Tag Archives: Steven G. Zylstra

capital

How can companies increase chances of securing capital?

Silicon Valley Bank committed to lend or invest at least $100 million to technology and life science companies based in Arizona over the next five years, yet many experts say lack of money is preventing the state’s tech sector from exploding.

“One area we still need to improve is in the area of capital availability,” said Steven G. Zylstra, president and CEO of the Arizona Technology Council. “Arizona lags behind our competitors in terms of access to capital.”

So what are banks looking for in up-and-coming companies in order to decide if they are worth the risk?

“There is a misconception about business lending, particularly with start-ups, that the application — all of the factual data surrounding the request, the projections, financial statement of the owner and business plans — are the most important things,” said Tim Bruckner, managing director and regional manager of commercial banking for BMO Harris Bank. “Though these items are important in underwriting, we are really looking for entrepreneurs that also show the ability to adapt to a changing environment, demonstrate knowledge and passion for their business and show solid understanding of where their business fits in its competitive environment. Too often, business owners overlook a banker’s interest and understanding in these areas.”

With that said, it is very difficult for a traditional bank to finance a start-up or new business, according to Mike Brown, Arizona regional president at Washington Federal.

“However, the ones that make sense have a well-developed and thought-out business plan, coupled with a strong guarantor,” Brown said.

Ed Zito, president of Alliance Bank of Arizona, the largest locally headquartered bank in Arizona, said Alliance looks at a start-up’s firm capitalization, cash position, “cash burn” rate and cash flow margins.

“Start-up company financing is a risk to be borne by the equity investors,” Zito said. “That said, accounts receivable, support by the ownership or equity investors can mitigate start-up risk.”

So when can a start-up do to increase its chances of getting financed in today’s heavily regulated and competitive economic climate?

Before you get started, Bruckner said to seek counsel from someone who has done it successfully.

“It is always good to hear the success stories, but these individuals will also have great insight into the stumbling blocks and things they would have done differently if they knew then what they know now,” Bruckner said.

Bruckner said first-time borrowers should also demonstrate that they have planned for contingencies, such as a cash shortfall or potential loss of a key customer.

“A start-up’s best chances at securing a loan is having an experienced management team or ownership, knowledge of the industry, proprietary product, service, technology, a demonstrated marketplace acceptance of the product or service and the ability to sustain the start-up until the company is cash-flow positive are crucial factors to consider,” Zito said.

Brown said that it’s imperative for new companies to have well-crafted business plans with reasonable targets to achieve.

“Make sure all financing sources are covered, because everybody has their particular niche or focus and your plan might fit that focus,” Brown said. “Look at traditional sources like banks, but engage all non-traditional sources like independent finance companies.”

energy innovation aps

Arizona Energy Consortium forms own organization

After several years under the leadership of the Arizona Technology Council, the Arizona Energy Consortium (AEC) today announced the formation of its own 501 (c)(3) non-profit organization. Comprised of over 200 members, the AEC is the only all-encompassing energy group in Arizona. The AEC — co-chaired by Michelle De Blasi, an environmental and energy law partner with the law firm of Gammage & Burnham, and Chris Davey, president of EnviroMission, Inc. — will continue to act as a resource for the Council on energy policy issues.

“Both the Arizona Technology Council and the AEC are proud to have reached this momentous occasion where a newly formed organization has realized the ability to stand on its own,” said Steven G. Zylstra, the Council’s president and CEO. “As a state organization that represents a wide range of types of businesses from various technology industries, the Council is proud to have served as an initial home for the AEC. The consortium has functioned exactly as expected in working harmoniously and collaboratively for the common interest of the state’s energy sector. We wish them all the best in their new endeavor.”

The AEC was originally established as a business consortium for Arizona’s energy industry. “By combining business leadership with guidance for good public policy, the AEC has worked hard since its inception to promote policies that will help strengthen the energy industry and reduce barriers to development,” said De Blasi. “We will continue to play an important role in helping Arizona’s energy industry achieve its full potential.”

With all of the recent policy changes affecting a sector of Arizona’s solar industry, Davey knows the importance of consistent policy in supporting an emerging industry.

“In an ever-changing energy market, the AEC will continue with its collaboration with key stakeholders to develop the Arizona Energy Roadmap and Solar Strategic Plan,” said Davey, who is developing a cutting-edge utility scale solar energy project in Arizona. “We will continue working with others to build on the foundations of a long-term, statewide plan for the energy industry to ensure it is a key economic driver for the state and the region as a whole.”

Any person or company that wishes to become an AEC member can contact De Blasi at mdeblasi@azenergy.org or Davey atcdavey@azenergy.org.

technical education career training looking at petri dish

How to build the next generation of innovators

The average Millennial sends 67 text messages per day – one every 15 minutes of their waking lives. The next generation is inherently tech savvy because they have spent their whole lives around tech. It is easy to imagine that our future will be an unprecedented avalanche of innovation as these digital natives grow into their roles developing tomorrow’s technology.

But there is a difference between understanding technology and being an innovator of it. While the number of text messages sent by teenagers continues to climb, America’s educational readiness has been falling. In 2013 only 36 percent of high school graduates were prepared for college-level science classes.

Education in science, mathematics, and technology disciplines remains crucial. It is impossible to be a technology innovator without the strong fundamentals of a STEM education. Tomorrow’s biotech leaders need access to strong biology, mathematics and engineering curriculums today. Tomorrow’s software wizards are enrolled in computer science classes right now.

As important as those fundamentals are, we must remember that innovation tends to occur at the fringes between disciplines. Driverless cars occur at the intersection of automotive and computing engineering. Augmented reality innovators require an understanding of human psychology in addition to expertise in engineering and computer science. It is not enough to simply educate our youth in STEM disciplines. We must encourage their spirit of innovation by inviting them to explore the powerful results of intertwining specializations.

It can be difficult to foster interdisciplinary interconnectedness in the classroom. Because innovation occurs on new frontiers, tomorrow’s developments will occur at crossroads we haven’t yet imagined. How can we ask educators to write a curriculum to cover a convergence still undreamed of?

We need to encourage today’s youth to participate in experiential learning activities held outside the classroom. By providing them with hands-on educational projects, activities, and seminars, we can organically introduce young people to the power of lateral thinking and cross-curricular synergy. While we cannot predict what skillsets will overlap to produce tomorrow’s epicenter of innovation, we can make sure the next generation is practiced at looking for it.

The Arizona SciTech Festival is a great example of a program that gets this right. The festival features events from an impressive variety of fields, from coding to manufacturing polymers to directing videos. By enabling young people to engage in a wide swath of activities, we can help inspire tomorrow’s visionaries who will make the quantum-leap discoveries that occur at the interface between different disciplines.

But as proud as I am of the SciTech Festival as a Foundational Partner, it’s just a start. Businesses, academic institutions and technology innovators need to keep coming together to advance STEM education. We must invite today’s youth to participate in programs that encourage interdisciplinary overlap and engage multiple skill sets simultaneously. Leaders of all stripes can collaborate to encourage young people to practice making new connections. We know great things happen when you get bioscience and business together, and when materials manufacturers and industrial designers inspire one another. We need to get that message out to young people.

Outreach to youth can have a significant impact. Young people consider environmental responsibility to be of paramount importance. My own children would react with horror to the idea of dumping chemical runoff into a river, yet that practice was routine only two generations ago. The environmental movement of the ‘60s and ‘70s had a big impact on teachers, who brought conservation messaging into their classrooms. We can see the results: Contentiousness about sustainability isn’t just widespread but viscerally important to today’s youth.

Imagine the impact we can have on the technology leaders of tomorrow if we invite teachers to support STEM education with the same enthusiasm with which they support environmental awareness. Imagine those teaching efforts being backed up by business and technology leaders coming together to create extracurricular spaces where young people could employ the toolsets from many disciplines at once. Tomorrow’s leaders will be blazing trails along frontiers we haven’t even imagined. Let’s get them excited about exploring.

Steve Zylstra.photo_.1Steven G. Zylstra is president and CEO of the Arizona Technology Council.

technology

Growing tech firms reflect emerging Arizona business sector

Don Hawley is the quintessential product of Silicon Valley. He went to college at the University of California, Berkeley, became a serial entrepreneur and founded and developed many successful technology companies in the San Francisco Bay area.

So why is he doing business in Arizona?

“Arizona is infinitely more business friendly,” said the founder, chairman and CEO of Scottsdale-based Innovative Green Technologies, which creates environmentally friendly products that reduce emissions and save users money. “Favorable tax rates make it less costly to do business in Arizona compared with California, which is attractive to newer companies that have to watch their pennies. Arizona is also blessed with Arizona State University and the University of Arizona, which supply a constant stream of high-quality young talent, which is a great resource.”

Hawley isn’t alone. The recently expansions of Zenefits and Weebly into the Valley and the emergence of Valley-based WebPT and Infusionsoft as technology powerhouses reflect an exploding techn industry in Phoenix that is transforming the state’s economy.

“The technology ecosystem in Arizona has never been more robust and these recent business attractions are going to become more commonplace,” says Steven G. Zylstra, president and CEO of the Arizona Technology Council. “One of the vital attractions for startups in the Silicon Desert as compared with Silicon Valley is the drastically lower cost of living, especially in the area of housing. The word is getting out about Arizona.”

Valley economic developers are doing more than using lower tax rates and promises of sunshine to convince tech companies to relocate here, the state is building its home-grown success stories. A great example is WebPT, which launched its cloud-based physical therapy software in 2008 and has evolved from startup into one the fastest-growing software company in Arizona, creating more than 200 jobs in Phoenix.

“There are great incentive programs available to businesses looking to grow,” says Brad Jannenga, co-founder, chairman, president and chief technology officer at WebPT. “The Angel Tax Credit program offered by the state is a great opportunity for investors to have peace of mind when backing startups and knowing they can take a tax break when doing so. This was a major win for us when we went out for our Series A round back in 2010. Investors were lining up around the block partly because of the early stage success we had, but also largely because of the Angel Tax Credit.”

It’s the success of emerging companies like WebPT that are driving the robust growth of Arizona’s technology sector, says Barry Broome, president and CEO of the Greater Phoenix Economic Council (GPEC).

“What we’ve done on the policy side was working with the legislature and governor so they understand that even though the headlines belong to Apple and Intel and companies like that, it’s the hundreds if not thousands of small and medium technologically based enterprises that have the chance to be the next GoDaddy,” Broome says. “Maybe you get lucky and you get a Google or a Microsoft or maybe an Infusionsoft becomes a Microsoft. Having the ability to get those small companies to go to scale and having the economic development programs and policies in place to help them are where we’ve been most helpful.”

Jannenga credits organizations like GPEC for helping the technology sector grow by tirelessly looking at new ways to diversify the economy and working closely with Arizona’s universities to produce the next wave of talent needed to feed the workforce demands of the technology industry.

But Phoenix Mayor Greg Stanton put it simply: “WebPT is a game-changer, not only in terms of showing the growth in the tech sector in Phoenix, but growth in the warehouse district in downtown Phoenix.”

Experts say Arizona has actually done a number of things well to build a business environment that fosters innovation and an entrepreneurial spirit.

“The state has emphasized economic development through support of key economic development groups like the Arizona Commerce Authority and GPEC,” says Jacque Westling, partner at Quarles & Brady in Phoenix. “(Arizona) has created and maintained some key tax incentives, such as the Refundable Research and Development Credit and the Angel Investment Tax Credit Program, promoted tech transfer from the universities and supported emerging areas of strength such as biotechnology, data centers, energy and other areas.”

Zylstra says having facilities with ready-to-go infrastructure in desirable hot spots such as downtown Phoenix and downtown Scottsdale has been a major part in attracting technology companies to the Valley.
“Knowledge workers like the type of amenities available in these locations,” he says. “When you add Arizona’s ample workforce, low taxes and low cost of doing business, the foundation is very strong.”

Jannenga says the state’s deep awareness of the emerging technology sector and what it means to our state’s economic future has been helpful to WebPT and other early stage companies.

“I think when people began to recognize that we couldn’t rely on the traditional engines that had previously fueled our growth — tourism and migration from colder climates chief among them — to provide the type of jobs we need, it caused a basic shift in how progressive leaders thought about the future,” says Don Pierson, CEO of SpotlightSales, which has developed a sales performance optimization tool.

With the foundation for building a successful technology sector in place, Pierson says he has seen tremendous growth in the software industry and expects that growth to continue.

“I think biofuels are really interesting,” he says, “and I’m always amazed by what comes out of the biotech area.”

Greg Head, chief marketing officer at Infusionsoft, agrees with Pierson that Arizona quickly becoming a center for software businesses.

“Right now, there are thousands of entrepreneurs incubating new innovations, hundreds of software business growing and employing more people and several bigger software companies like GoDaddy, LifeLock, Infusionsoft and WebPT that are growing fast,” Head says. “The Arizona software community is growing up quickly.”

Experts agree that diversifying Arizona’s tech sectors will continue to power its growth. Zylstra expects aerospace and defense and semiconductor and electronics to continue to be strong, “but IT, especially software and data centers, healthcare, bioscience and alternative energy will help lead us into the future,” he says.

“We need to have all tech industries thriving in Arizona,” says Mike Auger, CEO and founder of PikFly, a technology-driven same day delivery network for local businesses. “A focus in one area puts us into a corner. Semiconductors have been great for our state, but that is really what we are known for — we need to be known for all types of tech.”

While Arizona’s growth in the technology arena is impressive, the state must tackle one major issue to maintain that positive trajectory.

“I spend more of my time as mayor in economic development recruiting and retention than I do anything else,” Stanton says. “The reality is this: the companies are concerned about workforce development. Do we have the pipeline of employees that they are going to need as their companies grow?”

Jannenga agrees that Arizona needs to invest heavily into all levels of our education system and diversify our skilled workforce.

“The places where we’re falling short is we’re not delivering the engineering talent necessary for the tech sector to really take off,” Broome says. “We need to make a big move on the production of engineers and make a big move on the production of information communication technology people.”
Broome says that big move can come from anywhere from community colleges to higher education to unique specialty certification programs that are putting students through six-month boot camps and producing a qualified workforce. He cites the Maricopa Corporate College as a unique training program that is developing and delivering customized workforces.

“You’re going to see continued movement in creating new educational options and a huge infusion of these intermediate training strategies to build the technology sector,” Broome says.

Creating a viable workforce to feed the needs is of the technology industry is a must to maintain the state’s robust growth and quality of life, experts say.

“We either grow the tech sector of the economy or we will fail,” Broome says. “That’s how important it is. It’s where the wages are. It’s where the high-end people are. It’s the part of the economy that is most sustainable. If you’re not building a tech sector, you’re relying on your current industries to remain relevant and we know from history that just doesn’t happen.”

Broome says the Valley has learned from companies like Motorola and General Motors than mature companies in mature industries contract and fade away, so it forces the business community to continually recycle its economic strategy around new industries.

“From my perspective, you’re looking at a make-it-or-break-it situation,” Broome says. “The reason the economy is so sluggish is because it’s waiting for consumption. It’s waiting for government spending and it’s waiting for retail spending and it’s waiting for construction and home buying. When your economy can only recover on that basis, you’re going to continue to have ebbs and flows and dips and falls. Even a place like San Francisco, which has a very difficult business climate because it’s expensive to the point of being unimaginable, its net year-to-year economic growth is much more robust than Phoenix and the rest of the country because its economy is built around talent, innovation and the high-tech sector. If we do a good job and build that out better, there’s no reason why Phoenix can’t be the most exciting community in the United States.”

boeing-phantom-ray

It takes fuel to win tech race

Many of us can relate to thinking of Arizona’s economy as an automobile race. To win, you need a smooth race course, a fast car, a winning driver and high-powered fuel.
Carrying that analogy into Arizona’s technology sector, it’s clear that a lot of resources have been invested and progress has been made in building a world-class race course.  We’ve made tremendous strides in creating a business climate and technology environment for facilitating both private and public sector support to address the needs of Arizona’s technology businesses.

The Arizona Technology Council has worked collaboratively with many different technology champions to build this course. Technology issues are supported by the Governor’s office, the state’s legislature, the Arizona Commerce Authority, the Arizona Chamber of Commerce and Industry, and more.

Technology incubators and shared space facilities such as Gangplank in Chandler, Avondale and Tucson; Hackspace and Venture Catalyst at ASU’s SkySong in Scottsdale; BioInspire in Peoria; Innovation Incubator in Chandler; AzCI in Tucson; and AZ Disruptors in Scottsdale are making sure that today’s innovators are being given the right support, tools and environment to create the next big thing.

Collectively, our wins have included the passage of a tax credit for qualified research and development that is the best in the nation, the creation of the first statewide Arizona SciTech Festival and the birth of the Arizona Innovation Institute, to name a few.
Arizona’s technology industry also has great race cars. These are the technologies and intellectual property that create wealth and jobs driven by both Fortune 500 companies and entrepreneurs.  Companies such as Intel, Microchip Technologies, Freescale, ON Semiconductor and Avnet can all be found here.  Nearly all of the largest aerospace and defense prime contractors in the nation are located in Arizona, including Boeing, Honeywell, Lockheed Martin, Northrop Grumman and General Dynamics.

The state’s entrepreneurial spirit is reflected in companies such as WebPT, Infusionsoft, Axosoft, iLinc and Go Daddy that were founded in Arizona along with the many innovators that are coming to the table every day with new ideas rich in technology.

These companies large and small are driven by some of the greatest race car drivers the nation has produced.

But when it comes to fuel, Arizona’s economy has always been running close to empty. We lack the vital capital needed to win the race. Having access to angel investors, venture capital and private equity as well as debt instruments is critical to Arizona’s success.
The situation has not been improving on the equity side of the fuel equation. To offer some relief, the Arizona Technology Council is proposing legislation that would create a system of contingent tax credits to incentivize both in-state and out-of-state investors to capitalize Arizona companies.  This program, called the Arizona Fund of Funds, would allow the state to offer $100 million in tax incentives to minimize the risk for those seeking to invest in high-growth companies.  The state government’s role would be to serve as a guarantor through these contingent tax credits in case the investments don’t yield the projected results.  Expect more information on this important piece of legislation as it advances.

On the debt side of the fuel equation, there are encouraging signs that the worst of the credit crunch may be over. Early-stage companies need access to debt instruments, or loans. Capital is needed for equipment and expansion. A line of credit can help early-stage companies through ongoing cash-flow issues. But loan activity is still modest in Arizona for small companies. It remains heavily weighted toward the strongest corporate and consumer borrowers.

Capital goes hand in hand with innovation, high-paying jobs and cutting-edge technology, products and services. Before Arizona’s economy can win the race, we will need to become more self-sufficient at providing the fuel necessary to be a winner.

Steven G. Zylstra is president and CEO of the Arizona Technology Council.

Aerospace and defense industry - AZ Business Magazine March/April 2012

Aerospace And Defense Industry – Critical To Expanding Economy

Aerospace and defense industry is critical to expanding economy

When I’m asked to name one sector of Arizona’s technology community that is critical to expanding the strength of the economic recovery, I always sum it up in two letters: A&D  — the aerospace and defense industry. It’s a cornerstone industry for Arizona, as our state has seen groundbreaking innovation in this arena for decades.

Boeing, General Dynamics, Honeywell, Raytheon, Lockheed Martin, Northup Grumman and Orbital Sciences are just a handful of the state’s major industry players contributing to Arizona’s impressive resume. An Arizona economic impact study conducted in 2010 reported that compensation per employee in the Arizona aerospace and defense industry is approximately $109,000. This is 2.3 times the statewide average for all employed individuals. The study also reported when accounting for multiplier effects, the Arizona A&D industry in 2009 can account for a total of 93,800 jobs, labor income of $6.9 billion, and gross state product of $8.8 billion.

But keeping Arizona’s aerospace and defense industry healthy and at pace with the ever-changing knowledge-based economy requires competitive business policies and a coordinated effort among state and federal leaders. Recognizing the critical importance of this imperative, there has been a resurgent statewide support for A&D over the last few years.

A big step was taken when Gov. Jan Brewer created the Arizona A&D Commission. Its active members develop industry goals, offer technical support, recommend legislation and provide overall direction. Another milestone occurred when the Arizona Commerce Authority formed and designated the aerospace and defense industry as one of its foundational pillars. Through the efforts of these two organizations, a request for proposal was issued for the first ever Aerospace, Aviation & Defense Requirements Conference in Arizona. Hosted by the Arizona Technology Council in late January, this successful historic event offered a major opportunity for the A&D community to connect with potential new partners. Attendees also heard a multitude of informative speakers, including a gripping keynote address delivered by Gen. Philip M. Breedlove, the Vice Chief of Staff of the U.S. Air Force.

A new chapter in the state’s expanding role in A&D research also recently began when the Arizona A&D Research Collaboratory was formed. The organization brings leaders from Arizona’s A&D industries together with researchers from the University of Arizona, Arizona State University and Embry-Riddle Aeronautical University to work together to gain insight into future technological needs for A&D.

Although these initiatives and programs indicate that there’s a resurgence of attention on A&D in Arizona, there are several key elements upon which the industry leaders within the state must still focus. The industry can’t do it alone. We need a unified congressional delegation employing strategies focused on promoting the desirable, high-wage jobs that A&D bring to their constituents.

We also need states leaders to take the lead in advocating for federal A&D projects that are critical to the existence of the state’s industrial base. These efforts not only reap benefits to the large manufacturers but they are hugely significant to building a robust small business supplier base in the state.

Indeed there are great needs still to be met for achieving newly conceived and exciting goals for manned space flight, homeland security and connecting the world with ever-evolving modern communications technologies. With the proper support, Arizona’s aerospace and defense industry can be critical to meeting those needs.

Steven G. Zylstra is president and chief executive officer of the Arizona Technology Council.

Arizona Business Magazine March/April 2012

First Job: Steven G. Zylstra, President And CEO Of Arizona Technology Council

Steven G. Zylstra
President and CEO, Arizona Technology Council

Describe your very first job and what lessons you learned from it.
I picked blueberries at Pottegetter’s Blueberry Farm in Allendale, Mich., with my parents when I was about 10 years old. It was hard work for a 10-year-old, but I learned that with hard work you could earn good money and buy the things you wanted in life. I earned enough money to buy an eight-transistor radio. The first song I remember listening to on my transistor radio was “I’m Henry VIII, I Am” by Herman’s Hermits, which was popular at the time.

I had dozens of jobs as a kid: topping onions, cutting celery, weeding pickles, butchering chickens, cleaning exotic bird cages, shoveling snow, inspecting eggs, selling seeds, delivering Grit newspaper, bus boy. I was a truck driver in my late teens. All of these opportunities taught me the value of hard work and ultimately helped me realize I could do more with a good education.

Describe your first job in your industry and what you learned from it.
My first job out of college was as a design engineer at the Ford Motor Co. in Dearborn, Mich. I had the opportunity to participate in a two-year graduate training program at Ford that was originated by Henry Ford. I had eight, three-month stints across the company in areas such as development, engine engineering, the Dearborn stamping and assembly plants at the Rouge, and body engineering. I even did a stint in product planning and had an office next to William Clay Ford Jr., the future chairman and CEO of Ford.

I learned the value of going above and beyond and trying to always exceed expectations. As a consequence of positive performance reviews while in the program, our vice president of advanced vehicle development recommended me for positions at Ford Aerospace and Communications Corp. in California at the time things got rough in the auto industry in the early ‘80s. That led me to spend the next 20 years of my career in the aerospace and defense industry.

What were your salaries at both of these jobs?
Picking blueberries in 1964 paid 5 cents a pound. In my first job at Ford in 1978, I made $18,000 a year — more than my Dad, who grew up on a farm and attended school through eighth-grade had earned in any year prior to that.

Who is your biggest mentor and what role did they play?
I never really had a mentor per se, just role models. My father was a role model. He is still the hardest-working person I have known. I got my work ethic from my Dad. I had a high school girlfriend whose father was a role model. Beyond that, what pushes me is an internal drive to excel at whatever I do.

What advice would you give to a person just entering your industry?
After getting a great education, do what you love. People are always better at things they enjoy doing. I have always enjoyed going to work. I find it rewarding, invigorating. Always be honest and ethical. Don’t ever accept mediocre; pursue excellence. Always exceed everyone’s expectations — yourboss’, your colleagues’, your customers’, everyone. It will serve you well. Have fun!

If you weren’t doing this, what would you be doing instead?
I have always wanted to own a Harley-Davidson dealership (maybe a good retirement gig!). While often a lonely place, I like the challenges and rewards of having the top leadership position in an organization. I would enjoy serving as the CEO of many things, especially private companies, not-for-profits and trade associations. I would love to be a golf pro on the tour … if only I had the skill.


Arizona Business Magazine

February 2010