The feeling among those in the Arkansas startup space can be described as equal parts optimistic and determined. While the state is still far from where it could be in terms of capital, other avenues of support are hard at work to grow, attract and keep entrepreneurial talent in the Natural State. Looking to 2025, the heads of some of these resources can find much to be positive about.
“I expect to see an uptick in startup activity within the state now that we are past all the inflation talk and the election,” said Brent Birch, executive director of the Little Rock Technology Park. “Things have been relatively quiet on that front, and we are seeing that with our tenancy. The Arkansas ecosystem needs fresh ideas, capable startup leadership and investments to feed that fire.”
Brent Birch
The outlook is encouraging in northwest Arkansas, as well, according to Rodrigo Salas, executive director of Entrepreneurship for All Northwest Arkansas, and Phil Shellhammer, executive director of the office of entrepreneurship and innovation at the University of Arkansas in Fayetteville.
“I’d say it is an exciting time for entrepreneurs and startups in Arkansas,” Salas said. “The state keeps attracting top talent, as well as investment.”
Rodrigo Salas
“I mean, you could put a really nice spin on what you’re seeing,” Shellhammer said. “The startup ecosystem in Arkansas is continuing to grow, I think, quickly because of the amount of support that’s being built around our ecosystem.”
Reactions from outside observers are mixed. A study by National Business Capital ranked Arkansas as one of the worst states to start a business, citing “low rates of per capita business formation … and [Small Business Administration] funding.” On the other hand, Forbes recently placed Arkansas at No. 3 — “a fertile ground for new businesses” — for its “exceptionally low [limited liability company] business formation fee” and a low cost of living.
“Anecdotally, the quality of life, standard of living continues to be a huge attraction,” said Arthur Orduña, executive director of the Venture Center in Little Rock and managing partner at the newly launched Venture Center Arkansas Fund, a $10 million fund that invests solely in Arkansas businesses. “Some fintech companies that we’ve worked with have deliberately made their headquarters in Arkansas specifically because of those, as well as the outsized support at the chamber level.”
Arthur Orduña
Forbes’ methodology also factored in the support businesses find from a variety of different sources, not just SBA funds, and described the state as having a “commitment to entrepreneurial growth” in general. An ever-growing number of incubators, accelerators and other programs further attests to the state’s determination to encourage startups.
“There are more and more ESOs, or entrepreneurship support organizations, coming in,” Shellhammer said. “There’s more capital being brought in here because a lot of the ESO groups around here are really focused on trying to bring capital to the region. There’s more support structure, whether that be accelerators, prototyping support, consulting support, mentorship, advisors. We’re continuing to grow that whole ecosystem.”
Orduña also called the state’s earned-income tax credit “tremendous” for providing an immediate positive return to both local and out-of-state investors. There are no illusions about the continued need for more capital investment across the board, but even that seems to be improving. In addition to a few as-yet unannounced initiatives in the works, Shellhammer pointed out the work of StartupNWA and the Northwest Arkansas Council through its VC Immersion series focused on attracting venture capital.
“[VC Immersion days] bring multiple VCs from around the country and say, ‘Hey, there’s something that’s happening here in northwest Arkansas. You’ve got to come,’ and get them here for a day,” Shellhammer said. “Then they have a ton of meetings and, hopefully, bring in some of that capital into our startups that are here locally. That’s a great initiative.”
In its quest to make entrepreneurship more accessible, EforAll NWA serves mostly what Salas called “mom-and-pop businesses.” Some of the most critical barriers the founders face, aside from capital, range from limited access to technology, networking and mentorship to language and cultural barriers. Progress has been made on those fronts, as well.
“Both the state, as well as local foundations, have been working and investing in resources to lower barriers for entrepreneurs,” Salas said. “They have dedicated funds to increase access to capital to entrepreneurs in our state, as well as invested in attracting business training and mentoring programs, such as Entrepreneurship for All, to give entrepreneurs the tools and resources they need to have a greater chance of success with their ventures.”
Shellhammer and the OEI are addressing other challenges that occur at different stages of a business’ growth. The Entrepreneurial Law Project, in conjunction with the university’s law school, provides pro bono legal support for startups around the state. Working with the Arkansas Manufacturing Solutions team at the Arkansas Economic Development Commission, Shellhammer has also been able to give entrepreneurs access to more local or regional small-batch manufacturing options.
“Then you get into industry needs,” Shellhammer said. “As we can find these experts in our community, and there’s a ton of them, we try and connect them as best we can with our startups because we know they’ve gone through the experience before, and they can give them a ton of advice at that early stage, making sure they take the right steps.”
Phil Shellhammer
As a gathering space for tech-based startups to collaborate and grow, the Little Rock Technology Park has undertaken a multiphase expansion project to provide even more workspace for companies and entrepreneurs. All that is left before opening Phase 2, Birch said, is finalizing a few details to get the approval for occupancy.
“We are doing this development at 421 Main St. in subphases,” he said. “The first subphase is renovating the Capitol Avenue entrance, lobby and the third floor. Labscoop signed on as the first tenant in the new space and will take up roughly 40 percent of the renovated third floor. The plan is to complete additional floors as funding and new tenants become available.”
Making it easier to turn ideas into fully-fledged businesses has allowed more diverse ranks of founders to make their mark on the Arkansas startup landscape. As the entrepreneurs develop and grow, they become a key source of expertise and mentorship for the next generation of founders.
“Seventy percent of the entrepreneurs that we’ve served are females, and 76 percent are people of color,” Salas said. “To give you perspective, at the national level, 40 percent of small businesses are female-owned, so we are seeing a dramatically higher percentage of women starting businesses in NWA, which is amazing.”
The Venture Center is entering the second cohort of its veteran-owned small business accelerator in partnership with the Arkansas SBA. This year, Orduña said, the Venture Center saw double or triple the amount of applications. Elsewhere, the Venture Center is partnering with BioVentures at the University of Arkansas for Medical Sciences in Little Rock for its second cohort of founders focused on the digital health and wellness space. This will also mark the fourth year of the Women Achieve mentorship program.
“The turnout this year was even larger,” Orduña said. “We’re doing a lot of those activities as well in northwest Arkansas, but we’re also seeing entries from the south and from the northeast.”
Just as diverse as the entrepreneurs themselves is the range of industries in which Arkansas’ problem solvers are finding success. In addition to more established arenas such as tech, finance, supply chain and outdoor recreation, emerging opportunities in other industries and areas of the state, including artificial intelligence, show promise for the years ahead.
“In the high-growth arena, I see a lot of momentum in the outdoor and recreation and supply chain spaces,” Salas said. “The state is also investing in attracting AI and AI-enabled startups, which is great. As far as mom-and-pop startups go, the Walton Family Foundation has been heavily investing in bringing the resources that underserved entrepreneurs need in order to have a greater chance of success with their business.”
“I would say there’s a ton of room to grow [in outdoor recreation], and we see it every day,” Shellhammer said. “We started [the Greenhouse Outdoor Recreation Program] 3 1/2 years ago as an incubator. Honestly, when I first started, I was worried there wouldn’t be that many ideas, that we’d kind of run out of people. Now we’re at well over 400 — I think we’re over 500 — ideas that come across our desk at this point, and it doesn’t seem to be slowing down.”
Underpinning those and manifold programs statewide is a sense of community engagement and collaboration that can be hard to find in more traditional startup hubs. Organizations aimed at helping entrepreneurs not only support the founders but work with each other to bolster their collective impact — or as Shellhammer put it, “What’s awesome about our community is everyone will take a coffee.”
“I think you find more and more people want to be in that type of environment,” he said. “Founders are wanting to move here and be a part of this community because it’s an amazing place to live but also because the community around them supports them in a way that other communities didn’t show they would support them.”
The northeast portion of the state, Orduña said, is poised for even more growth centered around the steel industry. An Iowa native, he also sees the potential around agriculture and biotechnology based on successful examples in the midwest. Much buzz to the south, meanwhile, has been focused on lithium, and for good reason. Last year’s inaugural Lithium Innovation Summit, put on by the Venture Center in partnership with the Arkansas Department of Commerce, Standard Lithium and others, brought in more than 800 attendees across industry, government, finance and academia.
“When I think about southwest Arkansas, one thing that is not going away is the fact that there is an extremely large reservoir of lithium-rich brine anywhere from 8,000 to 15,000 feet below the ground,” Orduña said. “That is the very start upstream of what can and should be a really strong supply chain initiative over the coming years. I do expect to see more money, more business, more variations in interest flowing into those particular areas. Proof is in the pudding, obviously, but I think this would be a good year to start seeing some of those early signs.”
For those involved with Arkansas startups at any stage, the focus in the year ahead is to continue finding ways to uplift the state’s budding founders, further solidifying an ecosystem where entrepreneurship can flourish.
“It’s a virtuous cycle, right? The more that we can find and support and have successes, the more in-state and,
especially, out-of-state capital will start looking more heavily at the state,” Orduña said. “I’m not saying that there’s a huge influx yet of that capital, but probably the best takeaway there is we are now very firmly on the radar. It’s up to us to start bringing in and showcasing those opportunities for those kinds of investments.”
“Arkansas is a small state by population but has a long track record of producing some of the world’s biggest brands,” Birch said. “That entrepreneurial spirit lives on, and for companies here to be successful, they will need help from all four corners to make it happen.”
