CoLabs, a Tampa software company, tapped new federal rules on opportunity zones to attract investors to a $6.2 million capital raise.
Investors in the just-completed round were eligible for tax advantages, said David Hull, CoLabs founder and CEO.
The funding will help CoLabs accelerate its sales, marketing and development, Hull said. The company’s first product, contract management software called IntelAgree, already is in use by the three local professional sports teams — the Tampa Bay Buccaneers, Tampa Bay Lightning and Tampa Bay Rays.
CoLabs is among the growing number of technology companies that are upending historic notions about business in Tampa-St. Pete.
“Tampa gets this reputation for being a small sleepy community with call centers, distribution and a lot of restaurants that started here,” said Hull. “We want to do something substantial as a Software-as-a-Service technology company here in the bay area … We want to show the world that this type of company can be built in Tampa Bay.”
Opportunity zones, created by the Tax Cuts and Jobs Act of 2017, were created to lift up economically distressed communities and initially designed to spur real estate investment. CoLabs’ office, at 100 E. Madison St., is located in an opportunity zone in downtown Tampa.
CoLabs created its qualified opportunity fund after the U.S. Department of Treasury released new regulations in April 2019.
“The beauty for our investors that invested in this round is they were able to leverage either short or long-term capital gains for as long as they had them within 180 days and they were able to defer the tax on those gains since they invested in our business,” Hull said. “A lot of our investors took advantage of that. No one wants to pay taxes or would like to defer them. By investing in CoLabs in this capital raise, they were able to defer and potentially reduce their tax liability.”
A Washington, D.C.-based partner at the Foley & Lardner law firm was instrumental in working with the Treasury department in developing the regulations, and CoLabs was able to tap that expertise working with the law firm’s Tampa office. Accounting firm Grant Thornton worked with CoLabs on the tax implications.
The opportunity zone rules could help other local companies that are raising money, Hull said.
“If you are a company located in an opportunity zone you should absolutely research this and see if there’s an opportunity for you. It was very helpful for us,” Hull said.
Hull and two co-founders, John Wagner and Marc Miller, are tech entrepreneurs with proven track records of business growth.
Hull was previously a founder of technology staffing leader Veredus, which grew to $100 million in annual revenue by the time the company was acquired by Hays in 2014. Wagner is a founder of custom software development leader AgileThought, a fast-growing Tampa company that recently sold to AN Global, a leader in next-generation digital services. Wagner and Miller were the co-founders of eStaff365, the first cloud-based employee onboarding platform that launched in 2013 and was acquired by Boston-based Erecruit 20 months later.
Two well-known Software-as-a-Service executives recently joined the board of advisors at CoLabs: Otto Berkes and Justin Teague.
“One of the things we wanted to do was have a world-class board advising us as we grew this company,” Hull said.
Berkes, based in New York City, spent 18 years at Microsoft and co-founded Xbox, before joining HBO to lead the development of the HBO GO video streaming platform. Berkes subsequently served as chief technology officer for CA Technologies.
Teague, based in Boston, is the CEO of SmartBear Software, which empowers developers, testers, and operations engineers at companies such as Adobe, JetBlue, MasterCard and Microsoft.
CoLabs currently has 22 employees and plans to boost its headcount by 50 percent.
“As a result of the capital raise, we have 10 open positions to fill,” Hull said. The company is focused on sales, marketing and development. “By raising this money we can make those investments and also grow a little faster than we have in the past.”
IntelAgree, the company’s first product, is a contract life-cycle management software tool. It manages the contracting process between two entities, leveraging artificial intelligence and machine learning to make them more efficient. It helps create, negotiate and execute agreements, as well as understand what’s in their repository of agreements.
“We accelerate contract management so legal teams can do impactful work, not busy work,” Hull said. “Our customers are looking to reduce their risk. Sixty percent of corporate litigation revolves around contracts. If people can thoughtfully create contracts, understand what’s in the contracts they are signing and then be able to manage those contracts, it reduces their risk.”
The company describes itself as a software incubator, and Hull expects to bring other products to market.
In addition to the three Tampa Bay pro sports teams, CoLabs has other professional sports organizations in its pipeline. The company is doing a lot of work in the staffing industry and with accounting firms, and eventually expects to expand into other verticals.
“We have a bias for companies in Tampa Bay. We work nationally but we have a number of customers and prospects in Tampa Bay,” Hull said.