Brad Jannenga cringes when he hears someone refer to the Phoenix startup scene as “Silicon Desert.”
“I’ve personally sat through six or seven meetings where the topic is ‘branding Arizona,’” says the Phoenix software developer and co-founder, with wife Heidi, of WebPT, an 8-year-old cloud-based medical record-keeping service for physical therapists. In terms of longevity, the firm is already a senior citizen – trailing only GoDaddy – in the city’s growing pool of strong tech startups.
“And somebody always says ‘Silicon Desert,’ which I absolutely hate,” Jannenga continues. “Why try to make us sound like a copycat of some other community? The way that we grow into a vibrant community is by developing an identity that’s all our own.”
And don’t get him started on “unicorns,” Silicon Valley slang for those rare software startups that sometimes emerge from TechCrunch Disrupt conferences as billion-dollar valuations for venture capitalists – only to vanish into the crowded computing cloud.
“We’re not trying to create unicorns in Arizona. If anything, we’re all quarter horses here,” Jannenga says. “We’re good, solid, hard-working ranch horses, with hard feet!”
He may be on to something. “Valley of the Quarter Horses” may lack a certain zing. But so do the region’s most successful startups – starting with GoDaddy, a mundane domain-hosting business, after all, but one with more than $1.6 billion in annual revenue. Other local startup superstars – Infusionsoft, LifeLock, Limelight, Insight – are each ballers in tech’s most prosaic fields: e-mail marketing, identity theft protection, digital content delivery and IT solutions, respectively. But they’ve succeeded where countless would-be Snapchats or Instagrams have failed.
“You won’t find a lot of social media or mobile-based startups here,” says Jonathan Cottrell, CEO of Hopscratch, a business-in-a-box platform for entrepreneurs, and organizer of #yesphx and PHX Startup Week. “We have strengths in sectors like ed tech, med tech and life sciences. We have a lot of ad tech agencies and cyber-security companies. They’re companies solving real problems and trying to create sustainable businesses, not just ones focused on hyper-growth.”
“We often get pulled into the hype of tech companies that grow quickly and sell quickly,” says Jenny Poon, founder of graphic design company eeko studio and coworking space CO+HOOTS, an incubator for local startups. “But Phoenix has become a great place for lifestyle and even blue collar startups.” Poon cites landscape architecture firm Artifex10, which started at a CO+HOOTS desk, as a company boasting “great profit margins” and “a huge impact on our economy.”
Perhaps the best example of the non-sexy Phoenix startup is Tuft & Needle, founded by two Penn State college pals who became frustrated trying to launch a software company in Palo Alto – and even more frustrated trying to find a couple of good, affordable mattresses to crash on after long coding sessions. John-Thomas “JT” Marino and Daehee Park were attracted to the lower cost of living and supportive business climate in Phoenix, and finally achieved breakout success by relocating here and attacking what they admit is a rather humdrum but real-world problem: building a better, and cheaper, mattress. “In the beginning, it was really hard recruiting innovative and creative people to come work at a mattress company,” Marino admits. “It’s not sexy. It’s old, it’s boring. We saw a lot of eye-rolling. It was only when we started gaining traction and success that people wanted to join us.”
Now Marino and Park, whose business surpassed $1 million in sales its first full year of operation in 2013 and is estimated to pull in $150 million this year, have become poster boys for a new generation of Phoenix startup entrepreneurs: creative professionals who create actual businesses, not just algorithms to sell to the highest-bidding tech giant.
“Most people in Silicon Valley are chasing the stars – Facebook, Pinterest, Uber, Airbnb,” Marino says. “There are thousands of little companies that raise money trying to be like them. They come up with a little bit of a twist on what’s already out there, but they’re not really solving a problem people care about.”
“A lot of times they don’t even care about what they’re building; they’re excited over the exit,” adds Park. “At our company, we don’t talk about an exit. We talk about building a long-lasting company and a good business.”
That’s the classic Arizona mindset, Jannenga says. “Here it’s ‘build a business’ – not build a pitch deck. In Arizona, it’s not about building a high-concept idea you can quickly monetize, because investors in Arizona like to invest in businesses, not ideas.”
Maybe what those branding sessions need is a meme of Tex Earnhardt astride a quarter horse and drawling, “That ain’t no unicorn.”
