Diamond, Kasser Invest in Growth Companies

By David B. Pittman

Donald R. Diamond and I. Michael Kasser, two of Southern Arizona’s most successful businessmen, each has accumulated substantial fortunes investing in real estate.

But in today’s troubled times neither Diamond, chairman of Diamond Ventures, nor Kasser, president of Holualoa Companies, believes the real estate industry will lead Tucson out of its current economic doldrums into a robust future.

Instead, each predicts small, growth companies utilizing high-tech innovation will be the model to turn around the sluggish local business climate, create new, high-paying jobs and provide the increased diversification they maintain Southern Arizona desperately needs.

Putting their money where their mouths are, Diamond and Kasser have joined forces and formed Diamond Holualoa Capital, a limited liability corporation that will identify and invest in up-and-coming growth companies with promising entrepreneurial ideas.

Joining Diamond and Kasser in the new business are Diamond Ventures’ President David Goldstein and Holualoa Companies CFO & Co-Founder Rick Kauffman.

“Because of the groundbreaking research and development taking place at the University of Arizona, and because Southern Arizona is such a great place to live, I believe we are on the cusp of creating new high-tech industry that in itself will provide a big piece of the puzzle we need to get Tucson back on track,” Diamond said.

Both Diamond and Kasser said it will be many years before the local real estate market fully recovers. In addition, high labor costs and regulatory factors make it difficult for U.S. manufacturing industries to hold their own with foreign competition from Mexico, China, India and other developing nations.

Instead, the real estate chieftains contend it is time to look to high-tech, innovative growth companies to lead the economic recovery.

“We have always done well in this country by using our heads and coming up with new, important ideas. Whether it goes to the moon or Silicon Valley, or right here in Tucson, that is where the future of this country is in terms of getting us out of this six-year mess we’re in,” said the 84-year-old Diamond. “If we create the right atmosphere in this country to encourage innovation, we will stay ahead of the rest of the world as we always have.”

Kasser, 72, believes it is difficult for local political leaders and economic development specialists to recruit huge national and international firms to Tucson because of the major infrastructure investments those businesses have established elsewhere.

“General Electric is unlikely to bring its headquarters here – it’s just not going to happen,” he said. “But we can encourage the establishment of many small, high-tech startups that have the potential to grow into something big. The prime example here for that kind of growth is Ventana Medical Systems – but there are many others that are smaller that have also achieved significant success.”

While Kasser and Diamond expect to make profits providing investment capital to firms in need of financial resources to grow, they also make no secret of their desire to help Tucson and Southern Arizona diversify economically by creating high-paying, high-tech jobs that they hope will jump start local business activity.

“Don is a tremendous booster of Tucson – he always has been,” Kasser said. “He loves Tucson and wants it to flourish, and I feel the same way. We also hope to make money at it, which means we aren’t going to make investments that don’t make sense. Our priority is to invest in projects that are sourced in Tucson and beneficial to the Tucson area.”

There are multiple reasons Diamond and Kasser chose to collaborate in high-tech investing. Though the two have been frequent competitors in business, they respect one another and have developed a solid friendship. They also believe they can do a more complete and cost-effective job of evaluating companies together than they could do separately.

Both Diamond and Kasser have been making investments in high-tech growth companies in recent years. Though they describe capital investment as a hit-and-miss proposition, both have had enough hits to achieve profitable results.

Diamond Ventures struck gold through an investment it made in 2000 in a two-year-old company called Knowledge Computing that specialized in crime-solving software. The business, which provides software to about 3,000 police agencies nationally, still operates from Tucson, but is now a division of IBM after being purchased by the business giant in October 2011.

One of Holualoa Companies investment successes is CyraCom, a Tucson company formed in 1995 that is the leading provider of over-the-phone interpretation and language translation services for healthcare, business and government clients. CyraCom was named to the Inc. 5000 list of fastest growing companies in 2007, 2009, 2010 and 2011.

Diamond Holualoa Capital formed in February, but revved up its efforts in June with the hiring of Ngoc (pronounced “Knock”) Can, who recently graduated from UA with an MBA in finance. It is her job to evaluate companies seeking capital funds and provide reports to Kasser, Diamond, Goldstein and Kauffman, so they can determine which applicants will be allowed to make formal presentations seeking capital assistance. Kasser said growth companies in need of investment capital should email Can at can.ngoc@gmail.com.

Shortly after Can was hired, Diamond Holualoa Capital brought in Dr. Raymond L. Woosley, president of AZCERT, who formerly headed C-Path and the UA College of Medicine, as a consultant in areas of medical technology.

“Don and Mike are stepping up and investing in local companies,” said Woosley. “It’s not just about making money, but also about creating high-paying jobs and improving the economy in Tucson and Southern Arizona. These guys are doing good work and I’m proud to be a part of it.”

David Allen, executive director of Tech Launch, a newly formed technology transfer program at the UA, praised the efforts of Diamond and Kasser to invest in local, high-tech firms with growth potential.

“I’ve met with them and we’ve had productive discussions,” said Allen. “Those discussions will continue. I am confident we will enter into deals with them in the future.”

Diamond Holualoa Capital is about more than delivering needed investment funding. Diamond and Kasser say they also provide needed executive management expertise to technology experts who often need business assistance.

“Many of these developing businesses have smart people and innovative products – but they don’t know how to be successful in the marketplace,” said Diamond. “There is a big difference between coming up with a product, which these brilliant people can do, and running a successful business.”