That’s not the bees of spring you hear buzzing the fresh Arkansas air. Though it looks and feels like spring outside, the dogwoods are still a couple of months out and besides, we’ll get an ice storm or two before then. You know we will.

Rather, the buzz you hear is the sound of Arkansas entrepreneurial worker bees building up an environment for further startup growth. And the bees are busy:

The Iceberg Cometh

The Northwest Arkansas Entrepreneurship Alliance is preparing to launch the Iceberg, the area’s first official coworking space. This is a big deal for the NWA startup community.

NWABJ’s Serenah McKay recently featured the Iceberg in a recent story that was picked up by ArkansasBusiness.com.

On a sort-of-related topic, expect some news in this very space soon concerning Launching the ARK (the “Ark”), the business incubator started by Winrock, the University of Arkansas, NorthWest Arkansas Community College and Innovate Arkansas. These partners teamed to win a highly competitive, exclusive federal grant to launch the program.

Read more about it from AB.com here, and again, expect an update soon right here in INOV8.

Nano Nano

A nanotechnology niche in Arkansas? Could be.

We all know of the work in that field being done in NWA and at UAMS and UALR. Well, now UAMS has launched its own Nanomedicine Center that will serve as a collaboration center between it, UALR and other research partners across the state, including the X-Files like (just kidding) National Center for Toxicological Research in Jefferson.

Remember back in August when Gov. Beebe signed a collaborative research agreement on behalf of the state with the feds concerning NCTR? Well, here you go. Oh, and expect some news soon related to the Bioplex, which adjoins NCTR, as well.

Another ‘Gone in 60′ Pitch

Gone in 60 is back and generating buzz of its own.

As reported in this space and in Fort Smith’s great online paper The City Wire, the latest installment in Jeff Amerine’s awesome Gone in 60 Seconds elevator-pitch contest series for entrepreneurs, aspiring and otherwise, is set.

It’ll go down Feb. 27 at 6:30 from Second Street Live in the Fort. Visit event sponsor Centuria Ventures’ site for more info.

Wasn’t There Something About a LR Research Park?

What about this Little Rock research park? We’d like to say there’s been buzz about it, but the Little Rock Chamber, which is basically running the show, has been tight lipped.

Little Rock voters, you’ll remember, voted in September to fund a sales tax hike that in part would provide funds — 22 mil of it or so — to get the ball rolling on a research park that would serve in part as a foundation for the collaborative research between UALR, UAMS and its BioVentures program, and the Arkansas Children’s Hospital Research Institute.

The plan calls for a 30-acre site somewhere in Midtown between the UALR and UAMS. The Arkansas Times has done some good digging, and provides about all there is to know so far. We do know there is an entity called the Little Rock Technology Park Authority to oversee plans with members representing UALR, UAMS, the city and Chamber.

Representing UALR are the legendary Dr. Mary Goode and Bob Johnson; representing UAMS are AT&T’s Ed Drilling and BioVentures director Michael Douglas; the city — developer Dickson Flake and C.J. Duvall of Alltel Wireless, and the Jay Chesshir represents the Chamber.

Check back for tabs on future meetings and progress.

Magna Makeover

Our buddies at the Arkansas Science & Technology Authority want to brag on a client firm, Magna IV. Without further adieu..

Arkansas Science & Technology Authority Client Magna IV Transitions from Print Shop to Communications Expert

The credibility and accessibility of the Internet, particularly in the last decade, has revolutionized the way we communicate, both personally and professionally.

Yet no industry has faced quite the challenge brought about by the growth of online activity as that of print production. Company web sites have become the first and primary reference point for consumers, greatly decreasing the need for traditional pieces such as brochures or pamphlets. Surviving on large-quantity printing jobs is no longer a safe business model, and printers such as Arkansas Science & Technology Authority client Magna IV Communications (formerly Magna IV Printing) have focused on innovation in an effort to remain a relative part of business communications.

“This is not the first time we’ve faced challenges from new technology,” says Kent Middleton, president and founder of Magna IV, which celebrated its 35^th anniversary in 2010. “When the digital press became the industry standard, we had to become more than just ink on paper. The same applied here.”

As online communications became more widely trusted in the 2000s, Magna IV’s general print jobs (those on a transactional basis) were steadily decreasing.

Customers needed more,” says Middleton. “If we just did printing, they didn’t want to talk to us.”

However, demand from the company’s restaurant clients, especially those with a franchise base, continued to increase. To capitalize on market demand, Magna IV built an interactive portal that gave franchisees the ability to customize and print corporate-approved collateral and materials.

“A franchisor might have thousands of restaurants in the U.S., and each offers custom promotions and menu items,” adds Middleton. “Our portal system helped streamline the corporate approval process, keeping the brand intact while speeding up production and delivery. We became an all-in-one shop for franchises.”

To ensure additional internal processes complimented both the portal system and new industry technology, Magna IV participated in lean manufacturing and quality management programs offered by Arkansas Manufacturing Solutions, a program of the Arkansas Science & Technology Authority. The programs helped reduce waste and downtime, increased productivity and improved overall product and service quality.

“Long, single project print runs that use to take us days can now be completed on-demand,” says Middleton. “The AMS processes helped us gain the business of clients that may not have considered us before and has enhanced the workforce. The transition to an industry requiring minimal human touch has created a strong demand for well-trained, highly skilled professionals.”

Magna IV does print production, online marketing, grassroots marketing, direct mail, variable data print/cross media campaign consultancy and graphic design. It seems only fitting that the company complete the transition by re-branded itself Magna IV Communications during the last quarter of 2010.

As for predicting a key to future success, Middleton points to Magna IV’s ability to meet the flexible demands of a fast-paced, rapidly changing client-base. “We’ve always been on the forefront of what people need and that’s helped us grow.”

(In the meantime, is it too much to ask the Ice King to kill off the freakin’ ticks and fleas? Apparently, he’s too busy chasing princesses…)

Jeff Amerine

With the recent flurry of new startups, angel investment activity, accelerators, startup co-working spaces and networking events, 2012 may well be The Year of the Startup in Arkansas.

Why now? What’s different?

In Arkansas over the past 10 years or so, a steady march has been underway toward creating a robust venture ecosystem. The process began with the Milken Institute assessment in 2001. That report clearly identified the crucial linkage between education, innovation, entrepreneurship and achieving a higher standard of living.  Flowing from the recommendations of that report, Accelerate Arkansas sprang to life.

Accelerate Arkansas, comprised of notable Arkansas business leaders, developed a series of important initiatives to help address the major challenges Milken identified. These initiatives included the creation of the Arkansas Research Alliance (ARA), Innovate Arkansas (IA) and the Arkansas Risk Capital Matching Fund (ARCMF).

ARA, modeled after the Georgia Research Alliance, works to attract “rock star” researchers to Arkansas’ universities. IA, modeled after I2E in Oklahoma, provides mentoring and coaching to substantially improve the prospects for growth of technology and knowledge-based startups. ARCMF provides matching investment when qualifying early-stage companies have raised investment capital from other private sources.

The ARA, IA and ARCMF coupled with other startup-focused incentives and support from Arkansas Science and Technology Authority (ASTA), the Arkansas Economic Development Commission (AEDC), Arkansas Capital Corporation, and the Arkansas Small Business and Technology Development Center (ASBTDC) have created a startup friendly environment in Arkansas.

In addition, in 2011 the Fund for Arkansas’ Future (FAF), the largest, oldest, and most active angel fund in the state, continued to play an essential role in providing needed early-stage capital across the state. FAF was joined in 2011 by Gravity Ventures Arkansas (GVA), a 21-member angel fund focused on investment capitally efficient, high-growth startups.  GVA has made five investments in Arkansas companies during the past year, one of which was a joint investment with FAF.

Moreover, if anyone had doubts about Arkansas’ ability to compete in the startup arena with the best-of-the-best, they need only look at the unmatched national and international success the University of Arkansas graduate business plan teams have had over the past five years under Dr. Carol Reeves’ guidance.

Fortune magazine took notice by highlighting Carol’s leadership and the amazing success or her teams in a 2011 article about the 10 most influential entrepreneurial women in the United States. High potential startups such as BiologicsMD, Cyclewood Solutions, MerchantView and Silicon Solar Solutions would not exist were it not for Carol’s great leadership.

Another clear indication of Arkansas’ ability to compete nationally came in late 2011. A team comprised of the University of Arkansas, Winrock International and Northwest Arkansas Community College won the federal Jobs and Innovation Acceleration Challenge for 2011. The team was awarded a $2.1 million grant from the Department of Commerce to create an information technology and mobile applications focused startup boot camp.

This accelerator, known as Launching the ARK, will begin in the coming months to recruit the best and brightest startups to come to Arkansas from across the country.  The boot camp will engage existing flagship clusters in retail, supply chain, and food processing to identify their top information and mobile application challenges.

The ARK will then turn out 15 high potential, new startups each year, two of which will receive substantial seed investment and the opportunity to do 90-day pilot deployments with customers within the retail, supply chain, or food-processing clusters.

Building on the foundation set by the state, in 2010 the Northwest Arkansas Council commissioned Market Street Services to develop a regional, economic development strategic plan for Northwest Arkansas.  The Council unveiled the strategic plan in January 2011 and began to assemble a “coalition of the willing” to make it happen.

Within the economic development aspect of the Northwest Arkansas regional strategy, significant startup-focused objectives include creating an energetic entrepreneurial culture, supporting the formation of angel investment groups, creating startup incubators/accelerators, enhancing sustainable product development and expanding university technology commercialization.

To begin to rationalize how to implement the various big picture, startup-focused objectives, a framework for the Northwest Arkansas venture ecosystem comprised of programs, places, events and networking has come together over the course of 2011.

To be fair, some of the activities that support the startup environment  were underway prior to the Council’s strategic plan being released.  Even so, the Council’s support brought invaluable legitimacy and advocacy to initiatives such as the(NWAEA), The Iceberg startup co-working facility, the Gone in 60 Seconds elevator pitch contest and the Natural State Angel Association.

Everything I’ve mentioned thus far in the state and Northwest Arkansas serves as little more than accelerant. The fire must come from those with the vision, fortitude and tenacity to actually create amazing new ventures.  Some would question the romantic notion that optimism perpetually radiates from that strange breed we have come to generically refer to as “entrepreneurs.”

I believe it, and I believe the DNA for entrepreneurship in this state at this time can compete with anywhere else in the world.  Some recent examples that give a clear illustration of the growing vitality of the venture ecosystem in the region and state include the successful acquisition of Rockfish Interactive by WPP for an undisclosed-but-rumored-to-be substantial multiple, and the rapid growth and multi-round venture funding success of Acumen Brands.

Out of adversity, necessity or by design, everyday intrepid startup founders in Arkansas dive head long into the chaos of creating something from nothing with a clear knowledge that failure may await.  Yet, even in the face of significant obstacles, the new generation of Arkansas entrepreneur feeds on the spirit of entrepreneurial legends like Sam Walton, J.B. Hunt, Don Tyson, Sheridan Garrison, Jack Stephens and Donald W. Reynolds.

In my view, we have every reason to be optimistic that 2012 will be the Year of the Startup in Arkansas.  Together, we can make it happen.

(Jeff Amerine is an IA advisor, entrepreneurship educator, and officer with the University of Arkansas Technology Licensing Office. Each Thursday, or whenever the spirit moves him, his Techpreneurship blog will appear in INOV8. Drop him a line in comments.)

By Jamie Fugitt, the Startup Lawyer

Controversial proposed legislation in the U.S. Congress will directly impact Arkansas technology entrepreneurs. Popularly called SOPA (the “Stop Online Piracy Act”), or its Senate cousin PIPA (the “Protect IP Act”), the bills target “online piracy” by seeking to curb the pirating of U.S. copyrighted material – movies, TV shows, music, and more – through the internet.

Internet pirates are a multi-billion dollar annual problem for the U.S. However, since most pirates are foreign “rogue” websites, they are untouchable in the U.S. legal system. SOPA/PIPA creates new ways for the government and private parties to attack internet pirates where it hurts them most: access and money. So where is the controversy?

The goal of stopping internet piracy is not controversial; the proposed methods are.

Critics of SOPA/PIPA, including many high-profile technology innovators, argue that SOPA/PIPA jeopardizes their ability to innovate and build next-generation businesses. They point to two proposals in particular.

One. SOPA/PIPA supporters want to allow entire websites to be shut down on short notice for a single piece of infringing material regardless of whether the site owner participated in, or even knew about, the infringing post. This is a significant change. Under current law, websites are granted immunity for infringing content as long as they act in good faith to remove infringing content when they are notified by the rights-holder. Under SOPA/PIPA, lack of knowledge is no defense, effectively requiring site owners to police every piece of content on their site.

Two. SOPA/PIPA, as currently written, allows rights-holders to unilaterally cut off advertising and e-commerce funds to websites by filing a “notice that the site is ‘dedicated to the theft of U.S. property’ – even if no court has actually found that infringement has occurred.” What sites will be considered to be “dedicated to the theft of U.S. property?” Arguably, any site that subjectively isn’t doing enough to police its users. There are no clear standards in the legislation.

Because of the uncertain risk and liability, critics say SOPA/PIPA will “cripple startups.” They call it “American censorship,” pointing to a leading constitutional scholar who judged it an unconstitutional violation of the First Amendment. They call it ineffective, pointing to top IT security scientists who declared it a risk to cybersecurity and “internet functionality.” They call it a generational “schism,” and, my favorite, a “blunderbuss.”

SOPA/PIPA supporters simply accuse critics of hyperbole.

What is clear is that SOPA/PIPA has “exposed a growing fracture” between many traditional industries in the U.S. and the emerging internet-dependent technology industry. This fracture centers on the fact that the internet is the primary driver for the latter, but only a supplement to the former.

As such, SOPA/PIPA is low risk and low cost for many traditional industries, while high risk and potentially high cost for internet-focused entrepreneurs. An interruption in access or e-commerce will inconvenience a traditional business, but it will devastate a web-based one. Similarly, universal policing of content on a site will be a nuisance to traditional business, but it will be a barrier to entire innovation industries that exist through the active and varied posts of their users.

In Arkansas, we are gaining traction in an internet-based economy. We have established job-creating, revenue-generating companies (Doctorpreneur’s Acumen Brands) and are launching others (MyDealCompass, MobileFwd). We have nationally-recognized web-content producers (Oxford American), and programs aimed at bringing and mentoring new talent to the state (The Ark). We have businesses (Innovate Arkansas, Gravity Ventures, Vertical Studio) and co-working groups (The Iceberg) organized to optimize this growth.

The final SOPA/PIPA, whatever it looks like, will present new challenges for our growing internet-based economy and the people who support it. Take note and stay tuned. The debate is continually and quickly evolving. Catch the next formal chapter on January 18, when a group of the highest-profile critics will get their turn in front of Congress.

(Jamie Fugitt is an attorney at Williams & Anderson PLC with a focus on startup law and innovation. He is a graduate of the University of Arkansas and Harvard Law. Contact him at jfugitt@williamsanderson.com)

Jeff Amerine

Techpreneurship, with Jeff Amerine

So, how can the equity ownership motivator best be used? How can equity be offered to key team members in a way that will be fair to the founders, fair to investors and fair to the team?

Most startup junkies — or startup junkies in training (SJITs) — don’t go down the path of creating something new and world-changing because they expect market-level salaries and fantastic benefits. Founders do what they do for a myriad of reasons, many of which have nothing to do with personal wealth creation.

Even so, as a founder, sharing the prospect of equity upside in a venture with co-founders and key team members can be an appropriate motivator if done properly.

Jerry Kaplan, a notable Silicon Valley entrepreneur famously said (I’m paraphrasing to delete the operative explicative),

“Equity is like manure, pile it in one spot and it just stinks, spread it around and amazing things will grow.”

Here are few thoughts based on my years of experience doing options and equity grants wrong, seeing lots of smart people do it wrong, and finally advising others how they might do it right.

• Creating the pool.  At the outset of creating your venture, set aside 10-20 percent of the total authorized shares or membership units for an option pool.
• Options defined.  Options are the legal right (an option) to purchase shares or membership units at an agreed upon strike price (like 1 cent, for example).  Options can then “be exercised” once the options have met the vesting criteria (i.e. longevity, performance milestone, change of control, etc).  The money is made in an option exercise when the market price for the share of stock is more than the strike price, i.e. the reason why a low strike price is advisable. So, in effect, options give the benefit of equity and appreciation in the value of the company without having tax implications until exercised. Options also have no voting rights or control unless at exercise the shares are held.
• How are options earned? There are all kinds of opinions on this. Here’s my preferred approach. Tie the award of options to the achievement of meaningful business milestones.  The milestones can and should be tied to individual, team and company level performance but should also follow the SMART rule for creating the objectives (Specific, Meaningful, Attainable, Realistic and Timely).
• How many options should be awarded? It depends. Look for what comparable companies have done for comparable levels of team members. Benchmark. This is not new ground, and there really isn’t one answer. Do make strata or bands of numbers of available options based on the team member’s level and impact on the success of the venture.
• When do  options vest? Options may not always vest at the time of award and probably shouldn’t. Many times a four-year vesting schedule will be used, and one-fourth of the options awarded against a given milestone vest each year thereafter.  Having a time component to vesting should help keep talent on board with the venture at least through a liquidity event.
• What are acceleration triggers? So, how ticked off would you be if a good percentage of your compensation was tied to options and prior to the options vesting, the company sold?? This was commonplace in some circles in the 1990′s and 2000′s, and is a perfect example of an unethical practice. Acceleration triggers fix that issue. Acceleration triggers allow for all pending options that have been awarded but not yet vested, to vest at the time of company sale, merger, or IPO (Ha! What’s an IPO?? Read about these in history books from the Bubble).

So here’s the sort of startup junkie redneck bottom line on options. Options are a means of sharing in the equity upside (founders – you WANT to do this), motivating performance, making it attractive to stay with the venture, all without giving up control or substantially diluting founders and investors. I have been amazed with regard to how poorly this has been done by lots of successful people who should know better.

Also, don’t try to structure this stuff on your own. Get the best venture-savvy corporate legal counsel you can find and pay them to set up the structure and option agreement templates EARLY in the life of your venture. It will make a huge difference.

So how ’bout it?  Go spread some manure on your team and watch them grow… Wait a minute, scratch that, just be sure to think through how you set up your option pool so everyone can enjoy a nice swim in the Sea of Equity.  That’s a bit better…

Share your equity and option war stories if you got some.  Some of us could wall paper our houses with options gone wrong from the past…but that’s another story for another day.

(Jeff Amerine is an IA advisor, entrepreneurship educator, and officer with the University of Arkansas Technology Licensing Office. Each Thursday, or whenever the spirit moves him, his Techpreneurship blog will appear in INOV8. Drop him a line in comments.)