AZ-VC II Launches to Fill The Funding Gap For Non-Coastal Startups; Eschews Sky-High Coastal Valuations

Rhea-AI Summary

AZ-VC has announced the launch of its second venture capital fund, AZ-VC II, following the success of its $115 million Fund I. Led by former PayPal executive Jack Selby, the fund focuses on non-coastal startups, targeting Series A investments in post-revenue companies with proven product-market fit.

The fund is backed by notable Arizona-based limited partners including Pinnacle West Corporation, Western Alliance Bancorp, Trinity Capital (NASDAQ: TRIN), and Salt River Project. AZ-VC's investment strategy capitalizes on an average 70% valuation discount compared to coastal companies with similar metrics, addressing the significant disparity where California, New York, and Massachusetts receive 75% of venture capital despite representing only 22% of the U.S. population.

Positive

• Investment entry point offers 70% valuation discount versus coastal companies
• Strong backing from established institutions including Pinnacle West and Trinity Capital
• Proven success with Fund I portfolio including Etched, Bluetail, and other regional startups
• Strategic advantage as a dominant non-coastal venture capital provider

Negative

• Undisclosed fund size for Fund II creates uncertainty about investment capacity
• Geographic focus may limit investment opportunities
• Potential challenges in competing with established coastal VCs for later-stage funding

Insights

Venture Capital Analyst

Trinity Capital's LP position in AZ-VC's second fund likely strengthens its investment portfolio and regional venture strategy.

This announcement of AZ-VC's second fund represents a strategic advantage for Trinity Capital (TRIN) as a continuing limited partner. The first fund's $115 million deployment created a portfolio of promising non-coastal startups including Etched, Bluetail, and others, suggesting a potentially strong return profile for LPs like Trinity.

The fund's geographic arbitrage strategy is particularly compelling. By targeting regions outside traditional tech hubs, AZ-VC claims a 70% valuation discount versus coastal companies with similar metrics. For Trinity Capital, this approach offers portfolio diversification while potentially capturing higher returns from undervalued markets.

Managing Partner Jack Selby's PayPal background and Thiel Capital connection provides Trinity Capital access to high-caliber deal flow and strategic relationships that might otherwise be inaccessible. The recent Paradox acquisition by Workday demonstrates the potential for significant exits in these non-traditional markets.

The fund's focus on post-revenue companies with proven product-market fit aligns with lower-risk venture strategies compared to pre-revenue startups. While the new fund size remains undisclosed, the continuation suggests the first fund performed well enough to warrant a second vintage, which is positive for Trinity's initial investment.

For Trinity Capital shareholders, this partnership reinforces the company's venture debt strategy with complementary equity exposure through fund investments, potentially enhancing overall returns without dramatically increasing the risk profile.

Non-Coastal Venture Capital Firm AZ-VC Adds Second Vintage Vehicle to its
Successful $115 First Fund

PHOENIX, Sept. 19, 2025 /PRNewswire/ -- AZ-VC, a U.S. venture capital firm fueling innovation outside traditional coastal markets, today announced the launch of its second fund, AZ-VC II, managing an undisclosed amount in an effort to foster innovation and momentum outside of traditional U.S. tech hubs. 

The firm began its franchise in 2022, anchored by Pinnacle West Corporation (PNW: NYSE), in addition to mostly Arizona-based limited partners, including Western Alliance Bancorp (NYSE: WAL), Trinity Capital (Nasdaq: TRIN), and Salt River Project.  AZ-VC is led by Managing Partner, Jack Selby, an original employee and former executive at PayPal and currently a Managing Director at Thiel Capital (the family office of Peter Thiel).

The fund builds on the success of AZ-VC's $115 million Fund I, which has invested in breakout regional startups like Etched, Bluetail, Nuclearn, Stax.ai, Velocity Engine, Soraban, Uplinq, Orama, Peerlogic and many others.  The burgeoning portfolio reaffirms the surplus of non-coast talent seeking local financial capital sources.

Like its first vintage, AZ-VC Fund II will focus on exceptional entrepreneurs while maintaining a sector agnostic purview.  The Series A investment thesis targets companies that are post-revenue with proven product-market-fit.  The fund leverages Selby's "PayPal Mafia" background and opens doors for portfolio companies in Silicon Valley and around the world. 

Too many non-coast regions are stuck in a "funding" desert, which creates a series of negative feedback loops which reinforces this challenge.  Non-coastal entrepreneurs often must travel to coastal VCs for initial funding, which adds unnecessary complexity that can be a factor in companies failing to secure funding and ultimately going out of business.  For the start-ups that do raise money, many are beholden to their out-of-state financiers, sometimes moving offices - if not the entire company - in order to be near them. What is most problematic, when an investment proves successful the financial windfall usually recycles locally within the out-of-state ecosystem, reducing benefits to the non-coastal area where the entrepreneur and investment emanated.

"Coastal venture capital is broken; too much money is going into an increasingly concentrated geography and being invested in a finite subset of companies at astronomical valuations," continues Selby. "It is problematic when a couple of AI companies raise the same amount of capital as the entire U.S. venture capital industry's AUM in 2018.  Despite the breathless storytelling around sectors like artificial intelligence, the end result is an inflated asset bubble that will make the 2000 'dot-com' bubble seem pedestrian by comparison."

"California, New York, and Massachusetts technology companies received nearly 75% of venture capital in 2024. Yet these three states represent just roughly 22% of the country's population. This disparity begs the question: do any smart, 'investable' entrepreneurs live outside of these three states? AZ-VC believes they do. The COVID-19 pandemic precipitated the biggest intra-country migration since the Dust Bowl. The serial entrepreneur's family budget for the multi-million dollar shoebox house in Menlo Park goes much, much further when relocated to Tempe or Chandler."

"Our investment entry point is on average a 70% valuation discount versus coastal companies with similar financial metrics," said Selby. "Our thesis is a simple arbitrage: invest at a reasonable, non-coastal price, then help entrepreneurs build and scale their businesses. When our portfolio companies are ready to find their coastal VC 'big sister,' we take them by the hand to Sand Hill Road or the equivalent. Rinse and repeat."

Regional investment strategies are already manifesting, per the acquisition of Scottsdale, Arizona-founded Paradox, the candidate hiring experience agent company that was recently acquired by Pleasant, California-based Workday, the AI platform for managing people, money, and agents. It is the largest M&A in Arizona's history.

"One of my favorite Peter Thiel quotes is 'Competition is for losers. If you want to create and capture lasting value, build a monopoly,'" said Selby, "AZ-VC is the non-coastal monopoly for venture capital."

About AZ-VC

AZ-VC is a venture capital fund based in Phoenix, Arizona and targets non-coastal technology companies throughout the United States. The strategy is Series A focused and sector agnostic. The fund is managed by Jack Selby, a 23-year Arizona resident and former PayPal executive. For more information, visit AZ-VC's website and their LinkedIn profile.

View original content:https://www.prnewswire.com/news-releases/az-vc-ii-launches-to-fill-the-funding-gap-for-non-coastal-startups-eschews-sky-high-coastal-valuations-302561158.html

SOURCE AZ-VC

FAQ

What is the size of AZ-VC's second fund?

The size of AZ-VC II is currently undisclosed. Their previous fund, Fund I, was $115 million.

Who are the major investors in AZ-VC II?

The fund is backed by notable Arizona-based limited partners including Pinnacle West Corporation (NYSE: PNW), Western Alliance Bancorp (NYSE: WAL), Trinity Capital (NASDAQ: TRIN), and Salt River Project.

What is AZ-VC's investment strategy?

AZ-VC focuses on Series A investments in non-coastal startups that are post-revenue with proven product-market fit, targeting companies at a roughly 70% valuation discount compared to coastal equivalents.

Who leads AZ-VC's investment team?

The fund is led by Managing Partner Jack Selby, an original PayPal employee and former executive who currently serves as Managing Director at Thiel Capital.

What companies are in AZ-VC's portfolio?

Fund I has invested in regional startups including Etched, Bluetail, Nuclearn, Stax.ai, Velocity Engine, Soraban, Uplinq, Orama, and Peerlogic.