Capital Idea Puts Vim Into Genesis

Momentum is still swirling in Fayetteville’s mountain air following the Oct. 16 announcement that the University of Arkansas and the Arkansas Capital Corporation Group will partner to attract and develop startup companies in Arkansas.

ACCG said it would establish the Arkansas Ventures Fund — initially expected to be a $15 million venture pool — at the UA’s Genesis Technology Incubator. Since the announcement, two things have transpired:

• David Nelms is founder and chief technology officer of Integral Wave Technologies in Fayetteville. His firm, which manufactures thin film passive components for electronics, has already met with ACCG about the possibility of securing some venture funding. Integral is viewed as a powerhouse of potential because all wireless devices such as cell phones use its products.

Nelms’ advancements in thin film technology has enabled those devices to become more sleek and efficient.

• Jeff Hanson, managing director of Signal Hill Venture Partners LP, a budding early stage venture capital fund started in Little Rock, said officially that if his firm raises adequate capital it will locate somewhere in Fayetteville. Signal Hill recently was still finalizing some plans, but Hanson said he will know more in the next two months.

Genesis is not a lock to land Signal Hill, but the greater area apparently is.

The AVF, through its Small Business Investment Company license and expected additional funding from the Small Business Administration, could grow to $45 million.

Sam Walls is executive vice president of Arkansas Capital Corp. and chief operating officer of ACCG. He said Northwest Arkansas was chosen to start the fund because it’s the most promising place to develop a model that can be expanded to all of Arkansas.

Together, the ACCG and Genesis will offer clients a two-punch combination aimed at knocking out barriers to development such as the lack of venture capital or inadequate research and support.

ACCG is a family of economic development, finance and equity companies that provides financial and technical assistance to startup firms. Genesis, part of the UA’s College of Engineering, operates to diversify Arkansas’ technology and economic base by fostering developing firms in a research atmosphere.

Bob Friedman, director of Genesis, is readying about 1,000 SF of space for ACCG. He said the inclusion of capital availability through Walls’ firm has motivated not only existing clients but additional clients to inquire about relocating to Genesis.

Friedman said he could not elaborate on who the additional clients might be at this time. But he did describe the interest as “significant.” At last check, four potential clients were readying presentations for the Genesis board.

There are currently 15 clients at Genesis who occupy a total of about 30,000 SF. Another 14,000 SF is lease-ready, save for extensive modifications that could take three to four weeks.

This Walls Can Talk About Investor Perks

Walls still is raising capital for the fund. He said investors should know they receive a 33 percent state income tax deduction for contributing. The deduction may total 50 percent of their tax liability for a given year, but it may be deducted out over a number of years.

Also, the limited partnership only will draw on investor commitments as deals arise. Instead of forking over their entire commitment at once, investors participate incrementally as funds are needed, and in the meantime may use their money to invest in other ways.

Financial institutions can use contributions to AVF to get Community Reinvestment Act credit with federal regulators.

Walls said building startups is a difficult job and that ACCG’s venture capital strategy model has been devised to incorporate both intellectual capital and investment dollars.

The plan includes using mentor groups of investment professionals for support, something he said Northwest Arkansas has in abundance.

“Startups need an environment that’s conducive to people being optimistic about success,” Walls said. “You go to Northwest Arkansas, and there’s this can-do attitude there. You can’t touch it, you can’t put it on a shelf, but you can feel it there. We’re going to try to export that can-do attitude to the rest of the state.”