If Valley-based tech veteran and investor Andy Lombard was asked to name how many venture capital firms exist in Arizona eight months ago, it would have been a 30-second conversation.
Now that’s changing as this year is poised to be a renaissance for new venture capital fund development in Arizona, Lombard told hundreds of attendees at InvisionAZ’s 2023 Tech Summit, held Wednesday at the WM Phoenix Open.
“We have 24 different fund activities that we are looking at right now,” Lombard said, referring to Arizona Venture Development Corp. “We've closed three and there are four more in our deal flow right now in due diligence. I think we're going to have seven in a very short period of time.”
Lombard launched Arizona Venture Development in July as a nonprofit venture capital firm that aims to help close funding gaps, create jobs and promote economic growth in the state.
AVC, which is funded through The American Rescue Plan Act, is especially looking to increase access to capital for underrepresented entrepreneurs, Lombard said.
“This is a huge issue, he said. “VC is the most exclusive industry in the world and we're trying to make it inclusive.”
Lombard’s goal is to elevate Arizona to the top 10 in venture capital funding nationwide, closing the gap with other tech-heavy states like Colorado, Utah and Texas.
AVC plans to invest $87 million in Arizona-based startups, including seed to series A venture funds. It has already catalyzed more than $240 million in investments statewide, Lombard said.
As part of that effort, Lombard announced Wednesday he became a limited partner with AZ-VC, which is led by chairman Jack Selby and is the largest venture capital fund in the state. Lombard will also serve on AZ-VC’s board.
“The time is now to start building our future leaders and we have a number of initiatives that we're going to go after to do that,” Lombard said.
It’s critical to invest in Arizona’s underrepresented startups as it could boost Arizona’s GDP by $10 billion to $20 billion, Lombard said, citing statistics from Boston Consulting Group.
“We're also saying, ‘We're not changing the talent force. We're actually just tapping into it,’” Lombard said. “And it's a darn good business decision to do that.”
Venture capital trends
Lombard also led a panel of venture capital investors at the sixth annual InvisionAZ Summit, which drew an audience of entrepreneurs, business leaders and investors.
The panel consisted of Samantha Bradley, managing director of ASU RealmSpark; Justin Bayless, founder of the Journey Venture Studio and Chris Erickson, general partner of Pangaea Ventures.
Arizona is facing a significant labor shortage — particularly in the STEM sector — and it’s vital that the state focuses on building a strong workforce, Bradley said.
RealmSpark has invested capital in educational software platform CogBooks; InScribe, a platform that leverages artificial intelligence and Gradarius, a personalized math engine.
“Those three startup companies, along with Arizona State University content, will create a learning system that we hope — if we do our jobs right — change the way that STEM education is taught across Arizona and, hopefully, nationally,” Bradley said.
Bayless recently launched Journey Venture Studio, a nonprofit focused on serving diverse and underrepresented health care startups.
“My dream is we find an entrepreneur in Chicago, who has a family that has been desecrated by diabetes and wants to start a company to solve diabetes management,” Bayless said. “We bring them to Arizona — my hometown — we put them up in our program for 12 months and we co-found a company together that is going to solve that crisis. And they go back into their community in the future or they stay here and develop that concept over time to really solve that issue.”
Pangaea Ventures, a global venture capital firm, recently opened an office in the Valley based on its talent pipeline from local universities and growing semiconductor industry. Pangaea invests in clean energy and environmental technology companies.
“…Our deal flow in Arizona is fantastic,” Erickson said. “We look forward to investing here and working with people like Andy and our other panelists.”
Gov. Hobbs talks innovation
At a separate panel at the InvisionAZ Tech Summit, Robert Robbins, president of the University of Arizona, sat down with Gov. Katie Hobbs to discuss how to ensure Arizona remains a leader in innovation.
“We have to look at who's at the table and make sure that we're making our leadership as diverse as possible and I focused on that in my administration — making sure that we have diverse perspectives and voices at the table,” she said.
It’s also important to develop more funding sources in the state, including microlending, venture capital and community development financial institutions, Hobbs said.
“I think when we look at folks who can traditionally take advantage of venture capital, the communities that have been excluded don't have access to these kinds of funds,” she said. “So if we're looking at diversifying, we have to diversify those revenue sources.”
In addition, Arizona will need to address how to responsibly manage its water supply as technology and innovation depend on it, she said.
“We have some significant challenges there. We're ready to tackle those challenges and we are also on the forefront of being able to tackle some of the climate challenges that we're facing here in the state,” she said. “We have a lot of opportunity and I'm excited about it.”
