Phoenix tech is scorching: Now where are the VCs?

PHOENIX — Just a one-hour plane hop from Silicon Valley in California, a growing community of app developers, programmers and entrepreneurs here are trying to get a little more sunshine for their tech ideas.

The "Silicon Desert," as locals call it, is thriving, with start-ups taking advantage of the lower cost of living, tight-knit community and talent from one of the nation's largest schools — Arizona State University — to help sprout new tech ideas.

What it's not attracting yet is considerable outside venture capital investment — but the entrepreneurs say that could all change with just one big hit.

"We would really benefit from a breakout," says Fred von Graf, a Google Glass-wearing venture manager at ASU, whose entrepreneurship program helps seed early stage companies.

The Phoenix area boasts 4.4 million people. It's the 12th-largest metro area nationally, just 100,000 people behind 11th-ranked San Francisco/San Jose.

While there are no mega Silicon Valley-style household tech names here, Phoenix does have online security firm LifeLock, tech marketing firm InfusionSoft, software firm Axosoft and GoDaddy, the world's No. 1 Web hosting company.

GoDaddy, the dominant local tech firm, has an IPO planned that looks to raise $110 million. E-commerce giant Amazon also has one of its major fulfillment centers based in Phoenix.

According to the National Venture Capital Association, funding is growing. In the first quarter of 2014, some $40 million was invested in local start-ups, compared to $6 million the same time a year ago.

Still, "there is no local money," says Mark Rukavina, CEO of Scottsdale-based iMemories, which digitizes old movies and videos. "If you want investment, you have to leave the Valley."

Tishin Donkersley, editor-in-chief of AZ Tech Beat, a website that covers the local tech scene, says more VCs should "come here and play golf and see what's going on."

Most of the local seeding comes from personal and angel investors. A Tucson-based group, Desert Angels, is the eighth-most active angel investment group, according to the Angel Resource Institute.

The money flows to young developers and programmers who graduate from ASU, who can be found at local incubators, like SeedSpot and co-working tech magnets like Co+Hoots.

Peer-to-peer lending startup eMoneyPool, a bank alternative, just graduated from SeedSpot's mentoring program and raised $500,000 in initial financing — great for Phoenix, but a drop in the bucket for California.

Edward Loew, co-founder of restaurant loyalty app Veebo, says that despite Phoenix's proximity to California, venture firms consider Phoenix a "secondary" market — way beyond the San Francisco area, Boston and New York, and even Boulder, Austin and nearby Las Vegas.

What the Phoenix tech scene does have going for it are many innovative ideas.

For instance, consider Crowd Mics.

Who hasn't been to a conference where the moderator asks for questions, you get up to speak and no one can hear you because you're not amplified?

Shouldn't there be an app for that?

That's what Sean and Tim Holladay thought. The brothers went on to create Crowd Mics, using local resources to help build it. The app, when connected to a sound system, turns everyone's smartphone into an amplified mic.

"When you're at an event, you want to be heard," says Sean Holladay.

Area start-up highlights include everything from apps focused on education, health, gaming and utilities, notes Donkersley.

Highlights include:

— A service to buy closeout tickets and goods in real time via texts. ReplyBuy works with US Airways, 1-800-Flowers and the MGM Grand to sell last-minute texts via text.

— Bosse Tools, which was born at ASU, where two friends developed a more ergonomic shovel. "It's great going to a tech meetup here and walking in with a shovel," says Bosse co-founder Stephen Walden. "We get some great looks."

— Broken Window Studios, a young gaming company developing a new desert-based title that will play on the Oculus Rift virtual reality system, when it's eventually released.

"We don't want the Phoenix, Ariz., area to be the ones playing catch up with the industry," says co-founder Tristan Moore. "We want to be ahead of the curve."

Coupon and loyalty apps that work with local restaurants are popular. Both Veebo and Whistl were born here, and local firm Spindle acquired coupons app Yowza in late 2013 for $500,000. All offer deals at local eateries.

So why coupons and loyalty here? Tourism brochures note the 300 days of yearly sunshine — but omit the four months of scorching 100-plus-degree weather.

"What else do you when it's really hot outside?" asks Whistl co-founder Perry Czopp. "You go inside to eat, drink to cool off. The culture here is very involved with eating and drinking."

Investors, are you listening?