Arizona’s technology sector is booming, and our community has never been stronger than it is today. Technology companies such as GoDaddy, Benchmark, Carvana, Axon and Infusionsoft have Arizona as their headquarters, helping attract top-level talent across the world to our state. The startup community is growing rapidly because of a plethora of resources such as the co-working spaces CO+HOOTS and Galvanize, and an uptick in investment capital.
Through the work of leaders in this community, a pro-technology government, and emerging sectors such as artificial Intelligence, blockchain and cybersecurity, Arizona has established itself as one of the premier locations for innovation. Phoenix is well-positioned to meet our goal of becoming a leading technology hub, especially when considering the rising cost of living in the “traditional” U.S. technology cities.
Recently published reports corroborate the progress, including the Arizona Technology Council’s Industry Impact Report conducted by eImpact, Greater Phoenix Economic Council’s and CBRE’s The Phoenix Tech Story and CBRE’s Scoring Tech Talent in North America. Collectively, these reports show a growing technology workforce of 168,211 jobs, more than 8,000 technology companies operating in the state, a pattern of innovation and an engagement of diverse stakeholders. Arizona has proven itself to be a catalyst for the technology industry.
A pro-technology government leads the way
One of the key reasons for this success has been Gov. Doug Ducey’s focus on Arizona being “open for business.” It’s more than a campaign slogan; it’s a promise he and others have upheld. The governor has created a business environment that is welcoming to businesses of all sizes, especially those in the technology industry. The commitment to a technology-friendly environment has not stopped with our governor. It is something shared by many of our legislators.
One of the primary goals of the Council is to work with our members and the Legislature to develop and pass pro-technology legislation that benefits the economic development of the state. In past year, there have been a number of major legislative wins for the technology community.
One of the most significant legislative wins has been the recapitalization of the Angel Investment Tax Credit program. Over the past three years, the Council succeeded in gaining the necessary support to pass the measure. Arizona’s technology community rallied to lobby for recapitalization, which resulted in $10 million being put back into the program. This program is critical to the Arizona startup community, as it helps to incentivize investment for startups. It does this by giving investors a 30 percent state credit on qualifying investments, or 35 percent for investments in rural or bioscience startups.
Another major legislative milestone was the extension of the Research & Development (R&D) tax until 2021 to maintain base credit levels, which were due to sunset in 2018. The refundable R&D tax credit program gives the Arizona Commerce Authority the ability to approve refunds up to $5 million in any calendar year for companies with fewer than 150 employees. This credit remains a key driver of our competitiveness in the U.S. market, as it is the top research and development tax credit in the nation.
Working with the Arizona Astronomy Consortium, the Council also was successful in negotiating an amendment to a bill that threatened Arizona famed dark skies. Working with Sen. Sonny Borrelli and Lamar Advertising, technology leaders were able to protect the dark skies while still accomplishing Lamar’s economic development goals featuring lighted highway billboards in Mohave County. While the measure allowed electronic billboards within a 40-mile radius of Bullhead City, the Council fought to limit the number of billboards to 35, cap the illumination to 200 nits and restrict the areas where billboards are permitted. With potential statewide implications, the amendment includes language that encourages the advertising industry to minimize light pollution and to use modern, state-of-the-art technology that mitigates the impact of light from electronic billboards.
In education, Ducey made a significant commitment to improving Arizona schools, as well as improving compensation for our children’s most important resources, teachers. In January, the governor announced a plan to restore recession-era cuts to a key part of the school funding formula. The plan includes the restoration of $371 million in District Additional Assistance and Charter Additional Assistance, phased-in over five years for needed school items such as desks and textbooks.
Ducey also introduced the 20×2020 plan, providing a 20 percent boost in teacher pay over the next three years – including 10 percent in the 2018 school year – and a significant increase in flexible dollars to Arizona schools for support staff, new textbooks, upgraded technology and infrastructure. Both the 20×2020 plan and the recession-era cuts restoration have been fully supported by the Arizona technology community because the future of our industry depends on the education of our youth.
In STEM education, we are seeing a serious commitment by the federal government to fund at the state level those programs that motivate children and parents to get more involved in STEM education and develop the skills necessary for careers in technology. U.S. workforce entrants in recent years have lacked STEM skills, which is why our dependence on foreign talent has been so high. To help develop solutions, Sandra Watson, president and CEO of the Arizona Commerce Authority, and I were nominated by the governor to attend the inaugural White House State-Federal STEM Education Summit in June. The summit provided an opportunity to work with the federal government to help them understand which programs have the most impact in allowing children and young adults to explore in-demand career paths and allocate resources towards those programs.
Emerging sectors making a huge impact
One of the reasons our state has been so successful in attracting new business, as well as top STEM-educated talent, is the emergence of new and exciting technology sectors. These fields are among the fastest growing in Arizona, accelerating the technology industry and adding jobs. They signal innovation and future opportunities in a variety of disciplines:
Additive Manufacturing (3D Printing): 3D printing is an industry in which Arizona has proven to be a leader. Arizona State University (ASU) early last year opened the Southwest’s largest additive manufacturing research center, the Manufacturing Research and Innovation Hub. The center boasts $2 million in cutting-edge plastic, polymer and metal 3D printing equipment. Organizations like PADT and Honeywell are also exploring new ways to develop end-use parts for the aerospace sector with metal 3D printing. There are a number of innovative technologies developing in this area that will revolutionize manufacturing in Arizona, which is home to about 5,000 manufacturing companies. Additional organizations innovating in the space include Titan Industries, Carbon 3D and Stratasys.
Artificial Intelligence (AI) and Machine Learning: AI and machine learning soon will creep into every piece of software and connected device imaginable, as many companies are implementing or experimenting with the application. In our state, there is a great deal of research occurring at the university level. The University of Arizona has an entire lab dedicated to this research, which provides hands-on learning for its students, while ASU’s Consortium for Science, Policy & Outcomes is devoting attention to both AI and machine learning. Both universities are producing top talent who will apply this technology to future innovations of their own. There are also many applications of this technology in sectors such as marketing, with companies like Digital Air Strike implementing intelligent messaging and machine learning into its digital marketing tools, and cybersecurity, where WiZR has developed an industry-leading, AI-based computer vision technology with Internet of Things integrations.
Autonomous Vehicles: This is a sector where Arizona really shines. We lead the nation in the operation and testing of autonomous vehicles after our state government paved the way for these innovations. Some of the largest technology companies in the world, including Waymo, Lyft, GM, Veyo and Intel, are honing autonomous vehicle technology in the Valley. As these innovations progress and are proven, the opportunity for this sector to flourish becomes massive.
Financial Technology (FinTech): Financial technologies like blockchain and cryptocurrency have incredibly promising applications. For instance, a decentralized exchange system using blockchain would help individuals avoid corrupt and greedy governments in developing countries. As the sector matures and Arizona legislators open up to exploring the technology, we will see an influx of blockchain companies emerge. FinTech expands far beyond blockchain and cryptocurrency but this technology is the hottest in the sector at the moment. There are a number of very promising companies currently in Arizona’s FinTech sector, including BillingTree, Desert Financial Credit Union, CardFree and Upgrade, as well as a number of startups with exciting blockchain innovations such as KryptoPal and Sweetbridge.
Arizona is business-friendly, offers a competitive advantage in regard to cost and has a deep talent pool. The technology industry is rapidly expanding and, thanks to outstanding education programs offered by many schools, talent is becoming readily available to businesses. Arizona is well-positioned to claim its place in the national playing field of competitive technology markets.
This is just a snapshot of the exciting things going on in our technology sector today. Our community continues to grow with the Council leading the way, advocating for technology development and growth, as well as influencing public policy to match Arizona’s technological and economic goals. We are well on our way to competing with the nation’s leading technology hubs.
Steven G. Zylstra is president and CEO of the Arizona Technology Council.