PA 16-204—sSB 401

Commerce Committee

Finance, Revenue and Bonding Committee


SUMMARY: This act allows Connecticut Innovations, Inc. (CI) to use its unrestricted funds and funds in the Connecticut Bioscience Innovation Fund (CBIF) to invest in private equity investment funds under certain conditions (see “BACKGROUND”).

It makes the following changes to CBIF administration and eligibility:

1. crediting to CI's unrestricted funds any income or earnings in excess of the original award amount that result from CBIF financial assistance awards;

2. making businesses' eligibility for CBIF funding contingent on annual commercial revenue, rather than the age of the business and current activity; and

3. allowing CI to provide, through CBIF, additional funding to eligible recipients that have already received financial assistance from CI or CBIF (“follow-on funding”).

The act also makes technical and conforming changes.

EFFECTIVE DATE: July 1, 2016


CI's General Powers

The act authorizes CI to (1) invest its unrestricted funds in private equity investment funds, or “funds of funds,” and (2) enter into related limited partnership agreements or other contractual arrangements with the investment funds. The investment funds may be organized and managed and invested in businesses in- or out-of-state, as long as the funds' investment objectives and criteria are consistent with policies adopted by CI's board of directors. Under the act, these policies must require an investment fund to invest at least as much money as CI invested in the fund, discounting reasonable management fees and closing costs, to support the (1) growth of technology, bioscience, or precision manufacturing businesses or (2) relocation of these businesses to Connecticut.


Under existing law, the CBIF advisory committee provides CBIF financial assistance directly to eligible recipients. Under the act, the committee may additionally provide financial assistance indirectly to eligible recipients by investing in private equity investment funds, including those organized, managed, and investing in businesses in- or out-of-state.

The act requires the committee to adopt guidelines to provide CBIF financial assistance through private equity investment funds. The guidelines must require any fund that receives a CBIF investment to invest an amount at least equal to the CBIF investment, discounting reasonable management fees and closing costs, in Connecticut entities that qualify for CBIF assistance.


Income and Earnings

Under prior law, all money recovered or earned as a result of financial assistance provided from CBIF had to be credited back to CBIF and held for its use. Under the act, (1) any repayment of loan principal or other recovery of the original amount of financial assistance awarded from CBIF must be credited to CBIF and (2) any interest repayments and additional income, earnings, or return on investment in excess of the original CBIF award amount are deemed unrestricted funds of CI. Consequently, CI can use the CBIF returns to fund any of its other programs or for other purposes.


By law, entities eligible for CBIF financial assistance include accredited colleges or universities, nonprofits, for-profit start-ups, and early-stage businesses. The act makes businesses' eligibility for CBIF funding contingent on annual commercial revenue, rather than the age of the business and current activity, by modifying the definition of “early-stage business. ” Under prior law, an early-stage business was one that had been operating for seven years or less and was developing or testing a product or service that was (1) not yet available for commercial release or (2) commercially available in a limited manner, including market testing of prototypes and certain clinical trials. Under the act, an early-stage business is instead one that has not yet achieved annual commercial revenue of more than $2 million.



CI is a quasi-public agency with broad powers to finance and promote technological innovation. It is governed by a 17-member board composed of gubernatorial and legislative appointees, as well as four ex-officio members. Among other things, CI invests in startups in software and information technology, bioscience, clean technology, digital media, and technology important to advanced manufacturing (e. g. , photonics and advanced materials). CI can also fund research that has commercial applications (CGS 32-35).


CBIF is administered by CI and governed by an advisory committee. CBIF provides grants, loans, equity, and other types of investments (“financial assistance”) to colleges, universities, nonprofits, start-ups, and early-stage businesses to further the development of disciplines, such as bioscience, medical devices, and health information management, that (1) are likely to lead to an improvement in or development of commercializable services, therapeutics, diagnostics, or devices; (2) are designed to advance the coordination, quality, or efficiency of health care and lower health care costs; and (3) promise, directly or indirectly, to lead to job growth in the state in these or related fields. CBIF is capitalized by bond funds (CGS 32-41aa to 32-41dd).

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