Rep. Russ Carnahan wants to let the federal government make direct investments in early-stage technology companies, but it's not quite the leap into industrial policy that it seems.

Carnahan appeared Wednesday at St. Louis' Center for Emerging Technologies to drum up support for his SEED Act, which is attached to a reauthorization bill for the federal Economic Development Administration. The bill would allow EDA funds to be invested in startup companies, but the government wouldn't be picking the companies. That task would fall to business incubators like the CET, which has received three EDA grants over the years. That money went for infrastructure rather than direct aid to companies.

Startup technology companies are starved for funding, and this would be a way to help, Carnahan said:

"This is a vital piece of the economic-development puzzle ... It allows entrepreneurs to access money at a critical time, at the concept stage where a little money can go a long way and where private money is hard to get.

Carnahan said the bill wouldn't add any more money for such investments, but would merely make existing programs more flexible.

Marcia Mellitz, president of the CET, explained that EDA money can now be used to make loans to companies.The CET hasn't applied for the loan program, she said, because its terms are rigid and wouldn't work for most startup companies. Carnahan's proposal would allow for equity-like financing, such as forgiveable or convertible debt, that she says would be a better fit for early-stage companies.