Forum Fosters Entrepreneurs

They’re taking risks.
They have the ideas and have done the research. Enterprising Arkansans have plowed countless hours and dollars into innovative concepts. Now some just need a hand- -— one with a few million dollars in it.
At the Arkansas Venture Forum’s fifth annual conference, a number of entrepreneurs pitched their ideas, hoping to entice angel investors to pony up enough capital help to get products and services launched.
The conference, which was held at the Embassy Suites in Rogers on Nov. 16 and 17, attracted about 250 people. Ten companies presented their goals, and information on investments needed to grow their businesses. Profiles of each company begins on Page 18.
Speculative investors at the conference represented at least $500 million of potential investment, said Leslie Lane, vice president for the Arkansas Capital Corporation Group.
The conference agenda included three nationally-known entrepreneurs: Konnin Tam, vice president of Goldman Sachs Asset Management; Dan Sanker, CEO and founder of CaseStack; and Tom Szaky, CEO and founder of TerraCycle.
The AVF and the conference was founded in 2001 with funding from the Arkansas Capital Corporation Group. The goal of the AVFC is to create a supportive environment for entrepreneurs. The AVF is managed by the Arkansas Economic Acceleration Corporation, a non-profit affiliate of the ACCG. The conference was organized by members of the ACCG and other members of the business community from across the state who volunteered their time.
“What we’re trying to do is educate people on this category: how do you use private equity capital and what does it entail,” Lane said.
One purpose of the conference is to educate entrepreneurs on the process and information that is needed to attract investors.
“I think the entrepreneurs start to understand what venture funds are looking for and they’re able to tailor their presentations to that audience,” he said.
Another objective is to educate investors.
“What we’re trying to do there is show that we do have good deals,” Lane said.
That goal was achieved, he said, and investors were impressed with the conference.
“They commented that this was the best bunch that they’ve seen yet, just because the quality of all the deals keeps getting better and better,” Lane said.
“When we were walking away with the venture funds, they were talking amongst themselves which companies they want to put on their watch lists.”
The breadth of venture capital firms went beyond Arkansas Capital Corporation, including Noro-Moseley Partners in Atlanta, SSM Partners in Memphis and Prolog Ventures in St. Louis.
Arkansas Development
For its fifth year, the conference returned to Northwest Arkansas after being held in Little Rock for the last three years. The first conference was held in Fayetteville.
Lane said out-of-state investors seemed to be impressed with the growth and construction they saw in Northwest Arkansas.
“For the state’s benefit, lots of times you have perceptions when you come into a market about what that market’s going to be like, and in Arkansas we didn’t have really a good baseline to measure,” he said. “They didn’t really know a whole lot about us. So that was a good impression.”
Word of the Arkansas conference over the years has spread, attracting more investors and more conferences. The National Association of Seed and Venture Funds (NASVF) will hold its annual conference in Little Rock Sept. 17-19.
Lane said the conference is typically held in cities along the east coast.
“It’s quite a coup for the state to land the conference,” he said.
Choosing Arkansas makes a statement to investors that there are many good investments to be found in mid-America.
“With Arkansas in particular, I think we’ve had some valuable press around the Clinton Library, around the success of Wal-Mart and some of the other companies,” Lane said. “There was a curiosity about what’s in Arkansas, which is a positive for us.”
Lane said the AVF was uncertain about details of its meeting next year now that the NASVF will also be in town.
“It’s a great problem to have,” he said.
“That’s what we need to figure out is how we can, as a volunteer group, work with the national conference.”
Despite the increase in investments, Lane said Arkansas is not yet where it should be economically. For some time, Arkansas has lagged in per capita income, for instance. Research has shown that to improve the situation, the state needs a well-educated workforce to take positions in research and development, at corporations, government labs and colleges. This could open up plenty of growing room, perhaps replicating innovative meccas such as those found at Silicon Valley or Austin, Texas.
“I think there is growth if you look at other states and see what they have been able to do, or look at other regions, and you get some of these entrepreneurial companies, let them grow, and they can be pretty impressive,” Lane said.
Sam Walls III, vice president of Arkansas Capital Corporation Group, said Arkansas has a good history of entrepreneurship, citing businesses such as Wal-Mart Stores Inc., Tyson Foods Inc., Alltel Corp. and Dillard’s Inc.
“Clearly there’s something in the water here that grows good entrepreneurs,” Walls said.
According to the Ewing Marion Kauffman Foundation, in Kansas City, Mo., Arkansas is one of the most active states (tied for fifth) in the country concerning entrepreneur activity.
The rate of activity in Arkansas was 0.47 percent in 2005, which means that 470 of every 100,000 adults in the state created new businesses each month. This is an increase of 0.06 percent from 0.41 percent in 2004.
This is in contrast to 0.29 percent as the national average, with 290 people of every 100,000 starting businesses each month.
“Going from that point where they want to start a business to they’re actually starting a business, you see a pretty high attrition rate,” Lane said. “I think as a region, or anywhere in the Unites States, you’ve got to try to help as many of those people who want to start a business. Then from that point, when they’re ready to start that business, it’s just building an environment where they know they’re appreciated and we’ve got the resource to help them grow the business. If they need venture capital, if they need accounting, legal — what ever they need, they can get it here.”
That is what venture capital does. It bridges the gap, as the saying goes, between investments from the three F’s (friends, family and fools) to the ability to obtain traditional banking sources.
“The whole venture market is about building that relationship, getting the investors comfortable with the opportunity,” Lane said. “That’s what I think was started at that conference.”
(Worth Sparkman contributed to this report.)
Agrobotics LLC
Presenter: Jeff Burton, president
Year Founded: 2006
Location: Little Rock
Industry: Agriculture
Investment Sought: $1.2 million
Agrobotics looks to reap the benefits of its sole product, the patent-pending AutoProbe.
The AutoProbe collects soil sample cores from the ground every 15 linear feet. It can follow a GPS-coordinated track through a field. The machine stores each soil sample in canisters during collection, after which the samples are mailed to a lab for analysis.
Precision agriculture is the concept of using technologies, such as GPS and information management tools to assess variations in soil properties in a field. Once the information is processed, farmers can more accurately apply fertilizers and adjust sowing density. The bottom line is that the AutoProbe may help increase crop yields.
The first generation, tread-wheeled AutoProbe is pulled behind an all-terrain vehicle, such as Gator, Mule or even a lawn mower. Agrobotics plans to develop a self-propelled version of the AutoProbe before finally releasing a fully robotic version in years to come.
The current concept machine was built mostly by the hands of Jim Burton. Agrobotics is working on a beta machine that should be in fields this spring. Production of the first AutoProbe is planned for the first quarter of 2008.
While the AutoProbe can cut sampling time by about two-thirds when compared to machine-assisted or hand sampling, it’s more about precision agriculture.
BioBased Insulation LLCPresenter: Mike Muccio, COO
Year Founded: 2006
Location: Rogers
Industry: Insulation
Investment Sought: unspecified
BioBased Insulation (BBI) is farther along than most capital seekers. The company expects 2006 sales to reach $7 million.
It already has 100 certified dealers nationwide.
BBI is a manufacturer of soy-based spray foam insulation, as opposed to petroleum-based insulation, and has won a number of awards for its environmentally-friendly product.
BBI is working to gain distribution, grow existing installers’ businesses and build relationships with builders.
Mike Muccio, chief operating officer, said BBI is growing by about three new dealers each month, but with added capital, he hopes to push that to about six dealers each month.
Fiberglass insulation captures about 90 percent of the $8 billion insulation market in the U.S., but BBI says the spray foam segment is growing at 20 percent to 30 percent per year, compared to fiberglass’ 5 percent growth.
BBI knows that its insulation costs more than fiberglass insulation, however, the company says its insulation can save consumers 50 percent on energy bills, saving money in the long run.
Spray foam insulation is said to be more durable, provide better indoor air quality and better moisture control.
Elder Stay At Home Inc.
Presenter: W. Steven Carter, CEO
Year Founded: 2006
Location: Rogers
Industry: Health Care
Investment Sought: unspecified
The goal of Elder Stay At Home (ESAH) is to improve the quality of life for older adults through home-centered eldercare.
ESAH has three primary products: a certified home caregiver training program, a continuing education program for nursing assistants and caregiving skills for families. The programs are led through classroom education, as well as Internet and DVD instruction.
The caregiver curriculum was developed at the SCSHE/Reynolds Center at the University of Arkansas for Medical Sciences (UAMS).
The course materials have been used for seven years with 600 caregivers.
Caregiving is becoming an important issue, especially with the aging Baby Boomers.
More than 44 million families are involved with home care, but during the next 30 years, the population of those 65 and older will double.
Providing experience to the company’s management team are two UAMS faculty members.
Larry Wright, serving as ESAH chairman, is a geriatrics professor, and Beth Vaughan-Wrobel, serving as vice president, is a nursing professor.
ESAH expects to take financial losses through 2007, but, Steven Carter, CEO, believes it with turn a profit by the third-quarter of 2008, with income of more than $1 million, with private investment and debt financing.
InterveXion Therapeutics LLC
Presenter: Ralph Henry, scientist
Year Founded: 2004
Location: Little Rock
Industry: Pharmaceuticals
Investment Sought: $500K immediately, $17.2M long-term
InterveXion Therapeutics plans to combat drug abuse with treatments for addiction to methamphetamine (METH), ecstacy (MDMA) and phencyclidine (PCP) with continued funding.
InterveXion believes its therapies meet an unfulfilled need in addiction treatment. The market for these medications rise along with drug use. In recent years, nearly 200,000 new people used PCP.
In 2004, there were more than 400,000 people addicted to amphetamine-related drugs.
In 2004, InterveXion received a $2.8 million Small Business Technology Transfer (STTR) award from the National Institute on Drug Abuse for development and clinical trials for its PCP treatment.
The research has show that InterveXion’s drug medications can treat addiction as well as detoxify patients.
InterveXion is now looking for financing for the development of its medication to treat METH and MDMA. Federal regulations can prove quite a hurdle for pharmaceutical companies, but InterveXion anticipates a relatively short evaluation process by the Food and Drug Administration in part due to the amount of pre-clinical data the company has amassed during its research.
The company would like to position itself for merger or acquisition after Phase II trials, estimated for completion between 2010 to 2012.
KonaWare Inc.
Presenter: Jim DiSanto, CEO
Year Founded: 2001
Location: Menlo Park, Calif.
Industry: Logistics
Investment Sought: $1.5 million
KonaWare Inc. is another budding company with positive revenues. In 2005, KonaWare had revenue of $700,000. Projections for 2006 estimate revenues of $1.7 million and $5.7 million in 2007.
KonaWare offers visibility in supply chains through advanced technologies. It has developed logistics software that is sold directly to motor freight carriers, third party logistics providers, retailers and manufacturers.
Jim DiSanto, KonaWare CEO, said his company’s products provide necessary visibility in supply chains. The software suites allow customers to track shipments and assets, also giving way to improving efficiency, by taking advantage of technological advances in wireless networks and mobile computing devices. The software supports the three major mobile software environments: Java, Brew and Windows.NET.
Customers can pick and choose various applications, building customized business solutions.
“Our solution is very much like a box of Legos,” said Jeff Amerine, vice president.
KonaWare is headquartered in Menlo Park, Calif., where the core software development is done. Its second office is in Harrison and a new office recently opened in Fayetteville. There, the transportation and logistics division further develops the software and focuses on customer acquisition, marketing and consulting.
The company already has more than 30 customers, including GE, FedEx Freight and Tyson Foods Inc.
Mobile Health Services
Presenter: Lyle Williams, CEO
Year Founded: 2004
Location: Little Rock
Industry: Health Care
Investment Sought: $2.5 million
While medical technologies have improved patient care across the nation, rural physicians often have difficulty affording the latest high-end technology. This is where Mobile Health Services (MHS) is stepping in.
MHS has developed a business model where it leases equipment, such as ultrasound and bone densitometry, to clinics that otherwise would not be able to provide such services.
Rural patients who cannot make long trips will benefit the most from the company’s services said CEO, Lyle Williams.
MHS has developed a network of 75 physicians in 22 clinics in Arkansas, representing less than 10 percent of the total market.
The company is seeking revenue to hire sales and marketing personnel (about $300,000) and purchase more equipment for its services (about $2.3 million).
It hopes to continue growing in the state and then move nationwide with help from investors. Using a hub-and-spoke model, MHS has established its center in Little Rock.
But within 2007, MHS plans to add three additional units in area markets: Northwest Arkansas, Texarkana/Shreveport and Monroe/Jackson.
In 2005, revenue was $979,000. Scaling up its services, MHS projects revenue of $4.3 million in 2008 and hopes to obtain $4.7 by the end of 2008.
MHS is owned by JPMS Cox, Mike Lax and Radiology Associates, PA.
Lynguent Inc.
Presenter: Alan Mantooth, scientist
Year Founded: 2001
Location: Fayetteville/Portland, Ore.
Industry: Semiconductor/Electronics
Investment Sought: $1.5 million
Lynguent is an analog/mixed-signal (AMS) design engineer company, co-founded by Alan Mantooth, professor of electrical engineering at the University of Arkansas, and CEO Martin Vlach.
The company is based in Portland, Ore., but has a research laboratory at the UA Genesis Technology Incubator in Fayetteville.
Lynguent’s ModLyng product, which is a sort of computer-aided design software for AMS electronics, will help semiconductor and electronic systems engineers to speed up research and development phases.
Using ModLyng, ports, parameters, equations and topologies are easily checked, so engineers know if a system’s architecture is sound.
Mantooth noted that potential service sectors include consumer electronics, telecommunications, transportation, the medical industry and defense industries.
Two semiconductor manufacturers are serving as beta testers for the ModLyng product, and the company expects to charge about $35,000 per user for a one-year license agreement once the product is released.
The company received two Phase II SBIR grants in 2006 to continue research. Mantooth said Lynguent will roll out its first product in 2007.
The company was seeking additional angel investment capital to help continue the ModLyng product launch through 2008.
Lynndale Systems LLC
Presenter: Bob Dodson, CEO
Year Founded: 1974
Location: Harrison
Industry: Agriculture
Investment Sought: $1 million

Lynndale Systems is an older company that has developed a new product it hopes will revolutionize the agricultural sector.
Lynndale manufactures wood heating systems for residential and commercial use, but the company hopes to exploited a niche in providing systems for heating poultry houses.
The company is now working on a biomass furnace that will burn chicken litter to heat poultry houses. The furnace will eliminate the need for growers to spread the litter on fields (a source of consternation to neighbors and nearby watershed) or having to pay for litter to be hauled away.
Bob Dodson, CEO, said the prototype is thermostatically controlled and can sustain a constant temperature with up to 100 percent litter, significantly reducing the need to use propane or other fuels.
The company claims growers will be able to recoup their costs on the system in two years, or at least have immediate positive cash flow with 4- to 5-year leases on equipment.
Dodson said the company would take a loss of $535,000 on projected sales for 2007, but project that revenue from the system could reach $3.3 million by the end of 2008 and $6.9 million by 2009.
Lynndale is seeking capital to complete its management team, finalize patents, establish a distributor network and continue development of the product.
NN Labs
Presenter: David Battaglia, technology manager
Year Founded: 2001
Location: Fayetteville
Industry: Nanotechnology
Investment Sought: $3 million
NN Labs (or Nanomaterials & Nanofabrication Laboratories) synthesizes pure and uniform sized nanocrystals for various uses in research and production for other universities and companies across the country and in Europe and Asia.
David Battagila, technology manager, said uniform sizes of nanocrystals are very important, especially in semiconductor testing, because the color of light emitted can vary greatly depending on the size of the crystal.
One type of crystal that is 2.5 nanometers will absorb a light and emit green colored light, but if it is 3.5 nanometers, it will emit an orange light.
The company sold its first products in 2002, but Battaglia noted several industries where NN Labs nanocrystals might find a market, including the lighting industry and as biomedical markers.
NN Labs has licensed parts of its technology to another start-up company, Ocean NanoTech of Fayetteville, which is studying nano coatings for goggles for the U.S. Army.
Battagila said the company has about $2 million in research capital available currently.
As of November 2005, it had landed about $4 in SBIR grants.
The company is seeking investment capital to hire a CEO and a marketing director as well as ramp up its manufacturing and distribution capabilities.
Vegrandis LLC
Presenter: Calvin Goforth, interim CEO
Year Founded: 2002
Location: Fayetteville
Industry: Biochemistry/Microelectronics
Investment Sought: $1 million
Vegrandis is pursuing technology that will provide “laboratory-on-a-chip” tests for water pathogens such as Cryptosporidium parvum or Bacillus anthracis, the organism responsible for anthrax infections.
The company’s technology is under exclusive license from the University of Arkansas and was developed by Ingrid Fritsch, professor of chemistry at the UA.
Technology is based on the use of micro-scale electromechanical detection systems.
The company said a wide variety of harmful organisms can be detected with its technology, using small, inexpensive and simple-to-use equipment.
The company’s primary market focus is on point-of-care clinical diagnostics, with secondary markets blood banks and environmental monitoring.
Vegrandis is developing a proprietary chip (hardware) and proprietary biomarkers (to recognize specific substances) and expects to license the chip to third parties so that other biomarkers may be developed and a broader customer base sought.
Goforth said the company has received a total of $3.3 million in SBIR funds and recently obtained $250,000 from two Arkansas capital investment funds, but is seeking more private equity investment to support further beta testing.
Vegrandis’ first products were released in the third-quarter.