Venture Capitalists Predict A Strong Year Ahead

By Nancy Dahlberg
The Miami Herald.

Consider this: The single $1.2 billion venture round in San Francisco-based ride-sharing company Uber is larger than most venture funds and is bigger than some initial public offerings. And in 2014, Uber attracted two of those.

“It’s staggering money,” said John S. Taylor, head of research for the National Venture Capital Association, speaking at the Florida Venture Capital Conference in Hollywood on Friday. “But when you strip back some of the hype and look at what is going on in the rest of the country and even what’s going on in some of the concentration areas, it’s really for the most part business as usual. There are trends out there but also good opportunities in the marketplace.”

Venture capitalists from Ballast Point Ventures, Harbert Venture Partners, Fulcrum Equity Partners, Edison Ventures, River Cities Capital Funds and Stonehenge Growth Equity Partners — all firms that have funded Florida companies — joined Taylor in a panel discussion on the state of the industry. The session capped off the 24th annual conference, presented by Florida Venture Forum, that attracted about 500 investors, entrepreneurs, lawyers and advisers to the Diplomat Resort & Spa Thursday and Friday.

Beyond the mega-deals, the number of first-time financings and the total number of deals changed little between 2013 and 2014, Taylor said. What is changing is the funding source. “We are seeing new sources of money: Mutual funds are coming in big, more hedge fund activity, a lot of private equity players that aren’t traditionally in venture rounds,” he said.

In Florida, venture capital dollars doubled over 2013, thanks in large part to a $542 million mega-deal in Dania Beach-based Magic Leap, a secretive company developing augmented reality technology. Coming off such a phenomenal year, is the market overheated?

Consensus of the panel: frothy at the least. “Not every SaaS (software as a service) company is worth 10 times revenue. There are valuations out there that are outragous at times,” said Ed McCarthy, managing director of River Cities Capital Fund.

Still, all of the panelists were optimistic about opportunities in 2015. “All the trends are pointing in the right direction for the entrepreneur raising money,” said Lenard Marcus, partner in Edison Ventures. Marcus’s advice for the entrepreneurs in the audience hoping to entice a VC: choose wisely. “It’s much easier to divorce your spouse than a VC.”

In addition to panel discussions and networking, conference attendees got a glimpse into South Florida’s own brand of entrepreneurship.

And it doesn’t get much more Miami than the story of Zumba, co-founded by three Albertos from Colombia and now a worldwide sensation drawing 14 million class-takers in 186 markets around the world. CEO Alberto Perlman shared the Zumba story during the conference dinner.

The journey wasn’t easy. For Perlman, Zumba was actually his 18th or 19th company — by age 24. The team nearly ran out of money at one point, and Perlman acknowledged he made some poor hires early on. There were plenty of iterations as the company experimented with several business models.

Zumba was on the way to becoming an infomercial company, Perlman said, when the co-founders started getting calls from Zumba fans who wanted to become instructors. That’s when it hit them: Turn instructors into entrepreneurs. As they grew their own Zumba businesses, the instructors would deliver the holy grail of business models: recurring revenue and scale, Perlman said.

Today, in each new market, master trainers are empowered to scale the business — enabling Zumba to operate in 186 markets with just 200 employees.

“The biggest lesson I have learned in life is to never lose the pulse of my customers,” said Perlman.

Now Zumba is a fitness, music, apparel and gaming company. It is also a tech firm, with about 30 developers. “We are all technology companies,” he told the crowd. “To compete, Florida needs to invest a lot more in technology education. We need to lead.”

The conference attendees — many more entrepreneurs than investors — also heard from Dr. Maurice Ferre, co-founder of Mako Surgical, another South Florida success story. The surgical robotics company based in Davie was sold in 2013 to Stryker Corp. for $1.65 billion.

Just as Silicon Valley has the PayPal Mafia because so many companies have spawned from that venture, a South Florida Mako Mafia may be in the works.

Ferre is involved in several startups engaged in cutting-edge healthcare technology and robotics. Mako co-founder Rony Abovitzis is developing Magic Leap, which attracted $542 million in financing from Google and other investors in November. And some former Mako employees and Mako funding went into OrthoSensor, a venture-backed Broward company that makes “smart” orthopedic devices.

“I’m really excited about the ecosystem down here in Florida, and especially South Florida,” said Ferre, who is also on the board of Endeavor Miami, a mentorship and support network for high-impact entrepreneurs. “We are seeing more people come up with novel innovations.”

As a way to spark innovation, Andrew Rosen, chairman of Fort Lauderdale-based Kaplan, said at the conference Thursday that the global education company “is committed” to opening an ed-tech accelerator in Fort Lauderdale.

Jon Hage, CEO of Charter Schools USA, said his South Florida company is partnering with Kaplan on the program, which would help promising tech startups with solutions for the education industry, including social entrepreneurial efforts. The innovative and experimental nature of charter schools make them ideal laboratories for ed-tech startups to test their solutions, Hage said.

“I think we can build something special together,” added Rosen, saying more details would be coming soon.

In addition to keynote speakers and panel discussions, 23 early-stage or later-stage Florida-based companies, were selected to present at the conference; 12 were from South Florida. The CEOs, who gave six-minute presentations on stage and urged the suits in the crowd to visit their booths, represented companies including Fresh Meal Plan of Boca Raton, EZDoctor of Fort Lauderdale, ParkJockey of Miami, PowerPHASE of Jupiter, Senzari of Miami and Skypatrol of Doral.

Steve Calle, CEO of Snow Lizard of Miami, which offers products to optimize and outdoor-proof your devices, invited investors to his booth to give his products a try. Few were willing to drop their own smartphones in the tank, preferring to take his word that the Snow Lizard cases are waterproof.

And in another pitch, Carlos Diaz said his young Pembroke Pines-based software company Entic monitors and tracks energy use in commercial buildings, using the real-time analytics to prescribe energy-saving corrective actions. He said he was seeking to raise a $7 million to $10 million Series A round and rattled off a couple dozen well-known South Florida facilities using Entic’s product, including Marlins Park. His pitch even included a video testimonial from another one of its many customers — the Diplomat.

Nice touch.

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