A leading early stage investor in the Tampa-St. Petersburg area is unveiling a new funding organization to back young companies in Orlando.
David Chitester, co-founder and CEO of St. Petersburg-based SeedFunders, will be chairman of SeedFundersOrlando, focused on investing in pre-revenue technology companies in the Orlando area.
Serial entrepreneur Dennis Pape will be CEO of SeedFundersOrlando. Irv Cohen, a former Wall Street banker who is co-founder and a partner in the original SeedFunders, also will be a manager at SeedFundersOrlando.
SeedFundersOrlando will be a separate company, but with the same business model as the original SeedFunders, Chitester said. The company has partners who provide funding and mentoring to tech startups, primarily those that have yet to bring in any revenue.
The original SeedFunders was founded a year and a half ago, and now has 28 partners, 10 completed deals and two term sheets on the table.
Other investment groups, such as Tampa-based Florida Funders and Orlando-based venVelo and DeepWork Capital, all target revenue-producing companies, Pape said.
“There’s a capital gap in Florida and Orlando for companies that have not gotten to revenue but they are showing promise, showing signs of traction. Primarily these companies are getting funded from the founders, or friends and family, but typically they need a few hundred or more thousand dollars which may be difficult to get from individual investors, so the SeedFunders concept of aggregating a number of accredited investors to be able to put in a larger amount of money is what these companies need,” Pape said.
Those relatively small investments make a big difference, Chitester said.
“These companies would go out of business if they didn’t get that initial funding. We’re talking $150,000 on some of them. Relatively speaking, that’s not a lot of money. It’s a huge amount of money for a startup but nobody is willing to risk that $150,000 to get somebody to come out of the gate to be successful,” he said.
A year ago, SeedFunders invested $150,000 in TSOLife, a tech company with a platform that allows seniors to create personal legacies.
“Now Florida Funders is investing $1 million a year later,” Chitester said. “The founders told me they could not have survived for that year if it had not been for our investment.”
TSOLife has grown to nine employees since the SeedFunders investment. Not only are there new jobs, but “the whole ecosystem benefits,” Chitester said.
Pape and Chitester have known each other since 2013, when Chitester launched Florida Funders, a hybrid venture capital fund and crowdfunding platform. “Everyone said, ‘you’re crazy,’” Chitester recalled. “Dennis said, ‘How can I help?’”
The idea for SeedFundersOrlando came together a few months ago, after Chitester repeatedly heard about demand for an investment vehicle for pre-revenue firms. Some of that demand was coming from DeepWork Capital investors. That organization’s managing partner, Benjamin Patz, agreed that there’s a need for this kind of funding.
“Seed stage investing is critical to creating a vibrant innovation economy by providing the very earliest capital for disruptive ideas to germinate,” Patz said. “SeedFunders is one of the few organizations in Florida focused exclusively on this stage, and we look forward to the group bringing their successful practices from the Tampa area into Orlando to help advance companies for follow-on support.”
Just expanding the original SeedFunders to Orlando would not have worked, Chitester said.
“Investing is hyper-local,” Chitester said. “It has to be SeedFundersOrlando with its own investors, its own bank, its own attorney, its own board of directors. It has to be run by their own members.”
The Catalyst Fund, a $5 million fund that will co-invest in deals with SeedFunders, also will be able to invest in SeedFundersOrlando deals, Chitester said.
He’ll officially announce SeedFundersOrlando and start recruiting investors Tuesday night at the demo day for VentureScaleUp Accelerator, one of Pape’s several startups. He also is founder of Florida Venture Sourcing and Catalyst, a coworking space in Orlando. There’s no connection between Pape’s Catalyst and the St. Pete Catalyst.
The official launch date for SeedFundersOrlando is Sept. 3, but Chitester said he’s running a month ahead of schedule and could fund the first deal even sooner.