by Tyler Hale
Startups are launching all over the state of Arkansas. With the help of entrepreneur service organizations like Startup Junkie, The Conductor, The Venture Center and more, entrepreneurs have more resources than ever to utilize as they grow their business.
However, there’s one resource that is critical to growth that isn’t always easy to come by: capital.
One new organization is looking to change the landscape for startups and early-stage companies in Arkansas as they look for capital. The Central Arkansas Angel Network (CAAN), which is launching this week, is aiming to change the trajectory for early-stage companies in the Natural State by providing increased access to capital through a network of interested investors.
CAAN’s two-fold mission is to educate central Arkansas investors on better investment decision and sparking economic development through early-stage investments that will create jobs in Arkansas.
According to CAAN Director Jeff Stinson, the network is filling a void in the Arkansas investment landscape that has opened in recent year. CAAN emerged from Fund for Arkansas’ Future, an investment fund started in 2005 that ran to 2012 as well as a second fund that ran from 2013 through 2019. These two entities did not operate as a network but using a fund model, where a board of investors would make investment decisions for a larger group of investors.
Both of those funds have run their course, along with multiple other similar funds. The result is a lack of sources for capital.
“Five or so years ago, there were six or seven active, formal angel groups in the state – most of those operating in the fund model,” Stinson says. “All of those funds have fully deployed their capital. Right now, officially, there is no organized source of early stage capital. That is one of the primary drivers behind [the network].”
Through the network, companies will be able to apply for capital and individual investors can decide whether or not to make their own investment in the companies. CAAN will serve as the mediator between capital and company, providing the “deal flow” between the two.
Once companies apply and make presentations to the investor group, CAAN will then be able to perform more comprehensive evaluations to determine the investment feasibility of each company.
“We go out and find the companies, so we provide the deal flow back to our members. Every other month, we’ll have member meetings where a number of early stage companies will make presentations to our members. If there’s sufficient interest from our members, then a company will go into what’s called a due diligence process. It’s a deep dive and learning as much as we possibly can about the company,” Stinson says.
“Based on what we’ve heard in that due diligence process, we’ll prepare a report that’s available to our members. That will help individual members [decide] whether they want to invest in the company.”
For investors, they will not be tied into a larger group decision about investing in particular companies. Each investor will be able to make their own decision based on the information provided. “The way the network will operate is that we will all gather early stage companies to present to us for capital, and each individual member will make his or her own investment decision as to whether they want to invest in a company,” Stinson says.
Currently, CAAN is not setting hard goals for its membership for companies or investors. However, Stinson notes that greater numbers of investors will enable more investment in Arkansas companies – leading to greater economic impact
“From a membership standpoint, we just want as many people as possible to sign up,” Stinson says. “The more people we get to sign up to our network, the more investments we can make in Arkansas-based companies.”
In fact, Stinson says there is already interest in the group from both investors or groups. And it hasn’t even launched yet.
The official launch will be Thursday, Jan. 30, at 5:30 p.m., at the Venture Center in Little Rock.“That’s what we consider to be the launch of the Central Arkansas Angel Network,” he says. “That’s where we will host people and tell the story, and people can sign up based on their interest level.”
He encourages beginning and advanced investors to participate. A mix of investors will bring about a greater impact on Arkansas startups.
“The angel network, instead of a fund, is a great opportunity for bringing new people into early stage investing,” he says. “If we don’t have that, it will be very difficult for startup companies to launch. You have to have startup capital.”