Arizona Venture Capital Numbers Way Down

October 04, 2013

Let’s say you believe you have come up with an idea that’s going to revolutionize an industry—that you’ve figured out the next big thing. But you’ve checked your pockets, pretty empty. The savings account? There’s not much saved. You’ve got a plan—a well-organized, viable plan—but you need investors.

Venture capital could be the way to go. You’ve probably heard of venture capital. Usually it’s associated with start-up firms in Silicon Valley that are drawing attention.

“Venture capital tends to be at the earlier stages of growth for a company,” said Dennis Cornelius, CEO of Scottsdale-based CKS Securities.

“The typical start-up will get their funds from friends and family and then get off the beginning blocks,” Cornelius said. “Then they would go to a more formalized source, which may be angel investors and there are several of those groups in Phoenix. Then, there are some very sophisticated venture capital firms.”

According to the U.S. Commerce Department’s Bureau of Economic Analysis, the Valley saw more than $200 million in venture capital investment in 2012. That same group reports the Valley was only at $8.5 million through June of this year. Cornelius says the area is attractive to investors from New York to Shanghai, but ideas have to be promising and presented well.

“We see a lot of businesses that say ‘I’ve got this great idea. Just look on the back of this napkin. I can show you how it works.’ It takes some time and energy and investment to get it to a level to attract money,” Cornelius said.

Ed Zito, President of the Phoenix-based Alliance Bank of Arizona, is convinced that more synchronized efforts between business and government have the area moving in the right direction.

“With some of the leadership we’re getting from the likes of the Flinn Foundation and then the business sector, we’re really aligned and making meaningful, impactful progress on capital formation and, specifically, the availability of venture capital,” Zito said.

What, though, explains the lower venture capital figures? Zito isn’t sure but explains,

“If you were to do kind of a chronology or timeline on this, I think you would see that, in addition to the recession, a year or two was lost in terms of the infatuation with clean tech. Now I think the focus is back to a broader array of software development, sustainability, those kinds of segments and sectors,” he said.

And Zito says a lot of the capital in recent years has been going to more proven ideas and companies rather than those that feel new and, probably, riskier.

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