New Business Preservation Act (Legislative Proposal)

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What are the main aims and objectives?

The goal of this legislative proposal is to increase the geographic diversification of equity investment, with the goal of driving economic growth and job creation in regions of the country that are currently under-resourced.

This bill establishes and provides funding for a "Innovation and Startups Equity Investment Program", through which the Department of the Treasury shall work with states to invest in new businesses.

Equity financing – which this program seeks to expand - does not require repayment, but instead represents a long-term investment in the business. 

How does the program work?

The proposed Startups Equity Investment Program would allocate $2 billion in federal dollars ($1.5 billion initially, and $500 million in follow-on investment) to the states on a straightforward population basis to attract private venture capital by offering a one-to-one match of federal dollars with venture capital investment in promising startups, particularly in states outside the major venture capital centers.

The program is expected to be self-sustaining, with any returns on investment being reinvested in new businesses in future years. If a state receives funds from an exit, the state shall use such funds to further invest in startups under the approved program. An exit is defined as:

  1. The acquisition of a startup in which a state has invested under the program;
  2. The sale of a share of such startup following an initial public offering; or
  3. Voluntary purchase of a state's ownership interest by the startup, investors, or existing shareholders.
Eligibility

The legislation proposes giving special consideration to businesses created by women and persons of color, who face additional barriers in accessing investment capital.

Timeline
  • March 18, 2020: The New Business Preservation Act is introduced in the Senate by Amy Klobuchar (D-MN), Chris Coons (D-DE), Tim Kaine (D-VA), and Angus King (I-ME). Read twice at the Senate, and referred to the Committee on Banking, Housing, and Urban Affairs.
     
  • March 26, 2020: The New Business Preservation Act is introduced in the House by Dean Phillips (D-MN), Terri Sewell (D-AL), Ro Khanna (D-CA), and Tim Ryan (D-OH).
Notes + Additional Context

The New Business Preservation Act is supported by the Progressive Policy Institute, Third Way, Small Business Majority, Center for American Entrepreneurship (CAE), Economic Innovation Group, Small Business and Entrepreneurship Council, and the Information Technology and Innovation Foundation (ITIF).

On March 31, 2020, CAE published the essay “The New Business Preservation Act and the Tradition of U.S. Federal Government Support for Entrepreneurship and Venture Capital,” by board member Ian Hathaway.

On May 6, 2020, a letter from ten leading entrepreneurship, innovation, and small business organizations to Congressional leadership urges the passage of the New Business Preservation Act.

CURATED BY

John Dearie

Founder and President
United States