By Rob Wile
The Miami Herald
WWR Article Summary (tl;dr) Supporters of the startup scene in Miami say the region’s diversity is a plus. While Silicon Valley remains dominated by white males, South Florida is home to numerous startups founded by women and people of varying ethnic backgrounds.
The Miami Herald
Miami has always been known for its by-your-bootstraps mentality. But in the wake of the Great Recession, opportunities came slowly.
It’s one of the reasons why the Knight Foundation decided in 2012 to make entrepreneurship the centerpiece of its Miami program.
Since then, Knight has invested more than $25 million in co-working spaces, accelerators, and events as big as eMerge Americas and as small as community meet-ups to spark sustainable job creation.
Other organizations soon followed: Goldman Sachs brought its 10,000 Small Businesses program.
Endeavor, an international mentorship program, set up its first U.S. outpost in Miami. Cambridge Innovation Center, another startup convener, came from Boston. Silicon Valley’s 500 Startups, a venture capital fund, opened in downtown last spring after previously investing in local startups including facial recognition experts Kairos and Clutch Prep, a textbook app. The University of Miami, Florida International University and Miami Dade College added entrepreneurship programs. So many co-working spaces opened that Miami soon had more per-capita than any other city in the country.
As the economy again slows, the question arises: Has this flurry of activity paid off with companies that have scaled up to survive the next downturn?
The answer, according to local entrepreneurship leaders: Yes — and not yet.
“We’ve been seeing companies go through the growth process,” said Raul Moas, Miami program director for the Knight Foundation, pointing to classroom tech company Nearpod, Apple IT experts Addigy, and CareCloud, the stalwart electronic health records software company.
“I think we have a healthy number of companies now. There’s a sense of momentum building.”
Some of the region’s best-known successes lean on lifestyle, such as fitness companies Zumba and Orange Theory, or the Endeavor-backed restaurant group Pincho Factory. But the focus of the movement remains technology, whether as a standalone or in legacy industries like tourism, real estate and financial services that seek to modernize.
And according to Bureau of Labor Statistics data, as a share of jobs, Miami’s tech industry is still closer to an average Midwest city like Wichita, Kansas, than that of a gleaming tech mecca like Seattle.
When it comes to essential ingredients such as talent, venture capital and unified community effort, local leaders say, there’s still work to do.
But for Steve Case, the former AOL CEO whose Revolution investment fund and “Rise of the Rest” tour is exploring startup opportunities outside Silicon Valley, Miami’s reputation as an innovation hub has soared.
Rise of the Rest will host a pitch competition in Miami May 2, and Revolutions has invested in two Miami companies, education technology company Caribu and sales development platform Blanket.ai.
“There’s a recognition that it has risen quite a bit as a startup city,” he said in a phone interview from his Washington, D.C., headquarters. “Sometimes it’s just a matter of time.”
JJ Desai, a former Johnson and Johnson Labs executive and now chief strategic innovation officer at Miami medical device company INSIGHTEC, agreed.
“I think you’re just starting to see the nascent bubbling of Miami’s potential,” he said. Last year, Desai moved his work to Miami after shuttling between the Magic City and Silicon Valley for four years. “If you get in now, you’re an early-stage early adopter.”
In Desai’s view, Miami’s ecosystem trajectory is right on track — and he would know, having scored various metro hubs while at JLabs, Johnson and Johnson’s innovation center. L.A., he says, has already peaked.
Austin has plateaued. Instead, he likens Miami’s current status to places like Minneapolis, Houston, and even Madison, Wisc., which are all looking to transform their economies away from traditional industries.
But Miami is an international hub, and will soon likely leapfrog those other places, he believes. And it can happen overnight.
“It takes a few key people,” he said. “L.A. happened because three or four PayPal people moved down there, then other names declared they’d be coming. That’s what it takes, and we’re now starting to see that with influential people coming to Miami that have cash.”
MIAMI SCORECARD
Miami’s standing as a launchpad for successful startups varies by the way it’s measured. For the past two years, the Kauffman Foundation, a nonprofit focused on entrepreneurship, has ranked Miami No. 1 in the U.S. for startups — but 36th out of 40 in scale-ups, or business expansions.
The Miami-Dade Beacon Council says that between 2012 and 2017, technology jobs in Miami-Dade increased by 40% to more than 11,000.
Based on historical data, the agency said, tech jobs are projected to grow an additional 11 percent by 2023 — the fastest rate among the agency’s seven targeted industries, which also include finance, aviation, and trade and logistics. According to the federal Bureau of Labor Statistics, the average wage of a Miami-Dade software developer is more than $87,000.
But the BLS suggests Miami has room for job growth in the tech sector. Its data put Miami-Dade’s relative share of computer and mathematical occupations at 0.61 — on par with Wichita, Kansas and just one point above Flint, Michigan. A score of 1.0 means the share is at the national average. In fact, tech accounts for less than 1 percent of the jobs in Miami-Dade.
By comparison, Orlando gets a score of 0.92. Tampa-St. Petersburg gets a score of 1.07. Even Tallahassee gets a score of 1.14. Those cities are boosted by large research universities or, in Tampa, MacDill Air Force Base.
Still, for Jim McKelvey, co-founder and director of point-of-sale app Square, Miami has come a long way. With an eye on the region’s potential, he founded LaunchCode, a nonprofit training and job-placement program in 2017. He now splits his time between Miami, St. Louis and New York.
“We surveyed the nation [six years ago] and Miami, the South Florida region, was dead last as far as IT talent,” he said.
Since opening, LaunchCode has placed about 150 trainees in jobs.
“I think Miami has awakened to the fact that it’s not just ‘party central USA,’ full stop,” McKelvey said. “It is a place where you can come and build a tech company — or, you know, a bank needs programmers. And Florida has a friendly business climate. We’re seeing demand for talent spike — and if you have that demand call us.”
HOME-GROWN SUCCESS
Even in the lightning-paced 21st century, transformation takes time. It’s true of communities, and true of companies, say experts.
Take the case of BrightGauge Software. The company was founded in 2010 by Brian Dosal, a Gulliver Prep grad who started his career at IBM before taking up a position at his family’s cybersecurity company, Compuquip.
Dosal said BrightGauge, which specializes in client management software, prioritized sustainability over growth early on. In its first years, the company only hired a few employees annually, and later, never more than nine. By 2018, its team had grown to 33. And the company deliberately hired all of its talent from Miami, Dosal said.
In January, BrightGauge was acquired by Continuum, a Boston-based information technology company with more than 1,000 employees, for an undisclosed sum. At the time of its purchase, BrightGauge had annual revenues of $9 million and was growing 60 percent year over year, according to a source familiar with the company.
Dosal credits the acquisition in part to patience, and a “nose to the grindstone” focus on building a viable product. At no point did the company seek outside funding.
Dosal is now already on to his next startup, Strety, a human resources software company.
The BrightGauge sale is just one in a recent string of successful “exits” South Florida can put on its scoreboard. Brian Breslin, founder and chairman of Refresh Miami, a South Florida tech networking and community nonprofit and the current director of The Launch Pad, an entrepreneurship program for University of Miami students.
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said acquisitions like BrightGague’s show the region is moving in the right direction.
“Anecdotally, we seem to be advancing as we see more and more companies growing organically, and via [venture capital] funding, here in Miami compared to two years ago,” Breslin said in an email. “We’re also seeing more companies mature and prove viable on a national level.”
Other recent successful scale-up “exits” or major investments in the past 12 months show the time it can take for a company to peak:
— Weston-based Ultimate Software, a human resources software company founded in 1990, was acquired for $11 billion earlier this month.
— Plantation-based e-Builder, a construction software company founded in 1995, was acquired in February 2018 for $500 million.
— Miami-based Farelogix, a travel industry fare management platform founded in 1998, was acquired in November for $360 million.
REGIONALIZATION
Another factor working in Miami’s favor: regionalization.
The intercounty competition that has long plagued South Florida is diminishing. Virgin Trains — formerly Brightline — now links Miami-Dade, Broward and Palm Beach counties in about an hour.
The three collaborated on a single bid for Amazon’s HQ2 that was strong enough to land South Florida on the short-list of 20 finalist cities. And earlier this month, the three county chambers of commerce created the South Florida Business Council to address regional issues and formulate solutions.
If Miami-Dade is where tech companies are starting, Broward is where many have gone to scale. The latter county has history on its side: As Broward leaders like to point out, the first cellphone was developed by Motorola there. Fittingly, Magic Leap, among the buzziest tech companies currently operating in South Florida, took over Motorola’s former Plantation space.
Broward also benefits from having more space at a cheaper price, according to Tim Hasse, CEO of General Provision, Fort Lauderdale’s most prominent independent co-working space. Cost is a key consideration for a company looking to scale up.
One of those is Boatsetter, which moved from Aventura to Fort Lauderdale in 2017.
Today, Boatsetter, founded in 2014, is the leading online boat-rental and experience platform in the world, with more than 600 locations.
Last summer, The Economist named Fort Lauderdale-based Boatsetter as one of two firms “vying to rule the waves” among boat-sharing companies. That’s around the world: The magazine called Boatsetter “America’s leader.”
It already outgrew its first Fort Lauderdale office, and is now on to a second, larger one up the street.
Jaclyn Baumgarten, Boatsetter’s CEO and a Silicon Valley transplant herself, said that despite outgrowing Miami-Dade, the company’s DNA represents all of South Florida. Besides space, Fort Lauderdale was simply a midpoint between employees who lived in Miami and Delray Beach.
“I see the ecosystem as all one region,” she said.
For Baumgarten, the local ecosystem has paid off. To date, the company has raised $17 million in Series A financing, including $4.75 million from TheVentureCity, based in Little Havana. She has also served as a mentor for 500 Startups Growth Program.
The region’s diversity is also a plus, Baumgarten says. While Silicon Valley remains dominated by white males, South Florida is home to numerous startups founded by women and people of varying ethnic backgrounds.
Felecia Hatcher, co-founder of Code Fever and Blacktech Week, agrees. She says many black entrepreneurs have moved to Broward, and now refer to it as “Miami’s black suburb.”
For businesses and individuals alike, there’s more space for less cash there, she said. “The cost of living — you can get a lot more for your money, and you just make the commute,” Hatcher said.
THE MIAMI ADVANTAGE
But Miami has the brand recognition — a reality recognized in the Amazon HQ2 bid, which leveraged the Miami name for all three counties. And the brand is even more potent when it comes to Latin America.
“What we see in Miami, given that it’s the gateway to Latin America, is a lot of companies with a large multinational presence doing a tremendous amount of global business want to be here,” said Bobby Condon, southeast regional director for WeWork, the co-working space giant. “That goes anywhere from international players investing in these [real estate] developments, to local businesses that are growing.”
WeWork will open its sixth Miami location in August in Wynwood — despite proximity to existing co-working spaces at The LAB Miami, the city’s first independent co-working center, and CIC, one of its biggest. Both The LAB and CIC have said their client base remains stable.
Condon says the numerous locations reflect WeWork’s belief that there continue to be enough entrepreneurs, and enough different neighborhoods, in Miami to support so many locations. It has no offices in Broward.
One might think of a stereotypical WeWork denizen as a young professional hunched over a laptop. In fact, Condon says, multi-team enterprises now represent the fastest-growing segment of WeWork users.
One user is Albert Santalo. If it seems strange that the man who founded CareCloud, an electronic health records company, is now working out of the WeWork in Coral Gables, well, that’s just how serial entrepreneurs now think about business.
Santalo’s latest company, 8base, is a platform that allows developers to build basic back-office software like accounting or payroll programs, and let non-techies like creative professionals access them for a fee.
Like many other Miami startups, 8base has a team in Miami — seven full-time employees in the Gables — and a team out of town, in this case in Russia. A combination of cost and personal connections made the decision to hire a development team outside Miami an easy one, said Santalo.
The arrangement is more than a matter of cost: it’s a way to fill the talent gap that continues to bedevil Miami.
“We don’t always have people with experience here,” he said. “What’s hard to hire is not even developers — that’s hard to hire anywhere. But product marketing, product management, tech-specific roles — you can’t hire someone in a tech company marketing who has worked in brick and mortar marketing.
“The good news, is people are leaving Silicon Valley.”
Another nagging issue, say many Miami ecosystem participants, is a shortage of funding.
“There’s no one willing to do risk capital” in Miami, said Emily Gresham, co-founder of StartUP FIU, an entrepreneurship coaching program for students.
Steve Case agreed.
“Florida is the third largest state, but is only getting about 2 percent of venture capital–it should be attracting a lot more venture capital,” he said. “More capital needs to come off the sidelines.”
THREE MAGIC WORDS
Given South Florida’s vast wealth — at least 20 of the wealthiest Americans ranked by Forbes are said to live between Key West and North Palm Beach — the region’s ongoing shortage of venture capital may seem absurd.
One possible cause: The businesses with the most money — publicly traded companies — are investing in in-house teams to develop cutting edge technology.
One of those is Watsco Ventures, the innovation arm of Watsco, Inc., a Coconut Grove-based, publicly traded heating and air conditioning equipment seller.
Managing director Ivan Rapin-Smith observes that every company, even an HVAC company, is a tech company these days, meaning it is always on the look-out for high-skilled talent.
“We have some interesting assets that are hard to replicate by startups,” he said. “We now have these programs in house and [are] growing them.”
Visa, whose Latin America headquarters is located just off Blue Lagoon Drive, also has an innovation center here, where it is building new software to digitize payments. It has also invested in at least one local startup, YellowPepper, a payments processor.
Last year JetBlue opened a product research division in Broward, and Ryder recently announced the launch of COOP, a next-generation service that serves as a vehicle-sharing platform through which otherwise idle trucks can generate additional revenues.
In addition to assembling business/IT teams to develop its own technology, the company partners with a Silicon Valley-based VC fund and local venture-builders like LAB Miami Ventures.
But some in the community say that corporations could, and should, be doing even more to connect with local startups.
“From the corporate side, it seems like there’s a sense that just sponsoring an event or throwing your logo on something is enough,” said Natalia Martinez Kalinina, general manager of the Cambridge Innovation Center-Miami. “Or even their in-house innovation, if it’s an ‘intra-preneurship’ group that feels closed to the public, that to me is problematic.”
DISCONNECTS
For Martinez-Kalinina, Miami’s most recent startup success story, ParkJockey, is emblematic of an ongoing challenge: silos.
ParkJockey made headlines earlier this year when it raised hundreds of millions in investment (the companies declined to state the precise figure) at a valuation above $1 billion, making it a “unicorn” in tech parlance. The company developed on its own, outside the region’s entrepreneurship ecosystem.
Said Martinez-Kalinina, “Some of our most important companies are not active participants in our ecosystem — they’re busy building their companies. “It’s not a bad thing — they’re just kind of outside our daily cycle.”
In fact, ParkJockey was on the radar early for Kevin Burgoyne, the Miami-based President and CEO of the Florida Venture Forum, a private equity, venture capital and angel capital organization. The company presented at its 2015 early-stage capital conference in Hollywood.
But as a members-only organization, word didn’t get out about its progress.
Burgoyne sees clear progress in South Florida, noting there were at most three early-stage funds in the entire state just six years ago.
All of the metrics his organization tracks for the region, and the state, are pointing in the right direction, he said, noting he expects to exceed the 120 applications received last year for its early-stage conference. This year, the event is slated for May 9 in Orlando.
Still, patience is needed, he said.
“The companies born four or five years ago are just now getting ready to scale,” he said.
Code Fever’s Hatcher sees the ecosystem at a turning point.
“Miami is at this critical mass of cutting off the fat,” she said. “You can do a bunch of really noisy stuff in this space, but what is getting people results?”
For BrightGauge co-founder Dosal, many of the most promising South Florida startups he sees often operate outside or independent of the resources that have gone into cultivating the local startup community.
It shows the business talent is here, he said–they just may not be making much noise yet.
“We do a lot of celebrating startups and tech–but in many cases, it’ll be huge tech operation with just a branch office here that’s not focused on tech,” he said. “We need to focus on the meat-and-potatoes of churning out new products and ideas.”
Ana Paula Gonzalez, Miami director of 500 Startups, said she sees a promising pipeline of startups coming up in South Florida. But too often, she said, there is more heat than substance in the ecosystem.
“There’s sometimes a lot of noise, and not enough action,” she said. “We want to help interconnect it all.”
Unifying the startup ecosystem is now a core mission of the Knight Foundation’s Miami efforts, Raul Moas says; they plan to announce funding to this end soon.
“We are really interested in how connected a startup community is–how folks in town are relating to one another, how connected do founders feel, the peer support networks, and making sure it’s happening authentically. That’s something we’re going to be investing in.”
One recent event that brought the ecosystem together occurred about 250 miles away: More than a dozen leaders from the Miami ecosystem got on a bus together in January to attend the second annual Synapse tech conference in Tampa.
One attendee Felice Gorordo, who last year took over as CEO of Miami’s eMerge Americas conference.
“We have a lot we can learn from Tampa,” he said.
Others say there may be a more profound issue: reputation.
“There are a lot of startups, and a lot don’t go well unfortunately,” 8Base’s Santalo said. “People get burned by a startup investment, and we continue to have less-than-honest behavior from time to time, that always hurts us.”
Santalo says he has heard from investors that for them to invest in a Miami startup, they have to be twice as good as a startup from a more established city.
“So we’ve got an extra hurdle to jump through.”
MIAMI TIMELINE
Key moments in the growth of South Florida’s entrepreneurship movement:
— 2006: Refresh Miami launches as Miami’s main tech-oriented community group.
— 2012: The Knight Foundation identifies entrepreneurship as a key initiative for Miami, investing in The LAB Miami, the region’s first independent co-working space
— 2013: Endeavor, an international business mentorship group, opens its first U.S. program to Miami thanks to a Knight Foundation grant
— 2014: Miami hosts first-ever eMerge Americas conference, the largest tech conference in Latin America
— 2015: Kauffman Foundation releases first study on local startup activity, ranking Miami No. 2 in the nation
— 2016: CIC Miami and Venture Cafe Miami open, providing events and programming for local startups and entrepreneurs
— 2017: Kauffman Foundation ranks Miami No. 1 in startup activity; LaunchCode opens first non-profit coding academy in Miami
— 2018: 500 Startups, a Silicon Valley venture fund, arrives in Miami
