Early Stage Investors Converge on Tucson at Southwest Regional Angel Summit

This week Tucson played host to the 5th Annual Southwest Regional Angel Summit.  Organized by Bob Morrison of the Desert Angels and the McGuire Center for Entrepreneurship, the yearly Summit attracts early stage investors from Arizona, California, Utah, and New Mexico as well as from as far away as New York City and Mexico.

Summit organizer Bob Morrison welcomes everyone to the New Venture Expo

Here are some notes from the 2 day event:

  • Day 1: For the first time, an additional day of events were added with a focus on opportunities for investment in and collaboration with Mexico.  Melissa Guz wrote her first article for Startup Tucson News and covered Sunday’s events in some detail.
  • Day 2 kick off:  On Monday morning with a welcome presentations from Sarah Dickey from the Angel Capital Association.  Sarah provided a national update on trends in angel investing.  She made a special note about the success of this event (in it’s 5th year) and recognized the Desert Angels and the leadership of Chairman Curtis Gunn having funded over $6M in across over 20 companies in the last 2 years.  Most all of the funded companies are located in Tucson.
  • Side Cars: Next, Curtis and Jim Goulka of the Arizona Technology Investor Forum discussed “sidecard funds“.  Curtis and the Desert Angels have implemented a sidecar fund here in Tucson.  It allows investors to passively invest in deals by relaying on the collective domain knowledge of the group by taking investments in the sidecar, which in turn invests in certain deals made by members.  This increases engages investors who might not otherwise being investing money due to time limitations or domain expertise and ultimately results in more dollars invested.
  • Tech Transfer: The next session included Nina Ossanna of UA Office of Tech Transfer, Larry Hecker of Hecker and Muehlebach,  and Bob Morrison.  They discussed how discussed how UA OTT works, with a particular focus on supporting UA researchers as they go through the patent and commercialization.  Challenges facing UA commercialization efforts included limited resources resources available to aggressively support the commercialization of UA research.  This issue was further addressed during the lunch session with Dr. Len Jessup, Dean of the UA’s Eller College of Management who is heading UA’s effort to create Tech Launch Arizona.  This is discussed later.
  • Digital World: Chad Lehrman did a special write-up on the session discussing investing in digital, web and mobile app deals.
  • SyndicationBase Horner, Screening Panel Chairman for the Desert Angels and Jim Gouka handled the next session on how different angel groups often use “deal syndication” to partner together, share domain expertise, reduce risk and improve the ability of the groups to provide for  larger investments for portfolio companies. They also discussed the value of Gust (formerly known as AngelSoft), and how it helps with information sharing and due diligence on deals.
  • Tech Launch Arizona: Len Jessup, provided the luncheon keynote and introduced Tech Launch Arizona.  He explained that his past investigation into University technology commercialization processes allowed him to survey the best and worst practices at public research universities like the UA.  Unfortunately, the UA showed up on the “worst” list.  While the UA is among the nations top public universities with nearly $600M per year in research, it has some of the lowest revenues from research commercialization revenues.  The new plan will more closely align the Arizona Center for Innovation, the Office of Technology Transfer, the Office of Corporation Relations and the McGuire Center for Entrepreneurship.  Read more information on TLA here.
  • Angels and VCs: Harry George of Solstice Capital, Tucson’s only Venture Capitalist, discussed the how the VC sector has been shrinking, going from 2500 firms at its peak to only about 500 firms today.  Additionally, fewer firms are doing early stage deals which leaves a significant gap and increases the importance of angel investment.  He also provided 3 pints of advice for entrepreneurs who are raising money:
    • Send out quarterly newsletters to your  investors, share the bad news first. Don’t try to spin it.
    • Create listening culture in your company (in your portfolio companies if you are an investor) so the CEOs learn to take advice effectively.
    • “Get to revenue fast, if not faster” (to paraphrase a quote from Micky Thompson at Post. Bid. Ship, one of Harry’s portfolio companies and an alumnus of the McGuire Center).
  • Potpourri:  This session included a series of short sessions
    • Larry Hecker discussed the JOBS Act which will be signed into law later this week legalizing certain forms of “crowdfunding” for equity deals.  The practice has previously been limited to deals that didn’t involve equity in return for the investment, typically charitable contributions.  He said that there is both good and bad news in the new law, making it easier for companies to raise money and easier to for people to invest in companies, but it comes with lots of concerns about how complicated the process may ultimately be.
    • Chuck Bolotin provided a presentation on how early stage companies are leveraging free resources to save money during tight times. Resource Examples included (1) The Internet, (2) Google and other search engines, (3) Non-vendor content providers, (4) Vendor content providers, (5) The community
    • Emre Toker of Arch Partners, discussed and some of the limitations of Tucson including limited investment capital, imbalance between business school talent and software talent, and too few incubators.  Emre and Joann MacMaster of AZCI then discussed the latest models for both for-profit and non-profit business incubators.
    • Dan Roberts: Provided an update on the efforts of Maverick Angels, a California-based angel group.
  • New Ventures Expo: Finally, the day ended with the McGuire Center’s student teams hosting the New Venture Expo, a rocket pitch and team competition.  The teams created booths and presented their business ideas to angel investor-judges who visited each booth asking critical questions.  See our write-up on the competition for a summary of teams and the contest winners!

Building the Next Tucson

Building the Next Tucson

In 2010, Boulder, CO was named “America’s Best Town for Startups”.  Why?

“With the University of Colorado as an anchor and a backyard full of mountains as lifestyle bait, Boulder now has the highest concentration of software engineers per capita in the nation. It’s second only to Silicon Valley in percentage of workers employed in tech, according to the American Electronics Assn. Best-selling author and urban development expert Richard Florida says it has the greatest concentration of the “creative class”—scientists, artists, engineers, and the like—in the U.S.

The university and prestigious research labs such as the National Center for Atmospheric Research and the National Institute of Standards & Technology have long attracted well-educated folks to Boulder.”

Does this sound like any city you might know?

In 2006, David G. Cohen co-founded TechStars.  The idea was simple, but pretty bold – “create a program that would help create a bunch of new startups in Boulder”.

“Our belief was that the mentors–many of whom were experienced entrepreneurs– would engage deeply with the first-time entrepreneurs (the “TechStars”) over the 90-day program to help them get their businesses up and running..”

Then 5 years later, the model Cohen helped build in Boulder has been wildly successful, launching 80 companies, attracting 200 mentors and expanding from Boulder to Boston, Seattle and New York.

So what is the key to success for TechStars and Boulder?  Well, money, for one thing.  TechStars provides $18,000 seed funding to each of the companies accepted into their program.   But money isn’t the only answer.

Each year hundreds of companies from all over the country apply to TechStars and 10 companies per city are accepted into the program.  So the Boulder community benefits from the attraction of nearly $180,000 in startup investments made each year into TechStars companies, many of which move to Boulder.  Young, creative entrepreneurs move there.  They setup shop there.  It was all part of the plan from the beginning.

 “In our best case, we’d help start a bunch of neat new companies. In our worst case, we’d lose all of the money that we invested in the program but we’d end up attracting 20-plus new entrepreneurs to our Boulder community.”

While money is key, it’s not the only thing.  Cohen published an article on his blog, describing a recent discussion he had with a group of entrepreneurs and investors in San Diego, where he shared with them 7 things that really made Boulder work:

“So, I rattled off 7 things to the dinner group to spur discussion:

  • Richard Florida’s work on the Creative Class matters. Please read it. This is now table stakes.
  • I talked about how the real up and coming communities are entrepreneur led. Everyone else’s job is to support the entrepreneurs who are leading. I referenced Tony Hsieh in Las Vegas as a great current example of this.
  • We discussed the idea of a “high quality focal point.” – This is the notion that you need something in your community that engages everyone deeply across the spectrum of first time entrepreneurs, more experienced entrepreneurs, service providers, angels, venture capitalists, students, etc. They have to have something “real” to do together. TechStars provides this for the communities that we’re in. But it can be anything, as long as it drives real activity and energy together and it’s something that’s not shallow.
  • We talked about Brad Feld’s notion of entrepreneurial density. If the best efforts of a town occur in a dense area, you will have more serendipity and excitement around startups a compact area. In Boulder, this is palpable.
  • We talked about what Brad calls “fresh meat” – a constant inflow of new talent. Again, TechStars provides this. But so do universities. The best entrepreneurial communities seem to do this well.
  • We talked about being vocal about your community. I told the folks from San Diego “I can’t hear you!”. Talk about this more, and let the world know about your successes. Again, this has to come from the entrepreneurs (and be amplified by the media).
  • Finally, I said that a community needs visible entry points. Boulder’s new tech meetup and boulder.me web sites are great examples. I love the “ambassadors” part of Boulder.me. Look at the entrepreneurial leaders who have stuck their hand up to say “I’ll show you around here.” Amazing.”

This is a set of recommendations that leaders in Tucson should look at closely.  Startup Tucson and many other people and organizations are having this discussion right now.

At Startup Tucson, we are committed to helping build a robust startup ecosystem here in Tucson.  In the weeks and months ahead, we will be rolling out tools to help create a more connected and informed community.  We are launching Startup Tucson News to cover the startup events and companies from our local community.  We will be launching a collaborative calendaring platform to help inform people of what’s going on in the community.

Please join us.  The first step is to get involved:

To pull this off, we need you, the creatives, developers, designers, inventors, and investors… to show up… speak out…  contribute… create…. and do your part in Building the Next Tucson.

Please share your thoughts with us and each other in the comments section, on our Facebook page, on Twitter or just send send me an email.