[Source: Andrew Johnson, The Arizona Republic] – Venture capitalists invested millions of dollars in a handful of Arizona businesses in the second quarter, according to two new reports.
Recipients include medical-device companies that have received previous investments and a new company spun out of Freescale Semiconductor that nabbed $20 million, a large sum by Arizona standards.
Venture capitalists invest money in companies, typically in exchange for an ownership stake. Their investments are important because businesses use the funds to develop products and hire employees in hopes of becoming profitable.
But determining exactly how Arizona, which trails many other states in venture-capital activity, is trending compared with previous quarters is difficult because the reports contradict each other.
The MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association stated five companies received $33.8 million from investors. In the year-ago quarter, seven companies got $46.4 million, according to the report, based on data from financial-information service Thomson Reuters.
The Quarterly U.S. Venture Capital Report released by Dow Jones VentureSource paints an opposite picture. It states six businesses received $101 million, up significantly from the second quarter of 2007, when four companies received $31.9 million.
So what gives?
The difference is partly due to different reporting methods. The MoneyTree Report relies on information venture-capital firms report. Dow Jones surveys companies. The reports don’t always capture the same deals.
Nationally, the MoneyTree Report said venture capitalists invested $7.4 billion in 990 deals, while Dow Jones pegged the figures at $6.64 billion in 602 deals.
Although there has been a slowdown nationally in venture capital-backed initial public offerings and mergers and acquisitions, Steve Socolof said it’s still a good time to invest in new companies.
Socolof is managing partner of Murray Hill, N.J.-based New Venture Partners LLC, which, with four other venture-capital firms, invested in EverSpin Technologies Inc. last month.
EverSpin was spun off from Austin-based Freescale Semiconductor, which has operations in Chandler. EverSpin has about 50 employees and manufacturers magnetic-based memory chips.
“It’s a technology that many people . . . have worked on for many years, and no one has been able to bring a commercial product to market,” Socolof said.
A handful of Arizona firms received investments in the second quarter. Deals disclosed in two recent reports include: