What’s behind Arizona becoming such a true-blue friend for new and relocating businesses?
A few years ago, when Heidi and Brad Jannenga hit upon a novel idea for a new technology business, they had not yet fully comprehended how serendipitous it was they were planning to base their company in downtown Phoenix.
For one thing, the Jannengas happened to live in Phoenix, so their choice of location was set in stone. But more importantly, what the couple couldn’t have foreseen, was how prominently the city was positioning itself to become a leading national advocate for entrepreneurs and an eager partner in their plans.
Last year, the National Federation of Independent Business (NFIB) named Phoenix one of the top five U.S. cities opening its doors to entrepreneurs and helping them succeed in growing their businesses. Listing numerous reasons why Arizona’s largest metropolitan area is so attractive to both in- and out-of-state entrepreneurs, NFIB state director Farrell Quinlan noted that after the homebuilding bubble burst in 2008, Phoenix made tremendous, corrective strides to diversify its economy to include more manufacturing and healthcare-related businesses.
“We will never again be so exposed to a sector downturn,” he says.
The Jannengas’ company is one of many, with Arizona’s help, that are raising the bar for entrepreneurial growth and success.
According to Heidi, WebPT is an electronic medical record company that provides digital space for physical therapists, occupational therapists and speech and language pathologists.
In 2006, Heidi and her husband and co-owner Brad wisely anticipated the growing needs of physical therapists seeking to transition their medical records to an electronic format. Paper dictation and written documentation, they knew, were some of therapy clinics’ biggest costs.
But, as they soon discovered, there was nothing available in the marketplace to address the problem. With Brad’s technology savvy (he was a professional software developer) they created a Web-based software to hook up a wide range of clinicians with, as the WebPT website describes, “…intelligent business reporting, interactive and organized scheduling and one-stop shopping.”
Although, like many successful startups, the company began in a garage, WebPT has grown exponentially. The company is now located in Phoenix’s downtown warehouse district, a thriving new hub for innovative businesses, and employs roughly 250 people.
The flourishing company has become a model of sorts for businesses that actively tap state and municipal resources, resources that were created to establish and nurture new commerce in Arizona.
The Arizona ‘ecosystem’
“We are a technology business that’s evolved tremendously over the past seven years,” Heidi notes with understandable pride. But she’s quick to point out that her company’s evolution has resulted from assistance along the way.
“Arizona has lots of mentor networks that serve as connectors,” she says. “Over the past several years and now with the technology wave underway, a lot of coworking spaces and [business] incubators have popped up. We feel fortunate that when we were starting our business, we were part of the groundswell that was proliferating in Arizona, specifically the greater Phoenix metro area.” Some of the services that are now readily available to Phoenix—and, by extension, Arizona—businesses were in their infancy when the Jannengas began planning to launch WebPT.
“When we started out, I actually read something in the paper about how ASU had an entrepreneurial group that was offering something to local companies called Launch Prep,” Heidi recalls. “It was a group of ASU professors trying to gather local startups to come in and learn how to build a business plan, how to develop an elevator pitch and how to build out key financial metrics, among other things.”
The Jannengas happily accepted assistance, which they now say was an important stepping stone to meeting more people and organizations involved in the technology ecosystem. And as WebPT has grown, its leadership has taken advantage of other helping hands, including the Greater Phoenix Economic Council (GPEC) and the Arizona Commerce Authority (ACA).
“The ACA has some training grants that we’ve applied for. They have helped tremendously with growing our team,” Heidi says.
President and CEO of the ACA Sandra Watson points out that the organization is chartered to help both new and existing businesses in many ways, including training employees.
“The Job Training Grant is a job-specific, reimbursable grant that covers 75 percent of eligible training costs,” Watson explains. “It supports the design of customized training plans for employers creating new jobs, or increasing the skill and wage levels of current employees.”
Strength in numbers
Along with the ACA, Chris Camacho, president and CEO of Greater Phoenix Economic Council (GPEC), has been instrumental in helping businesses like WebPT take root and grow. Since GPEC was formed in 1989, when it represented the advanced business development interests of eight metro-Phoenix-area communities, the council has broadened its reach by adding 14 additional communities to its charter.
“It’s been our mission to support industries that are considering investing in the Phoenix market—industries ranging from advanced business services to technology to manufacturing to data centers,” Camacho explains. “Our goal is to promote inward capital and the placement of high-wage jobs in this region.”
GPEC’s plan for accomplishing their mission is threefold, Camacho says.
“First, in a big, sprawling city like Phoenix, one of our primary goals is to identify innovators who aren’t operating in densely populated locations and connect them to our region,” he explains.
“Next is to connect earlier-stage companies to key resources—especially growth capital and debt resources—and our banks. Third, we want to help align startups and even mid-scale companies [with a research profile] and larger corporations around the technology disposition. This helps smaller companies tap into resources that usually only larger corporations can provide.”
Small business aid
Most of the statewide organizations tasked with helping improve Arizona’s overall attractiveness to new businesses aren’t big, splashy enterprises. They are rather entities working quietly and steadily behind the scenes to improve the business climate and infrastructure for small-business entrepreneurs. One of them, the Arizona Small Business Association (ASBA), has been doing precisely that for the past 40 years. “We’re the statewide resource for small businesses,” says ASBA CEO Rick Murray, who explains that his organization primarily exists to provide opportunities to its 10,000-plus member businesses, helping them to learn more about marketing, finance, technology and a number of other critical areas.
“We don’t do everything,” Murray adds, “but we’re that hub for all the services that are out there to aid small businesses.”
In Murray’s opinion, Arizona is a solid bet for locating—or relocating—a business. On the whole, he believes the state is making steady progress away from the devastating hit it took during the last major recession.
“It’s on the uptick,” Murray says about the state’s business rebound. “Arizona was particularly hard hit, and it’s taken the state a long time to recoup losses. Arizona fell a lot further than almost every other state, which means we have a lot more digging out to do.”
“It’s been a slow, steady climb,” he continues, “but just because it’s been slow doesn’t mean that it’s been a bad thing. It’s sustainable growth that’s creating a very stable foundation so, if and when the next downturn comes, we won’t be falling nearly as hard as we did a few years ago.”
Murray says he sees Arizona’s business advantages on many different planes.
“The fact that we’re a fair-weather state is an important consideration; you can do business all year round here and Arizona is a great place to live” he says. “But we’ve also done some remarkable things over the past six to eight years with regard to regulation and taxation for small businesses. We continue to try to lessen some of the burdens of these areas, so that business people can focus on making payroll and not worry so much about taxes and other issues that might discourage them from operating their businesses here.”
On the regulatory front, Murray cites one specific piece of state legislation that he was instrumental in helping to get passed.
“Equity crowd funding went into effect this past July,” he says. “It allows businesses to raise up to $2.5 million by crowd funding and giving away an equity position within their company.”
As Heidi explains, sometimes the most important reasons for picking a business location boil down to needs. Take parking, for instance.
“The City of Phoenix has embraced this groundswell of technology and, more specifically, us. In the warehouse district, they’ve made street improvements and added parking spots, seemingly little things that have helped us tremendously with building a thriving business here in the city,” she says.
“The willingness of the city to help build infrastructure that allows more and more companies to want to come downtown is, I think, extremely important.”
According to GPEC CEO Chris Camacho, these are the top three reasons companies find Arizona attractive to startup or relocate:
- Worker talent: “The existing talent pool in the Phoenix metro area is key. A lot of companies, particularly those in California, come to Phoenix for the qualified labor pool that’s produced through the Maricopa community college system as well as Arizona State University and University of Arizona.”
- Creative space: “Real estate is another reason behind companies setting up shop in Phoenix. We’ve actually built a repository of real estate websites that are conducive to these kinds of technology users’ needs. They look for places that are open, clean, minimal and turnkey.”
- Cost advantages: “A lot of companies come here for the optimized cost positions this area can offer them.”
Written by Bruce Farr
Photography by Mark Lipczynski