‘Fund of funds’ launched to build venture capital

July 17, 2008

By hammersmith

The Arizona Economic Resource Organization (AERO), a nonprofit group created last year to coordinate the state’s economic-development efforts, has received $325,000 to launch a “fund of funds” to commercialize high-technology innovations. The initiative’s planners believe it could elicit $200 million in new venture-capital funding for Arizona-based entrepreneurs.

The state Commerce and Economic Development Commission (CEDC) provided the funding for AERO to establish the fund of funds, which will seek to attract around $50 million in private investments over the next two years. Those dollars will be reinvested in professional venture-capital firms that agree to two key stipulations: Money from the AERO fund of funds will support Arizona-based projects, and all AERO dollars will be matched by the venture firms on a 3-to-1 basis.

For a number of years, entrepreneurs in the biosciences and other high-technology areas have struggled to secure sufficient venture-capital funding within Arizona. That challenge has often forced innovators to take their promising concepts and nascent firms out of state, to wherever funding sources are available. Establishing a mechanism like AERO’s fund of funds was one of the 19 actions identified in Arizona’s Bioscience Roadmap as important to building a globally competitive bioscience sector.

“The impetus for all this is the recognition that Arizona is blessed with some very cutting-edge technologies, emanating in large measure from the university system,” said Larry Hecker, an AERO board member and Tucson attorney, in the Arizona Daily Star. “There is tremendous potential for commercialization, and it translates into jobs and a stronger economy,” he said.

Hecker and fellow AERO board member Bill Hardin, a Phoenix attorney, were named in March to co-chair an AERO committee focused on venture-capital formation. Hecker said in the Daily Star that 40 other states already have their disposal an instrument like the fund of funds.

“The partners on this project are committed to enhancing Arizona’s global competitiveness by accelerating the pace of discovery, innovation and technology business development,” said Jan Lesher, director of the Arizona Department of Commerce, in the Daily Star.

AERO, unveiled by Gov. Janet Napolitano last October, is designed to work closely with the presidents of the three state universities on technology-transfer and entrepreneurial efforts, and to collaborate with representatives from the CEDC, the Greater Arizona Development Authority, the Department of Commerce, Science Foundation Arizona, and the Arizona Global Network.

AERO’s action comes six months after several bioscience and investment professionals announced the formation of the Translational Accelerator, LLC (TRAC), a private, Arizona-based $20 million bioscience venture capital group.

For more information:

‘Fund of funds’ to invest in AZ tech startups,” Arizona Daily Star, 07/09/2008