Venture Capital Fund Key to Future

There are two reasons Arkansas has trouble keeping and attracting high-tech businesses — the state’s reputation and a lack of venture capital.

But John Maguire thinks he can solve one of those problems.

The former chief financial officer for Tyson Foods Inc. of Springdale has a reputation for finding money in the damnedest places. So he’s spearheading the effort to start a venture capital fund to attract businesses to Northwest Arkansas.

“That’s the magnet to putting people in here — capital,” said Maguire, 70, who took over as Fayetteville’s economic development director in July.

All Maguire really needs to get things started is a few million dollars.

“It could happen in short order if somebody gets behind it,” he said. “You take one person or a group to commit $5 million and it’s off and running.”

John Lewis, president of the Bank of Fayetteville, is backing the idea.

“I think we’re going to have to do something,” Lewis said. “It’s a question of when and how big. … The problem is Arkansas is not known for high technology. We’ve got an image problem. Even Mississippi graduates more IT students than we do. And our grads go elsewhere for jobs.”

Lewis said the fund could easily be formed within the next year.

But nobody has come forward yet with funding. Maguire said venture capital is a high-risk investment that could result in high returns. Of course, it could result in no returns.

“Jim Walton was noncommittal,” Maguire reports. “He said, ‘Well, John, there’s a lot of money around.’ I really haven’t had a chance to follow up with him.”

There may be a lot of money around the Walton family of Bentonville but not in Arkansas when it comes to recruiting technology companies.

Exodus from Genesis

Maguire said the University of Arkansas’ Genesis Technology Incubator helps keep fledgling technology companies in Arkansas, but more capital is needed to keep them from moving later to Austin, Dallas or Memphis — regional cities where more venture capital is available.

Nationwide, venture funds are more inclined to finance start-up businesses in larger cities, not in rural states like Arkansas.

Investors like to be near the businesses they assist so they can keep an eye on things. Since there’s less money available for wages here, it’s difficult for technology companies to operate in the Land of Opportunity. (Make that, the former Land of Opportunity since, among other reasons, Arkansas’ motto is now “The Natural State.”)

“All these guys with ideas and products are looking for capital,” Maguire said, “and we just don’t have anywhere to put them. We don’t know where to tell them to go.”

It’s The Law

Gov. Mike Huckabee recently signed into law a bill to help generate more venture capital investments in Arkansas.

But there seems to be some confusion about what it says. Maguire thinks it will help bring businesses to Northwest Arkansas. But Lewis said it appears the bill won’t apply to venture capital funds here.

State Sen. Kevin Smith, D-Stuttgart, sponsored Senate Bill 808, which was passed last spring.

The bill authorizes the Arkansas Development Finance Authority to certify an investor group to borrow private money and provide it to venture capital firms, which, in turn, would invest in Arkansas businesses.

But, Lewis noted, the bill stipulates that “one investor group [be] deemed best qualified to generate the amount of capital required by this act.”

That investor group would be Diamond State Ventures of Little Rock since it already exists, Lewis said.

According to the bill, the investor group could raise $60 million over six years and receive transferrable tax credits. The group could leverage considerably more than that amount from venture capital funds.

Coming Home

Maguire has a reputation for getting things done.

He grew up in rural Washington County. After 12 years with Tyson Foods, Maguire retired in 1982. As CFO, he helped Tyson broker some of the company’s largest acquisitions.

After “retiring,” Maguire bought three companies, Oldhams Sausage Co. in Halton, Kan., Wade Jones Co. in Lowell and six Hot Wheels convenience stores in Northwest Arkansas.

He also moved to Fort Worth, Texas, where he helped broker deals for Bollinger Industries, a sporting goods company in Grand Prairie, Texas. He’s still on Bollinger’s board of directors.

Maguire has since sold the three companies he owned and returned to Northwest Arkansas in 1999.

Maguire served as Fayetteville’s administrative services director for a year and a half before Mayor Dan Coody asked him to take over as the city’s economic development director in July. He replaced Alett Little, who left that position in June.

Maguire said he thinks it’s a temporary appointment, but he’s not really sure.

“I think it is highly likely that the city will contract with the Chamber of Commerce to handle economic development, as it had done until Mayor Fred Hanna put Alett Little in that job.”

Even if he doesn’t serve as the city’s economic development director, Maguire said, he will continue to work to help develop a venture capital fund to keep business here and lure more of them to the area.