically disadvantaged individual, as 12 those terms are described in paragraphs (5) 13 and (6)(A) of section 8(a) of the Small Busi- 14 ness Act (15 U.S.C. 637(a)(5), 637(a)(6)(A)); 15 (B) a woman; 16 (C) a veteran, as defined in section 101 of 17 title 38, United States Code; or 18 (D) an individual with a disability, as de- 19 fined in section 3 of the Americans with Dis- 20 abilities Act of 1990 (42 U.S.C. 12102). 21 (8) DISADVANTAGED ENTREPRENEUR OWNER- 22 SHIP.—The term ‘‘disadvantaged entrepreneur own- 23 ership’’ means— 24 (A) in the case of— 25 VerDate Sep 11 2014 23:55 Feb 25, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S3329.IS S3329 pamtmann on DSKBC07HB2PROD with BILLS 5 •S 3329 IS (i) a business, not less than 51 per- 1 cent ownership by one or more disadvan- 2 taged entrepreneurs; or 3 (ii) a publicly owned business, not less 4 than 51 percent ownership of the stock by 5 one or more disadvantaged entrepreneurs; 6 and 7 (B) control of the management and daily 8 operations of the business by one or more dis- 9 advantaged entrepreneurs. 10 (9) ELIGIBLE ENTITY.—The term ‘‘eligible enti- 11 ty’’— 12 (A) means— 13 (i) a category 1 startup incubator net- 14 work; 15 (ii) a category 2 or category 3 startup 16 incubator network that has submitted a 17 formal plan under section 3(f)(2) or 18 3(f)(3), respectively; or 19 (iii) a planned startup incubator net- 20 work that has submitted a formal plan to 21 establish a startup incubator network 22 under section 3(f)(1); 23 (B) includes a startup incubator network 24 that has received funding under— 25 VerDate Sep 11 2014 23:55 Feb 25, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S3329.IS S3329 pamtmann on DSKBC07HB2PROD with BILLS 6 •S 3329 IS (i) the Small Business Act (15 U.S.C. 1 631 et seq.); 2 (ii) the Public Works and Economic 3 Development Act of 1965 (42 U.S.C. 3121 4 et seq.); and 5 (iii) other Federal programs; and 6 (C) does not include a startup incubator 7 network that has received a grant under section 8 3(a) during the 3-year period ending on the 9 date on which an application is submitted under 10 section 3(g). 11 (10) INCUBATOR MEMBER.—The term ‘‘incu- 12 bator member’’ means a business that is served by 13 a startup incubator. 14 (11) NETWORK MEMBER.—The term ‘‘network 15 member’’ means a startup incubator that is a part 16 of a startup incubator network or planned startup 17 incubator network. 18 (12) PLANNED STARTUP INCUBATOR NET- 19 WORK.—The term ‘‘planned startup incubator net- 20 work’’ means a startup incubator network that mul- 21 tiple startup incubators intend to create. 22 (13) RURAL AREA.—The term ‘‘rural area’’ has 23 the meaning given the term in section 343(a) of the 24 VerDate Sep 11 2014 23:55 Feb 25, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S3329.IS S3329 pamtmann on DSKBC07HB2PROD with BILLS 7 •S 3329 IS Consolidated Farm and Rural Development Act (7 1 U.S.C. 1991(a)). 2 (14) STARTUP.—The term ‘‘startup’’ means a 3 business that— 4 (A) has less than $10,000,000 in annual 5 gross receipts; 6 (B) has not more than 5 years of gross re- 7 ceipts; and 8 (C) has been an active trade or business 9 for less than 10 years. 10 (15) STATE.—The term ‘‘State’’ means each of 11 the several States, the District of Columbia, and any 12 other territory or possession of the United States. 13 SEC. 3. INCUBATOR NETWORK AND STARTUP SUCCESS 14 PROGRAM. 15 (a) IN GENERAL.—Not later than 1 year after the 16 date of enactment of this Act, the Director shall establish 17 in the Office of Innovation and Entrepreneurship of the 18 Department of Commerce an incubator network and start- 19 up success program with the purpose of carrying out the 20 grants described in subsection (b). 21 (b) GRANTS AUTHORIZED.—The Director is author- 22 ized to award grants under this section on a competitive 23 basis in the amount of $50,000 to each network member 24 of an eligible entity selected based on the application sub- 25 VerDate Sep 11 2014 23:55 Feb 25, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S3329.IS S3329 pamtmann on DSKBC07HB2PROD with BILLS 8 •S 3329 IS mitted under subsection (g) and the criteria described in 1 subsection (h). 2 (c) MAXIMUM AMOUNT.—The total amount of grants 3 made by the Director under subsection (b) in a fiscal year 4 shall not exceed $2,000,000. 5 (d) MATCHING REQUIREMENT.—The Director may 6 not make a grant to the network members of an eligible 7 entity under this section unless each network member 8 demonstrates the ability to raise or plans to raise non- 9 Federal contributions in an amount equal to the amount 10 of Federal funds provided to each network member under 11 the grant. 12 (e) ANNOUNCEMENT.—The Director shall widely an- 13 nounce the incubator network and startup success pro- 14 gram established under subsection (a), including on the 15 website of the Office of Innovation and Entrepreneurship 16 of the Department of Commerce. 17 (f) FORMAL PLANS FOR PRELIMINARY ELIGI- 18 BILITY.—To be eligible to receive a grant under this sec- 19 tion— 20 (1) a planned startup incubator network shall 21 submit to the Director a formal plan to form a start- 22 up incubator network within 1 year of the receipt of 23 a grant under subsection (b) at such time, in such 24 VerDate Sep 11 2014 23:55 Feb 25, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S3329.IS S3329 pamtmann on DSKBC07HB2PROD with BILLS 9 •S 3329 IS manner, and containing such information as the Di- 1 rector may require; 2 (2) a category 2 startup incubator network 3 shall submit to the Director at such time, in such 4 manner, and containing such information as the Di- 5 rector may require— 6 (A) a formal plan detailing planned efforts 7 to increase access to the startup incubator net- 8 work for businesses with disadvantaged entre- 9 preneur ownership; and 10 (B) evidence relating to the likelihood of 11 the successful implementation of the plan de- 12 scribed in subparagraph (A), including evidence 13 of past success in increasing access to the start- 14 up incubator network for businesses with dis- 15 advantaged entrepreneur ownership; and 16 (3) a category 3 startup incubator network 17 shall submit to the Director at such time, in such 18 manner, and containing such information as the Di- 19 rector may require— 20 (A) a formal plan to increase the percent- 21 age of disadvantaged entrepreneur-owned incu- 22 bator members by 5 percent within 5 years of 23 the receipt of a grant under subsection (b); and 24 VerDate Sep 11 2014 23:55 Feb 25, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S3329.IS S3329 pamtmann on DSKBC07HB2PROD with BILLS 10 •S 3329 IS (B) evidence relating to the likelihood of 1 the successful implementation of the plan de- 2 scribed in subparagraph (A), including evidence 3 of past success in increasing access to the start- 4 up incubator network for businesses with dis- 5 advantaged entrepreneur ownership. 6 (g) APPLICATION.— 7 (1) IN GENERAL.—Each eligible entity that de- 8 sires the network members of the eligible entity to 9 receive a grant under subsection (b) shall submit an 10 application on behalf of the network members of the 11 eligible entity to the Director, at such time, in such 12 manner, and accompanied by such additional infor- 13 mation as the Director may require. 14 (2) CONTENTS.—Each application submitted 15 pursuant to paragraph (1) shall include— 16 (A) a report that— 17 (i) specifies whether the eligible entity 18 is a category 1, category 2, or category 3 19 startup incubator network; and 20 (ii) provides a good faith estimate of 21 the percentage of incubator members of 22 the eligible entity with disadvantaged en- 23 trepreneur ownership; 24 VerDate Sep 11 2014 23:55 Feb 25, 2020 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S3329.IS S3329 pamtmann on DSKBC07HB2PROD with BILLS 11 •S 3329 IS (B) the contact information of the official 1 point of contact for the eligible entity to coordi- 2 nate with the Director on behalf of network 3 members; and 4 (C) a plan that demonstrates that the re- 5 ceipt of a grant under subsection (b) would in- 6 crease certain measures of success for the eligi- 7 ble entity, which may include an increase in— 8 (i) access to startup incubator net- 9 work activities in the geographical region 10 of the startup incubator network; 11 (ii) access to startup incubator net- 12 work activities in rural areas; 13 (iii) the variety of startup incubator 14 network activities available to incubator 15 members; 16 (iv) the number of businesses applying 17 to become incubator members of network 18 members; 19 (v) the number of incubator members 20 retained by network members; and 21 (vi) the number of incubator members 22 that complete the incubation program of 23 the network member, including the number 24 of incubator members that exceed the cri- 25 VerDate Sep 11 2014 23:55 Feb 25, 2020 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S3329.IS S3329 pamtmann on DSKBC07HB2PROD with BILLS 12 •S 3329 IS teria of a startup established under section 1 2. 2 (h) CRITERIA.—In making grants under this section, 3 the Director shall evaluate eligible entities based upon— 4 (1) the likelihood that the eligible entity will 5 successfully implement the plan described in sub- 6 section (g)(2)(C); 7 (2) in the case of a planned startup incubator 8 network, a category 2 incubator network, or a cat- 9 egory 3 incubator network, the likelihood that the el- 10 igible entity will successfully implement a plan de- 11 scribed in subsection (f); 12 (3) in the case of a category 2 incubator net- 13 work or a category 3 incubator network, the evi- 14 dence of past success submitted under subsection 15 (f)(2)(B) or (f)(3)(B), respectively; 16 (4) the likely economic impact of successfully 17 implementing the plan described in subsection 18 (g)(2)(C) or a plan described in subsection (f), in- 19 cluding the potential for creating jobs; 20 (5) the likelihood that the eligible entity will re- 21 main a startup incubator network following the re- 22 ceipt of an award; and 23 (6) other competitive criteria that the Director 24 may develop. 25 VerDate Sep 11 2014 23:55 Feb 25, 2020 Jkt 099200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S3329.IS S3329 pamtmann on DSKBC07HB2PROD with BILLS 13 •S 3329 IS (i) USE OF FUNDS.— 1 (1) IN GENERAL.—A network member receiving 2 an award under subsection (b) shall use not less 3 than 25 percent of the award and not less than 25 4 percent of the matching funds raised pursuant to 5 subsection (d) to— 6 (A) create a new startup incubator net- 7 work; or 8 (B) support and expand existing startup 9 incubator network activities. 10 (2) CATEGORY 3 STARTUP INCUBATOR NET- 11 WORKS.—In addition to the requirements for the use 12 of funds under paragraph (1), a network member of 13 a category 3 startup incubator network receiving an 14 award under subsecti [Text truncated for display. 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