Startups throughout Florida have a new ally in a frontline challenge: raising capital.
This entry, with a twist on the standard venture capital model, is Florida Funders, a Tampa-based, for-profit organization founded by area entrepreneurs David and Kathleen Chitester. The couple sold their interest in one of their more recent successful startups, online education firm Redvector.com, to a group led by Tampa-based venture capital firm Stonehenge. Now the Chitesters want to help other startups.
“I experienced firsthand how difficult it is to raise capital for a startup,” David Chitester tells Coffee Talk. “It's easy to launch a company, but it's nearly impossible to fund it past family and friends.”
Florida Funders attacks that problem through an online model. First it finds companies that seek capital. It lists the ones that pass its vetting process on its website. Accredited investors, who can put in money from $1,000 up, then register on the Florida Funders website to check out the companies. Once enough investors show interest in a specific startup, Florida Funders creates a special purpose investment fund for that business. Florida Funders makes money from a percentage of the gains in the funds it facilitates.
This funding model, approved under the Federal JOBS ACT of 2012, the same regulation that helped give birth to crowdfunding, has grown popular in California. Chitester says the model has big potential in Florida, and not only because raising capital is a challenge for startups. There are around 500,000 accredited investors in the state, he says, but only 3% invest in private companies. That large pool is another opportunity.
Florida Funders officially debuted in March and made its first investment, in St. Petersburg-based SavvyCard, in June. That fund was $80,000, a small part of a larger, $1.5 million capital raise at SavvyCard, an online business card firm. Chitester plans more capital raise announcements in the near future. He adds that in addition to helping investors and startups, there's a third winner in this model: Florida, which could get to keep more up-and-coming businesses.
Says Chitester: “I think we solve a lot of problems in the startup field.”