Arkansas Economic Development Commission

Companies Look to Smaller Markets for Startup Funding

November 30, 2017

AEDC companies looking to smaller markets for start-up fundingOne of the biggest challenges for startup companies is finding the funding needed to get their idea off the ground. Even with the best business plan in place, if you don’t have enough funding to put your ideas into action, you can’t move forward. So, where can technology startups find funding outside of places like Silicon Valley and other large cities? Believe it or not, small towns often offer more opportunities for finding venture capital than large, tech-focused, metropolitan areas.

Arkansas has been focused on attracting technology-centered firms to the state. With steady job growth, foreign investment, low unemployment and a diversified economy, tech companies from around the world are starting to take a closer look at the state for new business opportunities. To compete with larger markets throughout the U.S., the state has had to develop even more ways to attract new business and qualified talent, and providing venture capital opportunities is a main component. That’s where companies like The Venture Center and Startup Junkie come in. 

The Venture Center
The Venture Center (VC) is a Little Rock-based company that helps entrepreneurs turn their startups into viable, high-growth businesses. By leveraging the expertise of a world-class team of mentors, intensive programming and introductions to the investor community, The Venture Center serves as an engine for economic growth. 

A key Venture Center program, VC FinTech Accelerator – Empowered by FIS, is a rigorous 12-week program designed to accelerate the growth of early-stage financial technology ventures. Selected companies receive a $75,000 initial investment with the potential for further investment up to $300,000 at the end of the program for top performers. The average capital raised by VC FinTech portfolio companies is $1.25 million.

BOND.AI, a conversational artificial-intelligence platform that understands financial goals and enables users to meet those goals in a short time period, is a recent graduate of the VC FinTech program. The company decided to move its headquarters from New York City to Arkansas because Little Rock had the capital, talent and cost-effective environment that the company needed to grow. 

Startup Junkie 
Startup Junkie is a global social venture based in Northwest Arkansas working with startups and existing ventures from a variety of industries to provide services to entrepreneurs and venture leaders. The company specializes in supporting ventures around and within retail, consumer packaged goods, supply chain (transportation and logistics), food and data analytics. 

The Startup Junkie team is comprised of investors, entrepreneurs and project managers with a shared mission to catalyze and foster emerging entrepreneurial ecosystems. The company also facilitates capital access for entrepreneurs through close relationships with commercial banks, alternative lenders, VC’s, PE firms and angel groups.

Success Story: Apptegy
An Arkansas-born-and-raised tech startup, Apptegy, is one of the fastest-growing technology companies in the state. The education-technology startup has seen tremendous growth over the last two years thanks to the support of Arkansas investors and school superintendents who took a chance on a small, local company with a big idea. 

Apptegy raised  $1 million from angel investors in Arkansas and qualified for the state’s Equity Investment Tax Credit program in 2015 and 2017. This discretionary incentive is targeted toward new, technology-based businesses paying wages in excess of the state or county average wage. The program allows an approved business to offer an income tax credit to investors purchasing an equity investment in the business. The income tax credit issued under the program is equal to 33.3 percent of the investment. 

In May, the company announced a $5.7 million growth investment from Kansas City-based venture capital firm Five Elms Capital. This is one of the largest out-of-state investments in an Arkansas technology company in the past decade. As part of the investment, shares purchased by the Arkansas Development Finance Authority (ADFA) were bought back, providing a significant financial and economic development return to the state. ADFA administers the Arkansas Venture Capital Investment Trust that made a $300,000 investment in Apptegy in 2016.

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