Building a successful long-term ecosystem that can drive the future of Tucson requires capital. It is the fuel for any stage company whether it comes from revenues, bank loans, or equity investment from angel investors and venture capital. With a continually evolving and regulatory lending environment, high growth companies at their early stages must seek equity investments from angels and venture capital. Attracting risk capital to the state has been the subject of many discussions. Recently, a report published by the AZ Bioscience Board in partnership with the Flinn Foundation recommended a goal of investing $25-40M annually in pre-seed and seed capital. While Phoenix is building a steady pipeline of companies that could result in attracting a new fund, Tucson struggles to build this next pipeline of companies. By investing in the earliest stage companies, the Garage seeks to mitigate some of the risk for venture investors and build equity in companies to support a long term evergreen seed fund for the region.
The success of the partners in Tucson's startup ecosystem are very important. They also provide an effective way of identifying deal flow. This phase is designed to demonstrate the partnership of the "TRB Garage" to their activities by become a core award sponsor. At this stage, the Director will seek out high quality companies that have the potential to build a strong, high growth company. These companies will have the ability to be awarded the equivalent of $50,000. This will include an immediate cash award of $4-10K with the remaining being allocated through performance deliverables negotiated with the awardee and the Director.
This is the core mission of the TRB Garage. It is this phase of the Growth Capital program where the leadership team works with the selected companies to negotiate an equity stake of 7%. This equity stake will be in exchange for workspace for up to 3 years or 12 people. After this time, a new cash repayment agreement will be constructed or the company will graduate into its own dedicated space. It will also include access to the talent development services, both the graduates of the coding bootcamp and the student engagement programs. The leadership will work with the companies to coordinate a best solution to minimize the cash flow impact of sponsoring a University program or international student. The company also has daily access to the Director and a staff software engineer.
While the "TRB Garage" should become self-sustaining through returns from the equity agreements, there needs to be a stable form of capital that can support companies following angel rounds. The goal of this phase is to create a transition plan for the Director into a new role leading a Venture Capital firm. Ideally, a protégé that has gone through the program to a successful exit will replace the Director and continue to operate the "TRB Garage" and be prepared to adapt to changes in technology. The "TRB Garage" will serve as a limited partner in this new fund and will contribute some portion of the gains returned to kickstart the fund. Given a fund must be able to deploy about $10M annually to make it sustainable, the Director needs to demonstrate the ability to select, manage and build a portfolio of companies through the TRB Garage to demonstrate the ability to be successful at managing a portfolio as the General Partner of a VC firm.