Rep. Hill hosts ‘venture summit’ to discuss Arkansas’ startup community

The chief lobbyist for one of the nation’s top small business investment trade groups told Arkansas officials on Wednesday (Nov. 6) that the U.S. is facing a growing “equity gap” that hinders some privately-held, early stage startups with great business ideas from gaining access to capital.

In an hourlong presentation at the Venture Ecosystem Summit sponsored by U.S. Rep. French Hill, R-Little Rock, at the University of Central Arkansas event center in downtown Conway, Small Business Investor Alliance President Brett Palmer made the case that top early stage startups in Arkansas and other rural areas have difficulty gaining access to startup and venture funds because of where they are located.

“There is a real problem, and it’s a national problem, which is the concentration of venture capital that is really 75% to 85% of the investments are in northern California and the New York to Boston corridor, but that’s not where the people are and the great opportunities are,” said Brett Palmer, president of Washington, D.C.-based Small Business Investor Alliance.

“So we have to figure out from a policy standpoint on how to break that concentration, not by tearing down Silicon Valley, Boston or New York, but do you do that in other parts of the country like (Little Rock),” continued Palmer, whose group represents privately-owned and managed investment funds that invest exclusively in domestic small businesses. ”There are a few other states that are working on new models, but there are things that you can here, and some that are different. But that growth equity gap is the biggest gap in the market that I hear about all the time from entrepreneurs that have proven themselves and are successful.”

SERIES A FUNDING CHALLENGES
In the startup world, many early stage companies get their first round of funding by tapping into loans and financing from so-called angel investors. That funding typically comes from close relatives and friends and the company founder has invested his own money. The next round, called Series A, is typically when startup entrepreneurs seek money from the financial community or venture firms that invest in exchange for stake in the company.

Palmer share his views on startup funding and other topics, such as reauthorization of the federal Small Business Administration’s investment program, as the keynote speaker during the morning session of the all-day summit. The event brought together more than 50 central Arkansas small business executives, entrepreneurs, policymakers and others to hammer new ideas, strategies and legislative policies to help the state’s venture community thrive.

Hill, a former banking executive, told Talk Business & Politics the impetus for holding the forum was to bring together all the varied interests and stakeholders in the state’s entrepreneurial community so he can craft better federal legislation to push local startups to the next stage of success.

“I saw this (entrepreneurial community) reaching critical mass, so my objective for this meeting was, ‘What are some more priorities that we can have at the federal level to encourage entrepreneurship and build out the ecosystem?’” said Hill. “And then what can we do at the state level and what ideas do people have to continue to build on that in terms of policy. … I am looking for ideas to help boost the venture ecosystem development.”

Hill also said he believes Palmer’s hourlong presentation provided Arkansas entrepreneurs and policymakers attending the summit with new and better ideas to foster more “Series A” investment for early stage firms across the state.

“For 20 years, we’ve had angel funds that mostly do that and with some with success. But when you rely only on angels, they soon realize they are tapped out but it is a long-term commitment,” said Hill. “I like the idea that Brett suggested that we have an ‘A round’ focus here in (Arkansas) and we bring some people in to meet here locally on how we can do that and boost investment.”

Later during the daylong event, summit attendees participated in two breakout sessions where they discussed legislative solutions and challenges for the entrepreneurial community at the federal, state and local level. Some of the key issues discussed was the nation’s immigration policy, HB1 Visa rules, Opportunity Zone legislation, and regulations dealing with accredited investment definitions.

FINDING TECH TALENT
The luncheon keynote speech came from former Acxiom Corp. CEO Charles Morgan, who now serves as the chairman and CEO of First Orion Corp., a central Arkansas tech firm that provides network enterprise solutions and caller ID management solutions and software for the wireless industry. Morgan told the gathering that privately held First Orion has now reached nearly 200 employees, yet still struggles with finding talent to fill dozens of high-paying jobs in computer science and coding, data analytics and other technology-related professions.

“There is as many smart people in Arkansas as there are kind of anywhere. Our corn grows like the corn in other places, but sometimes it starts off good but we might not have as good of preparation for that corn or as good of a technique to bring it to full realization,” explained  Morgan. “That is kind of what it is like with our (workforce). A lot of people in this state don’t have the knowledge of what is available in this field. There is a lack of awareness.”

To solve that problem at First Orion, Morgan said the technology firm is now training its novice employees internally for up to two years for jobs within the company.

“The skill requirements are even more complex in this technological world, so if I want to pay a scientist then there is a lot of things they need to know, even if they have a good computer science education,” said Morgan. “They have no idea at first how at First Orion what data science really is. They don’t know what kind of tools we use or source code management we use, and they don’t understand how our security systems work.”

Earlier this year, First Orion began construction on its new downtown offices in North Little Rock, where the company’s Privacy Star subsidiary is expected to house its workforce and employees from Inuvo, its thinly traded and closely related sister tech firm.