Arizona venture capitalists posted another strong quarter in Q2 of this year, again exemplifying why the state is becoming a hub for startups.
According to a report by Pitchbook and the National Venture Capital Association (NVCA), Arizona startups raised $209 million in venture capital last quarter across 33 deals – that represents a 30 percent increase in funding over 2018’s second quarter.
“I think it may finally be working,” angel investor and SciFi VC advisor Brad Selby said. “It requires entrepreneurs knowing the language better, traveling more and going to conferences where VCs are, attacking the right problems, getting institutional with university support, and just doing press better.”
Last year, startups had a record year in terms of investments from venture capital firms, according to another report by PitchBook/NVCA. State VCs invested over $538.9 million over 89 deals in 2018, which represents a 93 percent increase over 2017 and its best year since at least 2006, which is as far as the data goes back.
Although state VCs did not have a substantial first quarter, second-quarter investments give the state potential to have an equally strong year. This translates on a national scale as well. According to the report, VCs are not expected to eclipse last year’s record investments, but they are still on pace to post the second-best year in history.
“There’s a third thing that I’ve been seeing a lot out of the companies that I tend to invest in or advise, which is sense of place,” Selby said. “You know, San Francisco and Sand Hill Road – back in the previous cycle it was actual Silicon Valley, now it’s San Francisco – these places that are generally the best place to start businesses. That’s where you find your cofounders and your executives. That’s starting to change – I’ve dealt with more distributed [engineers] in the past six to twelve months than I have in the past twenty years of being a startup guy. I think that’s a really important and incredibly valuable thing.”
According to Pitchbook’s report, the total venture-backed exit value for the first half of 2019 amounted to roughly $188.5 billion – more than every full-year total recorded. In other words, VCs are investing more than ever before.
“A crucial aspect of the flood of big VC-backed exits is the liquidity they bring not only for the companies and their employees but also for venture funds and LPs,” the report notes. “With so many VC-backed companies staying private for longer and with gains consequently staying primarily on paper, some LPs tapped out their allocation to venture. Recent gains flowing back to LPs will allow them to reinvest in venture, so the dip in venture fundraising observed early in 2019 is likely transient and not indicative of declining LP interest in the asset class.”
Arizona ranks in the top ten states to start a business, and the access to venture capital funding is an integral part of that standing; as VC firms grow, so do local startups, and vice-versa. This strong second quarter is a positive signal of another impressive year for startup growth.
This story was originally published at Chamber Business News.