A U.S. Bankruptcy judge delayed making a decision about a proposed reorganization plan for Tucson-based copper miner Asarco LLC until May 15.

The delay gives more time for Asarco’s estranged parent Grupo Mexico SAB to submit a competing reorganization plan for the company.

Grupo, which lost corporate control of Asarco when it filed for bankruptcy in Corpus Christi, Texas in 2005, has been trying to regain power of the firm.

Judge Richard Schmidt already has given Asarco approval to sign a deal with India-based Sterlite Industries Ltd. Under the deal, which is dependent on approval of Asarco’s proposed reorganization plan, Sterlite would buy Asarco’s assets for $1.1 billion in cash and $600 million in notes.

But earlier this month Grupo said it planned to submit a competing offer for Asarco worth $1.3 billion in cash.

If Grupo fails to file the reorganization plan by May 15, Schmidt would allow Asarco to continue with its plan.

Raytheon Co., Honeywell International Inc. and other defense contractors doing business in Arizona could lose millions of dollars under proposed program cuts that the Defense Department announced Monday.

Defense Secretary Robert Gates outlined his recommendations for the agency’s fiscal 2010 budget during a news briefing at the Pentagon, saying the proposals “will profoundly reform how this department does business.”

Gates said he is urging Congress to cut spending for some aircraft, weapons and vehicle programs that have incurred cost overruns, rely on technology that is not yet mature or are not as crucial to U.S. security and combat needs given current and future threats facing the country.

Representatives for Raytheon Co., Honeywell International Inc., General Dynamics Corp. and other firms with local operations said Monday that it was premature to speculate on how the proposals might affect them because Congress has yet to approve the budget.

Defense analysts have predicted the Obama administration would cut spending for such programs as it devises plans to pull troops from Iraq and crack down on over-budget defense contracts.

Critics of the Defense Department’s handling of military programs have cited cost overruns in several weapons and vehicles programs, including a contract to build a new fleet of presidential helicopters, as reasons to revamp the procurement system.

Obama’s proposed $533.7 billion Defense budget for fiscal 2010 is about 4 percent higher than what Congress appropriated for fiscal 2009, excluding funding for military operations in Iraq and Afghanistan.

However, Gates has proposed to shift funds from traditional military weapons and technology to programs for increased pay and benefits for military personnel.

Arizona’s two Republican senators were split over Gates’ proposals. Sen. John McCain, co-sponsoring a bill that calls for more oversight of contract procurement, called the announcement “a major step in the right direction.”

Sen. Jon Kyl was one of six senators who wrote Monday to President Obama saying some of Gates’ proposals could “undermine” the country’s ability to protect against the “growing threat” of enemy missiles.

The department is proposing terminating the “multiple kill vehicle” program as part of an overall plan to reduce the Missile Defense Agency’s budget by $1.4 billion.

Raytheon Missile Systems in Tucson was awarded a defense contract worth $442 million in November to develop MKVs, which would launch satellites into space to crash enemy missiles. The program poses “significant technical challenges,” Gates said.

Representatives of Raytheon, which employs about 11,000 workers in Tucson, wouldn’t comment on the proposed cuts or how many workers are tied to that program.

The department’s recommendation to cease production of F-22 Raptors at 187 units could affect Phoenix-based Honeywell Aerospace, which supplies electronics and engine parts for the fighter jet.

Honeywell Aerospace, which employs about 10,000 workers in the Valley, said in a statement that it does not expect the recommendation to immediately affect its operations.

Gates also is recommending that the department purchase 30 F-35 Joint Strike Fighter jets in fiscal 2010 compared with 14 during the current fiscal year. Honeywell also makes components for that aircraft.

Another move that was widely expected was Gates’ recommendation to terminate a contract with Lockheed Martin to produce 23 new presidential helicopters.

Originally valued at about $6.5 billion in 2005, the contract has ballooned to more than $13 billion because of add-ons by the defense department.

Defense-products maker BAE Systems makes seats for the helicopters at its Phoenix facilities.

Gates also is proposing eliminating the vehicle component of Future Combat Systems, the Army’s $160 billion program to modernize vehicles, weapons and communications technology.

General Dynamics C4 Systems in Scottsdale has subcontracts to provide several computer software and hardware components for communication tools that are part of the program. The company declined to comment.

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Defense cuts

U.S. Defense Secretary Robert Gates outlined his proposals for the department’s fiscal 2010 budget, which could include funding cuts to programs key to Arizona contractors.

• Multiple Kill Vehicle: Raytheon Missile Systems in Tucson won a $442 million contract in November to develop a system that would launch satellites into oncoming enemy missiles.

• F-22 Raptor: Lockheed Martin is the prime contractor for this fighter jet. Honeywell Aerospace in Phoenix supplies many of the avionic components.

• VH-71: Gates recommends terminating this contract with Lockheed Martin to build a fleet of 23 presidential helicopters because of cost-overruns. BAE Systems in Phoenix has supplied seats for some of the test models. Honeywell Aerospace supplies some components.

Alan Sanchez, a senior field engineer, wears the Warrior Next Gen Ensemble, a project on General Dynamics C4 Systems' Scottsdale campus.

Arizona’s high-tech industry held its own in terms of employment and wages in 2007 despite the onset of a global slowdown that has forced some of the state’s biggest tech firms to make major cuts, according to a report released today.

The report, by Washington, D.C.-based TechAmerica, does not capture the impact of recent layoffs by large technology firms, nor the potential for additional job losses because of possible defense budget cuts by the federal government.

Still, Cyberstates 2009 paints a less dire picture of the state’s technology landscape than a study released in February by Science Foundation Arizona. That report, which included sectors other than high-tech employment such as biotechnology and life sciences, said employment declines in Arizona’s technology industry accelerated faster than the national average in 2007.

The state’s high-tech industry employed 115,989 workers in 2007, down 0.7 percent from 2006, the Cyberstates report said. That made Arizona No. 18 for high-tech employment among the 50 states, the District of Columbia and Puerto Rico.

The average annual high-tech salary in Arizona fell 0.6 percent in 2007 to $75,884, putting the state at No. 19 in the category, according to the report.

Nationally, high-tech employment grew 1.4 percent to 5.8 million, and the average annual salary increased 2 percent to $83,334 in 2007, the report said.

“We’re not doing as poorly as some states, but we’re not doing as well as some states either,” said Jim Garnett, executive director for TechAmerica in Arizona and New Mexico.

The trade group’s findings are based on U.S. Bureau of Labor Statistics data. The report includes job categories defined by the North American Industry Classification System, including high-tech categories such as semiconductors, defense electronics, communication equipment, software publishing and engineering services.

As in prior years, the state ranked high for employment in certain high-tech categories.

Arizona ranked fourth for semiconductor manufacturing with 22,643 jobs; sixth for defense-electronics manufacturing with 8,416 jobs and eighth for photonics manufacturing with 1,045 jobs.

While the report indicates Arizona experienced only minor slips compared with other states in employment and salaries, it does not capture the impact that recent downsizing by several large tech firms has had on the industry.

Semiconductor manufacturers including Intel Corp., Freescale Semiconductor Inc., ON Semiconductor Corp. and STMicroelectronics have recently laid off workers locally and internationally to trim costs amid dwindling demand for electronic chips used in computers, automobiles and consumer electronics.

Steven Zylstra, president and chief executive officer of the Phoenix-based Arizona Technology Council, said his group’s members are “generally optimistic” about future prospects despite the cuts.

“We’re looking at another year of this,” Zylstra said. “Starting in the fourth quarter and into 2010 they’re anticipating things will be turning (around).”

Some local tech consultants say the recent cuts could actually be a boon to the local startup community, prompting experienced engineers who worked at bigger companies to start their own businesses.

Derek Neighbors, co-founder of the Gilbert-based technology incubator Gangplank, said he is already seeing people from companies such as Motorola and Intel turn to the group to start consulting firms and new technology ventures.

“They’re kind of excited to explore opportunities that they’ve been thinking about for a number of years . . . and now are kind of forced into pursuing them,” Neighbors said.

Increased government spending on new military weapons, defense hardware components and software systems has helped Arizona’s high-tech industry in recent years.

But speculation about possible cuts in spending by the Obama administration for certain defense technology also throws into question how the industry will be affected.

Scottsdale-based General Dynamics C4 Systems, which develops networking systems and hardware components for the military, is one of the few local tech firms that continue to hire despite the slow economy.

The company, a subsidiary of Falls Church, Va.-based General Dynamics Corp., recently hired 31 engineers at a local job fair in January. The company has about 300 openings nationwide, including about 70 in Scottsdale, said Rich Skelnik, director of talent acquisition and community relations.

Typically salaries for the company’s engineering positions range from $65,000 to $110,000, he added.

Portrait of Scott L. Stern, Chief Executive Officer of Global Services Group in Phoenix. The rough economy has helped a local company gain ground in the security and private investigation industries.

Scott Stern was shot once and stabbed four times during his 12-year military- and law-enforcement career.

A long scar on his left knee from one attack is a permanent reminder of why Stern decided to take the security and investigation skills he honed in the public sector into private industry 14 years ago.

Stern, a licensed private investigator in Arizona, formed ISI Investigations in 1994. The operation was small in the beginning, using a handful of employees to handle a few clients.

The company has gone through two name changes since, most recently changing to Global Services Group Inc. this year. The name is meant to reflect the company’s new efforts to do business internationally.

Global Services Group’s headquarters are in leased office space in the iconic “upside-down pyramid” building at 3507 N. Central Ave. in Phoenix. The company employs about 65 security guards and about 10 private investigators.

A year ago, Global had about 35 employees.

The company is growing, Stern said, particularly because of greater demand for investigation work on fraud cases.

“We’re seeing a lot of incidents of workers’ comp, accident fraud, things of this nature,” Stern said. “That’s why the investigation side of our business has really taken off.”

When Stern started his security firm, he brought with him on-the-street experience.

He served stints with the U.S. Navy and the Guam Police Department. In the 1980s, he was assigned to security detail for visits by Pope John Paul and President Ronald Reagan to Guam.

Stern later served on the Phoenix and Mesa police departments. He left public law enforcement in 1990.

“I took my GI Bill and went and finished up my education,” he said.

He completed degrees in justice studies, psychology and legal studies, after which Stern started his own security business.

Stern’s current role as the chief executive officer of a security company gives him a bird’s eye view of the nation’s financial crisis.

For example, Global has seen a drop-off in small businesses that were using his firm to provide store security, he said.

“The little strip-mall, mom-and-pop stores that we were protecting – they’re gone,” he said.

At the same time, the weak economy is driving much of the fraud Global Services Group is investigating for insurance providers, employers, attorneys and other clients, Stern said.

The trend is not unique to his business.

Insurance fraud, in particular, often rises during economic recessions, industry experts say.

“There seems to be a growing trend of people looking for an extra cash handout by lying to their insurance companies,” said Jim Quiggle, spokesman for the Coalition Against Insurance Fraud.

The Washington-based organization issued a report in November that said reported cases of auto-insurance fraud are on the rise in several states.

In such cases, automobile owners will typically set fire to their vehicles, sink them in water or give them away and report them as stolen to cash in their insurance policies.

Stern’s company has also investigated more cases in the last year involving workers faking injuries on the job to obtain disability insurance.

Jim Trapp, an investigator with SCF Arizona, said 2007 was a banner year for the Phoenix-based workers’ compensation insurance provider in terms of fraud investigations.

Activity “definitely hasn’t slowed down any” this year, Trapp said.

The increase is not surprising, given more people are in precarious financial situations, Quiggle said.

“People become desperate and start doing desperate things to bail themselves out of a tight financial spot,” he said. “Insurance fraud is often the bailout of choice for normally honest people who wouldn’t even steal a candy bar from a drug store.”

The trend is keeping Stern’s team busy, though Stern declined to share revenue figures.

Global Services Group has also seen an increase in security and investigation work related to business and real-estate transactions, Stern said.

Tom Chenal, a partner in the Scottsdale office of the Mohr, Hackett, Pederson, Blakley & Randolph PC law firm, uses Stern for background searches, surveillance, and other investigation work related to commercial-litigation cases.

“I have a good relationship with Scott,” Chenal said. “He does a very fine job and I trust him.”

This year, Global Services Group landed a contract to provide some security services overseas for a large, U.S.-based oil company.

Stern said he was not allowed to name the client because of confidentiality reasons, but said the company was along the lines of an Exxon Mobil, ConocoPhillips or Chevron.

Stern said he expected his company would continue to add security guards and private investigators as it vies for more international business.

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Global Services Group Inc.

• Founded: 1994.

• Founder: Scott Stern, chief executive officer.

• Headquarters: Phoenix.

• Employees: About 75.

• Business: Provides security, bodyguard detail and private investigation work.

• Revenue: Would not disclose.

• Clients: Attorneys, employers, insurance providers.

Joan Koerber-Walker is stepping down as the Arizona Small Business Association’s chief executive officer after serving the group for two years.

Koerber-Walker will leave the group when her contract expires Dec. 31, the group announced Wednesday.

Koerber-Walker said she plans to focus more time on her consulting firm, CorePurpose Inc. and expects to be more involved in her role as a director on the board of California-based cancer-research firm, Ribomed Technologies Inc.

“I want to be out there,” Koerber-Walker said. “I want to be doing. I want to be helping not only my own company, but other companies.”

Koerber-Walker took the helm of the 3,000-member trade group in late 2006.

Current chief operating officer Leslie Barret will become the senior staff member until the group names a new CEO.

Association board member Doug Bruhnke commended Koerber-Walker on her efforts to raise the organization’s prominence.

“Joan is an amazingly intelligent and talented and connected person,” Bruhnke said, adding that she helped boost corporate sponsorships and membership around the state.

Credit and debit cards provide convenience to consumers but are often a source of headaches for mom-and-pop retailers.

Plastic consistently outranks cash as the preferred way to pay for everything from fast food to groceries.

For example, in a recent survey of 8,167 consumers by BIGresearch of Worthington, Ohio, 34.9 percent of respondents reported most often using debit cards and 27.7 percent reported most often using major credit cards for dining out. Cash buyers represented 35.6 percent of respondents.

“Whether (businesses) take credit cards or not – that really is not an option in today’s society,” said Neil Nelson, a counselor with Maricopa Community College’s Small Business Development Center in Phoenix.

However, processing fees, equipment leases and other contract terms that come with accepting plastic can be an expensive proposition for small businesses.

Every time a customer uses a credit card at Baker Wee Bakery and Cafe in Phoenix, a payment-processing firm charges the business a 16-cent fee plus about 1.75 percent of the transaction.

Owner Lora Wee said the fees add up quickly, especially when some customers spend only a few dollars for a cup of coffee and a doughnut.

The bakery typically does between $30,000 and $35,000 in monthly sales. Wee’s monthly processing bill has ranged between $700 and nearly $1,000.

“I wish I could just pull the plug on the whole machine and say I don’t need it,” Wee said. “(But) it would put a big dent in my business.”

Wells Fargo, Bank of America and other banks provide merchant-account services to businesses. Many other firms provide payment-processing services.

The processing firms charge fees for every card transaction a business performs. They also often charge a monthly service fee.

The fees are meant to cover the interchange rates that credit-card companies such as Visa and MasterCard charge the processor. The fees also cover the perceived risk the processor assumes by agreeing to handle a merchant’s payments.

Some processors require businesses to lease card-swipe machines; some allow businesses to buy the machines elsewhere, which can be significantly cheaper.

Processing firms and industry trade groups say fees have increased only slightly.

Meanwhile, “The volume of payments that are now being processed electronically has grown exponentially,” said Carla Balakgie, chief executive officer of the Electronic Transactions Association. The Washington, D.C.-based trade group represents banks and other firms that perform payment processing.

Merchant-account contracts are written in fine print, but owners should read any agreement line by line or consult an expert before signing, counselors say.

Two merchant accounts that Donna Doyle and Wade Nichols set up for their Scottsdale, Ariz.-based travel business, License to Travel LLC, were frozen by their processors for excessive “chargebacks.”

Chargebacks are payments a business makes back to customers who dispute a charge because, for example, a product or service was defective or because they didn’t receive what they paid for.

Processors will freeze a merchant account if excessive chargebacks occur. The purpose of the freeze is to ensure that there is enough money in the account to pay back consumers who have disputes and to make sure that no fraud is occurring. If a merchant runs out of funds or goes out of business, its processor could be on the hook for paying outstanding chargebacks.

Doyle and Nichols have not been able to access about $215,000 in customer payments in the accounts since they were frozen by Bank of America and National Processing Co. about six months ago.

The travel business owners have resorted to personal savings to pay some vendors.

“I will agree we were naive in many ways, and I will agree I did not read the contract clearly,” Doyle said. “My biggest concern and my biggest complaint is (that) they never talked to us like two adults and two people that made some mistake and are willing to cover those mistakes.”

———

Shopping for a merchant account

The growing use of debit and credit cards has motivated more small businesses to accept plastic. But processing fees, hardware costs and contract terms can be costly. Business counselors suggest the following when picking a merchant-account provider:

• Comparison shop. Firms charge different fees and require different contract terms. Some may provide card-reading machines for free; others require businesses to lease machines from them. Many charge expensive fees to cancel a contract early, while others are more flexible.

• Know the fees. The brand of card a consumer uses can affect the transaction cost for the merchant. Credit cards tied to frequent-flier miles or other rewards programs typically carry a higher transaction fee than non-rewards cards. Corporate credit cards also cost more than consumer cards.

• Monitor chargebacks. Consumers can dispute charges on their cards and get their money back. Processing firms limit the amount of chargebacks against a merchant as a safety precaution. Businesses that hit the limit can be blocked from accessing funds in their accounts.

Lora Wee, owner of Baker Wee Bakery and Cafe in Phoenix, prepares pie crusts for pumpkin and fruit pies. Wee said she pays between $700 and nearly $1,000 a month in card-processing fees.

Credit and debit cards provide convenience to consumers but are often a source of headaches for mom-and-pop retailers.

Plastic consistently outranks cash as the preferred way to pay for everything from fast food to groceries.

For example, in a recent survey of 8,167 consumers by Worthington, Ohio-based BIGresearch, 34.9 percent of respondents reported most often using debit cards and 27.7 percent reported most often using major credit cards for dining out. Cash buyers represented 35.6 percent of respondents.

“Whether (businesses) take credit cards or not – that really is not an option in today’s society,” said Neil Nelson, a counselor with Maricopa Community College’s Small Business Development Center in Phoenix.

But processing fees, equipment leases and other contract terms that come with accepting plastic can be an expensive proposition for small businesses.

Every time a customer uses a credit card at Baker Wee Bakery and Cafe in northwest Phoenix, a payment-processing firm charges the business a 16-cent fee plus about 1.75 percent of the transaction.

Owner Lora Wee said the fees add up quickly, especially when some customers spend only a few dollars for a cup of coffee and a doughnut.

The bakery typically does between $30,000 and $35,000 in monthly sales. Wee’s monthly processing bill has ranged between $700 and nearly $1,000.

“I wish I could just pull the plug on the whole machine and say I don’t need it,” Wee said. “(But) it would put a big dent in my business.”

Merchant services

Wells Fargo, Bank of America, Compass Bank and other banks provide merchant-account services to businesses. Many other firms provide payment-processing services.

The firms charge fees for every card transaction a business performs. They also often charge a monthly service fee.

The fees are meant to cover the interchange rates that credit-card companies such as Visa and MasterCard charge the processor. They also cover the perceived risk the processor assumes by agreeing to handle a merchant’s payments.

Some processors require businesses to lease card-swipe machines; some allow businesses to buy the machines elsewhere, which can be significantly cheaper.

Processing firms and industry trade groups say fees are meant to protect them from the risk involved with card transactions. Fees have increased only slightly, they say.

“What has happened is the volume of payments that are now being processed electronically has grown exponentially,” said Carla Balakgie, chief executive officer of the Electronic Transactions Association.

The Washington, D.C.-based trade group represents banks and other firms that perform payment processing.

Fine-print contracts

Merchant-account contracts are written in fine print, but owners should read any agreement line for line or consult an expert before signing, counselors say.

Two merchant accounts that Donna Doyle and Wade Nichols set up for their Scottsdale-based travel business were frozen by their processors for excessive “chargebacks.”

Chargebacks are payments a business makes back to customers who dispute a charge because, for example, a product or service was defective or because they didn’t receive what they paid for.

Processors will freeze a merchant account if excessive chargebacks occur. The purpose of the freeze is to ensure that there is enough money in the account to pay back consumers who have disputes and to make sure that no fraud is occurring. If a merchant runs out of funds or goes out of business, its processor could be on the hook for paying outstanding chargebacks.

Doyle and Nichols have not been able to access about $215,000 in customer payments in the accounts since they were frozen by Bank of America and National Processing Co. about six months ago.

Assessing risk

Merchant-service providers determine their rates based on the industry in which a business operates, the amount of transactions it performs each month, who its customers are and whether it conducts card transactions in person or over the phone.

Another reason why National Processing Co. froze Doyle and Nichols’ account was because of changes in how their business generated revenue.

Doyle and Wade originally specialized in event planning under the name Event Planners LLC. They currently operate License to Travel LLC, which runs a Web site that finds discounted resort packages.

The business charges around $4,000 for site access.

“This particular business morphed into a whole different business,” said Jim Oberman, senior executive vice president of the Louisville, Ky.-based National Processing Co.

Some providers also freeze accounts if there is a large surge in transactions in a particular month.

Doyle and Nichols said the increase in chargebacks was mostly due to customers having buyer’s remorse.

They say neither National Processing Co. nor Bank of America has given them an accounting of how much money they have left. They have resorted to personal savings to pay some vendors.

“I will agree we were naive in many ways, and I will agree I did not read the contract clearly,” Doyle said. “My biggest concern and my biggest complaint is (that) they never talked to us like two adults and two people that made some mistake and are willing to cover those mistakes.”

Oberman said only about 20 percent of the approximately $143,000 that was in the account at the time it was frozen remains because License to Travel continued receiving chargebacks after the account was frozen.

Bank of America spokesman Will Wilson said the bank was reviewing the matter.

Ask around

Business owners’ advice to others is to compare different options and ask for references when picking a payment processor.

Wee changed providers two months ago after receiving a sales call from Icon Payment Solutions.

Wee said Icon’s sales team told her that switching providers would save her about $400 a month.

When she received her October bill, the fees were nearly identical to what her previous processor, BluePay, had charged.

Brian Peterson, president of Phoenix-based Icon, said the company plans to work with Wee to bring her fees more in line with the quote the company provided her.

He said fees may differ from projections because of the type of cards consumers use. Credit cards tied to frequent-flier miles or other rewards programs typically carry a higher transaction fee than non-rewards cards.

Corporate credit cards also cost more that consumer cards.

Wee said she has considered posting a sign in the bakery asking customers to pay cash if they can.

Most debit- and credit-card companies prohibit merchants from setting dollar limits for accepting their cards, but many businesses still do so to cut back on fees. Some businesses include a surcharge for using cards, which generally is allowed as long as they apply the charge for all cards.

———

Shopping for a merchant account

The growing use of debit and credit cards has motivated more small businesses to accept plastic. But processing fees, hardware costs and contract terms can be costly. Business counselors suggest the following when picking a merchant-account provider:

• Comparison shop. Firms charge different fees and require different contract terms. Some may provide card-reading machines for free; others require businesses to lease machines from them. Many charge expensive fees to cancel a contract early, while others are more flexible.

• Know the fees. Transaction fees vary for credit and debit cards. The brand of card a consumer uses can affect the transaction cost for the merchant. Reward cards typically cost more.

• Monitor charge backs. Consumers can dispute charges on their cards and get their money back. Processing firms limit the amount of chargebacks against a merchant as a safety precaution. Businesses that hit the limit can be blocked from accessing funds in their accounts.

Derek Neighbors (left, Integrum Pragmatic Idealist) and Jade Meskill (right, Integrum Alpha Geek) work on the board in the Commons at Gangplank.

Competition may be king in the business world, but a group of Valley entrepreneurs says that “old-school” mentality also has created roadblocks for Arizona’s small technology startups.

They’re urging their peers to put collaboration ahead of competition with a recently formed technology incubator called Gangplank.

Web developers Derek Neighbors and Jade Meskill, founders of the Chandler-based facility, provide workspace, product consulting and financial support to early-stage software ventures in exchange for equity in the firms.

The facility, 325 E. Elliot Road, No. 34, also is the headquarters for five Web-development and marketing-related businesses, which serve as Gangplank’s anchor companies. A sixth anchor is expected to relocate there soon from SkySong, the ASU Scottsdale Innovation Center.

Gangplank’s focus on the startup community could be an economic boon for Arizona, where the unemployment rate has ballooned from 3.8 percent in September 2007 to 5.9 percent this September.

A 2007 study released by the U.S. Small Business Administration’s Office of Advocacy found that the creation of startups is the biggest determinant of gross state product, employment and personal-income growth.

For example, if the establishment of small businesses increased by 5 percent in a state, it would increase that state’s gross product output by 0.465 percent, the study said.

Neighbors and Meskill began offering space to existing Web-development and marketing firms about a year ago. In April, Gangplank began accepting project ideas from entrepreneurs.

The anchor firms, which combined employ about 30 workers, occupy their own suites inside the 5,000-square-foot facility. The project developers primarily work in an open room to promote collaboration among the participants.

“We’re really looking for those people who are pushing the envelope,” he said. “They’re not copying what anyone else has already done. They’re looking to be creative . . . and to stand out. . . . They want to be the next Google, the next Yahoo, the next Twitter, the next Facebook.”

While some business leaders lament the lack of investment dollars local technology companies receive in comparison to firms in neighboring states, Neighbors says a bigger problem for the startups he works with is not having access to expertise. Gangplank tries to address that need.

Neighbors and Meskill are funding Gangplank primarily with personal income. They are encouraging developers with product ideas to apply.

Here’s a look at four projects being developed at Gangplank:

AuthorityLabs.com

The Web site helps other Web site owners track where their sites rank in online search engines.

The site is currently in beta, or test, mode and is not available to the general public.

Once live, users will be able to enter their URL address. The program will spit back a list of recommended terms they should track to see where their sites rank when someone inputs those phrases in a search engine.

The site will generate revenue via a subscription fee, the cost of which has not been determined.

“We’re going to build a system that’s going to be able to handle not only the small-business client,” founder Chase Granberry said. “We’re also going to be able to handle the enterprise e-commerce business that wants to attract tens of thousands of viewers.”

DateDesigner.com

DateDesigner.com isn’t another eHarmony.com or Match.com.

Instead of pairing potential partners, the site lets people submit ideas for where to go and what to do on a date.

Users can submit restaurant and activity ideas. People can search for venue ideas by city and type of date (romantic, fun, adventurous, etc.).

“I came up with the idea three years ago after I got divorced,” said founder Beau Frusetta. “I started dating again and I had run into a lot of situations where I was dating different women, but I kept going on the same date. It just became very boring.”

Gangplank has provided Frusetta with about $15,000 in seed funding, he said. He debuted the first version of the site about three weeks ago.

Frusetta said he plans to sell banner advertising or listings to restaurants and other venues that want to be featured prominently on the site for future versions.

SimpleSeating.com

The Web-based program helps users build seating charts for weddings, banquets, dinner parties and other events.

Users can drop and drag attendees’ names on a chart. The program lets users link together the names of people that must be seated at the same table, simplifying the process of deciding where to place them.

The first version of the site has been out for about a year and a half and has made about $25,000, according to founder Steve Swedler.

He moved the program to Gangplank about three months ago.

The current version of the site is targeted at consumers. Sign-up is free to make charts for events with 50 or fewer people. Packages for planning events with more than 50 people cost $20 to $50.

With the site’s next version, Swedler plans to target to hotels and event-planning businesses.

GetWhuffie.com

“Whuffie” is the name of a social currency featured in the science-fiction book Down and Out in the Magic Kingdom.

In the book, the amount of currency people accumulate is based on what they contribute to others.

Gangplank participants are incorporating the concept into a software tool they plan to offer businesses to use on their Web sites. The program will allow customers to suggest ways to improve a company’s businesses. The businesses will be able contact specific customers if and when they incorporate their suggestions.

The product is still under development, but a bare-bones site is currently online.

Lending through the U.S. Small Business Administration loan programs fell dramatically in Arizona during fiscal 2008, another sign that the economic crisis is wreaking havoc on Main Street.

The number of SBA loans that banks issued in Arizona for the year that ended Sept. 30 fell 27 percent to 2,022, according to data released Friday.

From a dollar perspective, the amount of money lent fell 32 percent to $880 million.

“The economy, increasingly stricter credit standards, the pronounced aversion to risk among commercial lenders and the resulting difficulty in accessing capital are conditions small-business owners know well,” SBA’s Arizona District Director Robert Blaney said in a statement.

The SBA, which does not lend money itself but guarantees the loans for banks that issue them, attributed the decline partly to less demand for the loans from business owners who are putting off capital expenditures until the economy improves.

Blaney said the SBA’s qualifying criteria for its loan programs have not changed, but some borrowers who previously qualified for the loans no longer can because the value of their collateral has declined under harsh economic conditions.

Arizona’s top SBA lenders for the year based on loan activity were JPMorgan Chase Bank, Wells Fargo Bank and Bank of America. The average loan size was $246,000, or 35 percent larger than the national average of $182,000.

More than 70 percent of SBA loans in 2008 were to businesses located in HUB Zones, Low-Moderate Income Areas or redevelopment areas.

Global Solar in Tucson prints solar grids on flexible sheets.

Arizona’s fledgling solar industry got a big boost Tuesday after the Senate broke a months-long logjam and passed a $17 billion energy-tax package that will make it easier for businesses and residents to take advantage of the sun’s power.

If approved by the House, the bill would extend for eight years a soon-to-expire subsidy that provides any business that installs or builds a solar-energy system a 30 percent rebate of the cost in the form of a tax credit.

It would also provide a one- to two-year extension of certain tax credits for wind, refined coal and other forms of renewable-energy investments.

And in a major victory for the renewable-energy industry, the legislation removes a $2,000 cap on such rebates for residential systems. That means that homeowners might soon be able to recoup a much greater portion of the up-front cost of putting in rooftop solar panels or solar water heaters.

Tuesday’s vote came as a welcome relief to industry officials and small business owners alike, many of whom have watched with disappointment as the Senate tried, and failed, on nine previous occasions to extend the credit. In general, the renewable-energy subsidies had broad-based, bipartisan support, but lawmakers had clashed over how to pay for them. The current package passed 93-2. It was included in a $100 billion measure that also adjusted the alternative-minimum tax for inflation and provides federal relief to disaster victims, including those in Texas still trying to dig out from Hurricane Ike.

Solar-power backers said they were hopeful the measure will be approved by the House and signed into law.

“We have been hearing positive comments,” said Monique Hanis, a spokeswoman for the Washington, D.C.-based Solar Energy Industries Association. “And we’ve had a very positive signal from the president that he would approve it.”

In lobbying for the extension, the SEIA commissioned a study by Chicago-based Navigant Consulting Inc. that indicates that by 2016 the solar energy industry would create 440,000 permanent U.S. jobs. The states that would enjoy the largest economic boost include Arizona, Florida and California, it states.

But that’s not the only reason the tax credits were seen as critically important to Arizona.

Utilities here are under a state mandate to generate 15 percent of their electricity needs from renewable sources by 2025. To meet that goal, Arizona Public Service Co. has proposed building what would be one of the largest solar-power plants in the world, capable of serving 70,000 homes or more. But utility executives had also stated that they would kill the $1 billion, 280-megawatt Solana Generating Station proposal if the subsidy wasn’t extended past its Dec. 31 expiration date.

“The extension of the (tax credit) is vital to APS and to Arizona and for the Solana Solar Generating Station,” spokesman Jim McDonald said. “So this is a positive step, and we remain optimistic that the bill will become law . . . we are encouraged and confident.”

In addition, APS has teamed up with Salt River Project and several other regional facilities to contract for a 250-megawatt, solar-thermal plant in Arizona or Nevada.

Solar manufacturing companies stand to benefit as well.

Neil Shea, director of business development and marketing at Solon Corp. in Tucson, called the investment tax credit “hugely important.” The company, a subsidiary of Solon AG in Berlin, builds modules for solar facilities in the U.S. and across Europe. The extension “will double the amount of business we can do in the United States,” Shea said.

The House of Representatives could take up the tax legislation as early as today but face a tight deadline for its passage. Lawmakers are rushing to finish critical business, including finding consensus on the $700 billion financial institution bailout plan, before they adjourn at the end of this week.

Still, Arizona lawmakers said they were hopeful that it would get done. A spokesman for Rep. Gabrielle Giffords, D-Tucson, said Tuesday that she would push House leaders to extend the tax credits, saying that no state “had more to gain” than Arizona. Fellow Congressman John Shadegg, a Republican, said he was also in support.

“The Senate bill, if put to the House floor, is something that would pass,” Shadegg said. “It is a package that I can support and I will aggressively lobby to see passed.”

Meanwhile, Dustin Hamby, a partner at the Phoenix-based GreenFuelSolar.com, is just one of many Valley businessman who will be closely watching the legislative proceedings. His company installs residential and commercial solar-panel systems, among other things. Earlier this year, they lost a $14 million contract because of uncertainty over the tax-credit extension.

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What the bill does

Key components in the Senate-approved energy-tax package include:

• An eight-year extension of a tax credit that allows those who install or build a solar system to recoup some of their costs.

• The elimination of a $2,000 cap on rebates for residential projects.

• A one- to two-year extension of certain tax credits for wind, refined coal and other forms of renewable-energy investment.

• New tax credits for the creation of advanced coal-electricity projects.

• A provision that allows taxpayers to claim up to a $7,500 credit for purchasing a plug-in electric car.

Source: Associated Press

By Andrew Johnson, Ginger D. Richardson

Tony Tiedemann is founder of ABS Inc. Clothing and Exports in Phoenix. Every day, the business takes in about 120,000 pounds of used clothing and other items for grading and recycling.

The scene at ABS Inc. Clothing and Exports’ southwest Phoenix warehouse looks like an out-of-control swap meet.

Large cardboard boxes of used T-shirts, sweatshirts, pants, socks and dozens of other items sit on the pavement outside the building’s entrance.

Inside, a custom-made conveyor system will send the clothes to various sorting stations, where workers separate them by category and quality.

Some of the clothing will be cut into industrial rags to sell to mechanics shops, paint companies and other businesses. But ABS will sell most items to resale shops in low-income foreign countries.

To an outsider, the process looks chaotic, but it has allowed owner Tony Tiedemann to grow ABS into a business with 165 employees, about 20 of whom are based in foreign countries.

This year, Tiedemann expects annual revenue to reach $12 million, up from $9.5 million in 2007.

The growth has earned Tiedemann the distinction of being the U.S. Small Business Administration’s 2008 Small Business Exporter of the Year for Arizona.

“If someone were to ask me, . . . ‘What is the No. 1 reason that contributes to your success?’, it is our understanding and desire to continuously improve and learn,” said Tiedemann, who started ABS in 1998.

Kristian Richardson, an international-trade specialist with Arizona’s U.S. Export Assistance Center in Phoenix, attributes Tiedemann’s success to bringing in people who are experts on foreign business practices and efforts to make foreign clients feel at ease.

“He employs dedicated people who are knowledgeable about overseas markets,” said Richardson, who nominated Tiedemann for the SBA award. “When you have these global supply chains, any point in that supply chain that is weak can really disrupt business in a big way. Tony’s gone out of his way to make sure that doesn’t happen.”

Tiedemann, who cites corporate leaders such as former General Electric CEO Jack Welch in conversations about his approach to business, says he and his employees are constantly putting systems in place to move clothing more quickly in and out of ABS’ rented warehouse at 47th Avenue and Buckeye Road.

The continual change is necessary. He competes with a wide array of businesses to find used clothing from non-profit and for-profit consignment shops and thrift stores.

Tiedemann’s workers sort most of the clothing it buys and bales it by category. Men’s, women’s and children’s clothing is separated. Clothes also are sorted by type of item and condition.

ABS receives about 120,000 pounds of clothing and other materials daily.

The company typically packs the bales into 40-foot-high cubed containers that can weigh up to 50,000 pounds when full. ABS exports the containers to buyers in foreign countries, who sell and distribute the clothing to resale shops in those countries.

ABS also has three warehouses it leases overseas in Kenya, Uganda and Malawi. The company is also in the process of opening a warehouse in the Democratic Republic of the Congo. ABS currently exports clothing to about 20 countries, Tiedemann said.

“There’s a tremendous demand for used clothing because it is so much cheaper than new in developing countries,” said Peter Mayberry, executive director of the Secondary Materials and Recycled Textile Association.

The Falls Church, Va.-based organization has about 200 member companies, many of which operate similarly to ABS in that they buy clothes from resellers and sell to overseas shops.

The operations of such businesses vary from more high-tech setups to mom-and-pop companies, Mayberry said. ABS is at the upper end of such companies in terms of annual sales, he said.

The declining value of the dollar has helped such businesses by making it cheaper to export goods, according to Richardson and Mayberry.

More recently, Tiedemann has been fueling his company’s growth through acquisitions and new-store openings. Last fall, Tiedemann bought Arizona Cotton Products, which sells bar mops, wiper rags and other cloth products.

He also operates clothing resale shops in Tempe and Mesa, both called Tiedemann’s Family Thrift.

As a result of the expansions, Tiedemann hired about 50 new employees last year, he said.

Tiedemann has also paid for expansion through the SBA’s Export Working Capital Program, which allows qualified businesses to open up a line of credit to help pay for export sales through participating lenders that the SBA guarantees.

While the company deals in used clothing, quality is important.

“Reputation and quality are tremendous factors in the successful operation of an export business for used clothing,” Mayberry said. “If you send bales of inferior products to a country, you’re not likely going to have any repeat business.”

Once the clothing is separated and baled, ABS grades the items and prices them based on quality. One container generally costs between $2,000 and $4,000, and top-notch clothing can sell for as much as $30,000 per container, he said.

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More on this topic

Small-business winners

The Arizona winners of the 2008 U.S. Small Business Administration awards will be recognized today at a celebration in honor of Small Business Week. The Enterprise Business Conference, sponsored by the Arizona Small Business Association, will take place from 7 a.m. to noon at the Phoenix Convention Center. This year’s SBA winners include:

• Arizona Small Business Person of the Year: Tracy Markie, founder of Engenuity Systems Inc. in Chandler.

• Arizona Women in Business Champion of the Year: Lydia Duron Hilling of M&I Marshall & Ilsley Bank in Tucson.

• Arizona Minority Small Business Champion of the Year: Rano Singh, founder of DPS Biotech Southwest Inc. in Phoenix.

• Arizona Small Business Exporter of the Year: Tony Tiedemann, president of ABS Inc. Clothing and Exports in Phoenix.

• Arizona Financial Services Champion of the Year: Michele Lynn Ellison, vice president with M&I Marshall & Ilsley Bank in Phoenix.

• Arizona Lender Advocacy Award: PPEP Microbusiness and Housing Development Corp. in Tucson.

• Community Lender Award: Arizona Business Bank.

• 504 Lender of the Year: Wells Fargo Bank.

• Lender of the Year: JPMorgan Chase Bank.

More information: www.asba.com

ABS Inc. Clothing and Exports

• Location: 1411 S. 47th Ave., Suite 110, Phoenix.

• Founded: 1998.

• President: Tony Tiedemann.

• Business: Buys and sells used clothing to foreign resale shops. Also turns used clothing into wiping rags for mechanics shops, paint businesses and other companies.

• Revenue: $9.5 million in 2007.

• Employees: 165 worldwide; has warehouses in Uganda, Malawi and Kenya.

• Web site: www.tiedemannglobe.com

Board members and executives at the Arizona Technology Council are trying to bring stability to one of the state’s largest trade groups after years of high staff turnover and flat membership growth.

In its six years of existence, the Phoenix-based organization has been a revolving door for top leaders and staff, making some members reluctant to stay committed to their causes and renew their dues.

Several recent developments point to an organization that is reinvigorated.

Steve Zylstra, a veteran of the local technology community, took over as president and chief executive officer in December after serving seven years in the same role at the Pittsburgh Technology Council.

Past and present board members said his experience running that group, considered the biggest of its kind in the country, along with his regional and national connections is a boon for the Valley’s tech community.

The organization’s staff is nearly full, with the pending hire of a new director of finance and administration.

Members also are more eager to get involved with the council’s executive committees.

A legislative victory could be in sight as well, as a state research-and-development tax-credit bill for which it has lobbied awaits a full Senate vote after receiving House approval last month.

Zylstra is the Arizona Technology Council’s third full-time president and CEO since the organization was formed in 2002 with the merger of the Arizona Software & Internet Association and Arizona High Tech Industry Cluster.

Before leaving for Pittsburgh, Zylstra was involved in those groups and was director of business development for Simula Technologies Inc., which now owned by BAE Systems Inc.

In returning to Arizona last year, Zylstra took over an organization that is about one-third of the size of his previous employer.

The Arizona Technology Council has about 500 members, including technology companies, service providers and other academic and non-profit groups, according to Deborah Zack, director of membership services.

The group’s revenue for fiscal 2007 was about $900,000, up from about $740,000 in fiscal 2006, according to the council’s annual tax filings.

The Pittsburgh Technology Council had about 1,800 members when Zylstra took over. Today, it has about 1,480, according to spokesman Kevin Lane.

Zylstra oversaw three organizations under the Pittsburgh Technology Council’s umbrella. It was a structure that he helped build and one that the group’s board of directors later disassembled.

Zylstra admits he and board members didn’t always agree about how the organizations should be structured, but he said he left the organization on positive terms.

David Nelsen, a board member in Pittsburgh, described Zylstra as a leader who worked tirelessly to meet with government and business leaders to unite on key issues facing the technology community.

“Steve was a person who tried to bring things together and bring things under his management,” said Nelsen, an Arizona native who runs a technology company called TalkShoe.com in Wexford, Pa. “Some people would look at this as building an empire, and I think some people would find fault with Steve’s approach.

“I think he was exactly on the right track.”

While the Arizona Technology Council currently lacks the national reputation its Pittsburgh counterpart enjoys, Zylstra said he likes being in charge of a single group now.

“It is kind of a relief to have only one job,” said Zylstra, 54. “It really allows me to focus and concentrate my energy on this organization. My goal is for Arizona to (have) one of the biggest and best tech councils.”

Welcomed return

Local tech supporters who knew Zylstra from his days running the Arizona Innovation Network, a precursor to the High Tech Industry Cluster, say that they are excited to have him back.

Michael Berens, chairman of the Arizona Technology Council, called Zylstra “a leader who knows how to get the best out of people.”

“He knows where he wants to go, and he knows . . . the process to get us there,” said Berens, head of the Brain Tumor Research Unit at the Translational Genomics Research Institute in Phoenix.

Todd Bankofier, who served as president of the Arizona Technology Council from 2002 to 2005, agreed.

“He has been in a market where there is a much larger preponderance of . . . headquartered technology companies and has built an organization around that,” Bankofier said. “He has a lot of . . . the necessary leadership skills to take the tech council to the next level.”

Renewed interest

Since taking over five months ago, Zylstra has laid the groundwork for affiliate programs that allow members to purchase insurance and supplies at a discounted rate.

That effort has renewed interest by past and current council members, Zack said.

In years past, the organization’s rate of member retention was slightly below the national average, she said.

Since January, about 20 new members have joined each month, something she attributes in part to Zylstra. In year’s past, the group saw an average of 15 new members per month.

“We’ve got companies that I personally have been trying to contact for six, seven, eight months that are now contacting me because of his reputation . . . and because we know he’s here to stay,” Zack said.

The membership fees for companies range from $300 to $4,000 depending on the number of employees. While some are skeptical of the Valley’s ability to grow a strong technology base because of a lack of funding, Zylstra said he’s excited to be operating in this environment.

“I like to have a challenge in front of me, and I like to overcome things,” he said.

Group’s future

Potential mergers and alliances will be a key area he and other organization leaders investigate to expand membership and more effectively lobby for state resources.

Nationally, technology and bioscience groups have merged to go after funding for their members.

“It’s a lost opportunity to continue to have those boards and organizations function independently,” said Richard Nelson, chairman and CEO of the Council of Regional Information Technology Associations.

A key goal of Zylstra’s is to work more closely with the state’s other technology trade groups, including the Arizona BioIndustry Association in Phoenix and Southern Arizona Tech Council in Tucson.

Before joining the Arizona Technology Council, Zylstra conducted research for the organization’s board about the benefits of merging or collaborating with either group.

Based on the research, the board’s conclusion was to focus on filling the top executive job first because a merger could take as long as two years, Berens said.

Several state trade groups have merged in the past year.

The Arizona Association of Industries merged with the Arizona Chamber of Commerce and Industry last year, forming a group that has about 500 members.

The BioIndustry Organization of Southern Arizona merged with the Arizona BioIndustry Association in January, with a combined membership of 110.

Robert Eaton, president and CEO of that group, said that he supports collaborating with the technology council but believes a separate group is needed for the bioscience community because of the unique regulatory issues it faces.

Zylstra said, “My perspective is that we have to work together . . . and do some events together because the people that we all serve don’t really care about the organizations, they care about getting their issues addressed and growing the industry.”

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MORE

Arizona Technology Council
• Headquarters: Phoenix.

• Founded: 2002.

• President and CEO: Steve Zylstra.

• Purpose: Provides mentoring and training programs for member technology companies. Organizes the annual Governor’s Celebration of Innovation, which highlights technology advancements that local firms and academic institutions have accomplished. Lobbies for legislation in support of increased funding for technology ventures.

• Members: 500.

• Web site: www.aztech council.org.

Council leadership
The Arizona Technology Council has had three full-time and one interim CEO since its formation in 2002.

Todd Bankofier
Bankofier became president and CEO of the council in August 2002. He previously had been vice president of national sales for XO Communications Inc. He left the council in August 2005 to join Tempe-based information technology firm Ensynch. In February, he became a partner in investment firm Fairmont Capital Group in Tempe.

Ron Schott
Schott served as interim CEO from August to November 2005, when Donna Kent took over the position. He served in the position again between Kent’s departure in May 2007 and Steve Zylstra’s arrival in December. He continues to work as an adviser to the council on a pro-bono basis. His private-sector career includes development work with IBM Corp. and AOL.

Donna Kent
Kent joined the council in November 2005. She previously ran her own consulting business and worked as an executive for Xerox Corp. She left the council in May 2007 to become senior vice president of global sales, marketing and services at marketing firm Televerde in Phoenix.

Steve Zylstra
Zylstra took over as president and CEO in December. He previously was CEO of the Pittsburgh Technology Council from 2000 to April 2007. Before that, he lived in Arizona, working as director of business development for Simula Technologies Inc.

R&D credit update

One of the Arizona Technology Council’s main causes is HB 2653, which would increase the size of tax credits for research and development that take place in the state.

The House approved the bill 45-14-1 on March 24, sending it on to the Senate. The Senate Finance Committee voted 4-2-2 in favor of the bill, sending it on to the Senate Rules Committee.

The legislation would increase the size of tax credits that companies conducting R&D in the state can receive, to 22 percent, from 20 percent, on the first $2.5 million in qualifying expenses starting in 2009.

Those that spend above $2.5 million would receive a credit of $600,000 plus 13 percent of the exceeding amount. The current credit is $500,000 plus 11 percent on the excess amount.

For emerging companies, landing a capital investment can feel like a Catch-22.

Serious investors want to see examples of previous funding before they feel comfortable handing over their own money. That forces entrepreneurs to ask the question: How do I develop a history without securing investors?

That’s a reality of doing business regardless of when times are good or when the economy is backpedaling, as is the case now.

It is no secret that traditional lenders have tightened their standards, but some venture capitalists, private-equity firms and startup financiers have become more conservative, too, about where and to whom they float their funds.

Still, investors have money to invest. A Dow Jones Private Equity Analyst report released Monday showed that U.S. private-equity firms raised $58.5 billion in 81 different investment funds in the first quarter of 2008, up from $44.3 billion in 68 funds in the year-ago quarter.

“If you’re looking for money, it’s a never-ending process for any kind of venture,” said Thomas Duening, director of entrepreneurial programs at Arizona State University’s Ira A. Fulton School of Engineering.

Duening is in charge of the school’s Arizona Technology Investor Forum, a group started in 2006 that invests in companies spun off from the university.

He and other investment experts agree that lobbying for financing can be tiresome, but growing businesses can take steps to bolster their appeal to potential investors.

The first step is determining where to seek funding.

Investors are divided into three categories: family and friends, “angels” and venture capitalists. In most cases, the financial source will depend on the company’s stage: Whether it’s just starting out or is established and looking to grow.

Each source will have different expectations, and entrepreneurs need to anticipate and prepare for those expectations when pitching to each group.

The three F’s

Entrepreneurs starting out don’t need to look far when beginning an investment search.

“Raising money of the equity variety usually begins at home with ‘FFFs’: friends, family and fools,” Duening said.

“They’re the ones who would possibly invest . . . in a very early-stage venture. That’s because they know you, they believe in you, and they’ve heard your vision.”

That’s the path MSDx LLC is taking to fund its development of the first diagnostic blood test for multiple sclerosis.

The Tucson-based firm, housed at the University of Arizona’s Science and Technology Park, got its start in 2006. To date, the startup has supported itself on $250,000, some of which came from the management team’s personal network, President Marie Wesselhoft said.

The amount is small, but it has allowed the company’s team to forge ahead in developing its technology and buy time until it has a proven sales record to show future investors that the company has potential.

Relying on personal investments and donations from family and friends also has allowed MSDx to put off an important decision that more advanced firms have to face when accepting venture capital: How much ownership to give investors.

“We don’t want to give away more of our company than we need to,” Wesselhoft said.

Pitching to family and friends doesn’t necessarily mean an entrepreneur can sidestep preparing the information that more advanced investors seek, including a solid business plan, sales projections and competition analyses.

In that sense, a personal network can allow the business owner to hone pitching skills to interest for future investors.

‘Angel’ investments

“Angel” investors are the next audience to whom entrepreneurs usually try to pitch.

These investors tend to be more fickle than family and friends but not as aggressive as venture capitalists when it comes to taking equity in a company.

Angel investors often are organized in networks that look for promising new businesses in different sectors. Most of the businesses they fund are early-stage, and their investments typically are far less than those made by traditional venture capitalists.

One local example is the Arizona Angels Investor Network.

The network of business executives, technology experts and retirees selects companies to make presentations to the group every month. The companies that show the most promise often receive funding down the road.

“What we are interested in are companies that have the potential for fast growth,” said Dee Harris, chairwoman of Arizona Angels and senior managing director of Scottsdale-based investment banking firm Alare Capital Partners LLC.

Harris said Arizona Angels is interested in information technology, medical devices, renewable energy and related firms.

In 2007, the group’s members invested about $1.6 million in six companies, with individual investments ranging from $250,000 to $500,000, according to Harris.

Like all investors, Harris said, angels want to know about the company’s management team, competition and revenue projections.

Most angel investors seek companies that demonstrate a potential to grow, but they don’t expect their investments to produce returns as quickly as venture capitalists do.

The state has made efforts to spur more investments with its Angel Investment Tax Credit. The program, which started in 2006, aims to encourage people to invest in technology and life-science companies.

Under the program, investors can receive an income-tax credit from Arizona worth 35 percent of their investment in a rural or bioscience company and 30 percent of their investment in any other qualified business.

A business must be certified through the Arizona Department of Commerce to qualify as an investment prospect.

As of March, 58 companies qualify under the program, which is funded through June 30, 2011. Of the certified companies, 23 received investments worth a total of $6.8 million, according to David Drennon, department spokesman.

Venture capital

The next stage of financing companies seek is venture capital. Such investors look to infuse larger amounts of money into firms for larger equity stakes.

To be attractive to a venture-capital firm, a company needs to have a proven management team in place and often a sales track record to show the ability to be profitable down the road.

One of the biggest mistakes a company can make when going after funding is pitching to an investment group that focuses on sectors unrelated to what the company does, said Terree Wasley, who runs ASU’s Technopolis, a program that provides mentoring for emerging technology companies.

Investment firms typically specialize in specific areas. Experts urge entrepreneurs to learn about past companies in which venture capitalists have invested to get a sense about whether they’re a good match.

Early-stage firms can fail at landing money by providing wrong information to potential investors.

“They want to talk too much about the technology and not enough . . . about how it makes money,” Wasley said.

It’s important for an entrepreneur to be able to describe what the company does in a way that’s easy for outsiders to grasp. An investor, in addition to that, wants to have a clear idea of the impact an investment will have on the bottom line.

Entrepreneur Neeley Neal is hoping her company will land a venture-capital investment after presenting at the Invest Southwest Capital Conference in December.

The annual conference drew about 100 investors who listened to 10-minute presentations from startup companies that were selected by a committee.

Neal’s company, Sideline Star LLC, an online social network geared toward those in the cheerleading industry, was one of 14 firms that presented at the conference in Scottsdale.

“I think there is sort of this hurdle,” Neal said. “You have to either bootstrap and show some success on a shoestring budget or . . . find the larger firms that are willing to invest $1 (million) to $2 million.”

Entrepreneurs such as Neal not only must show investors how their companies can make money, they must know, too, what they own before pitching a venture-capital firm, said Jennifer Lefere, an associate with Rogers & Hool LLP, a Phoenix law firm that specializes in business and financing transactions.

“One of the issues I see are companies that haven’t properly taken ownership of all of their assets,” she said. “I see this more in the tech area . . . where they don’t own what they think they own.”

Assets can include patents, trademarks, copyrights and other intellectual property that may be attractive to a prospective investor.

“If you have no (intellectual property), then you aren’t looking at what’s around you because every business has IP,” Lefere said.

At the end of the day, the financing game is all about preparation.

“I always tell entrepreneurs, ‘Look, you have to have your pitch in your pocket because you never know when you’re going to run into someone who might be interested in your product,’” said Duening, the Arizona Technology Investor Forum’s director. “The crisper you can tell people this is how you can make money, the more exciting it is for investors.”

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More on this topic

Funding sources

The following organizations either provide funding or can help point you in the right direction.

• Desert Angels

Description: A Tucson-based network of angel investors that invests in promising startup companies.

Contact: 520-490-8137

Web site: edesertangels.safeserver.com

• Arizona Angels Investor Network

Description: A Valley-based network of angel investors that invests in startup firms.

Contact: 480-951-9200

Web site: arizonaangels.com

• Solstice Capital

Description: Venture-capital firm based in Tucson that focuses on alternative energy, education and environment-related ventures.

Contact: 520-514-8000

Web site: solcap.com

• Hercules Finance LLC

Description: A Scottsdale-based financing firm that specializes in software, biotech, information technology and real estate.

Contact: 480-773-4960

Web site: herculesfinance.com

Jim Schweikert, CEO of the Liberty Distribution Co., shows off some of the items that his company sells to retailers at his office in Chandler. Liberty, which sold more than 8.5 million Snickers bars alone to its retailers last year, distributes to stores where customers go to buy DVD players, plywood, air conditioning filters and cat litter, not breath mints, beef jerky or Sour Patch candies.

CHANDLER, Ariz. – Who knew that candy around the checkouts could be big business?

That’s been the case for Jim Schweikert and his company, Liberty Distribution Co. LLC, which sells candy and other snacks to retailers that don’t specialize in food but want to make an extra buck.

The candy supplier has charted average annual compound revenue growth of 26 percent over the last four years.

Liberty, of Chandler, Ariz., which sold more than 8.5 million Snickers bars alone to its retailers last year, distributes to stores where customers go to buy DVD players, plywood, air conditioning filters and cat litter – not breath mints, beef jerky or Sour Patch candies.

But the placement of these products at the checkout has helped even non-food retailers bolster their sales.

“It’s 100 percent impulse (and) it’s extra dollars to the retailer,” Schweikert said. “No one is going to these stores to by these items, but they’re walking out with them.”

Liberty’s growth attracted a major investor in the Scottsdale, Ariz. private equity firm Cave Creek Capital Management LLC, which recently bought a majority stake in the company and plans further expansion.

Schweikert attributes the growth to focusing on what he calls his “nontraditional customers.” While serving those clients is cost-prohibitive for larger distributors that sell to convenience stores, Schweikert has turned a profit by using proprietary software that enables the company to track sales and replenish its customers’ inventories as they run low.

Liberty Distribution’s shipping and storage warehouse at its Chandler headquarters is a fantasyland for anyone with a sweet tooth. Cardboard boxes full of Reese’s Pieces peanut butter cups, Skittles, M&M’s, Snickers bars and packages of nearly 600 other candy and snack food items line the warehouse’s 35-foot high walls.

A handful of workers pull out prepackaged cartons of the treats from opened boxes that sit on a row of metal shelves. They place the candy inside plastic shipping crates, which wind through a section of the warehouse on a large conveyor system.

Another team of workers fills the crates with Styrofoam packing peanuts as the crates arrive at their station on the conveyor. The workers load the crates inside UPS trucks, which deliver the items to retail stores throughout the country.

The action is precise and organized, slightly resembling a scene from the movie “Charlie and the Chocolate Factory,” minus the rushing river of chocolate, Oompa Loompas and fruit-flavored wallpaper.

The Willy Wonka – so to speak – of Liberty Distribution is Schweikert, who admits that he likes operating his company under the radar. The Scottsdale resident says he seldom seeks out attention for his company because of fear of tipping off potential competitors.

Schweikert and Cave Creek Capital Management declined to provide specific details of their transaction, which closed in January.

Under the deal, Schweikert owns 40 percent of the company and continues to run daily operations. The investment firm works with Schweikert and other upper management members on strategies for continuing the company’s growth, doing acquisitions and possibly expanding internationally.

Cave Creek partner Scott Lavinia said the firm typically invests in companies that do between $20 million and $200 million in annual sales. The firm liked Liberty Distribution because of its consistent growth, opportunities for expansion and a lack of direct competitors, he said.

Schweikert started Liberty Distribution in 1998. At the time, he was running Liberty Vending, a business he started in 1985 to sell vending machines to retailers.

CSK Auto Corp. of Phoenix, which owns and operates the Checker Auto Parts and other auto parts store chains, was one of Liberty Vending’s first customers. When the auto parts retailer approached Schweikert about selling candy in the stores, he decided to shift gears.

New technology is making it easier for bar and restaurant owners to automatically track liquor use instead of manually matching inventory with sales.

“If you don’t keep things in check, it can cost restaurants a significant amount of money,” said Steve Chucri, president and chief executive officer of the Phoenix-based Arizona Restaurant and Hospitality Association.

Restaurants and bars can lose up to 30 percent or more on drink sales if bartenders, for example, pour too much liquor or give away free drinks, said Michael Thomas, a franchise owner of Bevinco. Some of his clients were losing as much as 50 percent per drink.

Toronto-based Bevinco is one of a growing number of services helping restaurants and bars slow losses from overpouring alcohol. Bevinco, in part, requires bottles to be manually weighed on a regular basis.

More high-tech offerings include BarVision, developed by Tempe-based Nuvo Technologies Inc. It relies on digital pour spouts that record and wirelessly transmit how much liquor a bartender pours per drink.

The information is sent to a receiver, then to a computer program that tracks the data and creates reports that show how much money bar managers spend per drink – or their “pour cost.”

“The response has been excellent, although it’s a little bit of a tough sell simply because it’s so new and modern and a little bit outside of the box,” said Mark Cutsforth, senior vice president of technology for TekNV Inc. He declined to give sales figures or customers’ names.