The Arizona Commerce Authority
&
Arizona Innovation Accelerator Fund
November 2013
© Confidential, All Rights Reserved.
What is the Arizona Commerce Authority (ACA)?
 The ACA is the state’s leading economic development organization
 Our mission is to strengthen Arizona’s economy using a three-pronged approach:
Recruit, Grow, Create
1. Recruit out-of-state companies to expand their operations in Arizona
2. Work with existing companies to Grow their business in Arizona
3. Partner with entrepreneurs and companies to Create new jobs and
businesses in targeted industries
 Key Teams within the ACA: Business Attraction,
Business Expansion, Business Creation,
Workforce, Small Business
 Annually administers ~$1Billion of incentives
including grants, tax incentives & credits, bonds,
and loans
© Confidential, All Rights Reserved.
Recruit
Grow
Create
Arizona Jobs
Targeted Industries, Partners & Benefits
 Targeted Industries
– Science & technology, renewable energy & sustainability, manufacturing,
aerospace & defense, semiconductors, optics, and bioscience
 Targeted Lenders / Partners
– Regional & community banks, CDFI, IDA, local economic developers
– Arizona Associations, Chambers of Commerce
– Angel Investors, Private Equity and Venture Capital firms
–Small and large businesses
 Partnership Benefits
–Access to AZ growth oriented programs such as:
• Quality Jobs Tax Credit - $90.0mm annually
• Job Training Grants - $13.6mm available (reimbursable)
• Angel Investment Tax Credit – Up to 35%
© Confidential, All Rights Reserved.
What is the Arizona Innovation Accelerator Fund?
 Program Basics
–$18.2 million Loan Participation Program
– Participation up to 49.9%
– Loans range from $50k up to $2,000,000
– Potential to provide subordinated financing
– Potential “Grace Period” which may defer P&I payments for up to 2 yrs
– Interest rate reduction for every net new “quality job” created (up to 2.50%)
 Loan Terms
– Maturities typically inside 5 yrs (Revolvers and Term Loans)
– Commitment and annual fees of 1-3% of the participation amount or loan balance
– If pari passu, interest rate is equal to or less than bank
– If subordinated, interest rate is at 100-300bps above the bank’s rate
– After any grace period, interest rate is no less than 1% above the bank
© Confidential, All Rights Reserved.
Paths for Loan Participation…How It Works
Traditional Lender as Partner
Non-Traditional Lender as Partner
(Bank, Credit Union, CDFI, IDA)
(Angels, PE, VC )
Arizona
Commerce
Authority
AIAF
Funds
Traditional
Lender
Debt
Arizona
Commerce
Authority
AIAF
Funds
Private Capital
Traditional
Lender
Equity
and/or
Debt
Debt
Borrower
© Confidential, All Rights Reserved.
Borrower
Progress To Date
 Timeline
– Nov. 2011 - Received 1st of 3 tranches of $6M each
– Feb. 2012 - Launched AIAF program
– Aug 2012 - First deals close (~$1M of AIAF deployed, 73 FTEs)
– Sept. 2013 - Received 2nd of 3 tranches of funding
– Oct 2013 - 20+ deals closed (~$7.0M of AIAF $ deployed, 791 FTEs)
 Current Status
– Continue to reach out to lending and investing partners
(one-on-ones, board meetings, lending associations, local economic developers)
– Reached 70+ potential lending partners (Bank, CDFI, IDA, ABL, Angel, PE, etc…)
– Several new lenders and investors are actively working deals to partner
with the AIAF program
– Over 2 dozen deals in the pipeline
© Confidential, All Rights Reserved.
Traklight
Business:
Provides small businesses, entrepreneurs, and investors with services
that help identify and protect IP within their businesses
Goals:
Complete product development
Finance working capital
Challenge:
Company in early growth stage
Deal Details:
$250k line of credit ($50k AIAF / $200k Lead Lender)
AIAF pari passu with bank
Loan secured by stocks
Results:
5.0x SSBCI Leverage
52 New FTEs ($962/job)
$35k Average salary
© Confidential, All Rights Reserved.
Serious Integrated
Business:
Tech company focusing on enabling manufacturers to add user friendly
graphics and touch screen panels to products; AIC winner
Goal:
To finance working capital and support company’s growth
Challenges:
Early stage/start-up status
Company needed additional financial flexibility
Deal Details:
$150k Total RLOC: (100% AIAF participation)
$400k+ Equity investment from angel investors
80% Advance on A/R; 60% Advance on inventory
Results:
3.7x SSBCI Leverage
29 New FTEs ($5.2k/job)
$40k Average salary
© Confidential, All Rights Reserved.
Composite Mirror Applications
Business:
Defense contractor specializing in lightweight optics and optic systems
Goals:
Consolidate debt
Purchase new equipment
Make tenant improvements
Challenges:
Aggressive loan to value ratio
Deal Details:
$499,000 term loan ($249k AIAF/ $250k Bank)
60 month term loan with 9 month interest only draw period
AIAF subordinated to bank
Results:
2.0x SSBCI Leverage
10 New FTEs ($24.9k/job)
$70k Average salary
© Confidential, All Rights Reserved.
Kirin Manufacturing
Business:
Manufacturer and finisher for OEMs
Goal:
Purchase the building in which it operates
Challenges:
Loan exposure above bank’s threshold prior to AIAF participation
Kirin was acquired a year earlier, rendering it a “new” company
Deal Details:
$552.5k term loan (41% AIAF/ 59% Bank)
20 year amortization with AIAF portion maturing in 5 years
$65k provided by owner and $32.5k financed by seller carry-back note
Results:
2.9x SSBCI Leverage
25 New FTEs ($9.1k/job)
$31.2k Average salary
$147K Follow-on RLOC financing
closed Oct. 2013
© Confidential, All Rights Reserved.
Pride Group
Business:
Special events management provider
Goal:
Expand operations by acquiring equipment
Consolidate debt
Challenges:
“New” company
Historical financial noise
Deal Details:
$3.5M term loan: (50% AIAF/ 50% bank)
54 months fully amortizing with 6 months interest only
$500k RLOC: (100% Bank)
Results:
2.3x SSBCI Leverage
202 New FTEs ($8.7k/job)
$50k Average salary
Up to 500 PTEs ($17.5/hr)
© Confidential, All Rights Reserved.
333 North Central Avenue, Suite 1900
Phoenix, AZ 85004
602.845.1200 800.542.5684
www.azcommerce.com/incentives