Arizona entrepreneurs innovate on shoestring budget!

By J. Craig AndersonThe Republic | azcentral.comSun Nov 4, 2012 11:19 AM

The path that led Jonah and Adam Coe from dorm-room experiment to multimillion-dollar business did not exist a decade ago.

The Coe brothers, who founded their Tempe-based business with $500 in cash and an idea to rewire video-game controllers to make certain games easier to win, generated $1.8 million in revenue in 2011 and are on track to rake in $2.4 million in sales this year, said Jonah Coe, 31.

In 2007, they bought a few Xbox controllers, customized them to their liking and put them up for sale on eBay, he said. Within weeks, demand began to skyrocket as customer accolades spread virally across the Internet.

Like many of today’s entrepreneurs, the founders of Evil Controllers managed to grow their business quickly and inexpensively by relying on Internet chat rooms, blogs and social-media sites to do their marketing for them. If their idea had come in 1997 instead of 2007, “we could have sold them to a friend or two,” Coe said.

In the current economy, it’s essential for startup companies to be more resourceful and creative than in the past when it comes to raising funds, finding clients and connecting with suppliers, say investors and entrepreneurship experts.

The Coe brothers and other winners in this year’s Arizona Republic “35 Entrepreneurs 35 and Younger” contest said they’ve learned it is possible to carve out a sizable niche and even to compete with much larger companies on a shoestring budget.

“They’re operating under this new normal where there is no money, and they’re just making it work,” said Sidnee Peck, director of entrepreneurship initiatives at Arizona State University’s W.P. Carey School of Business.

Regardless of their age, owners of startup companies can tap into technology that offers access to powerful sales, marketing and communication tools at a greatly reduced cost, entrepreneurship experts said.

Those resources, which include social-networking sites such as Facebook, online-publishing platforms such as WordPress and video-chat services such as Skype, can allow even the smallest businesses to appear and act as if they are much larger companies. And that can level the playing field for smaller businesses, which may not have the traditional connections or access to credit that established business operators have.

The Web has become a focal point for services that cater to the needs of entrepreneurs, making it easier and less expensive than ever to outsource a variety of tasks, they said.

Other recent trends also are helping startup businesses keep overhead costs down, local business owners said, such as shared office facilities that cost less to rent and advances in automation that have reduced manufacturing costs, allowing local firms to compete for business that in the past had gone almost exclusively overseas.

“The end result of all this is that companies today need and burn through less capital than they would have 10 or 15 years ago,” said Jonathan Coury, a Phoenix-based attorney and 2012 chairman of the Invest Southwest conference, an annual event that connects small businesses with potential investors.

And for startups today, self-funding — and less cash — is the norm. Gone are the days in which a clever doodle on a napkin could attract millions in venture-capital funding.

Coury said most of the big venture-capital companies active during the Internet boom are long gone, and most of the remaining firms are interested only in larger companies with well-established track records.

As a result, startups and other small businesses must do more with less, he said. That need has spawned a cottage industry of third-party service providers offering inexpensive or even free tools for marketing, e-commerce, communication, networking and avariety of other business functions.

John Hartsell, owner and CEO of Glendale-based Hardsale Communications, said his small advertising, marketing and public-relations firm relies heavily on outsourcing.

“We’re going to provide any service our clients need, whether we can provide that service internally or externally,” said Hartsell, 33.

He said many of the company’s relationships with third parties were developed through old- fashioned networking and not over the Internet.

Still, Internet technology plays a critical role in serving the company’s clients affordably, he said. For instance, Hartsell said he often uses Web-based videoconferencing services to meet virtually with out-of-state clients, rather than traveling to visit them in person.

“We can’t afford to jump on a plane or rent a car every time a client needs something,” he said.

Phoenix business owner Jenny Poon, 29, is attempting to help startup firms tackle another perennial problem: the high cost of office space.

Poon, a former Arizona Republic employee whose husband, Odeen Domingo, works for Republic Media, has founded a company called CO+HOOTS that plans to open a 4,200-square-foot “collaborative workspace” in central Phoenix this week.

The goal is to provide a low-cost workplace in which like-minded entrepreneurs will collaborate, network and help each other succeed, she said. Poon already has leased the facility to 85 percent capacity, she said.

Poon said she chose the location, near 10th and Washington streets, because it is surrounded by other startup firms and companies that serve them. She said her goal is to promote sharing and cooperation among businesses in the neighborhood.

“If it were just an office space, we could have moved anywhere,” Poon said. “It’s a collaborative space — it’s a community.”

In Tempe, Adan Ortiz, owner of a a small manufacturing business, has found another way to use technology to grow his business and create jobs, he said.

Ortiz, 33, is owner and CEO of Quik Tek Assembly, a fast-growing manufacturer of circuit boards for a variety of products, including traffic signals, missiles and medical devices, that is on pace to generate $2.5million in revenue this year.

Founded in 2010, the business is proof that small manufacturing operations can thrive in the United States, he said.

“We’ve grown about 1,000 percent from when we started,” he said.