As I speak to more people and attend more events, I am coming to the belief that the most critical issue challenging the growth of the tech and entrepreneur community in South Florida is the access to investment capital, especially early stage angel capital.
It should be clear by now that “something is happening” with tech startups, bubbling up from Miami and extending at least through Palm Beach County, involving IT and life sciences, and some niches where the two overlap. But what is that “something” that is happening? That question can be answered in a number of ways, including trying to explain it as a cultural event, as a consequence of the region’s economy and job opportunities, as a result of programs to encourage entrepreneurialism, etc. All are legitimate. But add to the mix this harsh explanation of what is happening here: There is a burst of energy for new business ideas, including many promising ideas, and most of them will not get funded because the entrepreneurs do not have – or understand how to get – access to investment capital. Ain’t that a shame?
The issue is critical enough that it shouldn’t be considered collateral to the effort to build a tech community, but integral to that effort. Plain and simple: the promise of the region’s tech community will not fully blossom unless there is capital to fuel it. As I understand it, this has been a consistent complaint here for decades. It’s time to look not only at the demand side for investment capital, but the supply side. The region must make meeting that need a top priority. If it can succeed at that effort, two birds can be killed by one stone.
One of those “birds” is the need for investment capital for the region’s nascent tech community, as discussed above. The other of those “birds” is the region’s need for more Knowledge Economy jobs being created here. If successful, the emergence of the tech industry in South Florida would add a fourth pillar to what is currently a three-pillar economy that doesn’t include Knowledge Economy businesses: agriculture, real estate, and hospitality. Why not add a fifth pillar – another segment of the Knowledge Economy: the investment industry?
Charlotte is second only to New York as a banking center. That happened seemingly out of nowhere beginning in the 1970s. How? What can this region learn from the Charlotte experience?
As the Charlotte Business Journal’s finance editor Adam O’Daniel explained in a September 4, 2012 article, that region’s success came as the result of a small group of hard-charging CEOs who took advantage of an unique situation that existed but was ignored: North Carolina had one of the nation’s best laws to facilitate branching and to expand into other states (interestingly, the first state to which a Charlotte bank expanded was Florida).
So: Does Florida have any existing assets that haven’t fully been exploited that could be leveraged to allow this region to become a national (probably international) investment center? You bet!
As the Business Development Board (BDB) of Palm Beach County recently proved, and was reported on by The New York Post, the state’s tax structure is not only attractive to investment firms, but it is similarly attractive to the executives who work for those firms. In response, BDB President & CEO Kelly Smallridge created a special unit – bravo! Can the tax situation be used aggressively to recruit investment firms from elsewhere?
Consider another asset: the region’s weather and lifestyle. Can’t that be used to attract the execs from investment firms and interest them in the region? In fact, that has been happening for years, as those execs have made solo decisions to establish a residence in South Florida, whether in a multi-million dollar condo in Miami or a multi-million dollar mansion on Palm Beach island.
What if, instead of allowing these to be assets for the region on an ad hoc basis, the tax situation and the quality of life were integrated into an aggressive focused campaign aimed at the investment industry? Consider the money local jurisdictions have already pumped into building the tech sector and how long it will take to get a return on that investment. When it comes to building the region into an investment center, the targets can be identified with precision, the messages can be taken to them efficiently and effectively, and the decision to make a move and start building jobs in South Florida can take months instead of years. Plus, related issues confronted when attracting tech businesses, such as building a growing pool of young tech workers, do not need to be addressed.
So: You know all that enthusiasm, effort and money being devoted to encouraging the growth of the tech community in South Florida? Can similar enthusiasm and effort but less money be put into building an investment community here?