Innovate Arkansas completed its second year of operation this past December. While there are clear indications that innovation and the entrepreneurial spirit is alive in Arkansas, it is also apparent that increased efforts are needed to bolster technology startup companies in the state.
A little over one-third of the 83 IA client companies are information-technology related. A majority of the IT startups are involved with computer-software development and services. The remaining clients in this category are companies geared to internet specific uses.
This high IT emphasis is not something unique to Arkansas, but is reflective of national trends in the innovations field.
There is substantial activity in the areas of advanced materials, nanotechnologies and semiconductors and other electronics, with 14 new commercial ventures, and the life sciences, including eight biotechnology startups and medical and pharmaceutical companies.
Agriculture-related innovations remain low with three new products in the development stage and another two startups offering new commercial processes.
Aside from the specific areas mentioned, another one-third of IA clients fall into the general categories of business services and products, and consumer-product development.
The majority of the IA technology startups are non-university related initiatives. These may be spin-offs of existing companies, brand new ventures, or in some instances, existing companies that have developed a new product and are ready to take that product to market.
They will range from early stage startups to middle, and in about 15 percent of the cases, they would be considered later stage, already income-producing companies.
The university-related clients (approximately 30 percent of the IA caseload) are by nature predominately early-stage companies, and they are either currently relying on federal grants or have recently completed their proofs of product concept and are now looking to enter the market place.
IA is designed to mentor and support the various business efforts of its clients as they work through a series of "commercialization steps" and assist the clients in presenting to funding sources at the various stages of their development.
It is this financing effort that often offers the biggest challenge to new startups, especially in the availability of early-stage or "proof of concept" funding. Investors are looking for a return on their investments, and the risk involved in early-stage development is too high for venture funds and most angels.
To ease this "high demand - low availability" period, often referred to as the valley of death, IA assists its client companies in preparing investor presentations and strengthening the company's justifications for funding.
State agencies such as Arkansas Economic Development Commission, the Arkansas Science and Technology Authority and the Arkansas Department of Finance and Administration play important roles through providing incentives for private investors.
These incentives include investor tax credits for angel investors and matching funds for leveraging new private sector dollars. Recently, ADFA and ASTA have been given new amounts of risk-capital investment money to assist in early stage investments.
While the challenges are great, opportunities are present for new technology startups, and the state of Arkansas is working hard to assist these new ventures.