Miami targets venture capital magnet
Written by Scott Blake on September 4, 2013
Miami hasn’t been known as a hot spot for venture capital, but that could be changing.
Local venture capital firms, angel investors and academics are building a system – both independently and sometimes working together – where promising and established entrepreneurs have ways to find the cash they need to make their business plans become a reality.
Part of making Miami more of a venture capital center will be creating momentum, said William Silverman, director of The Launch Pad at the University of Miami, a service that opened five years ago to help students and alumni start new business ventures.
Mr. Silverman, who described Miami’s historical venture capital environment as “sparse,” said local entrepreneurs often have to look outside the area to seek investment opportunities, but that’s starting to change.
“There is a venture capital community in Florida and, from what I’ve heard, it’s centered around Tampa,” he said.
However, more venture capital firms “will locate to South Florida as there are more success stories,” he added. Investors “do like to be close” to the businesses that they fund.
Through consultation sessions, workshops and networking events, The Launch Pad helps entrepreneurs and inventors connect with appropriate investors – be they venture capital firms or smaller angel investors – and guides them in presenting their plans.
The Eugenio Pino and Family Global Entrepreneurship Center at Florida International University, founded in 2003, has a similar mission.
One of the Pino Center’s staples has become the annual Americas Venture Capital Conference in Miami, which has brought together hundreds in the venture capital community – entrepreneurs and investors included – in each of the past three years.
The Pino Center also has “coffee break” sessions where entrepreneurs can seek advice from professionals in various industries, said Pino Center Chairman Mike Tomas.
“Ten or 15 years ago, Miami was kind of a desert of [venture capital] opportunities,” Mr. Tomas said. “There’s been a real sea change. There’s a lot of efforts by different groups… and the universities are definitely part of that.”
He said Miami has seen an increase in venture capital activity in the past two to three years, including a “next generation” of venture capitalists who not only bring money to the table but also their expertise or “strategic value” after successful exits from industries.
Some promising venture capital opportunities in Miami are the life sciences, medical devices and information technology industries, according to Mr. Tomas.
“Miami and South Florida has become a base for the IT [information technology] community and for life sciences companies,” he said.
A prime example of the recent trend, he added, is Medina Capital. Located on Brickell Key in downtown Miami, Medina Capital is a locally-based venture capital firm led by Manny Medina.
Mr. Medina started the firm after selling his information technology company, Terremark Worldwide Inc., to Verizon in 2011 for $2 billion. He and his team have since focused on investing in promising companies in information technology and related fields.
Of course, like other venture firms, Medina Capital’s investments don’t come without caveats, such as having appointment rights on a company’s board of directors.
Mr. Medina founded Terremark in 1980 and later transformed it from real estate to global information technology. Over an 11-year period, he and his team at Terremark raised and invested more than $275 million of equity capital in the business.
Given that success in the information technology sector, Medina Capital regularly receives offers to evaluate investment opportunities in that and related fields, according to the firm’s website.
The firm’s list of investments includes Catbird, a software-defined security company; Easy Solutions, an electronic fraud detection and prevention firm; and Prolexic, a Hollywood, FL-based software/Internet security company founded 10 years ago.
“Six of the world’s 10 largest banks and the leading companies in e-commerce, payment processing, travel/hospitality, gaming and other at-risk industries rely on Prolexic to protect their businesses,” Medina Capital’s website states.
In addition to some homegrown venture capital firms, Miami also is home to some national and international venture capital firms and investment banks with local offices. That includes H.I.G. Capital, which has an office on Brickell Avenue as part of a network of locations that stretches from San Francisco and New York to Brazil and Europe.
Venture capital firms are generally defined as those that invest $500,000 and up in start-up companies that have used smaller funding from angel investors to already reach some level of success.
Angel investors include private investors who typically invest $25,000 to $250,000 in very early-stage companies. Angels often cooperate in groups of like-minded investors who hold regular meetings.
In South Florida, those groups have included the Gold Coast Venture Association in Boca Raton, New World Angels in Palm Beach County, the Angel Forum of Florida in Jupiter and the Tamiami Angel Fund in Naples.
According to Mr. Tomas, a current investment niche in Southeast Florida is stem cell research, part of the life sciences field.
In addition to his post at the Pino Center, Mr. Tomas is CEO at Bioheart, a company involved in stem cell development for heart muscle tissue repair. He said Bioheart is just one of about eight stem cell development firms in the region.
Part of the answer for entrepreneurs is knowing who to approach for investment opportunities, said Mr. Silverman, and that’s where his organization, The Launch Pad, comes in.
“We want to make sure they’re looking for the right type of investors,” he said. “We don’t want them to be approaching venture capitalists if they’re looking for $100,000.”
If that’s the case, they should be looking for angel investors, he added, “and getting angel investors is effective in eventually getting the attention of venture capital.”