The founders of Script and Lilypad Solutions say they owe their success to local investors who saw the potential in their companies.
Script, with software that allows schools to digitize paperwork, and Lilypad, which develops software for beverage alcohol sales, each got financial backing that allowed them to scale, their founders said at Upsurge Florida, a Tampa Bay Wave program to educate investors and potential investors.
The program, held at Red Mesa Cantina in downtown St. Petersburg last week, focused on the “funding gap,” the $100,000 to $500,000 in angel, pre-seed or seeding funding that early-stage technology companies need to grow to the size where they can attract venture capital.
“Almost all founders will tell you the same thing. If they hadn’t gotten their first early-stage low six figure investment, they wouldn’t be where they are at today,” said Allen Clary, Wave co-founder and director of investor relations. “If you don’t have an ecosystem that is comfortable writing those checks and getting those companies in play … you fail because you spend all your time trying to raise that money and you’re not running a growing business.”
Tampa Bay Wave, a nonprofit that houses and services tech startups, and StarterStudio, a startup hub in Orlando, have a $300,000 grant from the U.S. Economic Development Administration to focus on addressing early-stage capital funding needs. Unlocking local capital for those companies is critical to helping the region reach its full potential, said Linda Olson, president and CEO of Wave.
Aaron White, co-founder and CEO of Script, was an IT director at schools in Pinellas and Pasco counties when he first saw the need to digitize the field trip permission slips and other paperwork that children carry home for their parents to sign.
Like many founders, after his full-time job he and his co-founder put in countless hours at coffeeshops to develop their idea. When it came time to seek funding, he initially tried to raise capital outside of the Tampa-St. Pete area before he connected with Wave.
Olson introduced White to local investors. The first check he got was for $250,000.
“We’re now at over 350 schools nationwide because we were introduced to a family office here in Tampa that believed what we were doing, wanted to seed us and wanted to seed our vision in changing education right here in Tampa Bay,” White said. “We’re creating jobs and impact and hopefully creating good returns for our investors.”
Lilypad took a different route, said Eric Rabinovitz, co- founder and CEO. The company was incubated at another firm where Rabinovitz was working, and the founder of that firm invested in what eventually was spun off as Lilypad.
Lilypad, which also was a Wave company, initially developed technology to connect a distributed sales team, but pivoted to focus solely on the beverage alcohol industry.
“I kept going with the same investor. We got really far away from his core competency, but he saw the progress and what we were doing so he continued to support us,” Rabinovitz said.
Lilypad was acquired earlier this year by Financial Information Technologies LLC, a Tampa company with a suite of products for alcohol distributors and retailers.
“The original guy who helped us start got a great exit, so that was a lot of fun,” Rabinovitz said. “Now we are continuing to scale. I’m still on board and we’re still growing. We work with over 300 breweries, distilleries — if you’re drinking it, we’re probably helping sell it to you.”
Now Rabinovitz is an early stage tech investor himself.
So is Alex Sink, chairman of the Tampa Bay Wave board, former Florida Chief Financial Officer and former Florida president for Bank of America.
Sink said she invests through funds, such as Seedfunders in St. Petersburg and Florida Funders in Tampa, as well as some direct investments in startups. She helps the companies in which she invests find customers and calls herself their “chief cheerleader.”
“I take 10 percent of my investable assets and set that aside to do investments in either funds or in direct investment. I now have 10 to 12 investments in companies spread around Tampa Bay. I can’t tell you how much fun it is to follow along,” Sink said. “There have been successes. There have been failures. You do have to be prepared because – remember, I’m a conservative banker – but I decided so what, if I lose every bit of that 10 percent I set aside. Is it really going to change my lifestyle? No. It’s my entertainment money. It’s my cheerleading money and I feel incredibly hopeful that we’re going to have some big wins.”
The growing presence of business accelerators in the Tampa-St. Pete area has reduced some of the risk for startup investing, because those accelerators provide mentors and introduce founders to potential customers and investors, Sink said.
Still, there are potential downsides. It typically takes a long time, five to eight years, to realize a return on investment in a tech startup. The investment is illiquid, with a limited market for shares, and the investment can be lost. That’s why diversification – or investing in many companies not just one or two – is key, program organizers said.
More information about Upsurge Florida is here.