An Analysis of InvisionAZ’s AZ-VC Initiative (draft)
Background:
AZ-VZ is the first fund in Arizona focused on investing in startups inside the state. From idea in 2020 to inception and close of the $110M oversubscribed fund in 2022, what draws attention is that it started as an InvisionAZ initiative to grow Arizona’s investor base.
Geography: I think it's interesting to have a fund focused on local deals, in a time when there are so many new VCs, and most in this day and age don’t need or care to be geographically that close to their founders. I believe that now that people can work where they want to live (outside of NY & SV), that's where the important serendipitous action can take place. I do hear from top Texas VCs that they try to move their investments to Austin.
Before pandemic, that magic only existed in Bay Area and NYC because there wasn't remotely the type of investor scene existing anywhere else. Sand Hill Road was the THE road investors had offices on, then it expanded all over the Bay, and now all over the country/world. But, this might be key detail/the competitive advantage of states like Texas, Arizona, and Florida boasting lower cost of living, more space, better standards in general.
Marketing: I like that they extremely promote the network AZ VC has. Jack's network of SV connections, brought to AZ is think is the biggest draw. I also like that they attach their signature event to an anchor (Arizona Open) that not only locals attend but folks from out of state and still aligns with the venture brand. I like that they have board filled with successful entrepreneurs inside the state as well.
Investments: One investment is focused on small biz finances, and the other is around home-building which seem appropriate for state's interest, as mentioned in an article areas that AZ is naturally good at.
EmergeAZ is probably a good deal source for them because in partnership with the Governor's Office, InvisionAZ and StartupAZ helped startups with a Fast Grant program awarding $2.5M to startups addressing economic, health, or societal challenges.
AZ-VC de-risks quite a bit by investing "up the chain" with Series A/B investments versus earlier stages (which is where they mentioned their gaps were), so startups need to show traction with revenue. The fund also mentioning preference for seasoned entrepreneurs. They are open to deal flow outside of the state, but to startups who want to move to AZ. I can see why the AZ Chamber put in some money. AZ-VC is sector agnostic casting a wide net to be more successful, but again, focused on sectors AZ is naturally good at.
Their oversubscribed round means they had more interest from investors ($10M more) than expected and goes to show the big support folks have in their startup ecosystem inside the state. If investors and startups are even on the fence of deciding a place to HQ or just a new community to be part of, it's actions/outcomes like this that help.
Partners: Gov, Chamber, there’s a utilities co, and banks involved— I noted that InvisionAZ promotes this fund on their navigation bar. Even their LPs are inside AZ. But also if he didn't do that maybe it's odd because the fund manager still works at Thiel Capital as an MD, meaning he's active and not just a GP.
Overall: Apparently there was not a single venture firm focused on AZ (for example, Texas has at least 5). It started as an effort from the AZ Chamber to cover a sector of innovation, as one of their key goals to pump up the financing of local startups so I think the launch of that fund is a successful endeavor. This is a great acknowledgment of the startup ecosystem inside their state and I’m excited to see where this goes in 5-10 years, so definitely keep an eye out.
Other Funds: Other examples of funds I’ve I’ve been following are JobsOhio’s venture fund (that actually takes ownership in order to refill the coffers), here. And New York of course has been doing this for a while, but more recently this fund with a diversity element, here.