Businessman Manu Nair noticed a vexing problem in Northeast Arkansas when he moved to Jonesboro six years ago. The region didn’t have venture capital companies, or programs aimed at connecting potential angel investors with entrepreneurs or inventors who needed help starting their own companies.
Nair joined the Jonesboro Regional Chamber of Commerce and has put together a program to help, he told Talk Business & Politics.
Chamber officials announced Thursday (July 28) the Accelerate Jonesboro Angel Fund, AJAF, a partnership between the organization and at least 10 potential investors, Chamber Chief Operating Officer Cari White told Talk Business & Politics. The baseline goal is to raise at least $50,000 for an approved start-up company, but it could be more if an investor or investors choose to increase their commitment, Nair said.
“Our goal is to seed one to five companies in the next few years,” Nair said.
The criteria for AJAF was modeled after as similar program developed in Columbus, Ohio, Nair said.
Interested parties will have to keep their company and production in Northeast Arkansas, and fill out an extensive application, according to information released. Applicants will have to prove the commercial feasibility of the product, its marketability, and will have to have a prototype that can be demonstrated, White said. A demonstrated revenue history may also be vetted for applicants who own businesses, and it must be organized as a C-Corp in either Arkansas or Delaware.
“It’s a lot like Shark Tank,” White said.
Investors can commit as little or as much as they want to potential projects, or none at all, Nair said. If a potential applicant is rejected, another one be vetted and presented, he said. The goal is to get at least $50,000 for a worthy company, he said. Individuals who want to invest along with AJAF as “sidecars” may also do so, according to information released. Applications will be accepted until the end of August. Officials hope to have a solid candidate selected sometime in September.
AJAF will use a standard term sheet and deal documents based on the National Venture Capital Association model term sheet. Standard deal terms include: anticipating convertible preferred equity with an 8% cumulative dividend (paid at exit); an incentive stock option pool of 10-15%; cash investment by the founders (in most cases); a 5-year redemption feature; and the right to appoint a member of the company’s board of directors (typically a five seat board). AJAF and the founders should be aligned with the goal to build value and sell the company in 3-5 years.
Nair, who owns Aceone Technologies, hopes that if the program can help foster a number of successful companies, other angel investors and companies from outside Jonesboro will start to invest money in start-ups in this part of the state.
“That’s our goal,” he said. “The lack of angel investment is holding us back.”