Building Communities Kim Lachance Shandrow  | May 11, 2017

Phoenix Rising: How A Tech Startup Oasis Emerged in the Arizona Desert

Serial entrepreneur and Phoenix, Arizona, native Derek Neighbors had a software engineering degree, a passion for new technology and an entrepreneurial itch. He was a prime candidate to skip town for California’s Silicon Valley.

But he didn’t. Instead, Neighbors joined a growing number of startup founders who decided to start and scale their companies in Phoenix. In 2008, he and his co-founder, Jade Meskill, rolled up their sleeves and set to work building Gangplank, a startup co-working and event space in Chandler (just outside of the Phoenix metropolitan area), for tech-obsessed creatives like himself. In the process, Neighbors has also helped cultivate a blossoming tech ecosystem in what was once a startup desert.

Derek Neighbors, co-founder of Gangplank, a collaborative co-working and event space in Chandler, Ariz. Image credit: Christopher Barr Photography.

“We started connecting the startup community,” Neighbors, also chief technology officer at Chandler-based, told Free Enterprise. “In a sparsely populated region, it was important to get creative density and awareness happening. Today, that is full swing, and our current focus is on developing the talent pipeline and reinvigorating the hacker ethos into the community.”

Central to that ethos, he said, is exploring innovative business and product ideas in ways that enhance the area he and thousands of other ambitious tech entrepreneurs live and work in.

“Arizona is one of the most beautiful places on the planet,” Neighbors said. “One smell of the rain on the desert floor and you will understand. It’s affordable. It is a great place to raise a family. Mostly, it has an entrepreneurial spirit about it. The flora and fauna that reside here have adapted to hostile environments and aren’t afraid to claw back. The Wild West looks and feels like a startup community. Survival of the fittest. Riches aplenty to those who claw the hardest.”

Nestled in the seat of Maricopa County, the sprawling desert city of 1.5 million residents ranked among the top 25 rising American technology epicenters in the latest Innovation That Matters study, a joint research undertaking by D.C. startup incubator and venture fund 1776, Free Enterprise, and the U.S. Chamber of Commerce Foundation.

Like Neighbors, Odeen Domingo and Jenny Poon, the husband-and-wife co-founders of downtown Phoenix’s Co+Hoots co-working space, expect that ranking to rise in the near future, as the most populated city in the Arizona carves out an even bigger slice of the digital economy in the years ahead.

Here are six exciting factors fueling the explosion of innovative startups — Neighbors’, Domingo’s and Poon’s included — in the Greater Phoenix area:

Sun, fun and affordable living rule the day.

With zero annual snowfall — compared to the average U.S. city, which receives about 26 inches of snow per year — and with 299 bright and sunny days per year, the famously balmy climate is enough to attract people to the Phoenix area all on its own.

While he savors the sizzling sunshine and lack of precipitation, Domingo appreciates the relatively cozy cost of living even more.

Husband and wife entrepreneurs Odeen Domingo and Jenny Poon, co-founders of Co+Hoots, an innovative co-working space in Phoenix, Ariz.

“The cost of living is much lower here, and the quality of life is either the same and even much higher than that of other tech hubs in some aspects,” he told Free Enterprise. “You can still get great homes and condos in the city or within central Phoenix for less than $300,000 and be walking and biking distance from work. And if you need to go to San Francisco, Silicon Valley or Los Angeles for business, they’re just a cheap airline flight away.”

Neighbors, too, enjoys the affordable flight options out of Phoenix Sky Harbor International Airport.

“It’s great that San Francisco and Los Angeles are both only one and a half hours away by plane,” he said. “Add to that a cost of living here that’s a bargain, and you have a lot of young, raw talent looking to have a breakout opportunity, and most would rather do it here than to move away to get it.”

In fact, that’s precisely what he did, despite being tempted to move to the heart of Silicon Valley early in his engineering career.

“I grew up in Phoenix,” said Neighbors. “I started my career here and ended up working for a company in Mountain View, Calif., and had started to arrange to move there. I just couldn’t do it. The lifestyle change wasn’t worth it. That is when I decided to double down and invest in Arizona startups instead. That was 15 years ago.”

Opportunities are ripe for international trade export activity.

The city of Phoenix last year received the U.S. President’s “E” Award for its contribution to export trade growth, the highest award any American entity can receive for making an exceptional contribution to the growth of U.S. exports.

“Phoenix is only the fifth city to earn the honor in 54 years,” AZ Big Media reported. “It is typically reserved for companies and private sector entities.”

The arid metropolis is increasingly becoming recognized as a “model city for making trade and exports a priority,” also according to the publication, with Phoenix’s mayor Greg Stanton recently spearheading 14 trade missions to Mexico, penning trade agreements with Mexican officials and launching the city’s inaugural export boot camp. The initiative, called ExportTech, is headed up by the Arizona Commerce Authority and educates local founders of small- to mid-sized startups on how to trade abroad.

“Every day we see the growth of Phoenix businesses, due in large part to exporting,” Stanton said in a statement. “This growth has enabled our Phoenix businesses to add jobs and support their local communities as they expand their bottom line while at the same time making a significant and valued contribution to the expansion of our export economy.”

Continuing to ride the rising tide of trade momentum, Neighbors pointed out, the Greater Phoenix Economic Council recently released the Metro Phoenix Global Investment Plan, with an eye on boosting area international export trade activity over the long-term.

Domingo and Poon have taken note and are eyeing potentially expanding their business beyond American soil as well. They’re setting their sights South of the Border, in Mexico in particular.

“We’ve personally visited Mexico to see how we can strengthen ties as a co-working space,” Poon said. “We have seen the amazing potential to grow between Phoenix and the whole trade corridor, from Phoenix to Tucson, all the way into Hermosillo and Mexico City, Mexico.”

Poon continued: “Mexico and Arizona are already doing so much trade and there is so much collaboration that could happen if we nurtured the relationship. We’re looking at opportunities to work with their municipalities to help build similar ecosystems in Mexico, to support innovation along that route and to encourage new technology to be built to improve and connect to the bigger ecosystem. What’s great is that our city supports this and understands that Mexico is one of our most valuable partners.”

Support from local officials is in ample supply.

Several Phoenix area public entities, including the Arizona Commerce Authority and the Greater Phoenix Economic Council, as well as nearby Arizona State University, are actively pitching in to encourage area entrepreneurial innovation, and have been for some time.

“We’ve been incredibly lucky to have forward thinking, progressive leaders who see the value in supporting not just big companies but small ones as well,” Poon said. “The Greater Phoenix area has seen success through not only the groundswell of forward-thinking entrepreneurs, but from government taking a bigger role in building the ecosystem.”

The nearby college town of Tempe, situated approximately 10 miles to the southeast of downtown Phoenix, is leading area economic development, beginning with building a bioscience hub to attract startups and enterprise companies in the health industry.

“The also closeby city of Chandler has invested heavily in tech,” Poon said. “The city of Phoenix has supported the growth of light rail and removed barriers to create more attractive cities.”

Silicon Valley companies are getting in on the local action.

Several big-name and up-and-coming Silicon Valley tech companies have recently set up shop in Greater Phoenix, helping to foster the area’s innovation and talent tech boom. These include Uber, PayPal, Weebly, Zenefits and a host of others.

For its part, Co+Hoots has assisted many larger companies and brands that now operate nationally and internationally in launching in Phoenix. Among them are Uber, Heckler Design, Nijel, Sputnik Moment and Code Technology.

“These companies saw the value in Phoenix and believed in the future of Phoenix,” Poon said. “We have everything that it takes to build a great community, we have forward-thinking leadership at the government level, we have a strong base of entrepreneurs and makers, and we have world class universities pushing out young talent.”

There’s room to seize opportunity and to stand out from the crowd.

Domingo describes Phoenix as “a big city that acts small.” For entrepreneurs, it’s still a small enough pond to successfully innovate and attract attention, investors and customers in — as a relatively big fish.

“That’s not a bad thing,” he said. “What that means is, if you start something and do things the right way for the right reasons, you can make a name for yourself and your venture here. You can make an impact and, from there, make a dent nationally and internationally. If you show that you genuinely share the same values as the downtown and central Phoenix community, people will get behind you and support you.”

Neighbors echoed Domingo’s take on launching out of what’s recently grown to be known as the “Silicon Desert.”

“Here you have the ability to help guide the ecosystem, instead of being cog in an entrenched system,” Neighbors said.

There’s a built-in startup community that tech entrepreneurs can easily tap into.

It’s called #yesphx. Built and grown organically, the grassroots #yesphx community — which hosts several networking events, such as Startup Grind Phoenix and PHX Startup Week — “is a unifying banner for Arizona’s diverse startup ecosystem, 100 percent community-owned, bootstrapped and yours to help lead.”

Entrepreneurial community generosity and collaboration are the core founding values of #yesphx, enabling for welcoming pathways to networking and communication that encourage startup founders to actually work with one another in meaningful ways. The underlying goal: to help new businesses and innovations take root, succeed and scale at the local level and beyond.

“#yesphx an active and vocal community,” Domingo said of the grassroots booster organization. “There are several established entities within it that help keep the ecosystem flowing, including Startup Week, a popular week-long startup conference. And while chain co-working spaces and incubators have popped up in Phoenix, or will soon, locally-owned co-working spaces, of which there are now several, and locally-owned incubators, like the Center for Entrepreneurial Innovation, still lead the pack in helping local startups and small businesses grow.”