Here’s how Metro Phoenix attracts more venture capital


Innovation and Arizona State University (ASU) are essentially synonyms. In the seven years that US News & World Report has offered an innovation category, ASU has grabbed No. 1 each time, surpassing other behemoths such as Stanford University and the Massachusetts Institute of Technology.

One outlet for this creativity is Skysong Innovations, the vehicle that brings ASU research to market. In November 2021, ASU reached a major milestone when it announced that startups in its portfolio had attracted $1 billion in external funding.

READ ALSO: 25 tech startups to watch in the Phoenix metro

“It’s a testament to the quality of ASU technologies coming out of this university,” said Kyle Siegal, senior vice president and principal patent advisor at Skysong Innovations. “This speaks to the growing ability of Arizona businesses as a whole to attract venture capital investment from out of state.”

Historically, the Grand Canyon State has not been a prime candidate for venture capital. CBRE Q3 2021 Life Sciences Trends Report Shows Three Markets Attract 70% of Life Sciences Venture Capital Funding: Boston-Cambridge, San Diego and the San Francisco Bay Area . The same report identifies where the rest of the 30% is allocated, and Phoenix hasn’t attracted enough to warrant a “hot spot” label.

Joan Koerber-Walker is president and CEO of the Arizona Bioindustry Association and president of the Opportunity Through Entrepreneurship Foundation.

Still, Joan Koerber-Walker, president and CEO of AZBio, is optimistic about the state’s future as a magnet for venture capital. “We are making great progress. Every time I get new reports, Arizona gets more and more venture capital,” she says. “But we’re still not in the top 10 because other states have a complete ecosystem. If you are missing even one component, it does not work effectively.

An integrated system

An ecosystem is made up of separate but related parts that impact each other. If a herd of deer has no predators, the herd will overpopulate and stretch available resources until the population recalibrates. Even though the wolf preys on the deer, they both need each other for a healthy existence.

Fortunately, entrepreneurs are much more collaborative than people in the natural world. Brandon Clarke, co-founder and CEO of StartupAZ, describes the startup ecosystem as the humans, assets, and resources that make up a vibrant community. “Universities participate in the ecosystem, as do accelerators, incubators and mentor networks,” he says.

Clarke started StartupAZ in 2015 because he saw the need for an organization dedicated to founders learning from each other.

“As you enter the product market fit research phase, talent and capital become essential, but so does having a peer network of other founders going through the same thing. We took some principles from other CEO-type groups and focused on the early stages, founding CEOs of high-growth tech companies,” he says. “We thought if we could develop this category of leader, it would have a significant impact on our ecosystem. And more importantly, it could help build a stronger, more resilient economy rooted in high-growth technology in the years and decades to come.”

Convincing investors that successful tech or life sciences companies will come from Greater Phoenix is ​​a challenge because, as Siegal notes, venture capitalists want to locate near innovation hubs.

“Historically, it has been difficult for entrepreneurs in Arizona to raise seed capital because the majority of the wealth created in the state has been through real estate, not technology-related investments. “, he says. “It’s about making the case to the venture capital ecosystem over a period of years that they should pay attention to what’s going on here.”

What it initially looks like is out-of-state venture capital providing funding to local businesses and then hopefully relocating in-state and becoming part of the ecosystem. Clarke notes that over the past three years, active StartupAZ members have collectively raised more than $201 million, about 80% of which comes from outside of Arizona.

“It’s a sequential process, but we’re on the right track,” adds Siegal. “If we talk about ASU, we’ve launched over 190 startups. Many of our spin-off companies are based in Arizona, and most of their funding comes from out of state. This means that people outside of Arizona notice the quality of the innovations.

Internal growth

One of ASU and Skysong Innovations’ spin-off companies, OncoMyx Therapeutics, is built around a treatment that uses an engineered virus to attack cancer cells developed by Grant McFadden, professor and director of the Biodesign Center for Immunotherapy, Vaccines and ASU Virotherapy. In December 2021, the company announced a Series B funding of $50 million.

“That’s the exception, not the rule,” says Koerber-Walker. “It’s harder to get venture capital investments here than in places like Boston, San Francisco or San Diego. It’s not that our businesses aren’t better than what they have. It’s because we don’t have start-up venture capital, sometimes called seed capital. Businesses don’t get to a level where they’re ready to venture.

AZAdvances, an initiative of AZBio and the Opportunity Through Entrepreneurship Foundation, is designed to address the lack of venture capital in the state, which Koerber-Walker describes as a significant problem in how to grow the entrepreneurship industry. life sciences in Arizona.

“Venture investors look for certain milestones that a company has passed before it’s ready to write a big check. Going through those doors costs money,” says Koerber-Walker. “AZAdvances is not currently deploying capital, but the goal is to build a $200 million endowment that will then bring $10 million a year in seed capital to Arizona forever. This will allow the most promising Arizona-based companies to come through these doors to attract more capital.

Ultimately, she believes that dedicating resources to our innovation sectors, whether it’s technology, life sciences or advanced manufacturing, is one of the greatest opportunities Arizona has to come out of the pandemic.

“As we invest in these businesses, they will grow and hire people here. These industries tend to have high wages, which strengthens the money supply circulating in our state, so all businesses benefit,” Koerber-Walker concludes. “Every time that money recirculates, the state gets a little bit and it builds our tax base, so we have more money for the important things, like roads, education and taking care of our people. is a wonderful opportunity for Arizona, and it’s time to take advantage of it.


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