Arizona No. 1 for startups, Kauffman study finds
Arizona had the highest entrepreneurial activity rate of any state last year, according to new research from the Kauffman Foundation.
Definitely worth of a major shout-out
When I arrived in Arizona 4 years ago to help them build their entrepreneurship program, I had already spent over 15 years in Silicon Valley – the mecca for entrepreneurship (and venture capital). Needless to say I was cynical and underwhelmed by the scope and quality of the entrepreneurial community, but I wasn’t surprised or disappointed. Most areas outside of the “big 3” (Silicon Valley, NY, Boston) or the up-and-coming-3 (Denver, Austin, LA) lack the culture, critical mass or role models to sustain a vibrant entrepreneurial community. Phoenix was no different, and it wasn’t the fault of the entrepreneurs or other talented would-be entrepreneurs. Again, without a critical mass of role models (successful entrepreneurs), supporting companies, capital and a culture of risk and innovation – it just doesn’t happen. But it did happen in Arizona- particularly in the Phoenix metro area. After 4 years, we hit the top spot in the country for entrepreneurial activity. It wasn’t due to any one silver bullet. It was a combination of simultaneous and independent efforts by many individuals and institutions, all committed to stimulating entrepreneurship in the region. Some of the efforts were predictable – other regions have used similar techniques and failed. If these efforts weren’t buoyed by other activities and other individuals, they might have fizzled in Arizona too. But the synergy worked, and continues to work – primarily due to these influences:
Arizona State University
First and foremost, Michael Crow, the President of ASU deserves a lot of credit for his leadership. He made Entrepreneurship a top priority as one of his tenets of “The New American University”; Entrepreneurship is embedded in every college and in every department. And then of course there’s Skysong – which has been been a leader and catalyst, acellerating entrepreneurship activity in the region ever since Gordon McConnell took the helm last year.
Gangplank and the New Acellerators
Sure, New York and Silicon Valley have acellerators: Programs where they get a half dozen companies to spend a summer hoping to get a prototype they can demo before VCs. Rather than placing a few bets that might enrich a few companies and investors, Gangplank is more concerned with building a solid community and a permanent ecosystem for entrepreneurs. “Gangplanks” are part incubators, acellerators, hackspaces, workspaces, learning spaces, technology centers and community centers. Each one is a multifaceted combination of active partnerships between 
entrepreneurs, government, university and community. Under Derek Neighbors‘ leadership and tireless hard work, Gangplank has recently opened it’s third location, and has inspired others to start similar hybrid acellerators such as LaunchSpot, AZ Disputors, and Cohoots.
Mentors and Angels
Arizona may be in the desert, but there is no Sand Hill Road, like in Silicon Valley, concentrated with billions of dollars in venture capital along valuable connections and advice – the vital fuel for entrepreneurial startups. In the desert, it takes more than just money and savvy to nurture growth let alone tranform the area into the country’s #1 entrepreneurial region: It takes vision, patience and commitment – embodied by veteran entrepreneur, mentor and angel investor Francine Hardaway and her partners at Stealthmode. Dr. Hardaway sets the pace for committed mentorship and evangelaism among a handful of Arizona professionals who regularly work with fledgling companies and young entrepreneurs – making sure they get the attention and direction they need. Along with others like Jim Goulka of Arizona Technology Investment Form and Dee Harris of Desert Angels, they not only invest, but they organize, connect, and make sure their considerable infuence and expertise benefits the young entrepreneurs of Arizona who need it most.
Government
“We’re here from the government and we’re here to help” is what you’d expect – complete with tax breaks, proclamations, ribbon cuttings and photo-ops – none of which benefit struggling high-tech entrepreneurs. Most politicians and officials would rather take meetings with the CEO of the billion dollar corporation in their district than with a few entrepreneurs still working out of garages. In Arizona, the local officials have been particularly engaged with entrepreneurs in the trenches – not only by creating and supporting entrepreneur friendly programs such as Innovation Arizona, the Arizona Commerce Authority and the Arizona Innovation Challenge that fund entrepreneurship and innovation, but also by interacting with entrepreneurs at networking events and meetings. And like the mentors and angels, these officials really seem to get a sense of pleasure in connecting entrepreneurs with the help and resources they need.
The Entrepreneurs
And of course, it’s the entrepreneurs themselves that make Arizona the #1 place in the country for entrepreneurial activity. This isn’t some obvious, trivial point. It’s not easy being an entrepreneur in a region isolated from the major tech and financial hubs; these vital aspects of the Silicon Valley-like ecosystem than many take for granted simply did not exist here until a few short years ago. Networking events, acellerators, coworking spaces, the informal collaboration networks that entrepreneurs in other regions take for granted all had to be created in the past few years – often by the busy entrepreneurs themselves. In most other regions where these support systems don’t exist, the talent entrepreneurs simply relocate to Silicon Valley, New York or Boston. The Arizona entrepreneurs stuck it out and worked hard to make it work. And it bears repeating: The highly respected Kauffman Foundation’s annual report on the state of Entrepreneurship found that Arizona has the highest entrepreneurial activity in the United States.
I am not surprised. These days, it’s like living in Silicon Valley during the days when Steve Jobs and Bill Gates were getting started, and attending “home brew club meetings”, or during the early dotcom days when Jim Clark was walking around the Stanford campus looking for a student who had heard of a “web browser.” I am not surprised. And I am proud and excited to be in Arizona, at this time in history.
While fewer Americans started their own businesses last year, 520 out of every 100,000 adults in Arizona started a business in 2011. That was the top rate in the country and well above the national average of 320 out of every 100,000 people launching a startup.
Nationwide, roughly 543,000 businesses were created each month last year — still one of the highest formation rates in the past 16 years.
Texas, California, Colorado and Alaska were next behind Arizona. West Virginia was the worst state for startups — only 150 out of every 100,000 adults formed businesses there. Other laggards included Pennsylvania, Hawaii, Illinois, Indiana and Virginia.
The Kauffman Foundation uses census data to track business formation.
Startups are important for economic growth, since Kauffman has found that most net new jobs are created by companies less than five years old.