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Report notes unequal distribution of business funds

The 2021 report found that only around 10% of seed funding went to businesses owned by women or people of color.

ARKANSAS, USA — Following a nationwide trend, Arkansas entrepreneurs experienced an influx of seed funding in 2021, although there was comparatively less funding for female founders, according to a report from the Office of Entrepreneurship and Innovation analyzing Arkansas' startup capital.

The 2021 Arkansas Capital Scan found that about 90% of seed funding went to white male founders, with roughly 10% going to businesses started by people who were both women and people of color. Similar demographic disparities were seen among neighboring states Missouri, Oklahoma and Tennessee.

The report, developed with the Department of Finance in the Sam M. Walton College of Business, also found demographic and geographic disparities in venture capital funding. 

Of the state's 11 businesses receiving venture capital funding, all but one were owned by white men. The other was founded and owned by a man of color; no women-owned business received venture capital funding. 

Northwest Arkansas received the bulk of venture capital, with only two cities outside of the region receiving venture capital deals. 

The report noted these demographic and geographic funding disparities in venture capital could have long-term repercussions on the building of wealth and the overall vitality of Arkansas' economy. 

Citing a study from the McKinsey Institute for Black Economic Mobility, racial and gender wealth gaps could cost the U.S. between 4-6% of projected GDP by 2028. 

"We endeavored to develop a landscape scan in an effort to understand the deal flow and identify gaps and opportunities for new programs and policies to attract investment to Arkansas businesses," said Tiffany Henry, instructional designer of training and workshops in the Office of Entrepreneurship and Innovation.

Insights from the 2021 Capital Scan:  

  • NWA continues to drive the majority of Arkansas' venture capital funding (p. 32)
  • The total angel/seed funding going to Central Arkansas firms more than tripled (p. 20)
  • Arkansas' average angel/seed deal size surpassed neighboring states of Missouri, Oklahoma, and Tennessee (p. 19) 
  • Equity-based investments in Arkansas across all stages (seed, angel, early-stage VC, and late-stage VC) significantly eclipsed 2020 (p. 28)  
  • Black women in Arkansas outpace other demographic groups in business creation, but still face an enormous wealth gap compared to companies of white men (p. 14)
  • The number of angel/seed deals for women of color in Arkansas increased from 5 to 14 (p. 23)

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