February 24, 2016
For startups landing in the Arizona desert, finding a place to drop your backpack and laptop is a first priority then it’s off to the races to find capital.
The Arizona tech ecosystem has a wide range of angel and institutional investors that actively seek out deal flow. I asked some of the top angel investors in Arizona what advice they can give to founders looking to raise cash in the cactus state.
Join an Incubator
Some investors suggest for founders to consider joining an incubator, such as Seed Spot, MAC6, Startup Tucson Thryve, Game CoLab, Bunker Labs, BioInspire or one through the larger universities, as it helps investors target businesses that have potential.
According Canyon Angels chairman and founding member Tim Kelley:
“The level of professionalism that comes out of incubators greatly increases the probability of funding; they weed out the ideas that have no execution ability and makes our job easier to filter out the startups who show proof of concept.”
Enter Pitch Competitions
For startups ready to pound the pavement, the next step is to enter local pitch competitions and get in front of top investors.
Top public pitch competitions include Arizona Innovation Challenge (AIC), Venture Madness, IdeaFunding (Tucson) and BioAccel, among others.
“Pitch competitions, such as AIC, are awesome filters – we are all involved in those,” Kelley said.
Research Investment Fund Specialties
As with any ecosystem, investment funds have their specialties and it’s important for founders to do their research and match the stage of one’s company and type of product with a fund’s criteria.
Jim Goulka, managing director of Arizona Technology Investors (ATI) said:
“Only seek money from investors that are interested in your stage of company, in your domain and in your geography. At ATI we’re clear that we only fund companies that have prototypes developed. If an entrepreneur seeks us out for funding at the idea stage, he/she fails the research test, which can have a lasting effect.”
Depending on a startup’s product or service, it might be worth exploring industry-specify funds.
Aaron Call, partner of MediCoventures, said by getting deep into “the network within the industry one can find high net worth individuals that aren’t visible – and finding money might not be acquired through the traditional investment group.”
For example, med and health tech startups could consider the BioAccelerator Venture Capital Fund and hospital systems fund such as Mayo Clinic Ventures and Dignity Ventures, or choose to target angel groups such as VA Angels, Desert Angels or ATI who have life science expertise.
Treat Every Investor Interaction with Respect
When engaging with investors, regardless of their investment preference, it’s important to treat each interaction with respect.
“Respect all investors. They have resources you don’t. Even if they don’t invest in your business, if you operate on the level of mutual respect, they’re likely to make suggestions and introductions. They don’t do this for people they don’t like or for entrepreneurs who deem them too old to understand,” said Goulka.
Improve Your Credit Rating
If a founder decides to seek a loan or working capital from a bank, make sure to clean up your credit and have a solid business plan.
Noreen Bishop, Senior VP regional manager for Chase Business Banking said:
“I would recommend to a startup to have a good credit history, a defined purpose for the funds, history of income that could help qualify founders for the loan and a good business plan.”
To improve your credit rating, Bishop suggests to “separate business from personal expenses and set up a credit card in the name of the business-it’s one good way to demonstrate equity in the business and establish good credit.”
Right Deals, Right Partners
Ultimately, investors are looking for the right deal, and the right partners.
Patrick Armstrong, partner of Canal Partners, said, investors are looking for a business relationship, not a sales pitch:
“Almost every investor has a thesis and experience in the types of companies they are investing in, and are looking for the right ‘fit,'” he said. “Both investors and entrepreneurs need to find the right partnership if they are both going to become profitable.”
For women and minorities seeking capital, there are grants and funds specifically designed for this population.
One such fund is the TOP Foundation – a sponsored project by the Fusion Foundation. Francisco X. Aguirre, CEO and founder of TOP and The Office Pile co-working space said, the joint mission is to “advance education and entrepreneurship for minorities and women, by providing office space, microloans, grants, mentorship and scholarships.”
Have a Story to Tell
Regardless of where you look for the money, at the end of the day, you need to solve a problem and have a good story to tell.
“Raising money in Arizona is like raising money in any geographical location. You have to understand your value proposition to the investors,” TK Keugler, general partner at Wasabi Ventures, said. It’s important to be able to articulate how your business is “poised for rapid growth to become a $100MM plus business in the next three to five years. If you can’t tell that story in a plausible way, you will struggle to attract the correct type of capital as an early-stage startup.”
Other Arizona-grown angel groups looking for a good story include Desert Angels, Canal Partners, Canyon Angels, Tallwave Capital, Thunderbird Angel Group, Grayhawk Capital, and Startup AZ Foundation.
Find more AZ investors, pitch competitions, networking events and more startup resources at Arizona Commerce Authority.
This article is part of a Startup Week content series brought to you by Chase for Business. Startup Week is celebration of entrepreneurs in cities around the globe. Chase for Business is everything a business needs in one place, from expert advice to valuable products and services. Follow the Startup Week action here as we head to 7 cities in the coming months.
Editor’s Note: An earlier version of this article inaccurately referred to Tallwave as an incubator.
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