LITTLE ROCK, Ark. – Hoping to fill a void of in-state venture capital, the Arkansas Capital Corp. in early September expected a second close on Diamond State Ventures, a vehicle launched earlier this year.
Arkansas Capital, a 42-year-old Small Business Administration-secured lender with assets of more than $100 million, established the fund as an answer to the state’s glaring need for venture capital. According to Venture Economics Information Services, a data company affiliated with Venture Capital Journal, only one Arkansas-based company was among the 2,692 businesses in the United States to receive venture capital investments in 1998.
The need for venture capital in Arkansas to stimulate the state’s economy was “as bold as the nose on your face,” said Joe Haze, the managing partner of Diamond State Ventures, adding that the state’s only other early-stage investors are angels.
The firm will focus on expansion-stage companies that expect to grow through acquisitions and management buyouts in the technology and manufacturing industries, Haze said. Deals will range between $250,000 and $3 million. About one-quarter of the fund will be earmarked for early-stage investments, which typically will receive less than $1 million, he added.
Diamond State, which held a $6.5 million first close in July, expected to close on an additional $3.5 million in the first week of September, Haze said. The vehicle is targeting a $15 million final close by the end of the year. Arkansas Capital will invest as much as $2.8 million in the vehicle. Other investors include Arkansas-based investment bank Stevens Inc. and First United Bancshares, as well as other regional banks and high-net-worth individuals.
The fund also has applied to the United States Small Business Administration for a license as a small business investment company, which would provide the firm with as much as an additional $60 million.
Sam Walls, the chief executive of Arkansas Capital, serves as chairman of Diamond State Ventures, and Larry Carter is a partner.