Arizona Opinion: Arizona needs to better support start-ups

Launching a startup is hard. Arizona has a great startup community, but there are things we should do to make it better.

I am a clinical gastroenterologist and was CEO/founder of WaitLess Medical, an Arizona-based, pre-revenue startup until December 2022, when it closed due to not being able to secure outside funding. Its main software product, WaitLess, texted medical appointment cancellations at specific times patients wanted so they could get their care sooner. WaitLess was novel because it knew patient preferences and could be used for procedures, medical tests, surgeries, as well as office appointments. The U.S. Patent and Trademark Office granted a method patent on its unique waitlist functionality.

Organizations exist in Arizona to help startups, but there are gaps. Resources include networking spaces such as Venture Café to meet other startup founders, Arizona Commerce Authority, ASU entities including Venture Devils, and pitch contests. Opportunities to be mentored exist within many of the accelerators or incubators in the area.

Although support exists for investors, not so much for founders. A founder of a company cannot qualify for the Arizona Investment Credit if you own more than 30% of your startup. It is designed to help angel groups who invest, not the bootstrapping co-founders. Funding entities often want proof of concept, customers, and revenue. However, to do so, startups often need additional funding beyond what family and friends can provide.

Arizona lacks financial support for companies that are pre-revenue, but post-conceptual stage, who already may have an MVP, a website, a patent, and beta customers.

All the entities WaitLess explored in Arizona, including angel groups, venture capital groups, Arizona Venture Development Corporation, among others, by choice require either revenue status or a high measure of traction to consider the entity for funding.

The Arizona Development Corporation whom we approached, for instance, will not lead a round, nor will they consider investment by accredited investors as a sufficient measure for them to invest. You must have an investment from an angel group that has an established due diligence process in place, for instance, as well as revenue. This restriction excludes many good startups.

These Arizona funding entities miss many opportunities locally by not fostering good ideas at earlier stages. For example, WaitLess Medical had entered various pitch contests over several years including Venture Madness, Flinn foundation, Unmet Arizona, Arizona Investment Challenge, and Idea Funding, but we along with many other entities could not compete favorably in the final rounds against revenue-generating companies.

Running a startup should be hard, but it could be made easier in Arizona.

A strong startup community for Arizona is vital if we are to compete with states such as Texas, California, Massachusetts or Florida where there are currently more funding opportunities for startups and in my opinion, a more mature startup community.

To make Arizona stronger for future startups, it is vital Arizona develops entities that provide funding for startups that are pre-revenue. This can allow startup companies to explore the latest technologies that may eventually generate quality jobs and wealth for Arizona and its citizens.

At the moment, there is a funding gap for quality pre-revenue companies. Creating some type of funding to supplement bootstrapping in pre-revenue startup companies is needed in Arizona. The qualifying criteria for the Arizona Investment Credit could be modified to allow entrepreneurs with startups to make their own dollars go further. Universities could be better incentivized to partner with small community startups. This can help with traction and proof of concept stages, often a stumbling block for startups.

Investment in quality pre-revenue companies can help foster data for future rounds of investments, proof of concept on a larger scale, and place Arizona as a leader in the startup world.