This week, Etched, a rival to Nvidia, revealed that TSMC produced its inaugural chip earlier this year. As the four-year-old startup, valued at $5 billion, prepares to deliver systems powered by this chip to clients later this summer, scaling up production could be difficult. Similar to other chip designers, Etched is vying for limited capacity at TSMC’s facilities in Taiwan.

Copper Sky Capital, an early backer of Etched, is optimistic that the chip manufacturer will overcome its production limitations by eventually creating chips at TSMC’s facility in Arizona. When the four-year-old VC firm invested in Etched’s $120 million Series A two years back, founder Jack Selby ensured an allocation in part by pledging to assist the startup in eventually relocating its chip production to Arizona.

Selby, a former executive at PayPal and longtime managing director for Peter Thiel’s family office, Thiel Capital, established Copper Sky, based in Phoenix, in 2021 (previously known as AZ-VC). The firm’s inaugural $115 million fund concentrated mainly on startups situated in Arizona and the Southwest. Selby believed that many coastal startups, especially those in California, Massachusetts, and New York, are excessively valued compared to enterprises emerging in his area. Nonetheless, Selby identified an opportunity to reverse this trend by assisting hardware startups from California in relocating their production to Arizona.

Selby attributes Copper Sky’s investment in Etched — an otherwise hard-to-access startup — to his significant influence in Arizona’s economy. As a board member of the Arizona Commerce Authority, Selby is actively engaged in attracting out-of-state businesses to establish manufacturing operations in the area.

“When Copper Sky invested in Etched, the company clearly recognized our connection to the Arizona semiconductor industry, particularly the local TSMC GIGAFAB,” Selby stated to TechCrunch.

Although Copper Sky has recently broadened its focus beyond the Southwest to embrace nontraditional venture hubs across the nation, Selby remarked that the firm is also interested in supporting hardware companies, including those in the defense sector, that can establish manufacturing in Arizona. 

The firm is anticipated to soon secure more capital to invest in those higher-priced coastal firms, as well as others throughout the United States. Copper Sky is currently in the process of raising a $300 million second fund, according to a regulatory filing.