‘The Rise of the Rest' And Arkansas

Rod Ford Commentary

‘The Rise of the Rest' And Arkansas
Rod Ford

Steve Case, the famed founder of America Online, the original public portal to the Internet, spoke at length at this year’s SXSW Interactive conference about the national movement of entrepreneurship going regional.

Since the sale of AOL to Time Warner, Case has become a champion of regional entrepreneurship and works with states and regions to direct regional investment into the creation of new companies. He speaks passionately about progressive governors, mayors and city officials investing in programming, financing and infrastructure to reduce dependence on large corporations to provide jobs. Case says communities should choose instead to take control of regional job creation by supporting the birth of indigenous companies.

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Case encourages communities to follow a new approach: “The Rise of the Rest,” which shifts the nation’s heartland away from the old economic development policies of providing big subsidies to recruit large, obscure corporations. Instead, citizens of the region are encouraged to create jobs by redirecting funding to the creation of new, organic companies.

This Rise of the Rest mindset is analogous to recent developments in the U.S. energy sector, which has seen money go for domestic exploration and production rather than oil imports — independence, if you will. Case urges us to redirect tax-sourced investment internally so we can control our own destiny.

In the past five years, three trends have emerged that support the Rise of the Rest philosophy: 1) easier access to capital (crowdfunding); 2) the emergence of the benefit corporation, which allows for profit alongside social good; and, of course, 3) the availability of the full tech stack (cloud computing), where supercomputing is accessible to almost anyone on a rent-as-needed basis.

Listening to Case’s notion that any intelligent and progressive community can indeed become the next Silicon Valley prompted me to reflect on our progress in Arkansas as a Rise of the Rest region.

As I work daily in the Arkansas entrepreneurial ecosystem, I see tremendous progress around many of the programming and capital tenants required to sustain a robust startup world. To our credit, as a state we now have spaces where aspiring entrepreneurs can envision, create and test their products or service ideas: the Innovation Hub. Business startup and launch programming combine to coach the entrepreneur toward a successful launch: the Venture Center. Our state-sponsored accelerator program helps new companies bring their products to market more quickly: the ARK Challenge.

Our consulting expertise has expanded with firms providing experienced coaching for aspiring founders: Startup Junkie and Innovate Arkansas. Additionally, we now have at least seven private funds participating in early stage funding to complement the more traditional state-sponsored sources, as well as forums that connect capital to opportunity: the Natural State Angel Association.

Regarding infrastructure, however, central Arkansas’ grade is near failing as our public-private space, the Little Rock Tech Park, has apparently been hijacked by politics. Four years after Little Rock voters approved a 1 percent sales tax to help fund the Tech Park, it has made no meaningful contribution to the central Arkansas startup scene.

Conversely, the Arkansas Research & Technology Park in Fayetteville is a success and an example of what happens when true leadership and pure motive trump individual agendas.

Mugs Cafe in central Arkansas and Onyx in Fayetteville are examples of private enterprise stepping in to create a destination community for innovators and entrepreneurs.

What’s missing right now, other than the obvious need for infrastructure?

We need more experiential business coaching that teaches our startup founders how to transform an idea into marketable products, products that can be delivered and serviced by a sustainable company. There’s a common misconception that an inventor is always an entrepreneur. There’s also the misconception that a product is an investable company.

Most structured entrepreneurial programming focuses the startup on short-term product development. Sometimes the results can look a little like “startup theater.” Companies are brought in, buffed up, their ideas are formalized and burnished, and then they’re sent out into the market. Some of the graduates are prepared to compete as a company, but most aren’t. Most are simply ideas masquerading as a product. A single product has little sustainable competitive advantage and rarely generates a consistent profit; those single products that do are often quickly copied by the competition, negating any long-term advantage.

To achieve long-term investible company results, the entrepreneur must integrate product innovation with a business model, process and service innovation. Transforming an idea into a product and a product into a company requires the entrepreneur to have the right resources.

I’m not suggesting that the structured programming isn’t beneficial; it helps in the ideate and incubate phase of a startup’s life. What’s missing today for Arkansas to fully join the Rise of the Rest national revolution is the infrastructure for the germinating phase and the business coaching for the dominate phase of a new company’s journey.

Rod Ford is the founder and managing partner of XCelerate Capital of Little Rock, a first-round venture capital investor focused on investing and assisting founders during the early stages of a startup company’s life. He can be followed on Twitter @Fordarodney. For more information, visit XCelerateCapital.com.