A group that funds Florida's brightest businesses seeks to expand its clout. Can it outdo Silicon Valley?
Company: Florida Funders Industry: Financial services Key: Organization aims to dramatically increase its investor pool.
Florida has never lacked for solid entrepreneurial ideas or business plans to drive them.
Home Shopping Network, Tech Data, Jabil Circuit, Outback Steakhouse and even Hooters all started here as small operations before becoming global behemoths.
What has often been in short supply in Florida, however, is a large and reliable source of investment capital to get innovation off the ground.
While there may be more angel investors than taco trucks on every corner in California's Silicon Valley, the Sunshine State's geniuses often go begging for modest support.
A Tampa-based investment fund called Florida Funders (FloridaFunders.com) wants to change that by creating opportunities for the state's ever-growing crop of entrepreneurs to receive funding that is only for homegrown ideas.
Recently appointed CEO Marc Blumenthal says Florida Funders blends the best of angel investing, crowdfunding and venture capital investing into a single approach “centered around a great opportunity to diversify into many smaller investments.”
He calls the for-profit company “investment with a purpose.”
“We're apolitical. We believe in founders and entrepreneurs and the early stage ecosystem,” Blumenthal says. “And we believe that you can build great companies in the state of Florida. We believe that the depth and breadth of the quality of our businesspeople and our citizens here is great, and that our population is great, and it's a wonderful place to live. And it's a great business climate.”
From a tax and regulatory perspective, Blumenthal says Florida is a great place to build a company. He sees part of his job as being an evangelist not just for the companies that Florida Funders invests in but the state itself.
A number of high-profile Tampa Bay business leaders have signed on with Florida Funders as partners, including businessman Lee Arnold and Alex Sink, a former chief financial officer for the state..
“We're investors first, because we are investing our own money, and other people are investing through our platform into companies,” says Blumenthal. “We fully expect to give them a good return, or to provide an opportunity for a good return. But we're mission-based. We invest in companies that are in Florida. We do not invest in companies that are headquartered somewhere else. Florida Funders is all about Florida.”
Collaborate and connect
When Blumenthal refers to the investment company's “platform,” he's talking about a web-based investment portal that makes it possible for individual investors to participate with Florida Funders by putting up as little as $3,000.
“My experience is that there's a whole continuum of venture capital and private equity out there,” he says. “But where Florida has a real deficiency, and has had for quite some time, is in the early-stage venture capital, what some might refer to as start-up or seed capital. Sometimes they might refer to it as 'A' rounds or small 'A' rounds. It's not a very robust place for institutional venture capital.”
In California, Sequoia Capital is virtually a household name for its early bets on Cisco, Google, LinkedIn, Airbnb, Instacart, YouTube, Square, WhatsApp and many, many more. Florida has investors but none with that kind of carriage and reputation.
“We have some great organizations in the state of Florida and some committed people running venture funds or angel groups that do really good work,” Blumenthal says. “They're doing their part, and they're making good investments for their investors. They're working hard to help the founders build their companies. It's just that, for the third-largest state in the country, for almost 21 million people, it's not enough to ensure that every great founder — and every great entrepreneur who's smart and committed — can build a company here.”
As a result, many quality people either never come to Florida or they leave in search of money or help — never to return.
“We'd like to change that — not just because we think it's good for Florida, but we think it's good as an investment thesis,” he says.
Blumenthal says the idea behind Florida Funders is a “pretty simplistic” economic development model: Smart, hard-working people that build great companies create jobs and higher paying jobs.
“Because we're so big as a state, geographically, it's hard for people to know exactly what's going on city to city,” he says. “It's hard for people to collaborate and connect. It's hard for people to see a company in South Florida or a company in Gainesville and recognize that there are investors and people who can assist them in Tampa or Orlando. That's part of what we believe we can solve.
“We can bring the state a little closer together, make it a little tighter, a little more intimate by allowing larger numbers of people to make smaller investments or contribute in whatever meaningful way they can,” he says. “It doesn't have to be an investment. It can be a connection. It can be as a customer. It can be as a test site or as a partner. It can just be a goodwill ambassador. If you look at a lot of other places that have had — and continue to have—a tremendous amount of success in valuable companies being created, they have all those things, whether by design or accident.”
Florida Funders was founded in 2012. Blumenthal and Tom Wallace, an active, Tampa Bay-based angel investor, became interested in the company in 2014. The following year, they took a more active role as partners.
“We began to see the big picture, the vision of things that we had been thinking about and dreaming about for a long time in the technology community in and around Tampa,” Blumenthal says. “As a result, we decided that we were going to go big. And we invited a lot of our friends to participate. The people who are involved in this company today, our partners, see this as a great investment thesis, but also a legacy. There are some of us who would like to see our children, our grandchildren come back here one day after they go to college and have amazing jobs in Florida like they do in other cities in the country. We want to be in an environment and a community where there is a thriving younger population in work/live space.”
The paid staff of Florida Funders is pretty small — no more than eight people, including Blumenthal, who became CEO on June 1. They support 30 major partners and a legion of smaller, individual investors.
“We're able to democratize the investment process so that people who are accredited investors in the state of Florida — and we think that the number is somewhere near three-quarters of a million — can make a small investment, as little as $3,000, but as much as they'd like, into many companies on the platform, so that they can diversify, which is the only way to make an investment in this asset class. You have to diversify.”
Florida Funders has 430 accredited member-investors who are registered on its site. Blumenthal says the company's target is to more than double that to 1,000 by year's end.
Among the dozen or so companies that Florida Funders has invested in are Check I'm Here, Health Hero, Priatek, Savvy Card, LumaStream, Raw Shorts and PNMedical.
“Priatek is a fascinating story,” according to Blumenthal. The company is perhaps best known locally for putting its name in pulsating colors atop the former Bank of America office tower in St. Petersburg. “They're disrupting the digital advertising space. You're going to start to see a lot of their kiosks and mobile apps all over the country. Milind Bharvirkar, the founder of Priatek, had a vision and a tremendous amount of subject matter expertise in the space. He assembled a tremendous team of people and advisers. You just knew that Milind was going to be successful.”
Florida Funders also invested in PikMyKid.com, a mobile- and web-based platform that helps parents deal with their children's after-school dismissal and pick-up. The company also attracted investment from Orlando-based The FAN Fund.
“They seem to be good people, experienced, and we found a situation — PikMyKid — where I think we both bring value and we both invested,” says Mitchel Laskey, founder and managing director of The FAN Fund. “We like to syndicate a lot of our deals. And Florida Funders is certainly a group that we've enjoyed working with.”
Blumenthal says that at least four companies in which Florida Funders made early investments went on to “later stage financing at high valuations, which is an indicator of success, not a guarantee of it. ... They're all making progress. They're all headed in the right direction, adding staff, customers and revenue.”
“I don't want people to be enticed to get involved with this based on any one thing that happened or (an) anecdote,” he says. “Ultimately, we will be measured on exits, on liquidity events, and we will deserve to be judged by that.”