Hey Arkansas, where are all the investors?

It’s a year and a half into starting Skosay and a big question has come over me. Where are all the investors and more specifically where are they here in Arkansas?  During the last year we have raised $150K of which came from state backed investment vehicles.  We have been so appreciative of this support early on.  This support has been our lifeblood and we have went from idea, to product, to launch, to learn, to pivot all during this time.  We have listened and learned from our customers, have extended our expertise, and have found a viable place in the marketplace.  We have signed national brands and sit within a 30 mile radius of nearly 1,500 customers.  During this time though, we have been operating on a shoe-string budget and making the most of our funds and our hires, all while not paying $1 to a founder of the company.  This is not sustainable in the future, which is why we have started the process of raising additional funds for the company and have decided be a revenue first company and less focused on building technology. When we decided to seek additional funding we set our sights here in the state of Arkansas where our tax credits reside, where our customer traction is carrying us, and most importantly, where our families call home.

At a recent investor meeting here in the state it was mentioned to us that we were too early.  This has been a common theme amongst investors here in Arkansas and even a few outside the state. It made sense when we began our company but 18 months later it seems off.  When we had just begun it was asked of us to go get revenue, customers, and come back in 12 months.  We thought that generating revenue and signing national brands would be enough to gather additional investment.  Maybe we just aren’t sexy enough and honestly, we just need investors to shoot straight with us with a “quick no” as we like to put it.  Our best example of an investor shooting straight with us came from an investment fund in Silicon Valley.  We had a promising face to face and they showed excitement about our team, business, and momentum.  The review went back to the group and within less than a week we had an answer.  It was a “quick no”, but they said that while the group was excited about the opportunity they didn’t feel like they could provide value in the market as it wasn’t within their expertise. 

Another point that has been mentioned by investors here in the state is the question around IP (Intellectual Property).  When the question of IP comes up I need a reason to justify spending our funds on gathering protection when I also need to service customers and pay employees. Being an early stage start-up requires primarily 2 things.  Investment and Momentum, of which the order in Arkansas is the reverse.  That’s ok though and I get it, which is why we have become a revenue first company.  We have carried forward a lot of momentum because our ability to find potential customers has been top notch.  Where we have struggled is gathering the investment.  It’s a “Catch 22” because other groups we have reached out to outside of Arkansas have stated they are just not familiar with the state enough to invest in companies here, “Would you be willing to move to Dallas?”, “Would you be willing to consider locating in Atlanta?”, or even “We require companies we invest in to have at least 51% ownership interest located in our state.”  The tougher part here is to watch our competition move forward.  All the while we have raised $150K, my competition is raising $1MM angel rounds and over $3MM seed rounds in places like New York and San Francisco.  There is a legitimate argument though to be made regarding the cost of doing business in those places, which is much higher and requires more capital.

As a state and group of investors we should set our sights higher on capitalizing on our market expertise rather than simply reducing our risk to the point that an initial investment actually has a limited chance of survival.  I’m not saying my company is the right company for investors here in the state but it sure feels like the right fit.  Check the boxes: revenue, great customers, strong momentum, and what most investors like to a say they love, which is a “strong team”.  If we have anything going for us in the state of Arkansas it’s our industry expertise in retail, logistics, and a plethora of blue collar talent.  I came from a family of blue collar workers, truck drivers to be exact. We also have a lot of potential investors in this state, just take a look around at all of the wealth that has been created by companies such as Walmart, Tyson Foods, JB Hunt, Dillards, ABF, and so many others.  My question remains though, where are all the investors?  I am looking for them.  So far I have met with a few and maybe just not the right ones yet. 

Let me explain what I mean by looking for investors.  You have probably heard of AngelList.  AngelList (www.angel.co) is an online marketplace for startups, angel investors, and job-seekers looking to work at start-ups.  I have heard from some investors though that they simply prefer referral deals, which I can understand, but I’ll raise the question how do we know what deals you are looking for and how are we supposed to find you?  Is it in our best interest to operate on simply a referral basis, where only connections get you in front of somebody?  To date, AngelList, has raised over $100MM dollars, the platform has funded over 240 startups, and over 2,600 investors participated in deals in the year 2014.   All of this information is readily available on Wikipedia by the way at https://en.wikipedia.org/wiki/AngelList. 

Arkansas is a fairly small state by population standards in the US and ranks 32.  There is a probably a disparity between the amount of business acumen in the state and the size of it actually, but I haven’t done that research. Right now on www.Angel.co/Arkansas/investors has 15 people listed for the state, of which 3 have yet to invest.  Arkansas ranks 40th in the amount of people listed on AngelList and what that means for entrepreneurs in the state is that finding investors is actually tougher than it should be.  There are a standard set of funds or groups in the state that nearly every entrepreneur knows about but that doesn’t mean that we are finding every investor and connecting the “right” people. 

The CTA (Call to Action) here is for Arkansas investors to become more active and available, not through AngelList necessarily though, but through your network and your interests that you are looking to be involved in.  Help us find you and who knows, maybe this is the start of a bigger question for us in the state on how we can connect investors and entrepreneurs here.  If you are an investor, a believer, and want to invest in business, technology, entrepreneurs, ideas, the state, our economy, and our future then help us all out (fellow investors and entrepreneurs) by making yourselves available and help us understand your interest.  If it’s related to retail, give me a call.