Waltons, Alpha are Angels of Tech Boom (Ron Goforth Commentary)

In spite of all the turmoil and anguish resulting from the ongoing stock market volatility, problems linked in many peoples’ minds to a technology bust or an Internet bubble collapse, encouraging progress is being made in Arkansas relative to the creation and nurturing of new tech-based enterprises.

rThe $300 million gift to the University of Arkansas from the Walton Family Charitable Trust Foundation has to be a real boost to the fulfillment of John White’s aspirations for the school to become an important research university. With good results already moving out of the UA’s laboratories and into private sector-supported commercialization, the future with even more powerful and expanded research looks very promising.

rInside the UA, at the vital Office of Research and Sponsored Programs, there seems to be an increased emphasis on supporting commercialization of inventions and innovations of the university’s talented researchers. This support comes in the form of cooperation with the private sector and the willingness to negotiate and consummate business agreements that are fair to all those parties necessary to make the effort successful. Six of the eight client companies of the Virtual Incubation Corp., located here in Fayetteville, emerged from the UA in the last six months.

rSmall Business Innovation and Research funding has been widely considered to be the best source — and in some cases virtually the only source — of very early-stage money for tech start-ups. SBIR funding is highly competitive and it is usually inadequate to take a company from concept to a point where it is ready to offer a commercial product or service. Conventional money is not available to enterprises so immature — even though their potential can be very great.

rFortunately, The Alpha Fund is coming. The Alpha Fund is unique and vital, particularly here in Northwest Arkansas where organized “angel” networks are non-existent. This fund will not only be a means to help support early-stage, tech-centric companies, it is also a vehicle for the participation of investors that both lowers their risk and reduces the burdensome tasks of due diligence and monitoring for individual investments. This fund should close soon and be in full investment mode this fall.

rA new IDC, the Arkansas Regional Industrial Development Co. I LLC, approved by the State Banking Commission in mid-July, was created largely to support and encourage investor interest in the Arkansas Ventures Fund. This encouragement comes in the form of state income tax credits for investors in the IDC. Much to the credit and long-term thinking of Sam Walls, of the Arkansas Capital Corporation Group, this investor incentive is also available to The Alpha Fund through the same IDC.

rThe AVF is itself another resource for the state’s entrepreneurs that is being developed by the ACCG. Sam Walls reports that he expects the fund to close and to be in operation later this year. AVF will fund earlier stage funds than Diamond State Ventures, which is also an ACCG company. rThe infrastructure and support mechanisms to grow our own technology enterprises are coming together.

Consider this scenario: ideas are born in UA labs; Virtual Incubation assists in the formation and start-up of companies based on the resulting embryonic technologies; The Alpha Fund provides very early-stage money to complement SBIR and other research dollars; the maturing but still early-stage companies become candidates for Arkansas Ventures funding and perhaps lease space at the Genesis Technology Incubator; maturing further, the companies become candidates for Diamond State investments; they relocate into the Arkansas Research and Technology Park and start hiring significant numbers of UA graduates; and — low and behold — we have new, significant, home-grown tech enterprise in Arkansas!

rThis is a time of some nervousness in investment and tech enterprise development circles. It is also a time of extraordinary opportunity – if we keep putting together all the critical elements.

r(R.R. Goforth, Ph.D., is general manager of Beta-Rubicon Inc. in Fayetteville, which may be reached on the Web at www.beta-rubicon.com.)