The Seed Capital Investment Program: Navigating the Arkansas Risk Capital

Landscape

Seed Capital Investment Program Funding History

• In 1985, SCIP investment fund was established as a Revolving Cash Fund with $1.8 million

• In 2005 the General Assembly and Governor supported an appropriation of $292,653/yr in General Revenue Funds (GRF) to the Authority for seed capital investments.

• In 2010 the Governor released $700,000 in General Improvement Funds (GIF) to the Authority for investment in IA clients.

  Agency Program  

  ASTA Tech Transfer Assistance Grant (SBIR Phase 0)  

  Federal Small Business Innovation Research (SBIR Phase I and II)  

  ASTA Technology Development  

  AEDC/ADFA/ASTA Equity Investment Tax Credit & R&D Tax Credit  

  ASTA Seed Capital Investment Program (Part A)  

  ADFA/ASTA/AEDC Risk Capital Matching Fund (Validation)  

  ASTA Seed Capital Investment Program (Part B)  

  ADFA/ASTA/AEDC Risk Capital Matching Fund (Enterprise Dev.)  

Major Risk Capital and Investor Incentive Programs

TTAG SBIR TDP R&DTC SCIP EITC RCMF

NanoMech as a Case StudyARP* (1996) $ 30,200ARMF* (1999) $ 254,043TTAG (10 since 2002) $ 37,500R&D TC (2004) $ 591,362SCIP (2007-9) $ 500,000EITC (2008) $ 249,983RCMF (2010) $ 500,000

$ 2,163,088

Development Introductory Growth Maturity Decline

Sustain Successful Companies

Growth Entrepreneurship Risk Capital

Develop risk capital that is available for all stages of the business cycle, especially the funding gap.

Encourage entrepreneurship and accelerated new enterprise development.

Sustain successful existing industry through advancing technology and competitiveness.

NanoMech2011

Seed Capital Investment Program Funding Available for Investment

• Revolving Cash Fund $ 1,070,178.32• General Revenue Fund $ 292,653.00• General Revenue Fund $ 700,000.00

Seed Capital Investment Program Investment Portfolio

• Revolving Cash Fund $ 2,940,103.37• General Revenue Fund $ 1,458,120.92• General Revenue Fund $ 0.00

Revolving Cash Fund Investments

Art Exchange (01-SCIP-06) $ 288,146.35 Audio Access (98-SCIP-02) $ 84,284.74 Bentonville Int'l Group (09-SCIP-02) $ 88,000.03 ContourMed, LLC (06-SCIP-01) $ 391,046.60 EquityNet (10-SCIP-17) $ 49,203.15 Immigreat Now (09-SCIP-09) $ 50,000.00 Integral Wave Tech(01-SCIP-05) $ 470,491.30 IZON (06-SCIP-02) $ 226,550.17 Konaware (06-SCIP-03) $ 491,500.61 Merit Builder (09-SCIP-08 GR/SC) $ 7,347.00 NanoMech - Duralor (10-SCIP-16) $ 499,134.80 Prophet Line (99-SCIP-02) $ 50,796.19 Transparent Visibility (10-SCIP-20 GR/SC) $ 7,347.00 Unity Ware (09-SCIP-15) $ 42,650.00 Vision Technologies (00-SCIP-04) $ 193,605.43

General Revenue Fund Investments

Stage 1 Diagnostics (06-SCIP-04 SARs Inv.) $ 292,653.00 Accupal - MSTP (09-SCIP-03 GR) $ 99,131.34 Agri Research Init. (07-SCIP-17 GR) $ 93,994.00 Amer Defense Compon. (07-SCIP-01 GR) $ 97,551.00 AR Power Electronics (07-SCIP-02 GR) $ 97,551.00 Balm Innovations (09-SCIP-01 GR) $ 99,389.74 Infinite Energy LLC (08-SCIP-03) $ 97,551.00 Lynndale (08-SCIP-04 GR) $ 175,000.00 MeritBuilder (09-SCIP-08 GR/SC) $ 92,653.00 Silicon Solar Solutions (09-SCIP-13 GR) $ 200,000.00 Station X (08-SCIP-10 GR) $ 19,993.84 Transparent Visibility (10-SCIP-20 GR/SC) $ 92,653.00

Evaluating Risk Capital Investments

• Targeted Industries Match-Up

• Economic Impact Potential

• Market Feasibility• Technical Feasibility• Management

Strength

• Production Feasibility• Intellectual Property• Financial Health• SBIR/STTR Awards • Syndicate Financing• Level of Persistence • IA Involvement

A Risk Capital “Formula” -Using Multiple Programs Simultaneous

• An early-stage technology company is seeking to raise $1 million in risk capital.

– Seed Capital Funds could provide $250,000 with a matching investment of $750,000. The $250,000 could be part of the match for Enterprise Development Funds.

– Enterprise Development Funds could provide $200,000 with a matching investment of $800,000. The $200,000 could be part of the match for Seed Capital Funds.

– [The matching funds at this point would be $450,000 ($250,000 plus $200,000).]

– An Equity Investment Tax Credit of 33% could leverage a private investment for the remaining $550,000 and generate a $181,500 tax credit for the investor.