Venture capital deals surge in Arizona but still trail U.S. leaders

Early stage companies headquartered in Scottsdale and the East Valley led the way in a strong venture-capital showing for Arizona in the second quarter.

Venture capitalists invested $59 million in 12 Arizona companies from April through June, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters. That roughly doubled the five first-quarter investments totaling $30.9 million.

Scottsdale companies garnered five of the 12 second-quarter investments in Arizona. Two companies each from Chandler, Tempe and Tucson received funding, as did one in Phoenix. Two Arizona entities, ClearData Networks of Tempe and Calimmune of Tucson, accounted for two-thirds of the statewide investments in the quarter, according to unaudited numbers.

Andy Coumides, a PricewaterhouseCoopers partner in Phoenix, called it a good quarter for the state, both in the number of deals and dollars raised.

However, Arizona continues to trail the nation’s innovation centers by a wide margin. The state accounted for about 1 percent of the 1,189 venture-capital deals in the second quarter and 0.3 percent of the total $17.5 billion that was raised. The report didn’t provide a second-quarter ranking of the states, but Arizona was 24th in the first quarter. California is the perennial leader, accounting for about half of all investment dollars.

All told, it was a good three-month stretch. Venture-capital investors “deployed more capital to the innovation economy in the second quarter than any period in the last 15 years,” said Bobby Franklin, president and chief executive officer of NVCA, in a statement.

Venture-capital deals typically are speculative and involve developing companies, including start-ups. The most successful of these businesses often sell shares later to mainstream investors in initial public offerings, or IPOs.

Software companies received the lion’s share of overall funding at $7.3 billion in the latest quarter. Software entities are “continuing to disrupt entrenched industries and in some cases creating new industries altogether,” Franklin said.

Media and entertainment companies attracted the second-highest funding at $2.7 billion, while biotechnology companies ranked third at $2.3 billion.

The report indicated investors have been putting money into less-established businesses, with investments in seed-stage companies up 85 percent in terms of dollars, early-stage investments up 58 percent and expansion-stage investments up 38 percent. Investments in later-stage companies fell 5 percent in the quarter.

Here are the 12 Arizona companies that received second-quarter funding, with investment amounts listed in parentheses.

• appsFreedom Inc., based in Chandler, provides mobile cloud software that allows businesses to run mobile apps using a subscription model ($200,000 in investments).
• Calimmune Inc. of Tucson is a clinical-stage biotechnology company focused on developing gene therapies that have the potential to strengthen patients’ immune systems ($15.9 million).
• ClearData Networks Inc. of Tempe provides a cloud computing platform and information security services to the health-care industry ($25 million).
• CyMedica Orthopedics Inc. of Scottsdale is a medical-device company that develops products to treat joint injuries and resulting muscle atrophy ($5.4 million).
• Emailage Corp. of Chandler evaluates the financial fraud risk associated with email addresses ($51,000).
• Freshly Inc. of Tempe provides a delivery service featuring healthy, affordable meals ($7 million).
• Integrate LLC of Scottsdale provides cloud-based marketing software ($2.3 million).
• Mode Inc. is an engineering, manufacturing and production company in Scottsdale ($775,000).
• Omedix Inc. of Scottsdale develops internet services for physicians and healthcare organizations ($740,000).
• Recoleta Partners LLC of Tucson publishes a circular to help grocery companies reduce costs, generate sales and enhance customer loyalty (amount not available).
• Shelvspace Inc. of Scottsdale provides a cloud-based platform to help companies sell and promote products more efficiently ($1 million).
• Virtuous Software LLC of Phoenix helps nonprofits connect with donors and raise more money ($700,000).