Greater Phoenix benefits from a diverse, expanding business base, with strengths in healthcare, real estate and professional services and growing activity in advanced manufacturing, semiconductors, technology and biosciences. In conjunction with that observation, Kate Hickman, managing director of Commercial Banking in metro Phoenix at Western Alliance Bank, notes that diversity creates varied capital needs and helps sustain activity when one sector slows.
“Phoenix combines local entrepreneurial energy with access to national capital,” she says. “The region has strong banking capacity, but many equity investors and specialized providers operate outside Arizona. That can leave a gap for early-stage companies or those not yet suited to traditional bank credit.” She believes there is opportunity to build a more connected capital ecosystem that supports companies from formation through established growth.
“We see a market growing focused on certain segments and industries,” says Neill LeCorgne, president and CEO of Scottsdale Community Bank, adding, “The enormous investment in chip manufacturing and AI is obvious.” He notes local financiers are not major players in this space as these industries have brought with them massive investment and funding opportunities controlled and delivered mostly by national sources. “Along with these industries, the small and medium-sized businesses are growing,” he says, “but at a slower pace constrained by capital access.” Regarding demand for capital among Greater Phoenix businesses, he sees privately funded companies having the inside track, along with seasoned operating businesses that have a long and strong operating history — “which,” he says, “attracts bank financing.” And for real estate, where the commercial real estate market has softened along with the residential mortgage market, he notes, “Rates haven’t helped these sectors.”
Says LeCorgne, “As a local bank serving this market, we know that local decisioning and speed are two critical components to effectively providing capital to local businesses. Generally, community banks make credit decisions faster and have a greater understanding of the market. This translates to capital being deployed faster.” He notes larger regional and national banks, along with larger credit unions, typically have the capacity to make larger loans targeted to the bigger deals in town — and that these loan or capital decisions are also integral to the growth and evolution of the Valley.
Affirming LeCorgne’s observation, Western Alliance’s Hickman says, “We continue to see demand from established businesses investing in growth, capacity and efficiency.” In Greater Phoenix, that includes advanced manufacturing and its suppliers, healthcare, technology and professional services along with companies serving the region’s population and employment growth. From Western Alliance’s perspective, commercial real estate remains selective, but Hickman finds well-positioned industrial, medical office, multifamily and mixed-use projects still attract capital.
Says Hickman, “Companies are financing facilities, equipment and acquisitions, as well as working capital, liquidity and productivity technology. Businesses want to invest, but they are weighing decisions more carefully against borrowing costs, customer demand and expected returns.”
Offering a venture capital perspective, Xcellerant Ventures general partner John Shufeldt shares, “The biggest crunch is at the seed-to-Series A transition, especially in healthcare.” Noting that, while founders have a working product, early revenue and pilot customers, he says his firm is seeing that “they need $2 million to $4 million to build sales teams, clear regulatory and reimbursement hurdles, and prove their unit economics.” And that, he says, is “where promising Arizona companies stall.”
Shufeldt, who has extensive experience and expertise in healthcare, explains healthcare leads because of population growth, clinician shortages and the expanding medical ecosystem around ASU. “That combination is producing companies in care delivery, low-acuity care, clinical workflow and AI-enabled services, all of which take longer and cost more to validate than typical software.”
In terms of what is influencing the availability of capital, Shufeldt cites fundamentals that are core to our strength: population and talent growth, a university system producing engineers and clinicians at scale, industrial anchors, and costs that let a company reach milestones for a fraction of what it would burn in San Francisco or Boston. At the other end of that equation, though, is our weakness: depth. “The seed and angel community is strong, but local capital thins out quickly at Series B. Most Phoenix funds can’t lead that round, so founders look to the coasts, and too often the company follows the money out of state.”
Local investors are also disciplined, Shufeldt notes. “They favor revenue and capital efficiency over speculative bets, which keeps the market healthy but makes life harder for deep-tech and life-science founders on long timelines.” He sees opportunity to close the growth-stage gap by bringing in more out-of-state co-investors and connecting our industrial anchors with startups. “That is Xcellerant’s focus: pairing capital with operating experience so companies can scale here instead of leaving.”
Private equity is another funding option, and Montage Partners managing partner Rob Wolfman shares, “The company that typically reaches us is profitable, founder-owned, somewhere in the $10M to $50M revenue range, and the owner is anywhere from three years to three weeks away from wanting a different relationship with the business. The word people expect me to use next is ‘retirement,’ and that’s not really what we’re seeing.”
Noting that his firm tracks this closely, he continues, “Across 104 owner and advisor conversations this spring and summer, some form of liquidity was the motivation on just over half of them.” Coming in a close second at about 46% was growth capital. Retirement came up on 28%. “What tells me more is what owners want to be doing the day after closing,” Wolfman says. He’s found the most common answer – and by a wide margin — is continuing to run the company, with the least common being a clean full exit. “That’s why majority recapitalizations with the owner rolling equity are the most common structure we see,” Wolfman says. “So, the demand is for capital and a partner, with some liquidity attached, and not necessarily a full exit. Most owners we meet want something between selling and not selling, and that’s the transaction this market is built to do right now.”
The clearest local signal we have, in Wolfman’s view, is tied to growing end markets, such as data centers and semiconductors. “We are meeting a variety of founders who can’t keep up with the work and need help in terms of financial resources and building business infrastructure. Outside capital finds that profile every time: a lot of small, well-run, owner-operated companies serving a demand curve that suddenly got steeper.”
Wolfman believes population growth and everything that comes with it is what currently distinguishes the Greater Phoenix funding environment from other markets. He points to a decade of in-migration that has brought customers, companies and construction, and to the data center buildout that “dragged a whole trades and supplier ecosystem along behind it.” And he notes Phoenix is on the map not just nationally but globally. “Capital follows people, but with a lag measured in years,” he says.
“The limitation is that Phoenix has far more good operating companies than it has resident institutional capital,” Wolfman continues, noting that most of the money that ends up investing in an Arizona business comes from somewhere else. “That’s fine, but owners looking for capital need to be mindful of who outside of Arizona is showing interest in their business,” he says. “We hear from owners far too often that they are getting inundated with investors promising to buy their company at attractive valuations. The reality is that most of the outreach is automatically generated and there isn’t a real buyer at the table. The result is that a lot of owners are forming their entire picture of private capital from spam, and it’s putting a number in their head that no real buyer is going to pay.”
One more local reality Wolfman describes cuts the other way: “Being in Phoenix doesn’t change the constraint that matters most at the small end,” he says. “Below roughly $10 million of revenue, the buyer universe thins out fast and lender interest thins with it, in any city you want to name. It’s a big part of why we deliberately operate below where most institutional firms will go.”
Funding Insights & Perspectives
Looking at funding models, Western Alliance Bank’s Hickman explains commercial bank financing uses a defined borrowing relationship, repayment schedule and financial terms. “Unlike equity, it generally does not require owners to give up ownership or decision-making authority. Compared with some private credit, bank financing may cost less but requires established credit, reporting and repayment standards,” she says.
“The differences extend beyond price,” Hickman continues, explaining equity investors accept greater risk and a longer horizon, but they share in the company’s value and may influence major decisions, while private credit can offer flexibility or serve companies outside traditional bank parameters, often at a higher cost and with different protections.
At Scottsdale Community Bank, LeCorgne shares, “Our funding model is to offer the lowest borrowing costs in the market, including no origination plus no deposit service fees. SCB’s speed to closing is unmatched in the market.”
Xcellerant Ventures’ Shufeldt homes in on the element of risk as he explains banks lend against cash flow and collateral, take little risk and no ownership, and exercise control through covenants, while private equity buys control of established companies, often with leverage, and drives operational change over a three-to-seven-year hold, and venture capital takes minority stakes in young companies that can’t yet carry debt. “We accept a higher risk of loss for a share of the upside, and we only win if the company grows,” he says. “Our horizon is typically five to seven years, with follow-on rounds expected before an acquisition or IPO. We hold minority positions, usually with a board or observer seat. The founders run the company; we advise, challenge and help.”
Additionally, Shufeldt reports Xcellerant Ventures launched the Jetstream Venture Fund, structured as an interval fund, to open early-stage healthcare investing to a broader range of investors, “not just institutions and the very wealthy.”
Explaining venture capital’s role as, generally providing funding in exchange for ownership, directly or through an instrument that can convert into equity Tesoro’s Lombard notes that it differs from a conventional loan in not typically requiring scheduled principal and interest payments. The trade-off for investors is significant risk, including the possibility of losing their investment, against potential long-term growth.
What founders gain is room to develop the business while sharing ownership and certain governance responsibilities. Lombard explains investors generally leave day-to-day operations to the founder, inserting themselves in the business through board representation and approval rights over major decisions, depending on the investment terms.
“Our company-building approach adds practical involvement in shaping the business, connecting founders with talent and resources, and aligning development milestones with commercial opportunities,” Lombard says. “The level of involvement depends on each company’s needs.”
Noting the time horizon is measured in years, Lombard points out that semiconductor development, deployment of physical AI and validation of health technologies each follow different timelines and that capital needs to reflect those realities while maintaining clear expectations for progress. “Patient capital still requires urgency,” he says. “Every round should bring a company closer to technical validation, paying customers and a sustainable business.”
Montage Partners’ Wolfman focuses on structure in differentiating private equity. “We invest equity instead of lending, so there’s no payment schedule and no personal guarantee,” he says. “The majority recapitalization is our sweet spot and often the owner’s too, because it turns a meaningful piece of a lifetime of work into cash while leaving real ownership on the table.” At the other end of a business’s development, the private equity firm also buys businesses outright from owners who want to retire.
Wolfman singles out and directly addresses individual factors of their funding relationship:
- In terms of risk, Wolfman describes Montage Partners’ capital as sitting behind the lender’s. “If the business underperforms, the bank gets made whole first. We take that trade for the upside, and it’s why we underwrite the way we do,” he explains.
- He identifies the time horizon as where he would push back hardest on the stereotype of a buyer chasing a short-term return. “Every company we invest in builds a three-year strategic plan in our first year with us, and we update it regularly,” he says, explaining, “We’re trying to leave the business stronger and more valuable to whoever owns it next, including the management team and the founder who often still owns a piece of it.”
- Regarding ownership, Wolfman relates, “When we buy majority or 100% ownership, a founder who stays typically keeps real equity,” and points to long-term value: “That retained stake is the mechanism by which a second sale, years later, can be worth as much or more to the owner as the first one was.”
- And he explains the parties’ roles in decision-making, noting that governance moves to a board but operating authority does not move. “The people running the company keep hiring, pricing, customers and the daily calls an owner has always made. What changes,” he says, “is the short list of decisions that reshape the business, such as large capital expenditures, geographic expansions, or senior leadership hires. Those get made with partners in the room, and the capital to act on them is there.”
Wolfman cautions business owners to recognize that not all capital is created equal. “One difference owners rarely think to ask about is whether the capital actually exists,” he says. “Ours is committed, but that isn’t true of every buyer. A growing share of the businesses that reach us have already been through a sale process that broke; as a share of our calls, it roughly doubled between spring and summer. Some of those deals died in diligence, but many fell apart because the buyer hadn’t actually raised its money yet. Before an owner signs anything exclusive, they should ask a prospective buyer directly where the equity is coming from and whether it’s committed.”
As Hickman notes, no source is universally better. Each serves a different purpose, and many businesses use more than one as their needs, risk and stage change.
The Capital Match Game – Suiting Need to Source
“Securing bank funding can be more challenging to attain than private equity,” LeCorgne relates, explaining that banks are highly regulated entities that must follow stringent and conservative policies and guidance. “New businesses and venture capital deals don’t fit well into the bank lending box,” he says.
Where commercial bank capital does generally fit, Hickman affirms, is with established companies that have identifiable repayment capacity and defined needs, such as for working capital, equipment, facilities or acquisitions. “It can support growth without requiring owners to give up equity or day-to-day control,” she says. Pointing out that bank credit ranges from revolving lines for seasonal or operating needs to term loans for longer-lived assets and acquisitions, she notes, “The right structure depends on cash flow, the balance sheet, the business model and use of funds.”
And she reiterates that bank capital does not fit every stage or need. “Early-stage companies without predictable revenue may need equity, while businesses seeking higher leverage or more flexible repayment may consider private credit. The goal is to match the source and structure to the company’s needs, risk profile and long-term objectives.”
Xcellerant Ventures, for instance, is a healthcare-focused venture firm that invests in early-stage healthtech and medtech companies improving the quality, access and cost of care. Shufeldt points specifically to the venture firm’s JetSteam fund, designed to fill the gap between angel money and larger institutional rounds, where a company has proven the product works but not that it can scale. “Our model is deliberately de-risked,” he says. “Our sweet spot is a company with a compliant product, early traction and a need for [$X to $Y million] to build sales, expand into new health systems or reach its next institutional round.”
Lombard describes Tesoro as a venture platform, investor and company builder working alongside industry partners such as TSMC and Cadence, governments and universities to turn breakthrough technologies into globally scalable businesses. “Our focus spans semiconductors, physical AI and health,” he says, and explains the firm’s view of these as connected investment areas: Semiconductors provide the computing, sensing and connectivity that enable AI to operate in the physical world. Physical AI brings intelligence into robotics, machines and devices that can perceive, make decisions and act. Health brings these capabilities into diagnostics, medical devices, patient monitoring and care delivery. “Semiconductors enable intelligence, physical AI puts that intelligence to work, and health gives it some of its most consequential applications.”
While AI is an underlying technology across all three areas, Tesoro also views quantum technologies as critical to its long-term outlook, particularly their potential in computing, sensing and the simulation of molecules and materials. Of course, commercial maturity varies, so, Lombard says, “we evaluate each opportunity against a credible path from scientific progress to customer value.”
Tesoro is also working closely across defense and dual-use technologies, electric vehicles, advanced wireless communications and space. “These sectors share needs for advanced chips, intelligent sensing, secure connectivity and efficient computing, allowing breakthroughs in one market to create opportunities in others,” Lombard explains. He reports the firm’s current portfolio has grown to more than 40 companies, encompassing semiconductors, AI-enabled systems, robotics and sensing, health innovation and advanced connectivity.
Lombard places venture capital’s fit in the funding landscape where companies have substantial growth potential but still need to prove their technology and business model. “These founders often need funding for engineering, prototyping and customer validation before they have the revenue or collateral to support conventional borrowing. In health, that pathway may also include clinical evidence and regulatory milestones,” he explains. “Banks, venture investors and private equity firms each serve an essential purpose. Our role is to help companies navigate early uncertainty, establish commercial traction and become ready for a broader range of financing.”
And then there’s private equity. “Private equity isn’t a loan and it isn’t venture capital,” says Montage Partners’ Wolfman. Whereas a bank lends against the past and expects to be repaid on a schedule no matter how the year goes, and venture funds buy minority positions in companies that usually aren’t profitable yet and underwrite a very large outcome, “We buy into a business, most often alongside or from the person who built it.”
That suits a specific situation, which he describes as an established, profitable company where the owner wants meaningful liquidity now and doesn’t want the next chapter to arrive as a cliff. And he notes it’s a poor fit for a company that isn’t profitable yet, and for an owner who wants outside money with no change in ownership or governance.
Montage Partners works with companies that range, roughly, from $1.5 million to $7 million of earnings in industrial products/services and professional services. “That’s deliberately lower than where most institutional firms go, and it’s where a lot of Arizona’s best privately held companies actually sit,” Wolfman says. “We’ve been doing this for 22 years and have made 21 investments in that time, with no losses. At our size, that record comes from taking the time to really understand a business and whether both sides genuinely fit before anyone signs anything.”
Beyond Capital
“Community banks add value to their clients through local knowledge and banking advice,” says LeCorgne, while noting that the cost of doing business with a community bank is lower than that of regional and national banks thanks to lower costs of borrowing and less banking fees.
In similar vein, Hickman says, “Our role starts with understanding the business, its industry and the decisions its leaders face.” She notes that perspective helps align credit, deposits, treasury management and payments around the client’s needs, not a single loan.
In fact, she views that advisory role as more important in our current economy, observing that, amid higher costs, changing rates and uneven industry conditions, businesses need bankers who can examine trade-offs, anticipate liquidity needs and structure financing without unnecessarily limiting flexibility.
“The capital is the least differentiated thing we offer,” says Shufeldt. “Our partners have built, run and sold healthcare companies, so we help with what pitch decks leave out: payer and health-system contracts, regulatory strategy, clinical recruiting, pricing and preparing for the next raise or exit. We also connect founders to health systems, co-investors and ASU talent, and we amplify their stories through platforms like the Entrepreneur Rx podcast.”
Comparing his firm’s hands-on role to cheap money that, he says, lets investors be passive, he cites time on runway planning, scenario modeling and reaching milestones with less capital. “We also line up out-of-state co-investors early, so our companies can raise follow-on rounds without leaving Arizona,” he adds.
Tesoro Venture Capital uses its global ecosystem approach to connect founders with industry partners, governments, universities, customers and investors across markets. Additionally, Lombard says, universities contribute research and talent; industry partners bring technical expertise, tools and pathways to production; and governments help develop the conditions for growth. Investors support the journey toward commercialization.
For example, he says, working alongside partners such as TSMC and Cadence helps connect semiconductor entrepreneurs with the expertise and resources needed to advance their technologies. “Our broader platform extends that approach across physical AI and health, where success also depends on application expertise, validation and access to customers.”
Lombard believes Greater Phoenix is an anchor for this global approach, and says, “We help companies draw on research, talent and industrial capabilities across borders while building pathways into the U.S. market and international growth.”
By way of example, he notes that, with TSMC, Mayo Clinic’s Discovery Oasis and the ecosystem growing around them, the opportunity is here for Arizona to lead in building the next generation of companies advancing the frontiers of semiconductors, physical AI and health.
“The opportunity is to translate those regional strengths into new companies, commercially viable products and lasting economic value,” he says. “The opportunity for Arizona is to build the companies that will define what comes next.”
In the current economy, Tesoro’s emphasis is on helping founders make capital go further by resolving the right uncertainties early. That means, Lombard explains, identifying a real customer need, establishing realistic development milestones and bringing the right partners into the process before costly decisions are made. “Our job is to bring capital, company building and a global ecosystem together so breakthrough technology has a credible path to market.”
Wolfman admits that most of what his firm does in the first two years is unglamorous. “We build the layer of management the company outgrew, put in financial reporting that tells you something before the quarter has closed, build the sales function most of these businesses lack, and set a three-year plan and work it. Where an owner wants to grow by acquisition, we can support that, too.”
But he notes the role has shifted in two ways: Entry pricing is high enough that nobody should count on selling at a higher multiple than they paid, so returns have to come from the business being bigger and better run, which puts more weight on operating work. “And the hardest constraint on growth right now is people, not capital or demand, so a material amount of our time goes into leadership hiring and retention.”
Funding Factors
“Lenders and investors are emphasizing cash flow quality, liquidity, leverage, management experience and execution. They also examine customer concentration, revenue durability, competitive differentiation and how the business would respond if growth slowed or costs rose,” Western Alliance Bank’s Hickman relates.
Noting that clear information matters, she explains, “Companies with timely financial reporting, realistic forecasts and a supported plan for using capital are better positioned. Management also must show it understands the risks, not just the opportunity.
In evaluating a business, Scottsdale Community Bank’s LeCorgne explains bankers, generally, are looking for profitable businesses, strength of operators, well-capitalized and growing businesses, businesses with a clean operating history over an extended period, a growing industry sector, and a company with a well-defined and thorough business plan.
And, acknowledging that interest rates matter, Hickman adds, “Businesses also face higher labor, insurance, construction, materials and operating costs. Those pressures affect margins, cash flow and the debt a company can reasonably support.
“Valuations also shape acquisitions, real estate and equity-backed transactions,” she continues, and describes other factors impacting financial transactions: “When buyers, sellers and capital providers disagree, deals take longer or require more equity. Economic and policy uncertainty can delay major commitments even when underlying operations remain sound.”
In Hickman’s experience, the most effective companies are not trying to predict every short-term change, but are testing assumptions, protecting liquidity and assessing investments against realistic demand and cash flow.
Says LeCorgne, “Funding costs and operating expenses are both higher today and will continue to negatively impact bank earnings.” Furthermore, he adds, “the flat yield curve has not helped banks.”
Affirming that, for a commercial bank, repayment capacity remains central, Hickman notes, “Collateral and structure matter, but they cannot replace a sound business model, disciplined financial management and a credible plan.”
Xcellerant Ventures’ Shufeldt reports, “The cost of capital is the biggest factor, and it just got worse. On September 16, the Fed raised rates to 3.75% to 4%, its first hike since 2023, and signaled that more could follow.”
He explains why higher rates hit twice: “They make bank and asset-backed debt more expensive, which hurts capital-intensive businesses most, and they raise the bar for equity investors, who now demand more proof before they commit.”
Shufeldt cites valuations as the second pressure, noting, “Many companies that raised at 2021 prices are still growing into them, which leaves founders choosing among a down round, structured terms or stretching their runway. We’re seeing all three.”
Addressing characteristics lenders and investors are placing greater weight on today when evaluating a business, Shufeldt says the first questions are how much capital it takes to produce each dollar of revenue, and how long the company survives if the next raise is late. Specifically, he says investors and lenders are looking hardest at:
- Unit economics. Acquisition cost, payback and margin are now scrutinized at seed, not just Series B.
- Runway. Eighteen to 24 months of runway gives you leverage; six months gives it to the investor.
- Revenue quality. Signed, recurring contracts count. Pilots and letters of intent don’t.
- Leadership and governance. Experienced operators, clean financials and a functioning board are expected.
- AI defensibility. Investors ask whether the AI rests on proprietary data or deep workflow integration, or whether a bigger player could copy it in a quarter.
- Regulatory readiness. In healthcare, a clear FDA and payer strategy is now a requirement, not a later-stage concern.
“The founders raising successfully know their numbers cold and can say exactly what the next dollar will accomplish,” says Shufeldt.
Wolfman, from his private equity perspective at Montage Partners, also cites interest rates as top of mind and points to the Fed raising its target range a quarter point in September, to 3.75% to 4%, its first increase since 2023. He notes the result that “debt isn’t getting cheaper and buyers can’t count on leverage to make the math work.” Explains Wolfman, “In our part of the market, that means less debt and more equity in the capital structure, and more seller notes and earnouts to bridge price gaps. Tariffs and higher labor and input costs matter mostly through margins, and buyers and lenders are more careful about which earnings they’ll underwrite. Valuations for high-quality businesses have held up because so much capital is chasing them, but the gap between the best companies and everyone else has widened. And uncertainty is now the normal condition, so what gets paid for is resilience.”
However, Wolfman believes the biggest single factor isn’t macro at all. “It’s where the price expectation came from in the first place. A lot of what we look at is a banked process, so by the time we’re in a conversation the advisor has usually set a range and both sides are working off it. That’s fine, and a good banker’s range is grounded in the company’s normalized earnings and real comparable transactions. The trouble starts when the number traces back to something else: An unsolicited offer somebody got two years ago; one unusually strong year that hasn’t repeated; a figure that’s just been circulating in the industry; increasingly, a number a machine put in an email.” And he notes, “When we do see an owner arrive with a hard number of their own, that’s usually where it came from, and it’s the anchor that gets tested hardest once diligence starts. That gap, more than any interest rate, is the most common reason a deal doesn’t get done.”
From Wolfman’s perspective, characteristics lenders and investors are placing greater weight on today when evaluating a business come down to two things: whether the business can grow without the owner, and whether the numbers hold up under scrutiny.
On the first point, Wolfman shares, “The most consistent finding in what we see is that many companies have no real commercial function. Sales and marketing was the limiting growth constraint at 51% of the businesses we talked to this year, with growth coming from referrals, inbound, or the founder’s own relationships. A buyer reads that as revenue depending on one person. It matters most if the owner wants a clean full exit at closing, and much less if the owner is staying on to build the bench, which is a big part of what a recapitalization is for. Either way, building a real sales function is the highest-return thing an owner can do before coming to market.”
Regarding the second point, the numbers, Wolfman finds earnings quality is what has moved most. “Presented margins are often adjusted in ways that won’t survive a quality-of-earnings review,” he says. “We looked at a Southwest contractor this year that recorded direct labor below the cost of goods line, which inflated reported gross margin by close to 20 points. That’s rarely dishonesty. It’s a company arriving at market before its numbers are ready.”
Behind those two considerations, Wolfman cites recurring items of cap table complexity, key-employee retention and related-party entanglements, such as real estate or entities owned by family members. He notes, “All of it is far cheaper to sort out years ahead than under a signed letter of intent.”
Flow of Capital
The positive view from LeCorgne, at Scottsdale Community Bank, is that capital availability has generally improved, and he notes banks have made more loans in the last twelve months than in prior periods.
Hickman, at Western Alliance Bank, shares that view. “Capital remains available,” she says, “but providers are more selective.” Observing that lenders and investors are placing greater weight on durable revenue, cash flow, management experience and a company’s ability to perform under different economic conditions, she explains, “Strong businesses with clear plans and sound fundamentals still attract competition. Companies with higher leverage, uncertain cash flow or aggressive growth assumptions face a higher bar. More businesses also are weighing commercial bank credit; private credit; and equity based on risk, cost and flexibility.”
Says Hickman, “Capital has not disappeared. It is moving toward businesses that can show how they will use it, create value and meet repayment or investor expectations.”
And LeCorgne notes, ‘Banks are looking to make more commercial loans in the near term. Real estate lending — including construction, commercial real estate financing of investor projects and residential lending — are all expected to hit headwinds in the near term.”
Hickman anticipates activity around durable growth themes, including advanced manufacturing, technology infrastructure, healthcare, business services and productivity technology, with acquisition financing potentially picking up as owners and sponsors revisit transactions delayed by uncertainty around rates, valuations or economic conditions.
On the other hand, she says, “Funding could remain constrained for highly leveraged businesses, speculative developments and companies without a clear path to sustainable cash flow. Some commercial real estate categories also may face refinancing pressure when higher borrowing costs and current values complicate maturing debt.”
She believes the market will continue to favor growth supported by strong fundamentals over growth dependent on favorable financing. “Businesses that plan early, protect financial flexibility and involve lenders before a transaction becomes urgent will have more options,” she says.
From the venture capital perspective, Excellerant’s Shufeldt says, “Capital is more plentiful but far more concentrated.” He notes that U.S. startups raised more than $400 billion in the first half of 2026, more than any previous full year, but 87.5% of it went into rounds of $100 million or more, mostly in AI — and three firms raised nearly half of all new venture funds.
“For Phoenix founders, the national boom mostly isn’t reaching them. Outside the mega-rounds, investors want revenue, clear unit economics and a path to profitability,” Shufeldt says. “The ‘growth at any cost’ era is over.”
Shufeldt finds founders are adapting by blending equity with venture debt, revenue-based financing, strategic partners and grants, and by raising smaller rounds tied to milestones such as clinical validation or payer contracts. “That’s healthy,” he says. “The companies coming out of this period are leaner and better run.”
Looking ahead to the next 12 to 18 months, Shufeldt expects capital will flow to places where AI solves real operational problems in regulated or physical industries, such as healthcare delivery, advanced manufacturing and supply chain. In this regard, he says, “Phoenix is well positioned because it has the anchors: the semiconductor cluster, ASU’s growing medical ecosystem, and a fast-growing healthcare market under real capacity strain.”
Anticipating liquidity to improve gradually as IPOs and M&As pick up and distributions return to investors, eventually reaching the regional funds most Arizona companies depend on, Shufeldt advises businesses, “Raise for specific milestones, build out-of-state investor relationships before you need them, and treat capital efficiency as a competitive weapon.”
Montage Partners’ Wolfman reports, “Last year was generally slow at our end of the private equity market. GF Data, which tracks private equity-backed deals between $10 million and $500 million, counted 297 completed transactions in 2025, down 23% from 2024. Tariff uncertainty froze a lot of processes, and much of 2025 was spent digging out of it.” Observing that this year has been noticeably more active — with 170 deals completed in the first half and the market on pace to finish about 10% ahead of last year — he cautions, however, “Some advisors are seeing a real gap between how busy things feel and how many deals are actually closing, meaning activity and completions aren’t the same thing.”
Wolfman notes that what matters more than the volume is how unevenly it’s distributed. “The flight to quality is more present than ever as it relates to funding availability. A clean, well-prepared business draws competition that’s hard to call rational, and those with real flaws — customer concentration, a soft year or an unresolved succession question — can sit on the market for months without much happening.”
What’s constrained, he says, is anything levered to new residential construction, including building products and the trades that serve them. “Businesses with heavy customer or end-market concentration [are] easily the most common underwriting problem we run into; it was a flagged risk on 44% of the companies we looked at this year.” And he describes the very bottom of the market as below about $2 million of earnings, where a company can’t support much debt and the honest advice is usually to use less leverage rather than more.
Looking ahead over the next 12 to 18 months, Wolfman offers, “This is my read rather than a forecast, but it follows pretty directly from what advisors are telling us.
“More active: essential and non-discretionary services. Environmental, testing and inspection, industrial maintenance, mechanical and electrical, fire and life safety. Buyers treat those as insulated from most of what people worry about. Anything with exposure to power, grid or data center infrastructure should stay well-funded.
“Also more active, and here I’m describing the market at large rather than our own pipeline: companies coming to market because of the owner’s age, typically in the spring, when owners see their year-end financials and decide if now is the right time for an exit.”
Notes Wolfman, “The owners who actually reach us mostly want to keep going, and which kind of owner someone is determines almost everything about what kind of capital fits.”
