Startup Sector Expects to Flex More Muscle in 2017
January 6, 2017
When Matthew Kim, founder and CEO of Vigilant Biosciences in Fort Lauderdale started his company in 2011, he quickly found funding to be a serious challenge. Ultimately, he persuaded an out-of-state investor to help, but in his most recent financing round, he received support from venVelo, an early-stage angel fund in Orlando, the Florida Institute for Commercialization of Public Research, and some wealthy individuals in South Florida.
Funding a startup, he said, takes “constant networking, telling the story to anyone who will listen.” And now, his early detection product for the dental industry, which was inspired by his family’s history of oral and other cancers, is gaining traction. Vigilant Biosciences raised $5 million in 2016, pushing the total raised since the company’s founding to $12.5 million. Vigilant recently began shipping its first product, and by early 2017, will post revenues from operations.
With an encouraging year ahead of him, Kim said, “the future is bright for startups” in South Florida.
Companies such as Vigilant Biosciences are setting the tone for a startup community that is reaching new milestones. For the second year in a row, the Miami metro area ranked second among the 40 largest metropolitan regions in business creation in 2016, according to the Kaufman Index of Startup Activity. The region was second only to Austin, Texas, in startup activity.
As 2017 kicks in, entrepreneurial growth is gaining strength, say entrepreneurs, investors and mentors. More experienced business people are moving to South Florida, more investors are willing to invest in early-stage companies, and there are better networking opportunities for those in the industry to connect, launch startups and make deals.
“It’s a numbers game, a funnel. You have to have hundreds of thousands of startups to get thousands of early stage companies, in order to end up with hundreds to be venture-capital financed,” said Tim Cartwright, who started Tamiami Angel Funds, one of the largest angel groups in the state. In 2017, Cartwright will be raising money for his new Adrenaline Fund for “seed” investments, or capital used to start a business.
That’s a departure for the state, where seed capital and early stage investmenrs have been hard to find, and big venture capital dollars have proven elusive.
The big dollars have not been elusive for Magic Leap, a Dania Beach-based startup that could soon dramatically lift South Florida’s prominence on the national tech sector map.
Magic Leap has raised $1.4 billion and is hiring hundreds of people for its offices in Dania Beach and Plantation, as well as worldwide. The company is developing technology described by founder Rony Abovitz as “a new mixed reality computing platform that will enable people to interact with the world in ways never before possible.”
Magic Leap has yet to launch its first product. Could 2017 be the year? New marketing chief Brenda Freeman recently told online publication Recode that Magic Leap is “very much on time” and is “racing to launch.” She declined to detail the company’s timeline.
“Magic Leap is going to do incredible things. Just look who the investors are — those are not dumb people who are investing half a billion dollars. They must have seen something,” observed Cartwright, who is not an investor in the company.
Bob Fitts, organizer of Fort Lauderdale startup expo SUP-X , said no matter how Magic Leap fares, the company is attracting new talent to South Florida, a trend that could result in new entrepreneurs and startups in the region.
“I think Magic Leap has the potential to do to South Florida what Michael Dell did for Austin,” Fitts said.
He said the region’s “ecosystem” supporting startup activity is starting to mature, attracting more experienced business people to the region with higher quality ideas that draw more organized investing.
One local investor is Mark Volcheck, founder of Las Olas Venture Capital in Fort Lauderdale, which has invested in about 40 startups with partners. Now he’s turning his attention toward follow-on investment for startups by raising $50 million for Las Olas Venture I Fund. One target will be the health-tech sector.
“We see a lot of activity and opportunity in health-tech, particularly in Florida,” Volcheck said.
Las Olas Venture I Fund has invested $1 million in Fort Lauderdale-based CarePredict, a sensor system used to monitor the daily living activities of senior citizens in nursing homes. The fund was part of a $2.5 million round for CarePredict in 2016.
“The sector they’re in is very promising and a big problem for society — how do we improve health care and address the growing elderly population? These are important issues for us to solve,” Volcheck said.
Rob Strandberg, CEO of Enterprise Development Corp., which has startup incubators in Boca Raton and Miami, said there are plenty of good companies in South Florida that get overlooked by the big investors. “We pat ourselves on the back that we were so highly ranked with entrepreneurial activity, but we’re really not executing getting our entrepreneurs financed,” he said.
Florida pales in entrepreneurial investment when compared with other highly populated states including California, Texas and New York. Even with Magic Leap’s $793.5 million round in February 2016, Florida ranked fourth in venture dollars, quickly falling to 13th in the second and third quarters of the year.
Still, venture capital investments, which have been weak in Florida, were on track in October for the best year since 2000, raising $1 billion by the third quarter. The figure is more than double 2015’s total of $459.89 million, according to the MoneyTree Report.
Cartwright said there’s a new appetite by angels “to get in early and experience a ‘unicorn,’ ” which is a company valued over $1 billion.
His Adrenaline Fund will invest $10,000 to $25,000 in startups or even individual entrepreneurs, as their companies reach certain milestones. “This my small effort to attack that market in the state of Florida,” Cartwright said.
Some say that snagging a big investment isn’t always the answer — plenty of startups have burned through capital as fast as they’ve received it.
Strandberg of Enterprise Development said he measures success differently: whether the entrepreneurs are creating a sustainable business.
“We’re going to have dozens of companies that will do that over the next year or so,” he said.
Five Startups to Watch in 2017
According to local experts, the following companies are startups to watch in 2017:
Magic Leap: An innovative technology company that has raised $1.4 billion from big-name investors inclucing Google and Alibaba, and hired more than 450 employees in Dania Beach and Plantation, its new headquarters. The company could launch its first product in 2017.
JetSmarter: A worldwide private-jet connection service headquartered in Fort Lauderdale. In December, the company announced it had raised $105 million from investors that include rapper Jay-Z; the Royal Saudi Family; an Abu Dhabi-based growth equity fund, private jet operator JetEdge; KZ Capital, a London-based venture capital firm; and a Qatar-based private equity fund. Total financing so far is $157 million. The company is expanding it shuttle service between key cities.
Vigilant Biosciences: A Fort Lauderdale company that has developed tests that aid in the early detection of oral cancer. The company raised $5 million in 2016, and a total $12.5 million since the company was founded in 2011. Vigilant recently began shipping its first product.
CareCloud: A Miami company that provides a cloud-based platform to manage a health business. CareCloud raised $32 million in 2016 and a total of $102 million since it was founded in 2009. The company is planning to rapidly scale its clinical and financial platform in 2017.
Modernizing Medicine: An electronic medical record and data company in Boca Raton that raised $38 million a year ago, and $87 million in total. Management said it plans to continue improving efficiencies and outcomes for physicians and patients alike.
