Anthony Ronga and Mike Sablone paid $2,000 in rent per month for a 400-square-foot office in San Diego, but after relocating to downtown Tempe last year, their monthly rent dropped to $1,200 and their space grew.
Saving money on rent and other costs has helped Theta Interactive Inc. grow, said Ronga, co-owner of the company.
"We were able to use our money more efficiently," he said.
Theta Interactive isn't the only local company that has benefited from lower business- operating costs and housing prices than much of the rest of the country.
These factors helped Phoenix earn the top ranking for the second year in a row in Entrepreneur Magazine and the National Policy Research Council's list of the best cities to start and grow a business.
About 800 businesses like Ronga's relocated from California to the Phoenix metropolitan area between 1993 and 2002 to take advantage of Arizona business conditions, said Lee McPheters, senior associate dean for the W. P. Carey School of Business.
"If you can expand sales while you're reducing your costs, this is going to be an attractive sort of arrangement for any business," McPheters said.
Many relocated firms are small businesses concentrated in the electronics, aerospace and biotechnology industries, McPheters said.
The influx of entrepreneurs from California, a major source of new residents for Arizona, is expected to continue despite a major increase in state housing prices during the last two years, McPheters added.
The median price of a resale home in Maricopa County was $265,000 in the second quarter of 2006, up about 56 percent from $170,000 in the second quarter of 2004, according to the Arizona Real Estate Center at ASU's Polytechnic campus.
In contrast, the median sale price for a home in California was $567,360 in July, according to the California Association of Realtors.
Bret Giles, co-founder and president of Sitewire Marketplace Solutions, said operating a business in Tempe allows him to hire more employees than he could in a city with more expensive operational costs.
"I think we don't have to operate quite as nimbly," said Giles, who graduated from ASU in 1987.
Staying in the Tempe area allowed Michael Mueller, and Chuck Reynolds, founders of WebMediaRx, to start up their business in 2003 at what Mueller said was the relatively cheap cost of about $25,000.
That way, WebMediaRx could focus on developing its business instead of trying to quickly make a profit to pay back hundreds of thousands of dollars in loans, Mueller said.
In Tempe, ASU graduates starting new businesses have helped spur a boom in entrepreneurial activity, said Rod Keeling, president and executive director of the Downtown Tempe Community.
About 140 technology firms operate in and around downtown, he added.
Reynolds, creative director at WebMediaRx, said the vibrant, youthful environment and positive attitude toward business development in Tempe could set the stage for bigger things.
"It's a growing little tech spot," he said. "It's the undiscovered Silicon Valley, maybe."
Reach the reporter at: grayson.steinberg@asu.edu.
