Florida Funders has dramatically expanded its assets under management, after winning a bid to manage the portfolio of the Institute for the Commercialization of Florida Technology.
It’s part of a series of moves by Tampa-based Florida Funders to broaden the base of technology investors in the state and support a growing technology sector that is expected to bring more high-skill and high-wage jobs to Florida.
The $23 million portfolio from the Institute for the Commercialization of Florida Technology includes equity investments and loans to 62 companies that have licensed technology from the 28 research institutions in Florida, along with some cash, said Marc Blumenthal, general partner at Florida Funders, a hybrid venture capital fund and crowdfunding platform that invests in tech startups.
The new portfolio broadens the scope of Florida Funders’ investments, which historically have been concentrated in technology companies developing business applications, Internet of Things, artificial intelligence, cybersecurity, fintech, ed tech and health care tech. Many of the companies in the Institute’s portfolio are life science, biotech and engineering science firms.
It also complements Seed Florida, a for-profit fund created in collaboration with University of South Florida and Florida Funders and designed to provide funding for young, “seed-stage” startups. Seed Florida has an initial grant from the U.S. Economic Development Association, and Florida Funders expects to raise $5 million to $10 million for the fund, with fundraising efforts likely to start next week, Blumenthal said.
With both additions, Florida Funders will have close to $60 million in assets under management. It will have up to $100 million in “momentum capital,” as it activates the wealth from its crowdfunding platform. That “crowd” includes wealthy people who made their money in real estate, financial services and healthcare, and are looking to Florida Funders to do the due diligence for them as they start to invest in the tech sector.
Between all its channels, Florida Funders expects to invest about $20 million in 2019 in 30 companies, Blumenthal said.
“If we did that this year, and continue on same trajectory, it wouldn’t surprise me if we put $30 million or $40 million to work in 2020. You will see hundreds of millions of dollars flow through Florida Funders into Florida,” he said.
The impact on the economy will be substantial.
“We want to put enough money to work to make a difference,” Blumenthal said. “Sixty percent of the venture capital happens in four cities in the U.S. We’re not going to peak Silicon Valley and we’re not going to outdo New York. That doesn’t matter. But we shouldn’t underperform because we don’t have the mechanisms in place, the framework, and that’s what Florida Funders is all about.”
The state legislature created what was originally called the Institute for Commercialization of Public Research in 2007, as a nonprofit state entity to stimulate the growth of Florida-based innovation companies. Legislation passed in 2011 created the Seed Capital Accelerator Program to fill early funding gaps by providing seed capital through loans to qualified companies. In 2013, the legislature broadened the Institute’s scope, creating the Florida Technology Seed Capital Fund which could make equity investments.
But legislators shifted gears a year or so ago, changing the name to the Institute for the Commercialization of Florida Technology, and requiring the Institute to bring in a private fund manager. A request for proposals from fund managers went out in June 2018, with the decision made on the winning bid in the fall.
The Institute had “a successful run,” Blumenthal said, deploying $30 million in 70 companies, with eight exits. A 2018 study by the Washington Economics Group measured the impact of those investments. The study found:
- Overall economic impact for fiscal year 2017-18 of $408 million, a 20 percent increase over fiscal year 2016-17
- 2,636 total jobs supported in FY2017-18 and a total of 8,940 jobs between 2011 and 2018
- Average earnings per direct job created exceeded statewide average
- Capital raised in excess of $255 million, a ratio of 10-to-1 of additional private investment to state funds
- GDP impacts of $214 million in FY17-18 and a total of $725 million over the seven-year period
- Annual return on investment (ROI) to the state of Florida of over 31x.
Florida Funders will get a management fee that is equal to or slightly lower than industry standards, Blumenthal said. The fee offsets expenses, such as paying staff and rent, he said.
Florida Funders’ jobs is to continuously invest the Institute’s capital.
“Every time we get an exit or a loan payback it is money to be deployed into new companies,” Blumenthal said. “It grows and grows and grows, and gets deployed, because the state’s mission was total impact — jobs and new companies and making sure the commercialization pipeline out of our research institutions actually gets commercialized here.”