Business startups’ chances at funding not equal, UA analysis finds

Venture Capital investments in Arkansas have doubled but remain a small part of the state’s entrepreneurial system. Though funding is on the rise, Black and other minority-group-member business operators remain at the bottom of investment targets.

Those findings from a recent analysis — examining investments in 2021 — issued this month by the University of Arkansas are in line with national statistics, which reveal that Black start-ups receive far less funding than those operated by white men, by far the most attractive to venture capital firms. White male founders in Arkansas received about 90% of seed funding, while the other 10% went to businesses started by women and people of color.

The 2021 Capital Scan reveals that private-equity funding in Arkansas increased from 2020 in all key investment stages: seed, angel, early-stage venture capital and late-stage venture capital.

“The 2021 report follows national trend lines in terms of growth — both the number and size of equity-based investments grew significantly compared with the previous year — but also reveals that this growth was not equally accessed by all,” the research team reports.

There were 25 angel and seed investments statewide in 2021, representing 25 different companies, and investments ranged from $10,000 to $9.7 million. The number of investments were the same in 2020 but individual investments were much higher in 2021 with about half of the deals being more than $1 million. Six angel investments exceeded $5 million.

Medical-marijuana producer Good Day Farms of Pine Bluff drew the largest angel and seed investment at $9.7 million.

Venture capital deals in Arkansas doubled to 12 at a total value of $ 127.4 million, up from $16.4 million in 2020. Average deal size was up 287.5% and seven deals exceeded $1 million. In 2020, there were only two deals of more than $1 million. All but one of the Arkansas businesses that received venture capital funding in 2021 were owned by white men.

Along with racial and gender differences, funding was most often given to businesses in the state’s two most populous regions, Northwest Arkansas and Central Arkansas. Only two businesses in cities outside the region received venture capital deals.

Nationwide, Venture Capital firms raised a record

$128.3 billion in 2021, a 47.5% increase over 2020’s fundraising figure of $86.9 billion.

The report was issued with a warning that demographic and geographic disparities in venture- capital funding might have “long- term repercussions on the building of wealth and overall vitality of Arkansas’ economy.”

In addition to private investments, 19 federal grants were awarded to 13 Arkansas small businesses and entrepreneurs for a total of $6.99 million.

Researchers at the university’s Office of Entrepreneurship and Innovation, in conjunction with the Department of Finance in the Sam M. Walton College of Business began examining venture capital investments in the state in 2020 so there aren’t any robust historical comparisons for the data. The report examined funding options available to startups and small businesses in Arkansas.

“We endeavored to develop a landscape scan in an effort to understand deal flow and identify gaps and opportunities for new programs and policies to attract investment to Arkansas businesses,” Tiffany Henry, instructional designer of training and workshops in the Office of Entrepreneurship and Innovation, said in announcing the findings.

DISTRIBUTION SPACE CHANGES HANDS

A group of three investors have purchased a 184,524-square-foot industrial facility at 6001 Lindsey Road in Little Rock for $8.1 million. The buyers are Exchange Services Inc., Canyon Headlight and Sealy Lindsey Road

The distribution center is located in the Port of Little Rock with easy access to both Interstates 30 and 40. The facility features dock high doors and one drive-in door. Tenants include Conklin Metals, Certifit Auto Body Parts and Stuttgart Flour Milling. The complex is located in a state enterprise zone.

“This facility is a great asset for its new owners,” said Isaac Smith of Colliers of Arkansas, which represented both the buyers and the sellers in the transaction. “Industrial space remains limited in our market and with its accessibility and amenities, this property should have no trouble attracting and maintaining great tenants.”

DOWNTOWN WORKSPACE CELEBRATES

A Little Rock commercial real estate development company that hopes to attract downtown residents and lure high tech firms threw open the doors Thursday to celebrate the grand opening of the former Arkansas Power & Light building at 900 S. Louisiana St.

An investment group led by longtime developer John Flake and his daughter are renovating the 60,000-square-foot office facility, which was built in 1959. Updates will include a large covered outdoor area, an open atrium, conference rooms, office suites and, depending on tenants, a possible restaurant and coffee bar.

“This will be a high-techoriented facility that will attract businesses to the downtown area,” Flake said.

Flake & Co, a commercial real-estate company based in Little Rock, Ark. led by Jessica Flake Dearnley, is spearheading the development. Developers plan to modernize the building, the former headquarters for AP&L (now Entergy Arkansas), and market it as a collaborative workspace. There will also be outdoor areas specially designed for meetings and seating.

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