Editor’s note: This is the second of four stories about the VC FinTech Accelerator program at the Little Rock-based Venture Center. Link here for the first story in the series.
The Venture Center of Little Rock has compiled some impressive statistics in its first two years of operation. Officials with the Venture Center, located in downtown Little Rock, say they have attracted more than 100 startup companies, which have created more than 150 jobs and raised nearly $7 million in capital investment.
More in-depth work is going on as the Venture Center’s leadership and community leaders from across Central Arkansas concentrate on launching 10 startup businesses with headquarters across the world. The businesses are part of the Venture Center’s Financial Technology (FinTech) Accelerator, a 12-week program where the startup founders agree to live and work in Little Rock as they build a viable long-term business.
The bottom line?
Venture Center officials say Little Rock is attracting businesses that every community wants: startups guided by entrepreneurs willing to locate their businesses in communities that pitch in and work together to help them connect to growth opportunities.
“Startups and small businesses are the primary creators of job growth in the U.S.,” said John Haley, a mentor with the Venture Center and a Little Rock business leader involved in supporting entrepreneurs and startup companies. “I’m proud that we have something like the Venture Center here in Central Arkansas and that the business community is supporting this effort to help create an engine of economic development and growth.”
Across the country, more businesses are setting up funds to support startups. Venture capitalists invested $15.3 billion in startups in the second quarter of 2016, according to the MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association, based on data provided by Thomson Reuters. The same group reported that Samsung, HP Inc., Salesforce.com, Kellogg, Campbell Soup and JetBlue, among others, have established funds for investing in startups that can spur business growth.
The Venture Center of Little Rock has created successful programs to help startups establish their business viability as they work to attract investors and contribute to the area’s economic growth. The Venture Center is modeled after some of the best-performing programs in the country, said President & CEO Lee Watson, who helped establish the program with support form other community business leaders. Watson visited many similar programs in the United States and brought best practices back to implement in Little Rock.
“We learned what worked and what didn’t work, and why,” Watson said. “We used that to form a model for the Venture Center that allows entrepreneurs to move quickly to build a business.”
The Venture Center has a four-stage process to build successful businesses:
This process recruits entrepreneurs with business ideas to participate in the Venture Center to test the viability of the idea. The entry program uses a wide variety of events such as mixers and mentoring sessions to funnel the entrepreneurs into the program.
Business ideas that survive the first stage get to this pre-accelerator stage, where they participate in an intensive 14-week “boot camp,” Watson said, noting this stage involves hands-on training to further test the idea and its practicality in the business world. “We work together on how to build a business model, how to develop a customer base along with how to make an investor pitch to help them raise their first round of seed capital.”
The Venture Center has conducted four pre-accelerator programs, and every session produced at least one business that gained customers and attracted capital. The Venture Center is accepting applications for a new session that begins this Fall.
Startups that survive the first two sessions can apply for the Accelerator program, which accepts a limited number of participants for more focused attention. The first accelerator program, concentrating on the FinTech sector, closes its 12-week program in August. Entrepreneurs are put through an intense curriculum that builds a solid business model, hones their pitches to investors and helps them raise capital so they can easily scale their businesses.
“Our sweet spot is the Accelerator program, where we focus on businesses that have the greatest potential for high growth,” said Steve Rice, director of digital strategy and memberships at the Venture Center.
The ultimate goal is for each business to generate $1 million in annual recurring revenue within the first year of operation.
This part of the process is about continued growth over a long period of time. The process emphasizes fast growth with a fixed exit strategy such as private equity, an IPO or acquisition. Annual recurring revenue growth for this stage is $10 million.
FINTECH ACCELERATOR AND FIS
The FinTech Accelerator is the flagship program run by the Venture Center. It has gained support from Fidelity Information Services (FIS,) a global leader in the financial technology industry. FIS provides retail and enterprise banking, payments, capital markets, asset and wealth management, risk and compliance, treasury and insurance, as well as providing financial consulting and outsourcing services.
FIS has assigned its top executives to support the program, meet with the startups and give them guidance and coaching to help grow their businesses. Some of the 10 businesses in the FinTech Accelerator have the potential to provide services to FIS or its customers.
“When we created the Accelerator program, one of our goals was to build something that would have a global impact and leverage resources we have in Little Rock,” Watson said. “The support we’ve received from FIS has allowed us to do that. The partnership with FIS has worked well for what the Venture Center wanted to accomplish, what FIS wanted to accomplish and its worked for the city’s focus on creating economic growth, new businesses, job growth and additional tax revenue.”
The businesses in the Accelerator program all provide services in the wealth management, retail banking and payments spaces. All those services are part of what FIS provides to customers, or what vendors provide to FIS. The company gains the opportunity to help shape the startups so they can either work directly with FIS or one of its customers.
“The entrepreneurs in our program are innovators who can work with FIS or other businesses such as banks that are in central Arkansas,” said Gary Dowdy, managing director of the FinTech Accelerator program. “What makes innovation great is you get to experiment at very low cost and reduced risk. Then you get to decide as an investor when to align your resources with the right entrepreneur or startup business.”