A lot has changed in the Florida technology ecosystem in the three-and-a-half years since Florida Funders launched its Fund 1.
There’s more capital and operational support for startups. There’s a growing list of tech success stories throughout the state, and technology companies increasingly are seeing Florida as a place they can grow their business, said Tom Wallace, Florida Funders managing partner.
Since launching in mid-2017, Florida Funders Fund 1 has invested in 34 companies and nearly fully allocated the $18 million in the fund. About 1,500 accredited investors have registered with the organization, a hybrid venture capital firm and angel investor network, and one-third of them are active investors.
Florida Funders’ most recent investment is in MyPorter, an Atlanta-based startup in the moving and storage industry. The company provides a subscription-based solution that uses logistics and technology to pick up, catalog and store customers’ items. MyPorter has raised more than $2 million to date and plans to expand operations in Tampa in the next six months.
That’s not unusual. Wallace has seen growing interest in Florida as a base of operations for technology companies.
“We get calls and companies coming onto our website applying for funding out of California. We never used to get that. The Valley has gotten so expensive. Talent is expensive there, the cost of living is expensive there and it’s so competitive for raising capital that we’ve actually started to see companies that start out there and are looking to get out of California. That’s been going on for a number of years, but in the past those companies were typically looking at Austin or Denver or places like that. Now we’re hearing from them,” he said.
Another change is the expanding list of high-quality incubators, accelerators, university initiatives and mentor programs in the state. Locally, Embarc Collective, which opened earlier this year in downtown Tampa, joined organizations such as Tampa Bay Wave, Tampa Bay Innovation Center and the Florida-Israel Business Accelerator.
In addition to more resources for founders, there’s more capital, Wallace said.
“We’re writing bigger checks, our crowd is more active and we’re not the only ones doing this. There are more micro funds, which are sub-$50 million funds, investing in technology. There are more active angel investors, and we feel like we’re the leader in that space,” Wallace said.
“When we started, crowdfunding was in its infancy and completely new to Florida. We were thinking this would be something that we could put up a company for funding and investors would do this online and we would not really know them. They would come online and this would just magically happen. That’s not the way it’s happened at all. To the contrary, we have relationships with most of our investors. Most of them are very high-net worth individuals, and they’re not writing checks for $2,000 or $5,000. The average check size is $15,000 to $20,000.”
The technology developed in Florida also is advancing, he said. “Success breeds success.”
He cited companies such as ReliaQuest and KnowBe4, which each have gotten $300 million in funding from global investment firm KKR, as well as ConnectWise, which sold last year to Thoma Bravo, a technology-focused private equity firm.
They are among about 10 unicorns — or tech companies with a valuation topping $1 billion — across Florida, Wallace said.
“We’ve had big wins of terms of companies that are succeeding here. They didn’t move to Silicon Valley, they didn’t move to New York or Austin, they built it right here with local talent, and that’s really exciting,” Wallace said.
‘Angel investing on steroids’
One of the challenges for Florida Funders and other early-stage investment groups has been educating accredited investors, generally people with earned income that exceeds $200,000 (or $300,000 together with a spouse) or with a net worth over $1 million.
“Our best opportunity to change the game in terms of technology capital being deployed in Florida is to turn on and activate all the accredited investors we have in the state. We’re the third-largest state and we have a lot of very wealthy people in the state, but most of these people didn’t make their wealth in technology, like they did in California or New York. Most of them made it in real estate, construction, insurance, hospitality and they are not inclined to be active technology angel investors,” Wallace said.
“A lot of what we do is awakening the sleeping giant, these thousands of accredited investors we have, and get them turned on to angel technology investing, which can be a strong asset class if you do it right.”
Diversification, deal flow and due diligence are keys to successful early-stage funding, and Wallace said that’s what Florida Funders does. “We’re angel investing on steroids.”
The organization invests in just one of every 100 companies it looks at and spends about 80 hours doing due diligence on average before it make an investment. Its vast network of investors and operating partners gives it experience in most industry sectors.
While it’s still early to single out success stories from Fund 1, there are several companies that have had significant up rounds, or a type of financing whereby a company increase in worth when compared to its previous valuation. That includes companies such as Peerfit, a digital health company in Tampa; RepScrubs, a medical technology company in Orlando; PICKUP, a last-mile logistics company in Dallas; Trash Butler, a Tampa trash valet service; and Finexio, a fintech company in Miami.
There’s been one exit, when Bridge, a Tampa tech company that specializes in ecommerce platforms for independent retailers of wine, beer and spirits, was acquired by SevenFifty, an online marketplace and data platform for the U.S. alcohol beverage industry.
Wallace expects a second exit for a company backed by Fund 1 within the next 30 to 60 days
There have been a couple of investments that haven’t worked out, including Priatek, a St. Petersburg-based advertising technology company.
“The nature of early stage technology investing is there’s risk involved,” Wallace said. “Some companies that aren’t doing well right now will pivot and will end up great. Some of the companies doing great now will crash and burn. It isn’t over until it’s over in this business. Timing is very important. You can have a great solution to a problem but you are too early or too late, all those things factor into this.”
For Wallace, a technology industry veteran and serial entrepreneur, leading Florida Funders is a career highlight.
“We get to go to work every day and work with bright hardworking people are who trying to change the world. What could be more fun than that,” he said. “When you see a company grow from nothing to hundreds or thousands of employees, and make an impact on those lives, it is very rewarding.”