Arizona entrepreneurs looking for seed money have a new option in Scottsdale and the planned $10 million fund was founded by some familiar faces in the Valley.
Romi Dhillon, who previously led the Arizona Founders Fund, is the CEO and co-founder of the newly minted Sonoran Founders Fund. He said the new fund was a natural progression from AZFF into a larger fund that will make a bigger impact.
“The next generation of Arizona entrepreneurs should not have to leave the state to raise seed capital,” Dhillon said. “We just have so much conviction about that, we think that there's going to be more fantastic startups here, and that we're going to be able to recycle the next generation of seed returns back into the state.”
Dhillon is joined by co-founders Cathy Eckstein, Kevin Groman and Dan Burns. Eckstein is the founder and CEO of marketing consultancy Cornerstone CMO and she was previously the chief marketing officer at Insight Enterprises. Groman is the principal at Crown Canyon Capital, which recently broke ground on a new, exclusive community in Phoenix.
Burns was previously the CEO of athletic training company EXOS in Scottsdale. Working with the Sonoran Founders Fund is a way for him to share his knowledge, he said, after stepping down as EXOS CEO last year.
“As I thought about my next chapter, and where I wanted to spend my time, I'm really passionate about Arizona,” he said. “We live here, we're raising our kids here, we believe in the market here. And we've seen it come so far, over the 17 years we've been here and we've seen the ecosystem for startup companies just evolve dramatically.”
Dhillon said the fund has closed on an initial round of capital with the goal of raising $10 million by the end of the year. The fund will make pre-seed investments of $250,000 and seed rounds of $500,000. Based on those figures, at least 20 companies could receive an investment over the life of the fund.
The fund, which has already started its investing process, is looking for startups building disruptive technologies in business-to-business software, cybersecurity and health care IT. Dhillon said the fund committed to investing at least half of its fund into Arizona startups, but it will also be looking at companies in Southern California, Nevada, New Mexico and parts of Texas.
Access to capital
The Sonoran Founders Fund is based at AZ CoWork in Scottsdale, a coworking space founded by Hamid Shojaee, who announced his own venture fund earlier this year.
Eckstein, Groman and Burns all previously worked with Dhillon when he ran the Arizona Founders Fund. Dhillon said that the four of them started talking about what would become the Sonoran Founders Fund last summer.
Dhillon, who was born in India and immigrated to the U.S. as a child, said that he feels entrepreneurs and business owners have a right to accessing capital, and that the new fund has a special focus on ensuring the startups it works with are representative of the diversity of people in the Southwest.
Burns said the lack of access to capital inhibits founders from reaching their full potential, which is even more acute for historically marginalized communities.
“We have a responsibility to put the work in to find those entrepreneurs who are not just going through the typical channels, because right now they don't feel like they have access,” Burns said.
The next decade
Burns said a lot has changed in the tech ecosystem since his early days at EXOS; When the company received venture funding from a Boston PE group in 2006, he said the firm had its doubts about Arizona's startup scene.
“I think they were skeptical that we could build and scale a company here in Arizona, that doesn't have to be the case,” Burns said, referencing the changing attitudes of out of state investors.
He said that the missing piece in Arizona thus far has been “smart capital,” or capital coming from investors with startup experience who can better support entrepreneurs. The creation of the Sonoran Founders Fund is an effort to fill that gap.
Dhillon said that in the next decade, the state of Arizona will continue to build its growing reputation as a strong tech ecosystem.
“I think we're going to be seeing Arizona really solidifying its position as a relevant, fast-growing technology economy in the Sonoran region,” he said. “I do think that we are going to have hundreds and hundreds of companies every year being founded.”
