AzBusiness magazine HEAT May/June 2014

HEALTHCARE /// ENERGY /// AEROSPACE /// TECHNOLOGY

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What $1 billion in research buys us Manufacturing matchmaking Bringing innovative ideas to market The need For energy diversification

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HEALTHCARE /// ENERGY /// AEROSPACE /// TECHNOLOGY

/////////// What $1 billion in research buys us

98

/////////// The need FOR energy diversification

102

/////////// Manufacturing matchmaking

106

/////////// Bringing innovative ideas to market

110

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2014 HEAT advisory board Glenn Hamer CEO

Arizona Chamber of Commerce and Industry

Hamer has been president and CEO of the Arizona Chamber of Commerce and Industry since 2006. He has overseen the organization’s development into one of the most respected pro-business public policy entities in the state. In 2011, Hamer led the business community’s successful advocacy for passage of a landmark economic competitiveness package, which was hailed as the most significant job creation legislation passed in the state in a generation.

Mark Holohan President

Sethuraman Panchanathan Senior Vice President Arizona State University

Panchanathan is the senior vice president of the Office of Knowledge Enterprise Development for Advancing Research, Entrepreneurship and Economic Development. He is a foundation chair in Computing and Informatics; director of the Center for Cognitive Ubiquitous Computing; founding director of the School of Computing and Informatics; and helped found the Biomedical Informatics Department at ASU.

Robert F. Spetzler Medical Director

Arizona Solar Energy Industries Association

Barrow Neurological Institute

Holohan, Wilson Electric’s solar division manager, is a 33-year veteran of engineering and construction that includes well over 150 solar electric installations spanning nine states. As president of AriSEIA, he leads a nonprofit trade association that represents local, national and international solar companies in the Arizona market. The group’s focus is on education, professionalism and promotion of public policies that support deployment of solar technologies in Arizona.

Spetzler is a world-renowned neurosurgeon who specializes in cerebrovascular disease and skull base tumors. He has been involved in pioneering the technique of hypothermia and cardiac arrest for the treatment of difficult brain lesions. He has been honored by the American College of Surgeons and the Congress of Neurological Surgeons. In 1994, Spetzler was chosen to be the Honored Guest of Congress of Neurological Surgeons. At age 49, he was the youngest recipient of this prestigious honor.

Joan KoerberWalker President and CEO

Sandra Watson CEO Arizona Commerce Authority

Arizona BioIndustry Association

Watson brings more than 20 years of economic development leadership to Arizona. She and her teams have successfully attracted hundreds of companies that have invested billions of dollars in capital and created more than 75,000 quality jobs in Arizona. In her 17 years with the Arizona Department of Commerce, and now the Arizona Commerce Authority, Watson has also served as director of innovation and technology and continues to be a leading participant in these sectors.

Bruce Macdonough Steering Committee

Steve Zylstra President and CEO

Macdonough, co-managing shareholder at Greenberg Traurig, has concentrated his legal practice on mergers and acquisitions, public and private securities offerings, other sophisticated corporate finance transactions, and providing general corporate counsel to public and private companies. In 2013, he helped establish the Arizona chapter of the Aerospace & Defense Forum, a global aerospace and defense organization promoting collaboration and commerce among industry leaders.

Zylstra assumed the role of president and CEO of the Arizona Technology Council in December of 2007. He is responsible for strategy, development, operations and accomplishment of policy development, business goals and objectives and all financial matters related to the Council. In 2013, Zylstra assumed the role of chairman of the Technology Councils of North America — comprised of nearly 50 technology councils representing more than 16,000 member technology companies — for a two-year term.

Koerber-Walker works on behalf of the Arizona bioscience and medical device industries to support the growth of the industries, their members and our community on the local and national level.

Her past experience includes two years as the CEO of the Arizona Small Business Association. In 2004, she was recognized by the Stevie Awards, the “Oscar” for women entrepreneurs as one of the leading entrepreneurial women in the United States.

Arizona Aerospace & Defense Forum

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AZ Tech Council

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Here’s the

DeaL

Arizona Commerce Authority uses available tools to build business and bring business By ERIC JAY TOLL

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“A

pple is the most profitable corporation in the world. Why does the state give them this huge tax break? I own a business. How come I can’t get the same deal?” The words are heard in a northeast Phoenix coffee shop. They reflect some of the sentiment bubbling under the surface when a new deal is announced and media report millions of dollars in taxpayer incentives going to some out-of-state company.

“Government shouldn’t be picking winners and losers,” Gilbert Public Schools Board Member Julie Smith was quoted as saying in opposing the tax break for the Apple/GT Advanced Technologies multi-billion dollar facility in Mesa’s Eastmark community. Her statement says a lot more than a parroting of political dogma.

“Arizona is not cutting a check and handing it to a company so they pick us,” explains Sandra Watson, CEO of the Arizona Commerce Authority. “This is an investment for taxpayers that has a measurable return on investment for the public dollars. It’s not a hand-out and it’s not corporate welfare.”

“When Intel made its decision to build its $300 million research and development facility in Chandler, Arizona was not competing with Austin (Texas) or Hillsboro (Oregon). Arizona was in competition with Asia,” reports Jason Bagley, Arizona government affairs manager for Intel. “Intel is a capital-intensive business.

We spent $20 billion on capital equipment in Arizona.

When we’re looking to build a new facility, we look at long-term costs. Tax incentives are a major component of that analysis.”

programs to grow and expand our existing businesses.

There’s a lot of value in growing an existing company or helping a new local startup succeed.”

The art of the deal

Able Aerospace is the kind of company Arizona Commerce wants to grow in Arizona. “Export businesses pay employees more and they bring money into the state,” emphasizes Watson. “That’s why we have programs for existing businesses to help them grow as well as for similar businesses looking to build here.”

(See story about AZ Commerce and manufacturing matchmaking on page 106 in this issue) “We do really well with putting up houses and buildings and waiting for people and business to fill the space,” she says. “But we learned in this recession ‘sunshine and cheap real estate’ is not what’s going to build the economy. The fact that we can do that well and fast helped the last boom, but it also caused our economic plummet.”

“We’ve got the right ecosystem for business growth,” says Watson. She uses that base for putting packages together. “The governor and legislature gives us a $25 million closing fund to ‘make the deal.’ The closing fund may be the most important tool we have.”

Bagley at Intel says Arizona’s attractiveness to business is more than job incentives and the closing fund. “They are an important consideration,” he says.

“Intel takes advantage. The most important incentive is the change in corporate taxes. They make Arizona very globally competitive. Companies like Intel and Apple are far more capital intensive than most businesses.

Whether we’re here and want to grow or a company is looking to relocate, the new sales-emphasis tax rates combined with the [research and development] tax credit administered by AZ Commerce are huge.”

Analysis, research and financial projections are the big players in the art of a deal to bring a company to Arizona. Companies that contribute to the Arizona economy and improve the job base are the ones being sought by the Arizona Commerce. The quasi-public agency is responsible for investing millions of taxpayer dollars into measurable returns. The target companies are exporters—meaning the products and services go outside the state and bring money back home.

“Over the last 30 years, Arizona switched from an export economy to a consumption economy,” explains Janet LeBar, vice president of research for the Greater Phoenix Economic Council. “In 1988, our median per capita income was higher than the U.S. average; today it’s 88 percent of the national median.”

Reversing that precipitous drop and the accompanying drop in the Arizona export economy are among primary objectives of the Arizona Commerce Authority. Those two issues are the reason the Authority carries a big toolbox when it talks with businesses interested in relocating to Arizona.

“All our programs are performance-based,” says Watson. “We welcome business to Arizona. We have a great tax climate, a great work force and it’s less expensive to build or open a facility here. Just because someone wants to take advantage of those assets does not mean they qualify for incentives from the state.”

“We’re trying to get the message out that our incentive programs are not just for Apple and new market entrants,” she explains. "We’re here with

Getting in the game

Back at the coffee shop or in the locker room, some may continue to grumble about “government handouts.”

Some business people stopped grumbling and picked up the phone.

“Florida was offering to put up a building for me. I was going to close up shop, take my 200 employees and move two thousand miles. I like Arizona, so I picked up the phone and made some calls to cities.” Lee Benson is CEO of Able Aerospace Services, a growing company that just moved into a new building at Phoenix-Mesa Gateway Airport. He says, “Mesa told me, ‘we can do that for you,’ and they did.”

Last April, the ribbon was cut on the company’s new corporate headquarters, immediately adding 50 employees on its way to a future workforce of close to 500. “Mayor (Scott) Smith put the deal together to build our facility. We lease it from Mesa. He connected us with (the Greater Phoenix Economic Council) and Arizona Commerce Authority,” Benson reflects. “If they hadn’t stepped up, we’d have moved. We’re an export business, we have virtually no Arizona sales, but we work in more than 60 different countries as well as a multitude of (U.S.) states.”

Shining example

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System appeals to businesses

Bagley says that the tax system now focuses on sales rather than equipment. The change, started by Gov. Janet Napolitano and enhanced by current Gov. Jan Brewer are perfect for attracting and growing export-based businesses like Apple, Intel, Able Aerospace and others.

“Export businesses are not just companies selling overseas,” Watson points out. “When our businesses sell or move products into California, Texas, Colorado and elsewhere, they are exporting from the Arizona economy. We want to grow that side of business.”

To help Arizona businesses grow, the Authority has opened offices in California. One of those offices is in Silicon Valley Bank in the Bay Area. “Silicon Valley Bank is an Arizona fan, and when we asked for a good place to locate the Arizona office, they offered their own building.” She smiles, “It gives us a prestigious address with entrée and connections into the market.”

Sure, the AZ Commerce offices there are heavily involved with getting California businesses to look at headquarters and regional facility relocation into Arizona, but also getting them to look at buying Arizona-made products. Watson says, “We help Arizona businesses get in doors to sell to California companies.”

Arizona is one of the top locations in the United States for new business start-ups (see related article on AZ Commerce and programs for entrepreneurs and start-ups on Page 110 in this issue). Watson says that Commerce puts as much emphasis in growing a new business as it does in recruiting businesses from outside Arizona. “We want to build Arizona as a headquarters base,” she says. “There is no better way to do that than by helping our existing businesses grow into formidable corporations and our startups to get into the market.”

“Every policy we implement is a policy available to all businesses,” explains Watson. “All regulatory reforms, all new tools, and everything that helps create jobs and grow a business are available to any qualifying company. It is all based on meeting performance standards.”

Jason Bagley

Lee Benson

Janet Lebar

Sandra Watson

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ACA’s major victories Citing Arizona’s competitive cost of doing business, business-friendly atmosphere, access to highly skilled talent, the Arizona Commerce Authority has been at the forefront of major recruitment successes. Here are some of the ACA’s major victories: Apple and GT Advanced Technologies.

700 employees; $1.5 billion in capital spending General Motors IT Innovation Center.

1,000 employees; $21 million in capital investment.

GoDaddy Arizona Operations Expansion and Global Technology Center.

300 jobs; $27 million capital investment

State Farm Insurance Regional Headquarters.

5,000 jobs; $600 million in capital investment.

Picking the right tools

Every project that comes before the Arizona Commerce Authority is different. They go through the same evaluation process, but that helps the agency select the tools fitting business needs. When a business knocks on the door, Watson and her team reach into the toolbox for right program to meet its needs.

“There is no wrong door,” says Watson. “(Commerce) can help just about any business whether it be resource connections, workforce training, encouraging angel investment with tax credits or tapping the closing fund. We provide resources and market access for any Arizona business.”

The Authority is not waiting for the phone to ring. Watson and her team are providing a showcase on the international stage promoting Arizona business and business climate in the U. S., Mexico, Canada and Asia. Along with GPEC, Tucson Regional Economic Opportunities and other economic development organizations, AZ Commerce has also been part of sales pitches in Europe.

One of the organization’s most successful local events is the Requirements Conference. This annual program matches local vendors and suppliers to business buyers in Arizona and other markets. “The conference helps our local companies sell to the new corporations opening facilities and service centers in Arizona,” says Watson.

She concludes, “We’re all about marketing, promotion and education.”

Building relationships and opening dialogues — this is what the Arizona Commerce Authority is all about. It implements policy from the governor, who co-chairs its board of directors, and creates a value proposition for Arizona business. That value proposition is to invest when the results are better paying jobs, an improved tax base, and put down rooting for the businesses Arizona grows best.

Building a better

l ife Focusing on discovery, development and delivery will drive Arizona’s bioscience industry and quality of life

I

By JOAN KOERBER-WALKER

magine a total artificial heart that keeps you alive when your heart can’t, or diagnostic tools that help doctors identify disease early so that they can treat it early and get better results. Envision pacemakers about the size of your pinky nail or therapies that alleviate pain or combat the deadliest of diseases. Can we develop new agricultural products that can drive new industries and help the planet too? This is not a wish list for “someday.” These are just a few of the innovations that are being produced by Arizona’s bioscience industry today.

Bio is life

The life sciences focus on living things. So, if it’s alive, was alive or keeps things alive, it’s bio.

Arizona is home to one of the fastest growing, emerging bioscience industries in the country thanks to a concerted effort by leaders from across the state that is supported by the Flinn Foundation and the unflagging efforts of innovative companies from Flagstaff to Tucson and points in between.

The Arizona Bioscience Roadmap Steering Committee, more than 100 leaders from philanthropy, industry, government, and academia, work together to map out objectives, establish programs, and measure progress. They’ve been guiding the process since 2002, making this collaborative effort the nation's longest running bioscience industry development project.

Building on the 3 D’s

Rising to the level of a top emerging bioscience state is a significant accomplishment in 10 short years. In the overall rankings, this places Arizona in a very respectable place in the middle of the pack. The Biotechnology Industry Association ranks states on a scale from 1-5, with a 1 being the top tier. Today, Arizona ranks as 92 AB | May-June 2014

By the Numbers The success of the Flinn Foundation’s Bioscience Roadmap, a long-term plan launched in 2002 to make the state’s bioscience sector globally competitive, is undeniable and quantifiable. The Flinn Foundation released an updated Roadmap in April.

$463 million: Biosciencerelated academic research and development in 2012. This represents 1.13% of the U.S. total.

106,846: The total number of bioscience jobs in Arizona in 2014.

Of that number, 23,545 are nonhospital bioscience jobs.

$62,775: Average salary for a worker in Arizona’s bioscience industry in 2014.

1,383: Number of bioscience establishments in Arizona in 2014.

$182 million: Amount of National Institutes of Health funding in Arizona in 2013. This represents 0.82% of the U.S. total.

0.91: This is Arizona’s 2014 location quotient, which is the level of industry concentration relative to the nation. 1.0 represents the national average.

$37 million: Bioscience venture capital in Arizona in 2013. This represents 0.38% of the U.S. total.

Joan KoerberWalker is an entrepreneur, investor, and former Fortune 500 executive. She currently serves as the president and CEO of the Arizona Bioindustry Association.

a 3. But, Arizona can be much more.

Moving up the ranks is our next goal.

Top tier bioscience states have mastered the three D’s — from discovery to development to delivery — and strike a balance between investments and results across a continuum. Over the last decade, Arizona has made remarkable progress, but we still have gaps to bridge to get to the top tiers.

Discovery comes from the exploration of what might be possible. It occurs in our universities, in our private institutes like the Banner Alzheimer’s Institute, Barrow, C-Path, International Genomics Consortium and the Translational Genomics Research Institute (TGen), in our private companies and in the clinical setting.

We have attracted top talent and we will need to attract more. That means more investment and support will be required from government, industry and philanthropic partners.

Development comes next in the form of university tech transfer, translational research, industrial development, or clinical development and trials. None of this happens without capital.

Development capital is increasing both from state governments and private sources. It just is not here in Arizona at the needed levels yet. This means innovators must waste time traveling to “follow the money” and sometimes relocate to receive it. Unless Arizona resolves its investment capital crisis in a meaningful way and at bioscience scale, the benefits of our discovery will be realized elsewhere.

Delivery — taking products to market and gaining market acceptance — is the final step. All the discovery and development in the world will mean little if there is not a final benefit for customers, patients, and investors. Delivery requires still higher levels of investment and a labor force that can support it.

Next steps

Arizona’s success in biosciences to date has been derived through collaborative efforts, strategic investment in research facilities and talent, innovators committed to bringing new life saving and life sustaining products to market, and partnerships between philanthropy, industry, government, and academia.

Success comes through deliberate actions and activities. Here are just a few that will happen in 2014: • June 19, 2014 – Exciting Arizona based companies and innovations will be showcased

at the 2014 AZBio Expo, with speakers including the leader of one of Arizona’s most respected medical device manufactures and the CEO of Insys Therapeutics, the top performing biotech IPO of 2013.

Learn more at AZBioExpo.Com. • Aug 20-21, 2014 – Program mangers from the National Science Foundation and the Nation Institutes of Health will travel to Arizona and provide insights on how to best access Small Business Innovation Research (SBIR) Grants.

• September 17-18, 2014 – Arizona will host companies from across the Rocky Mountain and Southwest region and life science specific investors at the First Annual White Hat Life Science Investor conference in Phoenix. Learn more at WhiteHatInvestors.com.

Future Opportunities

Investments by the State of Arizona have helped to get us to where we are today. Our elected leaders have the opportunity to continue drive our momentum.

Here are two ways we can move forward faster: • Investing in research infrastructure at our state universities: Our universities have committed to doubling the research dollars they bring into the state by growing from today’s rate of $1.1 billion per year to $2.2 billion by 2020. The Arizona Board of Regents is asking for State approval of a onetime, $1 billion bond initiative to put in place the facilities they need to achieve this goal. Just do the math.

That’s a smart investment.

• Leveraging federal investment via SBIR: Federal SBIR programs provide grants to companies that are discovering and developing new life science innovations. The Federal Agencies evaluate the potential, award the grants and measure the accomplishment of the outcome of the project. Today, 10 states provide matching grants to these small business innovators to help them drive from discovery to delivery. It’s time that Arizona does too.

To become a top tier bioscience state, Arizona must master the three D’s and support our intentions with committed and sustainable investments across Arizona’s public, private, and philanthropic sectors.

When we do, we grow.

If we do not, Arizona life science innovations will still emerge, but the benefits of increased employment and an increased tax base will be harvested elsewhere. That’s not the way we do things in Arizona.

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Roadmap to

success Updated plan aims to make Arizona a global competitor and national leader in bioscience by 2025

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T

he strategic plan that has guided Arizona’s fast-growing bioscience sector for nearly 12 years is gearing up for a new decade.

“Arizona’s Bioscience Roadmap: 2014-2025” was unveiled in April in Phoenix, Tucson and Flagstaff, the state’s three metropolitan areas that feature growing bioscience hubs.

The plan includes updated strategies that can strengthen and diversify Arizona’s economy while providing Arizonans access to the latest healthcare innovations.

“The updated Bioscience Roadmap builds on the successes of its first decade and adds contemporary strategies to take Arizona’s bioscience base to the next level,” said Jack Jewett, president and CEO of the Flinn Foundation, which commissioned the update and the original Bioscience Roadmap in 2002. “Arizona is now known as a top emerging bioscience state, but we have far to go to reach our full potential.”

The updated Roadmap will continue to focus on developing Arizona’s biomedical research infrastructure but will emphasize turning this research into new therapies, products, diagnostics, jobs, firms, and other benefits to Arizona. Commercialization, entrepreneurship, creating a critical mass of bioscience firms, and the development of talent are prime themes.

The Roadmap’s overarching vision is for Arizona — a young but rapidly growing state in the biosciences — to become a global competitor and national leader in select areas of the biosciences by 2025.

Over the first decade, Arizona built major research facilities at its universities, formed new private research institutes, attracted top talent, created high-tech business incubators, and greatly expanded statewide STEM (science, technology, education, math) education programs. The number of Arizona bioscience industry jobs grew by 45 percent, nearly four times greater than the nation.

“Arizona has many bioscience strengths and opportunities, but a substantial increase in private and public investment will be needed over the next decade to realize the Roadmap’s goals,” said Walter Plosila, senior advisor to the Battelle Technology Partnership Practice, the Columbus, Ohio-based nonprofit research and development organization that authored the original Roadmap and its update.

Plosila noted that Arizona’s greatest needs are access to risk capital by startup and emerging bioscience firms, building a stronger bioscience entrepreneurship culture and an expansion of the research infrastructure combined with commercialization at the state’s universities.

The new Roadmap plan features five goals, 17 strategies, and 77 proposed actions. The actions are meant to evolve as needs change over the course of the decade. The plan was developed

by Battelle following research, interviews and focus groups with more than 150 local and national bioscience leaders, including extensive input from Arizona’s Bioscience Roadmap Steering Committee.

“An emphasis on the full spectrum of the biosciences — from research to hospitals to bio-agriculture — and a renewed focus on resources, collaboration, and long-term patience is needed for Arizona to continue its ascent in the biosciences,” said Martin Shultz, senior policy director for Brownstein Hyatt Farber Schreck, who chairs the Roadmap Steering Committee. “The impact can be profound — the biosciences are a multibillion-dollar industry for Arizona.”

There are six industry segments that comprise the biosciences in Arizona: agricultural feedstock and chemicals; drugs, pharmaceuticals, and diagnostics; medical devices and equipment; research, testing and medical labs; bioscience-

Jack Jewitt

Martin Shultz

Goals of the Roadmap

Arizona’s Bioscience Roadmap 2014-2025 is a long-term strategic plan to make the state globally competitive and a national leader in select areas of the biosciences. The Roadmap is available for download at flinn.org. Here are the Roadmap’s goals:

Goal 1: Become an entrepreneurial hub. Form a hub of bioscience entrepreneurs and new enterprises across Arizona.

Goal 2: Evolve research into practice. Increase the ability

of research-performing institutions to turn bench research results into improved disease/ illness prevention, detection, and treatment, plus bioagriculture and industrial biotechnology products.

Goal 3: Develop bio-talent. Make Arizona a bio-talent powerhouse where such talent is developed, educated, trained, and retained.

Goal 4: Connectivity. Promote Arizona to economic

partners in neighboring states, Canada and Mexico as a place where bioscience research, health care delivery, and commercialization seamlessly intersect.

Goal 5: Collaboration. Pioneer a new level of commitment to partnerships to sustain and enhance the state’s “collaborative gene” reputation.

related distribution; and hospitals. A new economic-impact analysis by Battelle estimates the total revenue generated annually by Arizona’s bioscience industry—not counting hospitals—to be $14 billion. With hospitals included, the figure exceeds $36 billion.

Based on the latest industry data (2012), Arizona has 106,846 bioscience jobs spread across 1,382 establishments and an annual average wage of $62,775 — 39 percent higher than the private-sector average. The numbers do not include academic research jobs at universities or private research institutes.

Hospitals account for the majority of the state’s bioscience jobs. With hospitals removed from the equation, the other segments combine for 23,545 jobs, 1,266 establishments, and average annual wages of $85,571. Growth in the non-hospital segments accelerated dramatically over the last few years.

The Roadmap also includes analyses of Arizona’s bioscience sector that were critical in developing the strategies and actions, such as an assessment of Arizona’s bioscience strengths, weaknesses, opportunities, and challenges. It identified Arizona’s core competencies as cancer research, neurosciences, bioengineering, agricultural biotechnology, imaging sciences, precision medicine, diagnostics, health information technologies, and health economics.

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TRENDSETTERS

HEALTHCARE /// ENERGY /// AEROSPACE /// TECHNOLOGY

Impact players ➤ In addition to spearheading the international Alzheimer’s Prevention Initiative, researchers at Banner Alzheimer’s Institute have an average of 30 clinical trials being conducted at any given time. These range from treatment studies on the use of investigational drugs to research studies to better understand the aging process and the impact Alzheimer’s and other memory disorders have on the brain.

GlobalMed

Telemedicine has become a reality for those who are in locations where immediate healthcare isn’t a possibility. By providing connected health with remote specialists, more patients can stay at their local hospital. This allows facilities to retain patient revenues, lowers healthcare costs by 30 percent and reduces hospital readmissions by 83 percent. Scottsdale-based GlobalMed, which develops integrated telemedicine solutions for healthcare providers and corporate health programs, is helping to meet the growing demand of healthcare telecommunications in the United States.

And demand for GlobalMed’s products and services is staggering. The company has grown more than 1,000 percent in the last year, increasing its revenue to $32.2 million and creating more than 100 jobs.

Guided Therapy Systems

Under Michael Slayton’s leadership as CEO and chief technical officer, Guided Therapy Systems has grown from a small, Arizona-­based R&D company to a world leader in intense therapeutic ultrasound and imaging with technologies sold around the globe by corporate partners representing the most recognizable and respected names in medical devices.

Slayton is also the founder of two of Guided Therapy Systems’ most notable and entrepreneurial successes: Ulthera in 2004 and Xthetix in 2006.

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➤ Under a new grant from the National Institutes of Health, Phoenix Children’s Hospital, Barrow Neurological Institute and the Translational Genomics Research Institute are studying the role of extracellular RNA as biomarkers in hemorrhagic brain injuries. ➤ Fueled by Subsys, the company’s breakthrough treatment for cancer pain, Chandler-based Insys Therapeutics delivered $40.2 million in revenue during the fourth quarter, a 673 percent increase over the year-ago quarter. The company plans to file at least one new drug application and four investigational new drug applications in 2014. ➤ Tucson-based HTG Molecular Diagnostics provides simple, cost effective solutions for accurate RNA testing. In 2013, the company commercialized its Edge instrument platform and has been expanded to fully automate sample and targeted library preparation for nextgeneration sequencing. ➤ Ventana Medical Systems and Tucson Medical Center have collaborated to implement what they call the “lab of the future” at TMC, connecting state-of-the-art technologies for the best patient results. It allows the hospital to perform more in-house tests, reducing the need for outside laboratories and creating a greater continuity of care.

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HEALTHCARE /// ENERGY /// AEROSPACE /// TECHNOLOGY

$1billion us

What will

buy

State looks to expand universities’ research facilities and capabilities, opening doors to healthcare and bioscience breakthroughs By ERIC JAY TOLL

I

t’s quite a return on investment. Put a dollar in the pot. Five years later, take home double the money and improve the quality of life for Arizonans in the process. The investment strategy worked in 2003, so why not try it again, especially after those who were part of the last deal have taken home $5 for every $1 invested?

That’s exactly what some Arizona officials are trying to do.

The Jobs 2020 Proposal, or Senate Bill 1378, hopes to pump $1 billion into research. It is modeled after the successful 2003 plan that became a catalyst which helped Arizona earn a reputation as one of the nation’s fastest-growing bioscience regions.

In 2003, the Arizona State Legislature authorized $34.6 million per year for 23 years to fund new research facilities

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at all three universities. A total of $500 million was invested into research and development infrastructure at Arizona State University, Northern Arizona University and University of Arizona. In five years, the Arizona Board of Regents (ABOR) reports that $2.5 billion in direct economic benefit was pumped into the state’s economy. During that time, high-paying bioscience jobs grew substantially faster in Arizona than the rest of the nation. Nationally recognized bioscience research institutes, facilities, companies, incubators and education programs cropped up throughout the state. Star scientists relocated to Arizona, bringing their labs and research grants with them. The result: A sector of Arizona’s economy has developed that is producing high-wage jobs and helping the state weather

economic storms, while making the latest healthcare therapies and products available to Arizonans.

Now, ABOR wants to try to duplicate its success on a larger scale — double the scale. ABOR wants the Legislature to approve $1 billion in bond money to pay for new facilities in hopes of doubling the research grant funding pulled in by the three universities and attracting top researchers who are working to discover cures for diseases. It was high on the Regents’ wish list for the 2014 legislative session.

“Research at Arizona’s universities pumps $1 billion per year into our state’s economy,” said ABOR President Eileen Klein. “We believe that this is one of our greatest opportunities to broaden our economy, which is why the Arizona Board of Regents has set goal to grow the research output to $2 billion annually to make it one of Arizona’s largest economic segments.”

$1 billion investment

With charts and numbers, smiles and plans, the Regents, university presidents, business groups and entrepreneurs went to the Legislature with a blueprint. State economy and business leaders want ABOR to invest the $1 billion into 10 new buildings, a half dozen major additions and renovations, and laboratory and research facility upgrades. With its proven track record, ABOR projects at least a $5 billion direct economic return. Some economic development officials project the indirect return could be greater than $7 billion in five years.

“Top-flight research facilities attract talent, grants and equipment,” Klein said. Marking her first year leading the board, Klein said the enterprise plan is the key to the future of the $4 billion public enterprise that is the state university system. The three colleges have risen dramatically in the national stature as a result of the 2003 initiative.

“The research and development program is needed to create new partnerships and ensure that we are turning out graduates to meet the needs of Arizona’s businesses,” said Klein. Out of the 2003 program, she said ASU research and development spun off more than 100 companies — many of which are major players in Arizona today.

Shopping for future

The three schools are not monument building or slapping lipstick on old facilities. The enterprise program directs the dollars to carry out a strategic research plan. “(University of Arizona) plans to double research expenditures and needs the space to house the researchers and facilities,” said Jennifer Barton, interim vice president for research. “Our strategic research areas are space sciences, water and the arid environment, defense and security, and biomedical research.”

Barton said that UA’s proposed share — $450 million for five new buildings, four in Tucson and one in Phoenix — are tied to measured returns. The university’s share of the previous

program generated $1.2 billion in economic impact, she said.

Construction at ASU is projected at $400 million for biodesign, engineering and technology facilities. NAU plans a new biological sciences building and laboratory upgrades for $150 million.

Reaping the rewards

“For businesses in Arizona, first there is the immediate multiplier from the $1 billion in new construction,” Klein pointed out. “Then there’s the expanded staff, the equipment and supplies, support services and the value of the research and development product.”

There are real results, too, she said. “An undergraduate student working in an NAU public health program discovered the source of the cholera epidemic in Haiti following the earthquake. The result saved thousands of lives.”

The direct economic value of construction alone, reported Ken Simonson, chief economist for the Associated General Contractors of America, will be $2.3 billion pumped back into the economy and 21,000 new and retained jobs.

Barton said UA’s program will also generate spin-offs. “We saw a number of high-technology companies grow from the previous program.” Barton said that Arizona expects the new program to at least match the return on investment from the 2003 program. The Wildcats’ return to the state was $1.2 billion from its share of the $500 million program.

Business gets the return

ABOR wants to finance the construction with state-backed bonds. Repaid from general tax revenues, the bond money will not impact tuition, operating budgets or dedicated revenue streams to the schools. The state will repay the bonds with the revenue generated by new tax revenues generated by the successful research partnerships, patent commercialization and technology transfers.

Arizona’s universities are already heavily committed to state economic contribution. The three schools are involved with cutting-edge programs designed to connect entrepreneurs with patents ready for commercialization. The three universities have cut a process that normally takes years in other states to a matter of months. NAU and ASU run the AZ Furnace program, incubating businesses from concept to angel financing in 12 months — a previously unheard schedule for development.

“The investment we’re making in research and development facilities is not just for researchers,” she said. “We work with companies to help businesses grow, expand and develop products using our technology and talent.”

Officials now need to keep the conversation going to ensure that the $1 billion baby is a high priority on the Legislature’s 2015 agenda. With a new governor and shift in state leadership, the door is open for Arizona economic opportunity.

Biggest healthcare companies Here are Arizona’s 10 biggest healthcare companies, based on 2013 employment: 1. Banner Health, 28,011 employees

6. Abrazo Health Care, 4,123 employees

2. Dignity Health, 7,744 employees

7. Carondelet Health Network, 3,668 employees

3. University of Arizona Health Network, 6,118 employees

8. Phoenix Children’s Hospital, 3,414 employees

4. Scottsdale Healthcare, 6,700 employees

9. John C. Lincoln Health Network, 3,211 employees

5. Mayo Foundation, 4,855 employees

10. TMC HealthCare, 2,977 employees

99 AB | May-June 2014

TRENDSETTERS

HEALTHCARE /// ENERGY /// AEROSPACE /// TECHNOLOGY

Impact players ➤ With the help of new, large-scale solar photovoltaic plants and customer-owned solar, APS added approximately 410 megawatts of solar capacity to its generating portfolio in 2013. Overall, APS has spent nearly $1 billion on solar projects across the state and now utilizes 750 megawatts of solar capacity, enough to serve the needs of 185,000 APS customers.

PROVIDED

POWER MOVE: The energy generated by Cove Fort Geothermal plant will offset enough

carbon dioxide emissions each year to equal removing 15,000 cars from the road.

SRP

SRP is purchasing the output of the 25-megawatt Cove Fort Geothermal plant in Beaver County, Utah. Geothermal power plants produces electricity from naturally occurring heat below Earth’s surface. Geothermal energy is considered renewable energy because no fuel is consumed and the energy is from a naturally occurring source. Under SRP’s Sustainable Portfolio goals, it must meet 20 percent of its retail electricity requirements through sustainable resources by 2020. SRP’s sustainable portfolio is currently providing more than 10 percent of retail energy needs with sustainable resources such as solar, wind, landfill gas, geothermal, biomass, hydro and energy-efficiency measures.

Intertek

Intertek, a leading provider of global testing, quality and safety solutions, is working with the United States Department of Energy and several national laboratories taking the lead on collecting “real world” data on a variety of alternative energy vehicles.

Testing at Intertek’s Phoenix location includes vehicle performance, durability and operational costs, helping consumers and the automotive industry better understand how vehicle technologies intended to reduce the consumption of petroleum actually perform in the streets.

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➤ Questar Fueling Company, subsidiary of Questar Corporation, plans to build a compressed natural gas (CNG) fueling station in Phoenix. The public-access station will provide fast-fill CNG fueling for fleet operators with mediumand heavy-duty trucks as well as motorists who drive light-duty natural gas vehicles. The station will open later this year. ➤ Gilbert-based Jatrobiofuels is creating sustainable biodiesel and bio jet fuel from non-food sources.

The company is cultivating Jatropha Curcas, which has a higher oil content than most oil seeds at greater than 40 percent.

It can also grow in marginal and poorly irrigated land that is not suitable for food crops.

JatroBiofuels has a production goal of 1 million gallons by 2015. ➤ KB Home has given Arizona homebuyers the opportunity to own a solar-powered home. Combined with the energy-efficient features already included in its Energy Star certified homes, solar power will help KB homeowners reduce their monthly energy bills by as much as 80 percent when compared with a typical resale home.

PROVIDED

BEING WATCHED: The 2013 Ford Fusion Energi Titanium and the 2014 Honda Accord plug-in hybrid electric vehicle (PHEV) are among the models currently under evaluation

by Intertek in Phoenix.

➤ In March, First Solar set a world record for cadmium-telluride (CdTe) photovoltaic module conversion efficiency, achieving 17 percent total area module efficiency in tests performed by the U.S. Department of Energy’s National Renewable Energy Laboratory. The company also achieved a world record in CdTe research cell efficiency of 20.4 percent.

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101 AB | May-June 2014

HEALTHCARE /// ENERGY /// AEROSPACE /// TECHNOLOGY

Power

Play The Arizona Energy Roadmap plays a vital role in diversifying Arizona’s energy mix

By CHRIS DAVEY and MICHELLE DE BLASI

Chris Davey, president at EnviroMission, and Michelle De Blasi, attorney at Gammage & Burnham, co-chair the Arizona Energy Consortium.

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I

t’s no secret that fossil fuels comprise a substantial portion of the U.S. energy generation resources. Even with several western states’ recent decisions to retire their coal generation resources, currently those resources are more often being replaced with natural gas than with clean energy resources. These decisions are being driven in large part by the current price of natural gas and new discoveries through “fracking,” the process of drilling and injecting fluid into the ground at a high pressure in order to fracture shale rocks and release the natural gas trapped inside. Natural gas prices have historically been volatile, and with liquefied natural gas terminals being developed for export, this pricing trend is likely to continue and be more closely tied to global pricing.

Although Arizona hosts Palo Verde, the largest nuclear power plant in the country, the state does not have many of its own oil or natural gas resources and most of its coal reserves reside on Sovereign Nations, namely Navajo and Hopi. Arizona does benefit, however, from renewable resources with its abundance of sunshine and a small amount of wind. When one considers the lack of diversity in its own natural resources, it is concerning that less than 2 percent of Arizona’s entire energy mix is renewable. Although current renewable technologies have found it difficult to compete with more efficient fossil fuel and nuclear generation, there is clearly a strong societal movement toward the importance of including renewable resources in the mix. EPA’s recent push toward more stringent regulation of carbon and greenhouse gas emissions has severely impacted the western states’ dependence on coal resources, forcing the utilities with coal-fired generation to take a hard look at what the future will hold for their energy mix.

Despite its current somewhat diverse mix of energy generation, it will be difficult, if not impossible, for Arizona to continue to adjust to the changing market conditions and environmental regulations without a comprehensive energy plan to provide long-term direction and focus. Such a plan will need to address issues such as developing supportive state and federal policies to promote industry growth and providing better access to capital for further development of the industry. It is for this reason that the Arizona Energy Consortium (AEC) has worked within the energy industry to develop The Arizona Energy Roadmap. The AEC provides a forum to have an open discourse on these types of issues in a thoughtful and methodical way to help further develop the industry. The roadmap is a living document that will evolve with the development of the energy sector through the implementation of innovation and changes in policy, and by incorporating other private and public sector efforts to guide the industry.

Arizona has had its share of uncertainty within its energy industry. The deregulation and net metering battles are just two of the issues that have brought uncertainty to

our market. Without a clear plan as to how Arizona desires to develop and transform its energy mix, finding common ground to resolve these issues will remain difficult. It is critical to remember that Arizona competes for business that will go to other states if we do not have the appropriate policies in place to be competitive, and these policies cannot be made in a partisan vacuum. It is equally important that an energy plan come from both industry and regulators so that it works in the real world, and benefits both the providers and users of energy. Any imbalance of equities will ultimately result in an unstable market that prevents growth instead of encouraging it.

A strong emphasis throughout The Arizona Energy Roadmap is that energy policy must create a stable climate for investment, be sustainable, and protect the needs of the current generation without compromising the availability of energy for future generations. The continued adoption and expansion of the clean energy sector cannot happen until investment capital is easier to access. Securing capital for the continued diversification of Arizona’s energy mix remains an issue for much of the industry due to the lack of a clear and stable policy and regulatory environment. There are tools that can be developed, such as Master Limited Partnerships (MLPs) and Real-Estate Investment Trusts (REITs) that allow tax benefits to be enjoyed by a larger investor base to enable renewables and efficiency measures to leverage the same tools that have enabled the expansion of oil and gas exploration in the U.S. As with building a strong investment portfolio, it is critical to diversify and pursue multiple resources with energy. For a low carbon environment to continue to flourish, the industry mindset must shift from viewing renewable generation and energy efficiency as a means to satisfy a series of mandates to an opportunity diversify its energy mix, while at the same time stimulating and enhancing Arizona’s economy. New business and development is attracted by consistent policy and access to capital. To be successful, Arizona must adopt an energy policy conducive to both.

Arizona has had its share of uncertainty within its energy industry.

Goals of Energy Roadmap Leaders of the Arizona Energy Consortium say a fully realized vision and execution of its Arizona Energy roadmap, supported by consistent policies, will provide the following sustainable benefits to Arizona: ➤ A more diverse energy mix, including an increase of renewable energy for in-state use and export ➤ Enhanced energy export potential ➤ Heightened energy self-sufficiency and national and state security ➤ Increased transmission reliability ➤ Continued low cost energy ➤ Enhanced job creation and higher-wage jobs within Arizona ➤ Increased state economic revenue 103 AB | May-June 2014

TRENDSETTERS

HEALTHCARE /// ENERGY /// AEROSPACE /// TECHNOLOGY Orbital Sciences Corporation Orbital Sciences Corporation in Gilbert has started production of 81 satellites for the Iridium NEXT program as part of a contract between Orbital and Iridium’s prime contractor, French-Italian aerospace company Thales Alenia Space. The production signifies the opening of a Foreign Trade Zone at the Gilbert facility, which allows Orbital to reduce program costs by importing foreignsourced hardware from Thales Alenia Space.

Aerospace & Defense Forum The Arizona chapter of the Aerospace & Defense Forum was launched in October 2013 as part of a global aerospace and defense leadership community. Members of Arizona’s steering committee represent the Greater Phoenix Economic Council, General Dynamics C4 Systems, Arizona Commerce Authority, Snell & Wilmer and Greenberg Traurig. Chapter Chair Stephane Frijia, director or research and strategy for GPEC, answered a few questions.

How have defense cuts impacted Arizona?

“In FY2013, Arizona received the fifth-largest share of new defense obligated awards in the country. The number of companies awarded new prime awards was 15 percent lower compared with previous years. However, these top line measures understate a very complex procurement dynamic. Total spending of purchases of certain types of procured products and services, decreased significantly, yet increased for others. Thus, the impacts of the cuts have not been felt uniformly across the industrial base.”

How is Arizona an innovator in aerospace?

“Arizona is well known for continuing to produce cutting-edge technologies from avionics, guiding systems and life support in extreme environments to remote sensing instrumentation, communication and cyber.”

Where is the future of aerospace and defense in Arizona?

“The future will depend on our aerospace and defense firms’ ability to continue to pivot toward emerging technology opportunities; remaining focused on developing cutting edge technologies; and on the ability to diversify the custom base away from over-reliance on DoD and other federal spending. It is critical that these firms find commercial application for their technology. With the right support mechanisms, these firms can become more commercially viable, productive and export oriented.”

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Impact players ➤ Raytheon Missile Systems, which employs 11,500 in Arizona, successfully tested communications advancements to the Tomahawk Block IV cruise missile this year. The missile maintained communications and provided updates on its location before hitting the target, validating its capability to engage challenging targets. ➤ Phoenix-based Honeywell Aerospace is the largest manufacturer of aircraft engines and avionics as well as a producer of auxiliary power units and other aviation products. It generates $10 billion in annual revenue from a 50/50 mix of commercial and defense contracts. ➤ SwissTeknik in Tempe is a three-time Inc. 500/5000 company specializing in the teardown and salvage of retired aircraft. The company re-certifies the components and sell directly to Boeing, Bombardier, Airbus and Gulfstream operators worldwide. ➤ Gilbert-based Rigid Industries has experienced three-year growth of 2,528 percent as it transitions from being a leading supplier of LED lights for recreational vehicles into being a leading manufacturer of military LED lights. ➤ Embry-Riddle Aeronautical University in Prescott is the world’s largest, fully accredited university specializing in aviation and aerospace and is also a major research center in partnership with the aerospace industry, other universities and government agencies. ➤ Paragon Space Development has has experienced threeyear growth of 49 percent as it designs, builds, tests, and operates life support systems and thermal control products for astronauts and designs and builds thermal control products for unmanned space missions.

i

t used to be when I traveled to different business meetings across the country, people would ask me about Arizona’s politics. While we still have reputation issues to repair, the questions I’ve been getting recently are more focused on the buzz they’re hearing about our growing technology sector.

There’s good reason Arizona is getting noticed for its growth. Over the last five years, Arizona has developed one of the most robust technology entrepreneurial ecosystems in the country. The state is home to five of Deloitte’s 2013 “Technology Fast 500” firms, specifically First Solar, LifeLock, Telesphere, Inilex and GPS Insight.

Other start-ups that have been home grown in Arizona into industry leaders include Axosoft, GoDaddy, iCrossing, Infusionsoft, Insight Enterprises, LimeLight Networks and WebPT. We were able to accomplish our strong entrepreneurial spirit in part by drawing the attention of the media and the state’s policy makers to the need to diversify our economy away from construction and climate into a knowledge-based economy with higher paying jobs. Our efforts resulted in a tax credit for qualified research and development that is the best in the nation and a successful angel investment tax credit.

A lot of other resources have been invested. Over a dozen business incubators and accelerators call Arizona home, providing resources to support technology entrepreneurs. In addition to graduating a vibrant workforce to fuel quality jobs, Arizona’s world-renowned universities and community colleges are also heavily engaged.

Arizona State University (ASU) runs the Edson Student Entrepreneur Initiative and the ASU SkySong Innovation Center was recently awarded one of the best organizations of its kind in the country. University of Arizona (UA) is helping create the technology of tomorrow in its Bridges/UA Bio Park and UA Tech Park that includes a Solar Zone. UA also participates in Startup Tucson – an organization dedicated to growing a vibrant ecosystem of entrepreneurship through educational events. Northern Arizona University fosters business growth through it Center for Entrepreneurship and Technology and benefits from its affiliation with NASA. All of that bodes well for Arizona’s innovation economy.

Other efforts are focused solely on exciting people about technology and science. We just celebrated the third annual statewide Arizona SciTech Festival with more than 300,000 people attending more than 500 events this year.

And although we have a long way to go, there’s a growing pool of capital. We’re home to two of the largest and top rated angel investor networks in the U.S. — ATIF and Desert Angels. The Arizona Commerce Authority has created the Arizona Innovation Challenge that awards the most money in the country to the most promising entrepreneurs meeting technology challenges. Grayhawk Capital just raised $70 million in funds for early and growth stage technology investments. And Tallwave Capital recently announced it has deployed $500,000 in capital in early-stage ventures.

The 2010 census reports Arizona’s population at 6.4 million, with a median age of 35.9 years. The predicted growth rates for Arizona by the federal and state government expect that between 1.5 million and 3 million people will move to Arizona by the year 2020. That type of robust regional population growth combined with an improved U.S. economy translates into high potential for investors.

It’s true we enjoy more than 300 days of sunshine each year.

But we offer a lot more than golf and spas. Venture capital sitting on the sidelines should put money into promising Arizona high tech firms and start-up ventures.

Now is the time to invest in Arizona.

Now isthe timeto investin Arizona

Steven G. Zylstra Technology

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

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HEALTHCARE /// ENERGY /// AEROSPACE /// TECHNOLOGY

M atchmaking anufacturing

Arizona Commerce Authority strives to help innovation meet business acumen By ERIC JAY TOLL

106 AB | May-June 2014

“W

hat is the overview of manufacturing in the U.S. and Arizona?’ That’s the question no one is asking. It’s a landscape of profound changes — especially for manufacturers who up their game and move up the value chain.”

Brian Sherman is filled with enthusiasm. As the senior vice president of business development for the Arizona Commerce Authority, he is the manufacturing “yenta” for the state’s official economic development agency; a “yenta” being a marriage broker hooking up couples perfect for each other.

“My No. 1 goal for 2014 is bringing together wellestablished manufacturers with business experience and an eye on growth with the young entrepreneurs who are building businesses from ideas and need prototypes and business acumen,” says Sherman. As the designated matchmaker, Sherman and his team have a new role at Arizona Commerce.

“Arizona is a land of innovation, and that’s what gives us an edge for manufacturers,” he says. “The day of business sitting back and waiting for orders is over. ‘Cranking it out’ has moved offshore, and businesses competing in that marketplace are going to get hit hard on price points.”

“Where a small- or medium-size manufacturer is going to succeed is with technical solutions and not just products.

Innovation is what makes this state great,” Sherman’s on a roll.

“We’ve got well-established manufacturing businesses aligned with our key sectors—but those same businesses could move into parallel sectors and grow even more. That’s what our team at Arizona Commerce is doing. We’re positioning these businesses for the next trend.”

Parallel sectors: Family classics meet Generation Z “We have classic family manufacturers across the state.

They’ve been around for decades; some for multiple generations.

They make stuff.” Sherman calls them ‘salt-of-the-earth’ companies. “They’re starting to feel some of the pressure of the sequestration and recognizing that depending on defense or government is not the road to the future.”

“Then we’ve got the young entrepreneurs. They want to write code. They want to make games and apps,” he enumerates the issues. “They think manufacturing is stodgy, dead end and offshore. But they don’t really see the full picture.

They’ll tell me, ‘yes, I have this vendor over in Taiwan and he’ll make this.’ Trying to prototype a product from 10 thousand miles away doesn’t let you see how it’s going to be built.”

“Back at the small manufacturer, let’s say it’s an aerospace or defense business. That’s high-precision work. The skills going into what it’s making now can be adapted into other high-precision manufacturing—like biomedical devices.”

Sherman’s enthusiasm is contagious. “So we take the tech startup and the established business, bring them together and show the young entrepreneur that manufacturing can be pretty sexy. We show the manufacturer that the tech startup has the innovations and ideas that can be adapted for future growth.”

RevAZ: Arizona Commerce Authority consulting services Sherman’s teams at Commerce work with manufacturing businesses as consultants — and in some cases bring in outside consultants — to help businesses transition into

the next economy. The service is designed to revitalize Arizona manufacturing. “Rev AZ is just a phone call away,” explains Sherman. “We show how innovation, diversification, and shared knowledge helps companies position for trends and profitably grow. We bring in the experts to help businesses manufacture — both new and old.”

Back to that prototype, he says, “If the tech start-up can have the prototype built here, it gives the view of how the production floor needs to function in order to turn out the product. It brings the new generation of innovation and technology into the experienced hands of our existing manufacturing businesses. It also opens new sectors for old business.”

Top 5 in aerospace and defense Here are Arizona’s five biggest aerospace and defense companies, based on 2013 employment: Raytheon Company ➤ 11,500 employees, missile manufacturing Honeywell International Inc. ➤ ➤ 10,000 employees, aerospace manufacturing Boeing Company ➤ 5,000 employees, aircraft manufacturing General Dynamics ➤ ➤ 4,816 employees, defense, communications Orbital Sciences Corp. ➤➤ 1,668 employees, aerospace manufacturing

Top 5 in manufacturing Here are Arizona’s five biggest non-aerospace and defense manufacturing companies, based on 2013 employment: Intel Corp. ➤ ➤ ➤ 11,000 employees, semiconductor manufacturing Freeport-McMoran Copper & Gold Inc. ➤ ➤ 8,200 employees, mining Freescale Semiconductor ➤ ➤ ➤ 3,000 employees, microchip manufacturing Asarco Inc. ➤ ➤ ➤ 2,356 employees, copper mining W.L. Gore & Associates Inc. ➤ 2,000 employees, manufacturing

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TRENDSETTERS

HEALTHCARE /// ENERGY /// AEROSPACE /// TECHNOLOGY EyeTech Digital Systems The next decade is expected to be about the technology we never see but improves the user experience. Natural user interface (NUI) technologies — touch, voice and gesture — have been revolutionizing human-machine interaction.

Now, imagine being able to simply look at your computer screen and open a file. A broad new range of products will now be able to incorporate eye control thanks to the new “AEye” technology from Mesa-based EyeTech. The AEye technology consists of a compact camera board which contains its own internal processor using the Xilinx Zynq System on Chip (SoC), combined with the world’s most robust eye tracking algorithm. The AEye hardware is suitable for computer displays, TVs, laptops, and other devices appropriate for this form factor. For more challenging devices, like smart phones, the algorithm can be licensed and run on the internal hardware.

Fennemore Craig Fennemore Craig is changing the way lawyers interact with clients by lending them Google Glass.

With the use of Google Glass, first-hand, live-action experiences are shared in real time between clients and attorneys, creating new mechanisms to convey evidence to juries, judges and mediators. The pilot program, called “Glass Action,” was launched in January when personal injury attorneys James Goodnow and Marc Lamber equipped several business and personal injury clients with the new Google Glass technology, not currently available to the public. “It’s the experience of the client unfiltered,” says Goodnow. “Jurors will now be able to see the nuances of a victim’s daily challenges firsthand.” Because of their use of technology, the ABA Journal named Goodnow and Lamber to its list of “America’s Techiest Lawyers.”

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Impact players ➤ Inilex, which manufactures and sells a vehicle recovery system that uses GPS and cellular technologies to locate stolen vehicles, made Forbes’ list of America’s Most Promising Companies, which recognizes the fast-growing U.S. businesses with brilliant prospects. ➤ Tempe-based Dixon Golf is

the creator of the world’s first biodegradable golf ball. “We had this idea of saving the world one golf ball at a time,” says William Carey, CEO of Dixon Golf.

➤ Tucson-headquartered CyraCom

International, the largest provider of over-the-phone interpretation operating solely in the U.S., ranked as the 32nd-fastest-growing job creator nationwide on Inc. Magazine’s Hire Power Awards.

➤ ON Semiconductor introduced

a new family of semiconductor “battery fuel gauge” integrated circuits that provide accurate measurements of the remaining power level of batteries used in smart phones, tablets and digital cameras.

➤ Invest Southwest, which

offers year-round opportunities for investors to connect with startups, teams up with the Arizona Commerce Authority for Venture Madness, which pits 64 start-ups against one another in a bracketstyle, head-to-head competition to crown the champion.

➤ Ziver Birg is founder and CEO of

ZIVELO, a Scottsdale-based public computing technology company that designs, manufactures and distributes self-service kiosk and digital signage systems globally. For three consecutive years, Birg has been honored at the White House as one of the Top 100 Entrepreneurs Under the Age of 30. In 2013, ZIVELO was recognized by Forbes as one of six fast growing tech companies in the U.S.

now

The future is

Arizona educators help tomorrow’s innovators make an impact today

A

PROVIDED

STUDENT INNOVATOR: David Strait, a senior at the University

of Advancing Technology, created a 3-D printable prosthetic arm with a headset that controls the arm. “I never expected to do this much in two years,” Strait said.

By JESSE MILLARD

rizona’s universities are known as places of innovation, but Tempe-based University of Advancing Technology (UAT) has taken that role to a new level by driving every student at the university to be an innovator of technology.

Since 2007, UAT has required all students to innovate and add to the ever-expanding world of technology in order to graduate.

“They have to innovate,” said UAT President Jason Pistillo. “We fanned the flame of innovation with this new requirement.”

David Strait, a former Marine who is a senior robotics and embedded systems major at UAT, has seen many fellow veterans and friends who are amputees as a result of their service. Strait turned UAT’s challenge to innovate into an opportunity to help those amputees.

“I go to hospitals and constantly see veterans that are swiveling around on peg legs,” Strait said. “We have better technology than that.”

Strait used that technology to create an open source 3-D printable prosthetic arm with a headset that allows the wearer to control the arm with his or her mind.

Strait said advanced prosthetics are too expensive for veterans to afford. 3-D printable prosthetics are much cheaper to produce, so Strait’s innovation gives veterans and amputees more advanced prosthetic technology that is much more affordable.

The neural headset that goes with the prosthetic arm works by reading the user’s EEG brainwaves through the skull without any surgery or connections to the brain. In order to make the arm move, the user must think of a simple and readable thing, which allows the headset to translate the brainwave and then tell the arm to perform a specific action.

To help students like Strait see their technological ideas come to fruition, Pistillo said UAT promotes an open environment where all students have access to every lab, regardless of major. While creating his prosthetic arm project, Strait said he was able to create everything he needed inside of UAT’s Maker Studio. He also said there was never a need to send schematics to a factory to build his project. Strait was able to make it at UAT himself.

To continue as a breeding ground for innovators, Pistillo said UAT looks only for students who are passionate and smart about technology and for students that are actually creating technology.

“Someone making solar robots will get in over a student with a 4.0 GPA who hasn’t even made a webpage yet,” Pistillo said. “When all peers have that same innovative personality, you have an entire environment of innovation.”

As UAT looks toward the future, Pistillo said that it is enrolling students in a new Digital Maker and Fabrication program, which trains students to create technologies that will revolutionize the world through 3-D printers, MakerBots and robotics.

“This program is as ahead of the curve in today’s world as a university would have been if it had been teaching classes on internet programing in 1991,” Pistillo said.

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HEALTHCARE /// ENERGY /// AEROSPACE /// TECHNOLOGY

Bringing ideas

to market

110 AB | May-June 2014

Arizona Commerce Authority helps create programs designed to grow successful companies

“N

By ERIC JAY TOLL

ot long ago, there were just five or six incubators and accelerators in Arizona.” Arizona Commerce Authority CEO Sandra Watson looks up to the ceiling in her office, she’s running the numbers in her head. “I think we now have close to 50 active in the state — plus collaborative workspaces, too.”

For the entrepreneur thinking about starting a new company, Arizona has a better business climate than just its golf courses and sunshine. The metric is not precise, but there may be no state in this country that does as much for new business’ growth than Arizona. Local governments, regional economic development organizations, the three state universities, community colleges, and the Arizona Commerce Authority all offer programs designed to grow successful companies.

While AZ Commerce business attraction wins have garnered much news and talk, the quasi-public agency has an equal emphasis for existing business expansion and new business startup. The agency offers a full menu of incentives, programs and innovation assistance for Arizona businesses.

“Those big moves by companies like Apple draw attention to Arizona from business leaders around the world,” says Watson.

“That kind of attention is good for our companies to market products globally.”

The state and its regional economic development agencies are focused on building export businesses and increasing the number of high paying jobs in the state. An export business is a business that ships the majority of its services and products outside local borders. Its result is money coming back into to be recirculated and grow the Arizona domestic product.

Brian Sherman, Arizona Commerce Authority’s senior vice president of business development, heads the team that deploys start-up programs. This isn’t just a toolbox for new business, Brian has the key to a garage filled with programs designed to scale up new companies.

“When we help a business grow roots in Arizona, we’re building the future of our corporate community,” says Watson.

“Our programs are designed to help a business from its early start-up stage into the marketplace to compete.”

“We have a number of different programs,” explains Sherman.

“We’re seeking companies ready to move up. Although we can help a very early stage start-up, we are looking for a business that has formed a company. They have to have two employees, a product concept and a business plan.” Under the “Start Up” tab at AZCommerce.com, there is a menu of incentives and programs for new business—see the sidebar for the list.

Arizona offers an angel investment tax credit. This incentive program for home-grown start-ups and entrepreneurs essentially reduces investors’ risk by 30 to 35 percent. This offset encourages angel investors to open checkbooks.

Getting an investor to sign that check takes a lot of effort and AZ Commerce’s business development unit has a program for that. “Newly-formed companies and small businesses may not be able to afford expensive consulting advice,” says Sherman. “What we’re doing is helping them become venture-ready by offering technical and business assistance and advice they can’t afford.”

It’s a practical MBA, Sherman says. In some ways, it’s a preliminary reality check. With the program, Commerce engages the business community and establishes mentor

Getting started The Arizona Commerce Authority offers assistance for start-ups. To learn more about the help and the programs available, visit azcommerce.com/start-up

Incentives

* Angel investment * Research and development * Job training * Quality jobs * SBIR/STTR * Additional depreciation * Sales tax exemption for machinery and equipment * Work opportunity

Programs

* Arizona Innovation Challenge * Arizona Innovation Accelerator Fund * Small business services * Rev AZ * Arizona Fast Grant * PIII Playbook * Energy reduction grant * Small Business Checklist for start-ups

relationships in front of making presentations to angel investors or venture capitalists. The same process can be used to help businesses compete in the Arizona Innovation Challenge, a state-funded grant program to help businesses get a product into the marketplace. This is for businesses doing research and development but more in the ‘D’ stage than the ‘R’ stage.

“There are steps to make this work,” explains Sherman.

“Businesses need to ‘certify’ in order to qualify for some of the programs. We offer a research and development tax credit that is similar to federal programs and small business grants that connect with federal funds. We have lending assistance programs to help close the loan gap and structure debt for a company.”

The tools stacked in Sherman’s garage are different for each business stage. The agency’s technical assistance has one primary goal in mind—move the business into the marketplace. Arizona wants its new companies to grow and hire people.

A business person with an idea for a new company should call the Commerce Authority. Types of businesses for which there are many open doors are those associated with technology, aerospace, health care, and bio and life sciences. That’s a wide playing field, and Watson says there are no closed doors for business who want to talk to the Arizona Commerce Authority about growth and expansion.

111 AB | May-June 2014

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TECH RESPECT 112 AB | May-June 2014

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