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St. Pete 10 years after the recession: Entrepreneurial energy ignites

Margie Manning

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The Greenhouse at 440 2nd Ave. N. in St. Petersburg

In the summer of 2011, a half-dozen young tech companies embarked on an adventure that was relatively new in Tampa Bay at that time.

They were part of the first Gazelle Lab business accelerator, a St. Petersburg-based initiative to foster development of the fledgling firms by providing small cash infusions and a big dose of mentoring, with the goal of building an entrepreneurial community locally.

It was a bold experiment for an area that had been hit hard by the Great Recession, which took a big bite out of startup activity in Tampa Bay and throughout Florida.

Daniel James Scott

“During the fourth quarter of 2011, when we held our first Gazelle Lab Demo Day, startup activity in Florida was just beginning its ascent back to 2007 levels,” said Daniel James Scott, co-executive director of Tampa Bay Tech, Florida’s largest technology council, and one of the founding board members of Gazelle Lab.

“We didn’t make it all the way back until the end of 2015, and, even today, we are still nowhere near the level of startup activity we saw back in 2004 and 2005. Plus 2008 and 2009 saw the largest number of Florida companies close their doors in the state’s history,” Scott said.

The foundation for a startup community was laid earlier. The Tampa Bay Innovation Center, an incubator formed in 2003, was an early pioneer in nurturing high-tech entrepreneurial businesses, long before it was trendy, president and CEO Tonya Elmore wrote in the organization’s 2013 annual report.

University of South Florida Tampa started its graduate program in entrepreneurship in 2005, with University of Tampa establishing an entrepreneurship program four years after that. USF St. Petersburg launched the state university system’s first undergraduate program in entrepreneurship in 2010.

“They each have been honored as world-class programs and have helped create successful startup businesses,” Scott said.

Gazelle Lab ran one accelerator round but ultimately found it too difficult to raise money locally, Scott recalled in a 2016 interview. By then, other organizations with similar goals — including Tampa Bay Wave, a non-profit dedicated to accelerating growing tech companies, and Florida Funders, a hybrid venture capital and crowdfunding platform — had emerged to provide the mentoring and capital needed to build an entrepreneurial ecosystem.

There’s been an increasing number of groups and activities to support startups in recent years, some of which are highlighted on the timeline below.

Sean Kennedy

In 2013, St. Petersburg was just the 19th city in the United States to launch a 1 Million Cups program, a Kauffman Foundation initiative to connect and support entrepreneurs and the local community. The weekly Wednesday morning program, held at The Greenhouse in downtown St. Pete, has just celebrated its 5th anniversary. It featured more than 480 presentations by startups, said Sean Kennedy, community organizer at 1 Million Cups and vice president of the St. Petersburg Area Chamber of Commerce.

The Greenhouse, staffed by a team from the City of St. Petersburg and the chamber, is “where people go to start their entrepreneurial careers in St. Pete,” said Chris Steinocher, the chamber’s president and CEO.

The Innovation District — a cluster of higher education, marine science, healthcare, business incubation and media institutions in a three-square-mile area south of downtown — along with the Grow Smarter strategy, which targets five industries for growth, and the new St. Petersburg Economic Development Corp., expand the city’s appeal, Steinocher said.

Early-stage funding has been growing as well, Speros Margetis, University of Tampa professor of finance, said in late November when the university presented its “State of the Tampa Bay MSA Entrepreneurial Ecosystem,” its third report tracking entrepreneurship in the Tampa Bay area.

Between 2016 and 2018, there was more than $100 million in local seed stage investments, and more than $200 million in early-stage and later-stage venture capital funding, Margetis said. “That’s important because it’s filling the pipeline with future companies to spur M&A and IPO activity going forward.”

Last year was “stellar” as far as number of deals done and the value of the deals, he said.

“2017 will be hard to replicate. I don’t think 2018 will reach quite those numbers, but I think 2018 will be better than 2016 when all the dust settles,” Margetis said.

Private equity buyers have dropped slightly, but merger and acquisition activity remains strong, Margetis said.

“It seems like our ecosystem is maturing. It’s not fully mature yet, but the seed has been sowed.”

Tampa Bay’s startup community grew up in a recovery, and it’s unclear how it could fare in another economic downturn — something many economists project will happen in another year or two.

Chuck Papageorgiou

That worries Chuck Papageorgiou, a serial entrepreneur who is co-founder and CEO of International Screening Solutions, and a member of the board of directors of Tampa Bay Wave.

“When I got here 12 years ago, Tampa Bay Wave didn’t exist. Vinik wasn’t here. We didn’t have anything,” he said. “All these people keep saying, ‘we’re going to keep growing’ and I keep saying, ‘where’s your dry powder?’”

A diversified economic base, with a variety of industries, including tech companies, is needed,  Margetis said.

“It will be stressful and there will be winners and losers, but as long as we maintain good diversification across industries and across life cycles, we can weather the storm to some extent.”

Closer look: Technology jobs in the Tampa-St. Petersburg MSA

“One key trend is that the share of US employees working at small companies is declining, while large and medium companies are picking up that talent. Tampa Bay (the MSA) has grown its tech employees by over 50 percent since the recession. Statistically speaking, most of those jobs are going to come from larger companies. However, anecdotally, in St. Petersburg, there are just a ton of incredible startups who are growing incredibly fast, and shaping the downtown in unique and innovative ways.  And that is a distinct competitive advantage we should be developing and promoting.” – Daniel James Scott, co-executive director, Tampa Bay Tech

 

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