Investment fund of $90M to help Arkansas firms

NewRoad, Kayne team up

Bentonville's NewRoad Capital Partners and Los Angeles-based Kayne Anderson Capital Advisors have teamed to create a $90 million fund to invest in early stage businesses.

The firms announced their partnership and commitment from investors in a news release Thursday, forming Kayne NewRoad Ventures Fund II. The fund was created to build on NewRoad's previous venture, a $21 million fund that largely supported Arkansas companies.

Mike Malone, chief executive officer of the Northwest Arkansas Council, said the partnership is "gigantic news" for the region because it meets a need for funding for growing companies.

"We've been advocating for a large-scale fund, $75 million or more, for a couple of years now," Malone said. "The fund would be able to make larger investments that the angel and bridge funds we do have here in the region ... just weren't able to get to the scale or size of what was needed."

Kayne Anderson, an investment firm founded in 1984, manages more than $19 billion in assets for institutional investors, family offices, high-net-worth and retail clients. The firm's relationship with NewRoad began a few years ago, when it invested in the Bentonville company's first fund.

NewRoad managing partner Clete Brewer said the experience was helpful in creating the partnership because "we like the values of the people there and what they stand for." NewRoad's other managing partner, Jeremy Wilson, said Kayne Anderson's interest in Arkansas also was attractive to the Arkansas company.

"They like underserved markets and see Arkansas as a really emerging opportunity," Wilson said.

The partners plan to invest in technology-based companies within retail, consumer packaged goods, supply chain and logistics, consumer health care, environmental and U.S. manufacturing, according to the news release. NewRoad's typical initial investment, according to its website, is $3 million to $5 million with the possibility for additional follow-up capital.

"We are excited to support this new source of growth capital, which is expected to help drive economic and job growth here in Arkansas and in other capital constrained markets across the country," Gov. Asa Hutchinson said in a news release.

The partners have deployed $6.5 million from the fund to two companies described as an innovative medical diagnostic testing business in Springdale and a software company in Kansas City, Mo.

The partners did not name the companies, but NOWDiagnostics, which produces one-step medical test kits, is based in Springdale and previously received funding from NewRoad. OpenMethods of Kansas City, Mo., announced it had secured $5 million from the Kayne NewRoad Ventures Fund II.

Investments won't be limited to Arkansas companies, but Malone said he is confident there will be plenty for the partners to consider. He also said investment opportunities created through the partnership could help lure companies from outside the state to relocate to Arkansas.

"We definitely know that some Arkansas-based startups are now at the point where they have a management team in place, they've got a history of revenues and are investable opportunities," Malone said. "So there's going to be plenty to look at here in the region. Probably not $90 million worth in the short run, but plenty. So it's enough to meet the needs for the startups that are emerging here now, and it's also an opportunity to serve as a magnet to attract other investable opportunities."

Business on 04/08/2016