Arkansas report offers possible template for public-private capital access analysis

An inaugural report looking at the landscape of capital resources in Arkansas may be useful to others who are interested in examining the capital access in their state or region. The report will serve as a baseline for trends in public, private and philanthropic investments in entrepreneurship across the state and may be a useful resource as the state plans its State Small Business Credit Initiative strategy.

Topics covered in the report include core economic indicators, angel and venture capital investments, SBIR/STTR awards and small business loans. A team at the University of Arkansas coordinated the 2020 Arkansas Capital Scan, with input from an advisory committee of local stakeholders, and compared their findings to neighboring states Oklahoma, Missouri and Tennessee.

In setting out to understand the flow of capital in Arkansas and identify funding gaps and areas that could be strengthened, the report revealed a number of insights despite the tumultuous year and a limited ability to project capital flows in the coming years, including:

• Angel/seed investment is strong for the region, but entrepreneurs still report difficulty accessing sufficient seed capital for their businesses;
• Venture capital investment lags significantly for Arkansas companies, with the majority of investment coming in from out of state;
• While businesses in the life sciences received a larger share of the angel/seed deals, venture capital went to a diverse set of industries;
• Angel/seed investments were made into a relatively diverse demographic of founders, as compared to national averages; and,
• Banks are a significant source of commercial lending across Arkansas, and dedicate a larger portion of their portfolios to these commercial loans as compared to the national average.

The study also pointed out areas of interest for further study including Economic Development Districts’ revolving loan programs, data regarding city and county governments with grant and/or loan programs targeting small businesses, USDA loan programs, crowdfunding, social impact investing and a greater understanding of the demand-side capital ecosystem.

SSTI members participating in the 2020 Arkansas Capital Scan are the Arkansas Research Alliance, Startup Junkie and the Walton Family Foundation.