Venture fund will focus on tech, optics

The area's fourth venture capital fund - the second in the last six months - opens for business Monday, this one focusing on information technology, optics and biotechnology.

Tucson Community Ventures has been in the works for about a year, as Larry Aldrich, chairman of the Greater Tucson Economic Council and the former president and CEO of Tucson Newspapers Inc., raised money from sources primarily in Southern Arizona. His company, Aldrich Capital Co., will manage the fund.

"As part of my involvement in GTEC, I realized there was a real absence of focused venture capital money. It was the missing element in developing Tucson's economy," Aldrich said.

Aldrich has raised roughly $8 million during the past year and will use the money to fund companies that have some customers or revenues already.

Larry Hecker, Tucson Community Ventures' lawyer and head of GTEC's capital formation task force, said the fund is the largest in the area that is supported primarily by Tucsonans.

"It accomplishes one of the most significant objectives of economic development: facilitating capital formation, which has been a critical weakness in our economy," Hecker said. "It will make more capital available to local companies."

Homegrown venture capital firms help keep high-growth companies in town. Arizona and Tucson get less than their share of venture capital money: The state received $247 million in venture capital in 1999, about 0.7 percent of the $35.7 billion invested nationwide, while it makes up more than 1.75 percent of the country's population.

Tucson Community Ventures' Southern Arizona investors include UniSource Energy Corp. and the Jim Click Automotive Team as well as individuals.

"Larry Aldrich is one of my favorites. I like his management skills and the team he's assembled, and I like that we are trying to grow businesses in our own backyard," said Jim Click, president of the Jim Click Automotive Team.

Mark Zupan, dean of the Eller School of Business and Public Administration at the University of Arizona, called the formation of Tucson Community Ventures "a big step forward."

"My initial impression when I came to town four years ago was that there was a mentality that we couldn't promote that we were a high-tech, high-wage city," Zupan said. "We're starting to eliminate those excuses."

The announcement that Tucson Community Ventures had closed on its initial fund-raising drive was foreshadowed by the announcement earlier this week that Aldrich would step down as interim president of GTEC, a position he has held since the president of the economic development agency stepped down in July.

While Aldrich will continue as the organization's chairman, John Grabo has been promoted from GTEC vice president to interim president until a new president is named this spring.

Aldrich will serve as the new venture fund's day-to-day manager.

"I thought I could add value on the operational side because I had run a business," he said. In some cases, he might consult with firms that are too green to put venture capital funds to good use, helping them mature and prepare for an infusion of capital later on.

The other Tucson venture capital firms are Coronado Venture Fund, Solstice Capital and Ceres Seed Fund. Coronado, the biggest fund with an estimated $30 million, invests in companies up until they reach their later stages of growth. The other two - like Tucson Community Ventures - focus on young companies.

Tucson's efforts to attract more well-paying, high-tech jobs have been boosted with the recent startup of Tucson Community Ventures; Ceres, launched last summer by two East Coast attorneys; and the Desert Angels, a network of individual investors who tend to invest in small startup companies.

With every venture capitalist or angel investor who stakes out territory in Tucson, the area's growing high-tech industry will draw interest from investors elsewhere, Hecker said.

"If the local community feels strongly about the opportunities, it sends a strong message to the financial community that this is a good place to put dollars," he said.

Several experienced local investors and business leaders have thrown their support to Tucson Community Ventures. Bill Lomicka, a local and national investor and former senior vice president of finance for Humana Inc., is on the advisory board. Other members of the advisory board include Dick Powell, vice president of research at the UA; David Cohen, a CPA with Beach Fleischman and Co.; and Mike DeConcini, senior vice president for strategic planning and investments for UniSource Energy, the parent company of Tucson Electric Power.

Harry George, co-founder of Solstice Capital, will serve as a formal adviser to Aldrich Capital.

* Contact Star Business reporter Paola Banchero at 573-4237 or banchero@azstarnet.com