Why One Tech Startup Decided To Expand In Phoenix Instead Of Silicon Valley

This post is sponsored by the Arizona Commerce Authority.

Why would a tech company choose to expand into Phoenix instead of expected cities like San Francisco and New York City?

Red-hot Gigya was in the midst of a major growth spurt, raising $25 million in new venture capital and making plans to double its workforce. "We were looking at our sales trajectory and goals for investment," recalls CEO Patrick Salyer, "and we realized that we were going to have to look beyond Silicon Valley to find what we needed."

Salyer's search team built a matrix of factors they would weigh before selecting a site for a new office location that would complement Gigya headquarters in Mountain View, Calif., as well as existing satellites in London, Paris, and Tel Aviv. A multi-state competitive process began, and as soon as it became clear that proximity to the home base was the No. 1 consideration, Phoenix emerged as the top spot. "Most people don't realize that it's only a one-hour flight to the Bay Area, and there are plenty of flights every day," Salyer explains. "That's a big plus for a tech company."

Equally appealing was Arizona's exceptionally business-friendly climate. Gigya found the official welcome mat extended from the governor's office all the way down to the city's administrative offices, helping them to secure all the necessary permits to open a new office within a matter of days rather than months.

The prices were also right: Desirable office spaces can rent for over $100 per square foot in Silicon Valley, while in Phoenix a good quality space in a prime location can go for as little as $25 per square foot. Likewise, Gigya's new employees will find that the median home price in the upscale suburb of Scottsdale is just $272K compared with the Bay Area's $585K.

Arizona's corporate and personal income tax rates in Arizona are (or will shortly be) among the lowest in the country. Other tax cuts for businesses and individuals are being phased in through 2017. On top of that, there's no franchise tax, business inventory tax, or estate tax whatsoever.

Innovative businesses like Gigya are eligible for several attractive tax credit programs. For example, Arizona offers up to $70 million of refundable tax credits annually under its Qualified Facility Tax Credit Program, up to $90 million of nonrefundable tax credits annually pursuant to its Quality Jobs Tax Credit Program, and tax credits of up to 34% of certain qualifying expenses in accordance with its R&D Tax Credit Program - all of which support investments in new technology. The state's Job Training Grant Program has been ranked among the best in the nation in terms of training flexibility and ease of access to the funds.

Knowing that the area is home to Arizona State University and that the University of Arizona is close by in Tucson, Gigya's human resources pros anticipated finding a large pool of well-educated recent graduates they could train to succeed. "What surprised us," says Salyer, "was how many employees who already have years of experience in tech that we were also able to get on our team."

Reflecting on the move, Salyer has no regrets: "We were up and running within a month, hired 40 employees within a few months, and we are already seeing results in less than a year." He expects to have 200 employees in the Phoenix office by 2016.

Learn more about business development in Arizona from the Arizona Commerce Authority.

- Written by Jennifer Keeney Sendrow

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