Phoenix/Scottsdale Tops the List of Best Startup Ecosystems

Phoenix/Scottsdale: America’s Leading Startup Ecosystem

Phoenix/Scottsdale, Arizona, is the undisputed winner of this year’s list of best ecosystems for pre-IPO startups. It offers a unique blend of advantages, making it a magnet for entrepreneurs. The region’s robust infrastructure, dynamic startup culture, lower operational costs, a major inte

rnational airport, supportive government, and easy market access make it an ideal location for startups.

Vibrant and Inclusive Community

The entrepreneurial community in Phoenix/Scottsdale is vibrant, inclusive, and collaborative. Numerous incubators and accelerators, along with the support of Arizona State University’s Edson Entrepreneurship + Innovation Institute, foster innovation and provide startups with the resources they need to thrive. This supportive environment reflects the region’s ability to attract venture capital, indicating strong investor confidence and making it a positive space for successful crowdfunding issuers seeking to scale beyond crowd capital.

Government Support and Quality of Life

Arizona’s state government is pivotal in supporting startups with incentives, tax credits, and a business-friendly regulatory environment. Additionally, Phoenix/Scottsdale’s vibrant business and tech community, combined with a lower cost of living and high standard of living, makes it an ideal location for pre-IPO startups. The Greater Phoenix area also offers a vibrant cultural scene with great food, outdoor activities, and a pleasant climate (at least seven months a year), making it an attractive place for both work and life.

Economic Impact and Community Engagement

As a crowdfunding ecosystem, Phoenix/Scottsdale ranks very high for pouring money back into the local economy and experiencing high valuation growth. The region shows strong community engagement relative to its population size and boasts more mature startups with a growing employee base pulled from a pool of talented, experienced, and expert subjects.

Momentum and Valuation Growth

Momentum significantly contributed to Phoenix’s high score, where it outperformed other regions by a wide margin. This was particularly evident in the dramatic increases in valuation across funding rounds. For instance, Nxu’s valuation soared from $3.9M to $385M over three rounds, and Battle Approved saw its valuation jump from $6.3M to $53M across two rounds. Collectively, offerings from Phoenix/Scottsdale experienced an average valuation increase of 1365%, starkly higher than any other ecosystem, with Pittsburgh the next closest at under 500%.

Repeat Issuers and Ecosystem Support

Phoenix/Scottsdale is ranked fifth in average funding rounds per issuer, indicating an environment that attracts and retains businesses across multiple stages of growth. This reflects a more mature market where investors are committed to supporting companies through successive growth phases.

Investor Confidence

The ecosystem’s high rankings in average check size (9th) and total capital raised per offering (11th) testify to the market’s stability and potential. These rankings showcase the volume of investments and significant individual investor commitments, underscoring a deep trust in the market.

Workforce and Expertise

Although not the leader in average issuer age, Phoenix/Scottsdale has more employees per issuer than the average across other ecosystems, enhancing its expertise ratings. This robust workforce empowers issuers to manage and scale their operations effectively, supporting sustained growth.

Community and Network Effects

With a large population relative to the number of offerings, the ecosystem benefits from a wide base of potential backers. This broad support base is critical for fostering a sustainable and growing ecosystem comparable to other top-performing regions like San Diego and New York.

Success Stories

Several companies have driven Phoenix/Scottsdale to the top of the list in 2024:

  • NxuOne (formerly Atlis Motor Vehicles Inc): An advanced energy company known for its high-powered, versatile charging solutions for businesses and electric vehicle fleets. NxuOne significantly influenced the average valuation growth for Phoenix/Scottsdale, with valuations increasing from $3.9M in 2018 to $385M by 2021. They received the highest average amount of capital per round across their three rounds, averaging $2.35M per round.
  • Barrana (State 48 Brewery): A local Arizona craft brewery and restaurant chain with a high employee count, significantly influencing the ecosystem’s expertise score.
  • World Tree: A carbon forestry company with innovative Empress Splendor tree farms that rapidly sequester carbon and produce sustainable hardwood. World Tree has completed five rounds of Reg CF, matching the maximum across most other ecosystems and maintaining a substantial average check size.

Phoenix/Scottsdale’s top ranking in the Crowdfunding Genome report is a testament to its thriving startup ecosystem. The region serves as a model for other cities looking to foster innovation and support entrepreneurial growth. Explore the full Crowdfunding Genome report for deeper insights into what makes Phoenix/Scottsdale a leader in the startup world.