Cash remains elusive for
by Andrew Johnson –
Venture-capital investing in
The economic downturn rattled investors, making it tougher for startup companies that often rely on venture capital to grow their operations.
The recession also made it more daunting for businesses – locally and nationally – to reach the financial goals attractive to investors, causing many venture capitalists to only invest in companies that already received funding to ensure their survival.
In Arizona, six mostly technology companies received $20.3 million in the fourth quarter, according to PricewaterhouseCoopers and the National Venture Capital Association’s MoneyTree Report released Friday.
One recipient in the report, grocer Sunflower Farmers Market, is incorporated in
A year ago, the report counted five
Full-year investment totals were slightly better.
A report released Friday by Dow Jones VentureSource showed a similar trend, counting 16
Venture capital is used to gauge the entrepreneurial strength of a region.
Investors typically provide the funding in exchange for a stake in companies.
They hope recipients will be acquired by another company or go public at a later date, providing a big payoff for financial backers.
“Venture-capital funding is very much tied to the overall general economy,” said Andy Coumides, a partner in PricewaterhouseCoopers’
Nationally, venture capitalists invested $17.7 billion in 2,795 deals in 2009, according to the MoneyTree Report. In 2008, they invested $28 billion in 3,985 deals.
Despite the rough year, venture-capital experts and entrepreneurs say they see signs the deep freeze on investing is starting to thaw.
For example, valuations that banks and investors use to gauge the financial worth of a company are improving and the credit markets have loosened, said Stephanie Spong, a principal with investment firm Epic Ventures in
“The ground has firmed beneath our feet,” said Spong, who helps organize the annual Invest Southwest venture-capital conference in
She added that her firm is in the process of closing three investment deals initiated in 2009.
With businesses and consumers spending less because of the tough economy, companies must try to attract investors by offering products and services that address “a deep customer need” vs. “a luxury,” Spong said.
Chris Sherrell, president and chief operating officer of Sunflower Farmers Market, said companies that wisely manage their resources are still able to attract capital.
“We . . . just ended 2009 and actually achieved budget,” said Sherrell, noting the company operates in the hypercompetitive retail-grocery market.
The company, which operates 28 stores in six states, received $5 million from Pacific Corporate Group, a
It plans to use the funding along with $30 million in credit it obtained to open up to six more stores this year.
Reach the reporter at firstname.lastname@example.org or
-Sunflower Farmers Market,
-HVVi Semiconductors Inc.,
-41st Parameter Inc.,
Source: PricewaterhouseCoopers and National Venture Capital Association.
*Sunflower Farmers Market is incorporated in