An Authority Sponsored Event Makes State Wide News
Wednesday, Sep 19, 2007
Popular investments, state’s resources tied
BY TOBY MANTHEY
Wednesday, September 19, 2007
Arkansas Democrat Gazette
Business Section, pg. 27 & 29
Copyright 2007
LITTLE ROCK — While Arkansas is far from a hotbed of venture capital activity, its natural resources match up nicely with what experts say are two hot investment areas - biofuels and carbon sequestration.
Energy-related investments grew in the second quarter of this year, when they represented 12 percent of “early stage” venture capital deals, or those that involve a company that is not making revenue, said Richard Fox of the Orlando, Fla.-based Astralls Group.
In addition to offering a list of hot fields, Fox listed those that are not popular with venture capitalists.
His presentation was part of the National Association of Seed and Venture Funds’ annual conference being held through today at the Peabody Little Rock hotel.
Kef Kasdin, general partner at the $220 million Battelle Ventures venture capital fund, said that cellulosic ethanol - produced from nonfood plant materials such as trees, grasses or agricultural waste - will attract more venture dollars than corn ethanol.
“Corn ethanol Is going to run out of gas,” Kasdin said, adding it takes resources from food production and other areas.
Kasdin’s take on biofuels was just what Elizabeth Hood, associate vice chancellor for Research & Technology Transfer at Arkansas State University at Jonesboro, wanted to hear. One of the start-up companies she was promoting, of which she is chief executive officer, is Infinite Enzymes.
The company offers a system for producing enzymes used in the cellulosic ethanol industry.
Gov. Mike Beebe, speaking at the conference, said Arkansas wants to be the “Silicon Valley” of cellulosic fuels. But, he added, the state needs capital from seed and venture funds like those at the conference.
Kasdin said carbon sequestration is an area she thinks will see growth, particularly investing in ways to monitor and measure carbon use.
Carbon sequestration Is a process by which carbon dioxide from the atmosphere is absorbed by trees, plants and crops through photosynthesis and stored as carbon in trunks, branches, foliage and roots, according to the U.S. Environmental Protection Agency.
Many Arkansas landowners already are planning to sell “carbon offsets” to industries that emit significant amounts of the greenhouse gases, gases many scientists blame for global warming.
Polly and Dan Foote, for example, own timberlands In Nevada County, and earlier this year told the Arkansas Democrat-Gazette that they hope to sell carbon credits on the Chicago Climate Exchange.
Software for business applications capture the most “early stage” capital deals - about 22 percent, Fox said.
Biotechnology is another hot field. One company that Hood was promoting, Hyphenated Solutions, is developing products that will help rapidly diagnose contaminants in human tissue or fluids.
Energy and telecommunications are other active fields. For example, companies developing hybrid vehicles and celi-phonebased payment solutions are both attracting investors.
Fox said financial services, security and optics have lost their sheen to early-stage venture capitalists. Homeland security also is waning in popularity.
Nanotechnology is one field in which “we’ve gone through the bubble where everyone with a ‘nano’ in their name” receives investment, Kasdln said.
Battelle finds investments not by blindly investing in nanotechnology, but by searching for investments by looking at problems in the marketplace and asking where nanotechnology might be a solution, she said.
Venture capitalists look for a return of 10 times their initial investment in five years, Fox said. They profit when the companies they invest in are sold to corporations that are looking for a return of five times their investment in five years.
