Lee’s Addition Fuels Expansion Hopes at Virtual Incubation Co.

The addition of former Tyson Foods International executive Greg Lee to the board at Fayetteville’s Virtual Incubation Co. illustrates the firm’s plans to expand its portfolio of companies. 

Virtual Incubation is a technology-venture development firm – an incubator for high-tech Arkansas startups – located in the Arkansas Research & Technology Park. VIC pairs its clients with investors and essentially serves as senior management until they are ready to hire their own full-time team.

While it has numerous ties to the University of Arkansas – founder and president Calvin Goforth is a former UA mechanical engineering professor – VIC is a privately held company. Goforth believes Lee’s expertise can help VIC grow its portfolio of companies from 12 to 20.

“We’re thrilled to have Greg join the board,” Goforth said. “He’ll help us accelerate our vision of taking this to the next level.”

Lee is the former president and chief administrative officer of Tyson’s international division and spent 27 years there. He served on the boards of Tyson subsidiaries including Tyson de Mexico, Cobb Vantress and Specialty Brands, on various trade association boards and chaired the National Chicken Council and the International Foodservice Manufacturer Association board. But his time with the Springdale chicken giant was R&R compared to his “retirement.”

Since stepping down at Tyson (where he still serves as a consultant) in 2007, Lee has not lacked for things to do. He is active with the Northwest Arkansas Business Council, chairs the Technology Development Foundation of the University of Arkansas, serves on the UA’s Board of Advisors, the Dean’s Advisory Board for the UA’s Walton College of Business and the UA’s 2010 Commission.

He was named Northwest Arkansas Outstanding Philanthropist of the Year in 2008 and has received numerous other civic accolades. He is a member of the boards at Washington Regional Medical System and Signature Bank of Arkansas. His tenure on the Research & Technology Park board made him aware of VIC.

“Through my participation on the research park board, I had knowledge of VIC and its efforts,” Lee said. “As my business career wound down, it seemed like a natural. The model they’ve developed is a great model. I thought that I’d love to be a part of this.”

That model entails using private investments and federal grants, mostly in the form of Small Business Innovation Research grants, to nurture its companies to the brink of commercialization. Since its founding in 2003, VIC has brought in more than $25 million in grants for its client companies. It has benefited as well from the state’s R&D tax credits, passed by the state Legislature in 2003, that enable businesses to receive a tax credit of 33 percent of what they spent in a given year on R&D.

“The tax credits are a very important element in making this work,” Goforth said. “The income the grants don’t cover has been a really important element to how we make this work.”

Lee was drawn as well to that model and especially to the potential represented in VIC’s companies, which range from very early stage to almost fully developed. VIC helps bridge that gap by bringing in federal grants, hooking up clients with investors, providing managerial direction and market research, and sometimes by just plain offering advice.

 

‘Instant Management’

It’s that “instant management” aspect of VIC’s guidance that is so valuable, said NanoMech CEO Keith Blakely. NanoMech is a VIC client that is poised to hire its own full-time managerial staff. It could be considered one of VIC’s bigger success stories, having won multiple military contracts for its nanoparticle coatings and additives.

“It’s a very rare circumstance to find an inventor who has the full set of background and skills to build a company from scratch – not to mention access to capital – and who is truly prepared to risk it all to see his technology dream realized,” Blakely said. “VIC offers them an opportunity to advance their idea and product to a point where a better assessment of the commercial viability, technical uniqueness, market interest and manufacturability can be made.”

Lee understands what it takes to make a company successful and appreciates the risks involved in evaluating opportunities.

“I was very impressed with the rigor Calvin and the management team used in evaluating opportunities,” he said. “I was impressed with their ability to actually execute a cadre of services that you have to bring to bear in a very discerning manner. There’s a lot of rigor applied to trying to determine the viability of technology: Is it commercially viable; is it financially viable?”

He thinks VIC has some winners in its stable. SFC Fluidics, which develops laboratories-on-a-chip technology for use in the life science fields, is another client ready to realize its own full-time management team.

“Theirs is a very interesting portfolio with companies at different stages of development. Each, in its own right, has an interesting future,” Lee said. “Because of my long business career, I’ve touched a lot of things these companies are going to have to touch. Maybe my experience could make a difference for them.”

 

Economic Impact

VIC has licensed technologies from research institutions around the world, such as Japan and India, but remains very much rooted in Arkansas. Originally, all the technology originated out of the UA, and now 10 of 12 VIC clients have Arkansas tech associated with them.

All VIC firms are headquartered in Northwest Arkansas. While not all its firms will make it big or perhaps even stay in Arkansas, those that do are expected to have a big impact on the state.

“The economic impact could be big, with very high-quality R&D jobs on the Ph.D. and Master’s levels – scientists and engineers,” Goforth said. “That’s just the tip of the iceberg. Hiring goes up significantly as you emerge out of R&D and into sales.”

Goforth said the companies have the potential to hire hundreds, if not thousands, of people in the not-too-distant future.

“A significant number should stay in Arkansas,” he said. “Even if a company is sold and moves out of state, the economic impact is there because people here will make money from the sale. It’s a cycle that builds on itself. It could become a thriving part of the economy.”

Carol Reeves, assistant professor of entrepreneurship at the UA’s Walton Business College and mentor to its renowned student business-plan teams, credits Virtual Incubation Co. with helping foster entrepreneurship in Northwest Arkansas.

“I think the main benefit VIC has provided over the years is to open up many people’s eyes regarding the possibilities of science- and engineering-based firms,” she said. “It’s hard for me to imagine what the environment for knowledge-based firms in Northwest Arkansas would be without VIC. As is clear from their record, they are experts at leveraging federal research dollars into startup companies. Much of the foundation for the entrepreneurial successes in Northwest Arkansas can be laid squarely at VIC’s doorstep.”

Goforth said VIC had established a “great pipeline” to new technology – which he’s keeping under wraps for now – that he hopes to bring on board soon. He envisions a Northwest Arkansas that could become a high-tech hotbed.

“I think the pieces are coming together,” he said. “You look at the products, the facilities … it’s a compelling story. Things are starting to crystallize here. We’ve not been a hotbed of technological development to date, and Arkansas is not ahead of the curve in terms of overall progress, but folks are impressed by our rate of progress. Our accelerated progress is impressive. There are some very strong groups working together.” 

 

Greg Lee’s Colleagues on the VIC Board

 

Greg Lee is the newest member of the board of directors at Virtual Incubation Co. His 27 years of experience at Tyson Foods fit right in on a board already teeming with Arkansas business leaders.

Here’s a look at the board Lee is joining:

• Calvin Goforth, VIC’s founder and chairman, taught mechanical engineering at the University of Arkansas before founding Vector Inc., a software startup that he self-financed and built into a $500,000 annual revenue firm in two years before selling and moving on to other ventures. Goforth serves on the Science Advisory Committee of the Arkansas Science & Technology Authority.
• Ramsay Ball is a Northwest Arkansas commercial real estate broker. He has formed more than 30 entities that have invested in real estate and venture capital in the region and is manager of CDFP Capital Management 2006-LP, a $35 million real estate fund. He serves as manager of the technology investment company Alpha Fund I and serves on the board of BlueInGreen.
• Clete Brewer is chairman of the board and chief executive officer of BlueInGreen LLC, a VIC portfolio company. Previously, he was CEO of Staffmark Inc. (now Edgewater Inc. of Wakefield, Mass.) and then spent eight years with Sport Clips Inc. as part-owner and president. Under his watch from 2002-09, Sport Clips grew from 42 stores to more than 670 and from $15 million in revenue to $190 million-plus.
• Ted Dickey, of Little Rock, is a chartered financial analyst, adviser to Innovate Arkansas and former chairman of the Arkansas Ethics Commission. He is a former vice president in the Private Placement Group at Stephens Inc. In 2004, he was selected to Arkansas Business’ 40 Under 40 list.
• James Hendren has been a leader in raising the awareness of technology development in Arkansas since the mid-1980s. He serves on the boards of the Arkansas Science & Technology Authority and Accelerate Arkansas and helped organize the nonprofit Association of Knowledge-based Companies of Arkansas. Based in Little Rock, he is involved as an investor-adviser to eight startup technology companies.
• Blair Johanson is president of Johanson Group of Fayetteville and has more than 25 years of business operations experience with a focus on strategic planning, budgeting, hospital and physician management, as well as marketing and human resource management. Previously, Johanson worked with Pendulum Practice Management Co., Physicians Resource Group Inc. and Charter Medical Corp.
• Ruth Whitney is the founder and CEO of InVeritas Research & Consulting of Little Rock. She serves as a strategic adviser to corporate, political and nonprofit clients nationwide based on her expertise in law, government, politics and public opinion. Before founding InVeritas, she built and managed the Arkansas office of Global Strategy Group.

– Mark Carter