Startup Phoenix

The past few years have seen a tremendous growth in the entrepreneurial ecosystem and the emergence of a strong startup community in Greater Phoenix. The broad interest in incubating businesses and accelerating startup development is evidenced in the diverse membership of the Arizona Business Incubator Association, which ranges from co-working spaces, incubators and accelerators to economic development organizations and community colleges.

In the continuum of the startup ecosystem, co-working spaces have emerged to offer entrepreneurs and small businesses an opportunity to rent space in a professional work setting. They often foster collaboration among members. Business incubators provide more high-touch, hands-on assistance after accepting clients through an application process. Typically, an incubator supports first-level startup companies, with a technical assistance program tailored to each company in the program — putting a strategy in place to help the companies quickly develop, grow, establish all the best practices to everything from bookkeeping to marketing to following a business plan, and providing accountability to move them forward. Accelerators are generally the next step, helping companies raise funding and recruit the right kind of talent. Entrepreneurship has also become its own discipline in colleges and universities, which have been able to channel the strength of their knowledge resources to the advantage of students’ startup enterprises.

Economic development cannot be stagnant. Bringing new businesses into our community remains a key purpose of municipal and regional economic development departments (three of whom share their city’s efforts in this issue’s Feedback on page 10) and organizations — and startups is where much growth potential lies. In fact, Phil Bradstock, program manager with the City of Phoenix who oversees its Entrepreneur and Innovation Strategy, notes that seeing WebPT grow from one person to more than 260 employees made him and his colleagues in economic development realize that, shortsightedly, “we were focusing on the larger companies.” The need he observes is to focus on the small companies that have the ability to become the larger companies.

Q: What is the impact of your organization on the Greater Phoenix area business community/economy? 

A: We are the support structure for the growth of more than 250 scaling businesses. We provide entrepreneurs, regardless of race, age, gender, sexual orientation and socio-economic status, a safe place to launch, scale and fail. We surround companies that range from service-based businesses to health technology companies to startups with resources for them to be successful. Being an entrepreneur is incredibly isolating, and oftentimes the one thing that can be the difference between failure and success is the access to resources and a community to push them forward.

We are a physical space, but what makes us unique is we are a strong community of like-minded entrepreneurs who have been through it all and have a unique alignment of wanting to help others also succeed. We facilitate daily educational events, peer-to-peer mentoring, happy hours and networking opportunities, and an online community for members to share challenges and grow in the way that makes the most sense to each as a leader, as an employee, as an innovator.

Combined, these companies generate more than $80 million in revenue.

Q: If you’ve followed businesses after they left your program, can you speak generally as to types of challenges that were make-or-break for them to succeed or fail (such as funding, personnel, market knowledge), and resources that helped or resources we are lacking that would have been valuable?

A: One of the biggest things that CO+HOOTS graduate Sputnik Moment learned was how to grow its team. Because it was able to keep its office costs low with its CO+HOOTS membership, it was able to concentrate on scaling its team from a solopreneur to a company with an international presence that has created more than 15 jobs. Sputnik Moment founder Pierre Kaluzny was able to find talent and fill needs on his team through the CO+HOOTS community. Sputnik Moment also hired and collaborated with a handful of fellow CO+HOOTS members to grow and develop its brand.

Q: Tell us about one of your successfully launched businesses — how you worked with it and what difference it’s made to the Greater Phoenix area community/economy.

A: Heckler Design joined CO+HOOTS when it was about to hire its first employee. CO+HOOTS helped Heckler Design founder Dean Heckler find his first employee and then continued to support his growth as a leader and in managing his team. As he grew, he needed different support. He hired his bookkeeper from our community, and found his general manger through connections in our community as well. A lot of his new products were beta tested with the CO+HOOTS community of early-adopting business owners.

For the startup’s perspective on launching the business, scroll down to the Sidebar.

Q: What is the impact of your organization on the Greater Phoenix area business community/economy? 

A: Arizona State University values entrepreneurship as a core institutional characteristic. As such, ASU provides support for entrepreneurship in a shared support services model across our community of university entrepreneurs as well as in the greater community. Two examples of Arizona State University’s programs focused on supporting entrepreneurs are the ASU Edson Student Entrepreneur Initiative and Venture Devils. The Edson Initiative is going on its 12th year and has supported nearly 300 student-led startups with teams receiving around $3 million in seed funding to date and securing more than $5 million in external funding. The Edson Initiative supports student-led ventures from all colleges and schools across ASU, for-profit and not-for-profit, across a wide swath of industries. The Edson Initiative was the catalyst for further growth of our accelerators programs and led to the creation of Venture Devils to cast a wider net of support for our student, faculty and community entrepreneurs.

ASU’s newly-formed Venture Devils program is designed to support students, faculty and community members by aligning with the vision of access, excellence and impact at the university. Participants have access to numerous resources, including being paired with one of 40 ASU Venture Mentors, typically a local successful entrepreneur, who provides regular ongoing support to the venture. Currently, nearly 200 ventures are participating in the program, with industries ranging from technology to healthcare. Formalized curriculum (both through academic degree programs and non-academic training programs) is available and encouraged for all participants, including the community-affiliated ventures. All funding competition applicants across the university are included in the Venture Devils program.

Q: If you’ve followed businesses after they left your program, can you speak generally as to types of challenges that were make-or-break for them to succeed or fail (such as funding, personnel, market knowledge), and resources that helped or resources we are lacking that would have been valuable?

A: Certainly funding continues to be a challenge for teams after they leave our programs because of the uneven distribution of venture capital available nationwide. The need for capital in order to scale is a common denominator for ventures that have successfully demonstrated proof of concept, prototyping, product development and readiness to enter the market. However, there are increasing connections being made here in Greater Phoenix, and the startup community is working collaboratively to have greater collective impact.

Q: Tell us about one of your successfully launched businesses — how you worked with it and what difference it’s made to the Greater Phoenix area community/economy.

A: NeoLight joined the ASU Edson Student Entrepreneur Initiative (2014–15) with just an idea on how to treat jaundice in an efficient and accessible way globally. Equipped with seed funding from the Edson Initiative, within 30 days the team created their first prototype. Fast forward two years later, NeoLight created 12 jobs, raised almost $2 million in funding and is currently going through the FDA approval process that will enable them to go to market in early 2017 with their device that cures jaundice 40 percent quicker than traditional methods. The startup support the ASU Edson Initiative provided through mentorship, entrepreneurial training, prototyping facilities and funding allowed NeoLight to take flight.

For the startup’s perspective on launching the business, scroll down to the Sidebar.

Q: What is the impact of your organization on the Greater Phoenix area business community/economy? 

A: Hotwire is an entrepreneurial product development firm that partners with capitalized startups and early-stage companies for the purpose of greatly reducing their product development costs while also increasing their likelihood of success. We provide our array of engineering, product development, marketing and business development services without any profit added in. We can do everything from a back-of-the-napkin sketch to placing a product on a store shelf. 

In exchange for working without profit, we receive upside in the success of the company or product being developed. As a result, Hotwire is only successful when our client partners are successfully selling the products we develop. Like a true business partner, we share in both the risks and the rewards. Since 2003, Hotwire has successfully launched multiple multi-million-dollar companies and dozens of products with combined volumes of more than 5 million units.

Q: If you’ve followed businesses after they left your program, can you speak generally as to types of challenges that were make-or-break for them to succeed or fail (such as funding, personnel, market knowledge), and resources that helped or resources we are lacking that would have been valuable?

A: Startups fail for multiple reasons during their early stages. Oftentimes, it is because the founders don’t have the experience to appropriately recognize, assess and mitigate the risk of a business choice they are making or the financial resources to weather the storm when things just aren’t going as planned.

In startups, things never go as planned — it always takes more time and money than envisioned. This is just one of the areas where Hotwire makes a substantial difference. Because we become partners in the business, we are inherently invested in overcoming challenges and producing a successful outcome for the product being developed. We do this through a talented team of personnel with a proven track record of developing successful products and businesses.

We, personally, have developed products that have been successfully sold or licensed to the likes of Belkin, Dell, HP, IBM, Microsoft, Logitech and Toshiba and sold through national retailers such as Costco, Home Depot, Sam’s Club and Target.

Q: Tell us about one of your successfully launched businesses — how you worked with it and what difference it’s made to the Greater Phoenix area community/economy.

A: We became so involved in one of our partnerships that we actually became the operator of the company after the products were developed. The company is now Evolve Technologies, and it markets and sells a unique energy-efficiency technology designed to save hot water while showering. Today, Evolve is a multi-million-dollar enterprise among whose customers are the largest utility companies in the U.S., including but not limited to APS, SRP, Southwest Gas, Southern California Gas and Pacific Gas & Electric as well as San Diego Gas & Electric.

For the startup’s perspective on launching the business, scroll down to the Sidebar.

Q: What is the impact of your organization on the Greater Phoenix area business community/economy? 

A: The impact of SEED SPOT on the local community has been immense. To date, the totals are 288 ventures launched, 742 new net jobs created, more than $8.4 million in capital raised by the ventures, and more than 1.1 million lives impacted nationally and globally. Our mission is to create sustainable solutions to the problems communities face through the power of entrepreneurship. SEED SPOT has been a driving force for social enterprise business advocacy, community development and the promotion of Phoenix as an ideal city for startup and innovation culture.

Q: If you’ve followed businesses after they left your program, can you speak generally as to types of challenges that were make-or-break for them to succeed or fail (such as funding, personnel, market knowledge), and resources that helped or resources we are lacking that would have been valuable?

A: Over the past four-and-a-half years, we have seen how very valuable the Phoenix startup community and local government has been to our entrepreneurs’ long-term success. It is crucial that Phoenix paves the way for entrepreneurs to launch and succeed, and continues to develop a support system of mentors, devoted leaders and community activists to aid in their success.

Two of the biggest challenges our ventures face is lack of access to local capital and the need to overcome the prejudice surrounding the idea of what a social-impact business is. Increased knowledge and advocacy of this type of entrepreneurship is necessary to continue to propel these businesses forward, and will result in more capital access as well. The businesses that are created by SEED SPOT have the potential to be high-revenue-generating companies that create jobs and drive our economy forward.

Q: Tell us about one of your successfully launched businesses — how you worked with it and what difference it’s made to the Greater Phoenix area community/economy.

A: One successful business incubated by SEED SPOT is Vestafy, started by founder Steve Zeidman. This business came through our fall 2014 full-time cohort with the mission to transform the animal welfare fields’ relationship to technology and data that will empower organizations to save lives. Through SEED SPOT programming and mentorship, Zeidman learned how to properly market his product, build crucial business operations, and surrounded himself with the community and resources necessary to his full-scale launch. Zeidman’s company was purchased by Pethealth, Inc. in May 2015.

For the startup’s perspective on launching the business, scroll down to the Sidebar.

Q: What is the impact of your organization on the Greater Phoenix area business community/economy? 

A: Through the work we do at Tallwave with B2B technology companies, we’ve been fortunate to work with numerous Arizona-based companies as well as nationally recognized enterprise organizations to bring their ideas to commercial success. As a result, these companies have been able to diversify revenue streams, differentiate themselves in the marketplace and, most importantly, disrupt their own industries with innovative software products. This is particularly important for Arizona, as the revenue growth and product diversification inevitably creates more job opportunities locally, injects more cash flow into our local economy, and shines a spotlight on our innovation community.

The Arizona-based companies we’ve gotten to work with include AppointmentPlus, Shutterfly, Picmonic and Sparrow, to name a few. These companies have had tremendous success over the years, contributing greatly to our local economy.

Q: If you’ve followed businesses after they left your program, can you speak generally as to types of challenges that were make-or-break for them to succeed or fail (such as funding, personnel, market knowledge), and resources that helped or resources we are lacking that would have been valuable?

A: Because we work mostly with growth-stage to enterprise companies, they come to us at critical, but often very different, points in their business. We’ve worked with companies needing to develop their product and successfully launch it in the marketplace. For this, we helped bring the concept to life, from conducting extensive market research to building and testing the product to branding the companies and planning their sales and marketing channels.

For larger companies, we assist with the development of new technologies that either add to or supplement their current offerings. These companies often have a successful place in the market, but simply needed the resources to prototype and bring their innovation to life.

With other clients, we assisted with brand development and rebrands following company mergers and product evolution.

Q: Tell us about one of your successfully launched businesses — how you worked with it and what difference it’s made to the Greater Phoenix area community/economy.

A: While we no longer serve as an incubator, in our early days one local success was Shelvspace. It has become a leading provider of cloud-based sales technology for the Consumer Packaged Goods industry. This company disrupted an industry that had gone more than 30 years without significant change to the fragmented sales and brokering process. The CPG industry was ripe for innovation, and Shelvspace broke into the market with its mobile tools and real-time data reporting. It has since closed venture funding from local and national investors and is being used today as an enterprise sales cloud for many of today’s leading CPGs.

For the startup’s perspective on launching the business, scroll down to the Sidebar.

 

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The Startup’s Perspective

This cover story looks at the impact on our economy and community of organizations that help startups develop into viable businesses. In Business Magazine asked them to share what they contribute to the process.

To get a more rounded view of startup experience, In Business Magazine sought input from some of the new startup businesses themselves. Business founders share their perspective on what difference the support made to their success, what challenges they faced post-launch and what resources were of value to them in the business community (or what resources the community lacked that they believe would benefit startups), as well as the impact they, themselves, are now having on our business community and economy.

Dean Heckler

Founder
Heckler Design

Launched from: CO+HOOTS

“One of our greatest success stories is Heckler Design, which started in our space with just one member and now employs more than 10 in two downtown Phoenix warehouses,” says Jenny Poon, creative director and founder of CO+HOOTS.

An example of the ripple effect of one startup’s success is the description Dean Heckler gave this writer when interviewed for an In Business Magazine article on the local manufacturing sector: He designs his company’s products so that they do not include anything that can’t be made in Arizona — 99 percent of it in the Phoenix metropolitan area. The steel fabrication is done in Tempe, as is the powder coating; plastic parts are tooled and ejected in the Scottsdale Airpark; parts are assembled in the company’s Phoenix warehouse; and the packaging is custom-made in Tempe.

Vivek Kopparthi

Co-Founder & CEO
NeoLight

Launched from: Entrepreneurship + Innovation, Office of Knowledge Enterprise Development, Arizona State University

ASU is a powerhouse. The spectrum of help we got started with using the law school to file the LLC; using the patenting school to file the first patents; leveraging on the university’s partnership with prototyping spaces like TechShop; access to mentors; and exposure to lean, launchpad startup curriculum; and extended all the way through hiring a team and funding the startup. The sheer size and interdisciplinary nature of the university helps brings the incubated startups to a critical mass level, easily. Of all the above resources, I feel the most valuable resources were access to mentors, free patenting resources and the startup school curriculum.

Q: What significant challenges (if any) did you face once you launched from that program? What resources were available to help you — or, what resources are lacking in our community that you feel would be valuable?

A: Our first hurdle was technological — it took us about a year to zero down the technology that is both functional and manufacture-able. We figured it out with some help from engineering school faculty and prototyping resources at Techshop. Except for that first hurdle, it was mostly an execution game for us.

Q: Is there anything that, with the benefit of hindsight, you would have done differently? What support might you have looked for from the community?

A: Seed funding. It took us 14 months from the ideation date to raise funding. We undervalued the power of marketing and focused more on the technology. If I went back in time, I would focus 50/50 on both the verticals, which would have given us a better investor success hit ratio.

John Lockhart

CEO
Billfire

Launched from: Hotwire Development

It’s hard to put a value on them, but here are ones I count at the top. One is, the principals at Hotwire Development are smart entrepreneurs, and they don’t just develop a product without thought. As a matter of fact, they don’t even take projects without really understanding it from the front to the back — the market, the manufacturing, the cost, the potential price. When you partner with them, they bring all those skills with them; they’ve done all those things.

We started with an idea I brought to them, and we sat down together and looked at: What was the market? What would this cost to make? Where would we manufacture this? What would the marketing plan be? Pricing? All those kinds of things.

Q: What significant challenges (if any) did you face once you launched from that program? What resources were available to help you — or, what resources are lacking in our community that you feel would be valuable?

A: No; it was really a big project, there was a lot to it. We built the company around that; raised money around that. There were a lot of employees involved in that. Hotwire was the primary driver around all those activities.

With Hotwire, our experience is a little different. Hotwire and I co-invested in getting the product to a functional prototype (we’d had a working prototype). And then we did some test marketing, and figured out that we really had something. And then we created and built a company from there.

Q: Is there anything that, with the benefit of hindsight, you would have done differently? What support might you have looked for from the community?

A: There are always little things you learn from the market, but I wouldn’t launch it a different way. The people at Hotwire are awesome. But they wouldn’t pursue something that didn’t make any sense. I thought we had a really good process between us for developing my product, and a very fair way of working it out — I would almost say overgenerous. They’re smart enough to be able to structure a program for each partner that meets that partner’s needs.

Steve Zeidman

Vice President of Software Solutions
Pethealth Inc. – A Fairfax Company

Launched from: SEED SPOT

I found the coaching from the SEED SPOT staff, mentors and fellow entrepreneurs the most valuable. It’s very hard to keep believing in yourself in isolation. The outsider view on what you are doing is so important.

Q: What significant challenges (if any) did you face once you launched from that program? What resources were available to help you — or, what resources are lacking in our community that you feel would be valuable?

A: After the program ended, I missed the urgency of needing to show progress to others. Even though I had an office at SEED SPOT, I really missed the daily interaction with the other ventures. Luckily for me, within a few months I started a conversation with the company I ultimately joined.

Q: Is there anything that, with the benefit of hindsight, you would have done differently? What support might you have looked for from the community?

A: I wish I had mentors in the technology and software product lifecycle area. At the end of the day, building a business for social impact is still about a product, and needing solid advice in product is critical.

Dave Albertson

CEO and Co-Founder
Shelvspace

Launched from: Tallwave

For founders, knowledge and networks are always extremely valuable. As an early-stage company, it’s hard to predict the roadblocks that will be in the way to realizing your vision. For this reason it is critical to align yourself with others who can remove blind spots for you and connect you with folks who can help. Knowing who to go to and having a deep bench of connections can often help you get past the big barriers faster and with less capital.

Q: What significant challenges (if any) did you face once you launched from that program? What resources were available to help you — or, what resources are lacking in our community that you feel would be valuable?

A: There is never a shortage of significant challenges; I think by definition that is what a “startup” truly is. Navigating cash needs, product build-out, and building repeatable sales systems seems to always be a consistent focus. For many of these challenges, we have leveraged people with specific knowledge and skillsets in the community. Simply having access to the many experienced and talented people, and being fortunate to have them provide us with time and support, has been the greatest help of all. Having our community continue to drive connectivity across investors, founders and other supporters is a tremendous value.

Q: Is there anything that, with the benefit of hindsight, you would have done differently? What support might you have looked for from the community?

A: I am big believer in the founder path being unique to all, yet attracting great people with a shared vision is a key to success for all.

The Arizona community is full of great people, and there are terrific people and networks outside of Arizona as well. I think the learning I’ve had over the course of our journey is that it is very easy to have your head buried in the day-to-day. However, if you get connected externally to the right individuals, there is even more magic and acceleration you can accomplish. Whether it be through incubators, organizations, advisors, events, et cetera, doing it all over again I would make sure networking with high intent and vision sharing are a core part of the daily routine.