VC investments in state startups skyrocket in Q2

According to venture capital reports, Arizona startups raked in over $160 million in funding this quarter. That represents both a quarter-over-quarter and year-over-year increase for startups in the Valley of the Sun.

In the first quarter of 2018, startups raised $67 million – that’s a 138 percent increase in funding in just one quarter. Even more impressive, in the second quarter of last year, startups received roughly $52 million in funding. In just twelve months, Arizona startups experienced a 207 percent increase in investments.

Principal of Tallwave Capital Nate Mortensen explains that the jump in investments stems mainly from quarterly cycles. He states, “If you look at the funding events in Arizona, it’s very cyclical. Looking at Q2, [investing] goes in waves until we have a solid base of consistent companies where the cyclicality evens out. A few of them just happened to succeed in Q2. It’s more based on timing for these specific companies.”

This is consistent with recent investment trends. Although startups did post significant year-over-year and quarter-over-quarter increases, the investments over the past couple years have been fairly volatile. According to a MoneyTree Report, Arizona startups raised just under $170 million in 2017, which is much lower than the approximate $225 million raised in 2016.  

However, Mortensen also notes that investments will continue to increase in the future, explaining, “Over the years, the trend will be up and to the right. There will be some lumpiness [in the trends] based on quarters, but overall, there will be upward growth through the coming years.”

Some of the companies generating the highest investments this quarter include CampusLogic, a cloud-computing student financial services firm, Emailage Corporation, a fraud prevention software company, and Integrate, a cloud marketing software business, which received $55, $50, and $25.6 million, respectively. These are just three of the sixteen firms that generated the whopping $160 million figure.

In fact, Mortensen describes Emailage as a company about which Tallwave is especially excited. He notes, “Emailage is the one we’re very bullish on, based on where they are revenue- and growth-wise.”

When asked about whether or not certain industries gain more traction with investors over others, Mortensen cites healthcare and tech as two major industries that consistently perform well. He adds, “Healthcare and tech tend to divide the funding of most investments. You’ll continue to see that — there are some consumer goods, hardware, and other peripheral areas, but tech and healthcare drive the most investments.”

Although VC investments in startups have been volatile the past few years, this strong second quarter performance is a promising sign for startups in the valley. As more entrepreneurs attempt to start their companies in Arizona, venture capitalists will continue to invest like they did in the second quarter of this year.