Even though the national venture capital scene this year isn’t as supercharged as it was in 2021, it showed signs of strength during the second quarter, and Arizona was no exception.
The latest quarterly Venture Monitor report released Thursday by research firm PitchBook and the National Venture Capital Association showed that Arizona companies sealed 39 VC deals during the second quarter of 2022, down from 44 in Q1 and down from the 47 recorded in the same quarter a year earlier.
But even with the lower deal count, the money invested was more than twice that of Q1 2022 or Q2 2021. Arizona companies hauled in $463.08 million during the quarter, up from $201.49 million a year earlier and $227.69 million in Q1.
That funding level was also the fifth-highest quarterly amount Arizona has reached since 2014, which is as far back as the Venture Monitor report goes.
Giving Arizona its biggest boost was a $150 million series D deal in mid-April for Source (Alternative Energy Equipment) — an Arizona State University spinoff founded in 2015 and formerly known as Zero Mass Water. It makes a solar hydropanel that extracts potable water from the air and stores it.
Two other top Q2 deals for the Grand Canyon State included $86 million in series C funding for Postscript, also in April, and $50 million in series B funding for FlipOS in mid-May.
Here are Arizona’s other Q2 deals of $10 million or more:
The bulk of Arizona’s deals were with companies in the Phoenix metro — with 33 in the Valley, five in Tucson and one in Lake Havasu City.
National slowdown
Nationally, the second quarter deal count of 3,374 was down from last year’s 4,268, but the bigger drop was in value. Without the megadeals of 2021, the overall value was $62.3 billion, down from $81.2 billion in Q2 2021.
The report’s authors said the investment drop was to be expected given the economic conditions in place since the start of the year, but they noted that there is a record amount of dry powder — the amount investors still have on hand to invest — that is fueling critical innovation.
“As the market continues to react to volatility over the past six months, the venture ecosystem demonstrates strength as dry powder reaches new heights and fundraising levels surpass more than $100 billion for the second consecutive year,” said John Gabbert, founder and CEO of PitchBook, in a statement.
When it comes to exits, the report said Q2 largely mirrored Q1, with the corporate mergers and acquisitions activity staying steady and a decline in traditional IPOs and SPAC mergers. The total number of public listings from in the first half of 2022 is at 42.
“Exits remain extremely low while late-stage companies act with caution as a result of bearish public market activity,” Gabbert said in a statement. “There are still uncertainties as to what to expect in the second half of the year, however, market indicators show resilience to weathering the potential economic downtown.”
