Groups Responding to Needs of Technology Growth In State

Saturday, January 26, 2002

By Ethan C. Nobles
The Morning News/NWAonline.net

FAYETTEVILLE -- The executive vice president of Arkansas Capital Corporation Group on Friday said both cash and good business practices are needed to get technology firms in the state up and running.

Sam Walls, during the Improving the Odds seminar hosted by Fayetteville's Beta-Rubicon Inc. at the Town Center on Friday, said there's a misconception that money alone can help someone with a good idea turn it into a commercial product or service.

"Money's a component, but it is not necessarily the only component," Walls said.

Arkansas Capital manages Diamond State Ventures, a firm with a pool of $56 million in money to invest in established technology companies in and out of Arkansas. Walls said the firm provides more than just money for technology companies -- expertise from the Mentors Guild. The Mentors Guild, he said, is a group of entrepreneurs offering companies the managerial expertise needed to survive.

That guild will also be involved with Arkansas Ventures, a new pool of venture capital being set up by Arkansas Capital to provide money for newly-formed technology companies.

"It takes a collaborative effort to take startup companies and make them successful," Walls said. Walls mentioned another venture capital organization, Venture Group of Arkansas, is forming and should start considering companies on May 21.

Tim McFarland, managing partner of MCG Financial Advisory Services in Harrison and one of the investors setting up Venture Group, said that organization won't offer a pool of venture capital. However, it will identify Arkansas companies in need of cash to get into business and will help secure money for them.

Walls said he was encouraged by the formation of Venture Group because it's a sign that investors and entrepreneurs are getting together to address the problem of a lack of money for starting technology firms in the state. "A lot of people have been interested in this subject, but they've been laboring alone," he said. "The reality is, we need to work together."

Ron Goforth, president of Beta-Rubicon, has maintained in the past that venture capital is necessary to technological development in the state. Often, he said, banks aren't willing to float loans to businesses that aren't established and don't have significant collateral to pledge. Ken Hammonds, executive director of Arkansas Bankers Association, said during a phone interview Friday that the chances of getting a commercial loan all comes down to the risk.

"The bank wants you to share that risk," he said, explaining that collateral is important to secure a loan. Hammonds said some banks might be more willing than others to loan money to a starting company if it has people on hand with a working knowledge of the technology the company wants to develop.

"They may have some experts in it and be comfortable with it," Hammonds said, explaining that some banks in Arkansas have people knowledgeable about developments in technology while some do not.

Also, he said banks receive considerably more commercial loan applications these days than in the past, so banks are very selective in handing out loans and try to minimize their risk as much as possible.

"It probably is more difficult than it used to be to get a loan," he said.

Venture capital groups, however, are willing to take risks on the development of new technologies in hopes of getting a large return on their investments, Walls said. On Thursday, the formation of the Alpha Fund was announced. That group, based in Northwest Arkansas, focuses on startup companies. Another venture capital pool in the state is Signal Hill Venture Partners.

Walls said venture capitalists in Arkansas will have to cooperate with each other and concentrate on developing technology companies in Arkansas.

"We are in a spirited competition with other states," he said. "The end result of this competition will determine nothing less than whether we will be an exporter of our raw materials and best and brightest.

"We either prosper or we lose together."