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Arizona entrepreneurs who are enthusiastic about bringing a new technology to market face many obstacles, but many agree the biggest determinant to developing their vision is funding.
“Outside of New York and California, raising capital to start a technology company is very difficult,” said Paulo Shakarian, founder of Cyber Reconnaissance, Inc. (CYR3CON), a new, Arizona-based technology startup. “The venture markets are less mature in Arizona than in other parts of the country.”
To support Arizona’s venture ecosystem, Arizona State University Enterprise Partners and the former Thunderbird Angel Network joined forces to increase access to early-stage funding for growth-oriented startups through InvestU.
“InvestU played a key role in overcoming this challenge by bringing investment and entrepreneurial stakeholders together — driving innovation,” Shakarian said. “CYR3CON has successfully raised capital and integrated with the local community through InvestU. It has proven to be a key step toward maturing Arizona’s innovation community.”
The lack of capital for technology ventures not only hinders a company’s potential for success, but also slows Arizona’s ability to drive economic growth and build enterprises for greater societal impact. As an angel investing platform focused on advancing the vitality of Arizona, InvestU sources and curates a selection of state and university originated or affiliated startups to connect with accredited investors.
"It's incredible to see the caliber of companies that are coming out of the university and Arizona community," said Marcel Valenta, head of enterprise development at ASU Enterprise Partners and InvestU executive board member. "We're proud to be the convener of top talent among the entrepreneurial and investment communities and connecting them with the resources and innovation that ASU and Thunderbird have to offer. InvestU's pitch events provide an accessible and effective forum for leaders from the venture community to come together as a like-minded community and make meaningful investments in the growth and success of companies that will fuel Arizona's future economy."
InvestU leverages its connection to the No. 1 most innovative university and No. 1 graduate school for global management to give investors unique access to technological innovations that directly or indirectly arise from students, faculty or the more than half a million alumni around the world. In turn, investors provide capital and mentorship to help accelerate startup growth and catalyze economic development through job creation and innovation.
“It’s in Arizona’s and the nation’s best interest to have strong and continual sources of innovation,” said Ji MI Choi, associate vice president of entrepreneurship and innovation at ASU. “It’s a necessary part of not only economic development, but also community development. Thriving and continually renewing ecosystems are sustainable and cultivate stronger and more resilient communities.”
Since its inception a year ago, InvestU has had a tremendous year of success. The program held four pitch events with seven technology startups vying for capital investment. Each pitch event saw on average about 75 to 100 community and business leaders who support innovation and entrepreneurship. The pitch events resulted in over one million dollars in capital being committed to startups poised for significant impact.
Entrepreneur Bret Larsen had an innovative idea to transform the way health care providers deliver care to their patients. He founded eVisit, a virtual care platform providing technology and infrastructure for large hospitals and physician groups, to connect with patients remotely for improved outcomes and revenue.
Larsen showcased eVisit at an InvestU pitch event in October 2019. eVisit received approximately $300,000 of investment capital from the InvestU network of angel investors. Since inception, the company has grown to serve patients in all 50 states, enabling health care systems to simplify the care they provide through virtual visits. Further, the company landed partnerships with leading health systems in the nation, such as Banner Health and Honor Health.
“As an early stage company going after a huge market, we spend a lot of time pitching to investors,” Larsen said. “InvestU has connected eVisit with various investors that we would not have met otherwise. They also went beyond capital investment and leveraged their network to help accelerate our company’s growth. They helped us get access to local health care leaders, which has been very valuable.”
In 2012, Larsen graduated with bachelor’s degrees in accounting and marketing from the W. P. Carey School of Business. He expressed gratitude for the InvestU program because it helps catalyze high-growth entrepreneurial activity from the state and university. Additionally, it expanded the impact of eVisit.
“I’m grateful to be a beneficiary of InvestU’s commitment to Sun Devils,” Larsen said. “I think any angel investing group focused on helping Arizona technology companies succeed and grow is what Arizona needs. We have a lot of opportunity here and a lot of really good talent in the market.”
Shakarian, who is also a Fulton Entrepreneurial Professor in ASU’s Ira A. Fulton School of Engineering, was also grateful to raise funds for his faculty-affiliated cybersecurity startup through an InvestU pitch event.
CYR3CON harnesses the power of artificial intelligence to predict the use of software exploits. The cybersecurity platform allows large enterprises to allocate security resources in a way that prevents cyberattacks before they happen.
Since attending the pitch event in March, CYR3CON has seen tremendous success. Last year, the company’s annual recurring revenue more than doubled and more than half of its non-government revenue was earned in the fourth quarter alone. CYR3CON was also selected as a distinguished vendor in the 2020 TAG Cyber Security Annual.
“The first piece to building a dynamic entrepreneurial investment community is exposing entrepreneurs to the right investors who are willing to take risks and bring new technologies to the market,” Shakarian said. “People need to network. They need to get to know each other. That’s how you grow the community and increase the availability of capital. It also increases the level of trust between entrepreneurs and investors.”
ASU alumnus Rashad Jazzar was one of the first investor members of InvestU. He works for HHB, a family owned and operated investment firm in the Valley with more than 60 years of combined real estate, construction and investment experience. Jazzar noted the firm is always looking for ways to diversify their portfolio and provide a greater benefit for the masses.
“Arizona is the stomping grounds of institutions renowned for being the leader in innovation and having the top global management program, respectively,” Jazzar said. “Creating a healthy venture ecosystem to surround and potentially support such a high caliber of output is the component that will lead to the materialization of great ventures in science, business and technology.”
Since becoming an InvestU member, Jazzar has found getting access and exposure to quality startups and ventures in their early stages of funding has been “as easy as attending a catered event and listening to reputable accomplished speakers.” He said the InvestU process is more approachable than going through the traditional route, and he’s been pleased with the program’s affiliation to ASU.
“I haven’t seen a company pitched through InvestU that I didn’t think was interesting and had the right amount of traction to seek further funding. This tells me that the vetting and criteria placed by InvestU is of high standard,” Jazzar said. “And of the companies I’ve actually invested in, I’m very pleased to say that it has been a positive outcome with the companies seeing growth and achieving milestones.”
During the past year, graduate students from the Thunderbird School of Global Management and the W. P. Carey School of Business have played an integral role with InvestU. Through ASU’s startup investing course, students partake in the startup vetting process.
The InvestU operating team sources and screens a number of startups for consideration. The team puts together a curated list of investment opportunities for the students to complete additional research and due diligence on. Students then present their findings to the InvestU Advisory Board, which selects the company finalists for each InvestU pitch event, and a handful of students present their research findings during the event to investors.
The graduate-level startup investing course gives students the opportunity to examine opportunities in different early stage firm settings. Students conduct a broad spectrum of research on the entrepreneurial firms who are applying for candidate status at InvestU. They look at markets and growth potential, products and competitors, business models, management teams, financial projects and deal structures.
“Having students involved in due diligence research makes the InvestU process more valuable for investing members because they receive an immediate and independent outlook about the candidate firms,” said Gary Gibbons, a clinical associate professor at Thunderbird School of Global Management. “The investors, who are typically a part of the ASU community, also have the opportunity to interact with and mentor these students. So, it also provides a nonmonetary benefit that’s engaging for investing members.”
The course enables students to be part of the investing process outside the theoretical world of lectures and classrooms. Students gain practical experience and have the unique opportunity to see real clients, firms, investors and capital transacting. Students also learn how the venture ecosystem is a crucial part of the business landscape and how they play a role in the continued growth of the ecosystem in Arizona.
“Arizona has a lot going for it,” said Gibbons, an expert in investing and corporate finance. “We have one of the most innovative environments in the university ecosystem. We also have industries very high up in world rankings, such as semiconductors and health care. Those two sectors represent very large portions of our gross domestic product here in the state, so we need an ecosystem that’s independent of other regions if we want to continue to develop those sectors and other technology sectors.”