Etched Investor Jack Selby's Arizona Connections Fuel Startup Deals

Etched, a four-year-old Nvidia competitor valued at $5 billion, announced this week that TSMC had manufactured its first chip earlier this year. The startup is set to ship systems powered by that chip to customers later this summer, but scaling production may prove challenging due to limited capacity at TSMC's Taiwan factories. Copper Sky Capital, one of Etched's early investors, is hopeful that the chipmaker will find a solution to its manufacturing constraints by eventually producing chips at Arizona's TSMC facility.

When Copper Sky invested $120 million in Etched's Series A two years ago, founder Jack Selby secured an allocation in part by promising to help the startup eventually reshore its chip fabrication to Arizona. Selby, a former PayPal exec and longtime managing director to Peter Thiel's family office, Thiel Capital, founded Phoenix-based Copper Sky in 2021. The firm's first $115 million fund focused primarily on startups based in Arizona and the Southwest.

Selby's thesis was that most coastal startups, particularly those based in California, Massachusetts, and New York, are grossly overpriced compared to companies popping up in his region. However, Selby saw an opportunity to bridge the gap in the other direction by helping California-based hardware startups move their production to Arizona. Selby credits Copper Sky's investment in Etched — an otherwise hard-to-access startup — to his influential role in Arizona's economy.

As a board member of the Arizona Commerce Authority, Selby is deeply involved in recruiting out-of-state businesses to set up manufacturing operations in the region. "When Copper Sky invested with Etched, the company clearly understood our connectivity to the Arizona semiconductor industry, and in particular the local TSMC GIGAFAB," Selby told TechCrunch. While Copper Sky has recently expanded its focus beyond the Southwest to include nontraditional venture hubs nationwide, Selby said that the firm is also interested in backing hardware companies, including in the defense sector, that can set up manufacturing operations in Arizona.

The firm is expected to soon have more capital to invest in those higher-priced coastal companies, and those throughout the United States. Copper Sky is currently raising a $300 million second fund, according to a regulatory filing. Why this matters: The deal highlights the growing importance of Arizona as a hub for semiconductor production and the role of investors like Jack Selby in shaping the industry.

As the US seeks to bolster its domestic chip manufacturing capabilities, Selby's connections to the Arizona Commerce Authority and TSMC's local operations position Copper Sky Capital to play a significant role in helping startups navigate the complex production landscape. For developers and businesses, this means potential access to more localized and reliable chip supplies, which could have a ripple effect on the broader tech industry. However, questions remain about the long-term viability of reshoring chip production to the US and the challenges that come with scaling production in a region with limited existing infrastructure.