Walton College Releases Inaugural Arkansas Capital Scan

Steve Sullivant

A team of collaborators across the Sam M. Walton College of Business and the Division of Economic Development at the U of A have released the inaugural Arkansas Capital Scan report. This report provides a comprehensive view of the financial resources available to startup and small businesses in Arkansas, across a broad cross-section of capital types. 

Modeled after a similar report published each year by the University of Oregon, the Oregon Capital Scan, the 2020 Arkansas Capital Scan covers the flow of capital to early-stage companies located in the state of Arkansas during a single calendar year. The report overviews angel and venture capital investments, crowdfunding, grants from governmental and philanthropic bodies, and loans from banks and credit unions. It also provides an analysis of other activities influencing the development of the entrepreneurial sector in the state, such as the proliferation of Entrepreneurship Support Organizations (ESOs) and patent filing trends. 

The primary goal of the Arkansas Capital Scan report, intended to be an annual publication, is to help policymakers, investors and other stakeholders in the state identify gaps and opportunities in their support of small business and entrepreneurial development across the state. 

Sarah Goforth, executive director of the Office of Entrepreneurship and Innovation, and Cash Acrey, managing director of the Master of Science in Finance Program in the Walton College of Business, co-led the Arkansas Capital Scan project. 

"We know that 2020 was an anomalous year to be examining any part of the economy, and that was certainly the case for the flow of resources to small businesses and startups in Arkansas," Goforth said. "That said, this project has helped us understand quantitatively what we discuss from a 'boots on the ground' perspective every day within the ESO community. That is, how well are we faring in Arkansas in our ability to provide emergency support to small businesses, and how do we stack up against peer regions in our ability to capitalize high-growth, technology-based firms?" 

This year's report was supported by more than 20 students from the U of A, both undergraduate and graduate. The team collected data from a variety of sources, including Pitchbook, SEC filings, national and state databases, interviews and surveys. 

"We posed to our students a seemingly straightforward question: where is the money? What sort of funds are flowing to founders in Arkansas, and where are the gaps?" Acrey said.

"Our hope is that by including students in the creative process of the Arkansas Capital Scan, we empower the next generation of finance professionals in Arkansas to understand how to navigate and improve the capital landscape for our founders."

An advisory board consisting of government officials, investors, ESO leaders and others was assembled to steer the inquiries in meaningful ways and to facilitate the collection of data. The full report can be found at entrepreneurship.uark.edu/capital-scan. 

Insights from the 2020 Capital Scan Report:

• With the onset of the COVID-19 pandemic, new business applications in Arkansas grew at a historic rate. (pg. 15)

• Patent filings for new technologies and angel/seed investment are on upward trends in Arkansas, but entrepreneurs still report difficulty accessing sufficient seed capital for their businesses. (pg. 37)

• Venture capital investment lags significantly for Arkansas companies compared with peer regions. (pg. 31)

• While businesses in the life sciences received a larger share of angel/seed deals in 2020, venture capital dollars flowed to a diverse set of industries. (pg. 23 & 30)

• Angel/seed investments were made into a relatively diverse array of founders, as compared to national averages. However, 100 percent of the venture capital invested in Arkansas in 2020 went to companies founded by white men. (pg. 24 & pg. 31)

• Companies based in Northwest Arkansas and Little Rock received nearly all of the equity investments in the state. (pg. 24 & 31)

• 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. Credit unions in particular serve as an important liquidity channel for Arkansas small businesses. (pg. 51)

About the U of A Office of Entrepreneurship and Innovation: The Office of Entrepreneurship and Innovation creates and curates innovation and entrepreneurship experiences for students across all disciplines. Through the Brewer Family Entrepreneurship Hub, McMillon Innovation Studio and Startup Village, OEI provides free workshops and programs — including social and corporate innovation design teams, venture internships, competitions and startup coaching. A unit of the Sam M. Walton College of Business and Division of Economic Development, OEI also offers on-demand support for students who will be innovators within existing organizations and entrepreneurs who start something new