2018 was the year of the Arizona entrepreneur. State startups secured a record number of investments from venture capital firms last year, posting its best year since at least 2006.
According to a report by PitchBook/National Venture Capitalist Association (NVCA), state venture capital firms invested over $538.9 million over 89 deals in 2018. This represents a 93 percent increase over last year and its best year since Pitchbook/NVCA started collecting data in 2006.
Arizona Founders Fund founder Romi Dhillon explains that although the numbers were extraordinarily high last year, the startup presence is nothing new for Arizona.
“We’re the first seed stage fund in Arizona, and there’s a reason why we’ve been so bullish on Arizona,” Dhillon said. “Since the 1970s, Arizona has been home of many public tech startups, like GoDaddy, Carvana, JDA, Avnet, and more. These companies create over $600 billion in shareholder value and thousands of jobs. When you look at these companies, we knew it was just a matter of time until entrepreneurs would be galvanized by Arizona and want to do business here.”
The initial entrepreneurship process then creates a domino effect for future startups. The addition of new companies leads to more capital, which then allows other entrepreneurs to more easily start their own companies. Plus, the initial entrepreneurs are still investing more into the original ecosystem as they continue with their business ventures.
Many industries have grown over the years in Arizona, but Dhillon notes that health care and science create the backbone for state entrepreneurship.
“The industries that Arizona venture capital receives most of its checks in are in life sciences, health-care IT, and software” Dhillon said. “Those are the ones that receive most of their checks. And we have a great startup ecosystem — for example, it is efficient to build a health care system in Arizona. Dignity, Mayo, Banner — these are all co-ops for startups, and venture capitalists have taken note of this.”
Dhillon explains that to maintain a healthy startup atmosphere, an ecosystem must meet eight key criteria: tech companies, incubators, sophisticated investors, new citizens, company networks, software engineering, and regional R&D. With Arizona’s growing population, collection of co-working spaces, college systems, and more, Arizona checks all of these boxes.
Dhillon believes that this is just the tip of the iceberg for Arizona startups. “I think we haven’t even seen the beginning of it yet,” he said.