Below is an article ran in the Phoenix Biz Journal in May 2009.  It is interesting how far Arkayne has come in 3 short months!  It will be even more interesting to see where we are in 3 more months.

Source: http://www.bizjournals.com/phoenix/stories/2009/05/18/story19.html

Funding for small firms and new business ventures continues to be locked up as companies face increased competition for cash from bearish investors.  Officials at the Arizona Technology Investment Forum say they have gotten one financing deal out of the past six they have presented to investors. At Invest Southwest, the largest conference in Arizona for companies seeking capital, none of the participants received funding.

Good companies still are coming to the fore, and there is some funding. But, with venture capital firms slowing their pace of financing and other sources still dry, it’s challenging for startups to find a deal, said Tom Duening, director of entrepreneurial programs at the Ira A. Fulton School of Engineering at Arizona State University. “I think across the country, angel groups in terms of numbers are investing less,” said Duening, who also is a founding member of ATIF. “As the economy improves, I think we’ll start to see more deals getting done.” Part of the issue is the nature of startup investing. Venture capital firms, often one of the first stops for late-stage startups, have hunkered down and are investing only in their own portfolios — if at all. According to the MoneyTree report compiled by PriceWaterhouseCoopers, the first quarter was anemic for deals in the Southwest, with only $40 million of the $3 billion invested nationwide going to Arizona, Utah and New Mexico companies. Of that, about $12.2 million went to three Arizona businesses. Southwest Windpower in Flagstaff nabbed the bulk, about $10 million. FiREapps Inc. in the Valley received $1.2 million, and Salutaris Medical Devices Inc. got $2 million.

Rough market for some Dan Mahoney, an attorney with Snell & Wilmer LLP in Phoenix and chairman of Invest Southwest 2009, said it’s still a rough market, but certain segments are getting cash, such as clean tech and biotech.

“You’re seeing a narrow band of industries getting funding,” he said. Startup funding also is hampered by the decline in initial public offerings, which have falled off in the past two years, and a lack of funding for mergers and acquisitions — two of the principal exit strategies for angel investors, Mahoney said. “You put your money in, and you’re waiting a long time,” he said. Firms seeking capital are being asked to take lower valuations because of the down market, and investors are asking for much more information in their due diligence, said Nicholas Aretakis, CEO of Arkayne Inc., a Scottsdale firm that develops software for bloggers.
Aretakis is an investor who got involved with Arkayne while doing due diligence on the company. From ATIF, the company was able to raise about $300,000, with an additional $200,000 committed. Arkayne is seeking about $750,000 in this round. “If this was 12 to 18 months ago, we’d have been targeting to make twice that much,” he said. With more diverse companies seeking funding and a potential lower entry point, those with money can be choosy about which startups they finance. For some, investing in a company also might lead to better short-term results than investing in stocks, Duening said. SDCmaterials Inc.received more venture funds in the second quarter than the total VC dollars invested in Arizona companies in the first quarter. The Tempe-based company received $14 million for its projects, which range from fuel additives to composites for vehicle and aircraft armor.

Businesses face more scrutiny Maximilian Biberger, CEO of SDC materials, said his company had better luck securing financing in its second round because it already had established venture capital partners. It received funding this round from Invus Financial Advisors, Emerald Technology Ventures and BASF Venture Capital. The latter two also participated in the company’s first round.

The financing didn’t come without more scrutiny. The company did an extended first round last fall and completed a full due diligence analysis. It did the same thing for each investor this time, Biberger said. “For the funds with the money, this is the perfect time,” he said. “Are they being pickier? Of course, but they can be.”

Dee Harris, president of the Arizona Angels Venture Group Inc., said while deals may be in short supply, angel investors still are seeking information about companies, a sign he takes that they are still interested.