Why Phoenix Startups Should Raise Money In Phoenix
There is money in Phoenix
Too many times, I hear the complaint that there is no money for startups in Phoenix. There is a percentage of people who advocate to raise from ecosystems like Silicon Valley or New York, instead of looking around in their own backyard. I’m not a part of that group.
Historically, Phoenix has had success with real estate but not so much in tech investments. Up until recently, there really hasn’t been too many sources of funding for startups here. That has changed as of recent years, which is why I am advocating Phoenix startups to look in Arizona for funding.
Three reasons why Arizona startups should raise in Phoenix
1.) We have the money
Although this hasn’t always been the case, there is money in Phoenix that is looking to be deployed to local high-growth startups. Here is a list of some of the venture funds based in the valley of the sun:
- Arizona Founders Fund — Primarily Seed stage
- Coplex Ventures- Seed and post-seed stages
- Tallwave Capital — Seed and post-seed stages
- Canal Partners — Growth stage
- DWP Investments — Growth stage
- Grayhawk Capital — Growth stage
2.) You won’t get a ridiculous valuation
….and that could be a great thing.
Raising large rounds in markets like SV or NY have their perks, but increase the chances of founders raising a down round in the future.
For example, a company that raises a seed round at a $8M valuation in the bay, would have to grow at a faster rate to justify a valuation of $20M+ to raise a series A round. At the early stage, most startups don’t have their customer acquisition strategies laid out and still haven’t found hyper-growth. With that said, raising a smaller round in Phoenix allows founders to have a little more time to figure out how to reach hyper-growth, without those large valuation expectations.
3.) It develops our capital ecosystem
If you raise from AZ investors and have a nice exit, all that money flows back into the ecosystem, giving the investors more money to deploy to future startups. If you raise from out-of-state investors, and have an exit, that’s great for you, but doesn’t support our local investors. The Arizona Commerce Authority is one of the many entities that is trying to develop our capital ecosystem here. Now, some huge exits may help. If you want to impact Phoenix, start here, raise here, and exit here.
Anyway, why would you want to leave Phoenix in the first place? You’ll miss the beautiful sunsets :)
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