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South Florida start-ups set sights on financing


By Nancy Dahlberg

ndahlberg@miamiherald.com

Intellocorp5To Morten Bjoern, launching a company in Miami that provides business intelligence solutions to the marine industry seemed a no-brainer, with its cruise line headquarters, world-class ports and a sea of wealthy investors. But landing the funding he needs has not been so easy.

Bjoern’s Intellocorp offers cloud-based subscription software to distill fuel optimization and other important maritime data onto an online dashboard that can be accessed anywhere, anytime. Within a month and a half of launching his products this spring, he landed a big customer, Erria A/S, a Danish operator of 43 ships that use Intellocorp’s products. He has a couple of ships in trials and is talking with other large cruise and maritime companies, as well as the Navy and U.S. Coast Guard, a potential $5 million market for him.

The maritime industry can be conservative and slow moving, but Bjoern expected that. And since he signed his first customer, arranging meetings with other target companies has been much easier.

But he never expected having so much difficulty attracting funding. He’s had more interest from investors in Brazil, Norway, San Francisco and New York than in Miami, the cruise capital of the world. “So far it is all talk,” he said of his encounters here, where he was led to believe there was interest but it went nowhere. “Show me — actions speak louder than words.”

So far Bjoern, a Danish marine engineer with an extensive industry background, has mostly self-funded development with $350,000. He needs $1.5 million more, he said, to develop Intellocorp’s third product, a vessel performance system, and add developers and marketers to his six-person staff.

“Investors here want to see an ROI [return on investment] in 12 to 24 months. They don’t understand what it’s like to be a growth company,” said Bjoern.

South Florida is teeming with bootstrapping start-ups seeking funding like Bjoern’s, and experts say developing a robust angel and venture capital network is a regional challenge that must be overcome to grow and sustain a healthy technology ecosystem.

While South Florida is home to great wealth, it’s not necessarily the kind that goes into startups. Many investors here have never invested in early-stage companies and don’t want to take the risk. And even when they do, it’s not necessarily “smart money,” leaders here say. Ideally, robust tech ecosystems are rich with investors that share their tech expertise as well as their wealth to get startups going.

Isaias Sudit is founder CEO of GridGlo, an energy-related technology start-up in Delray Beach. He is also a member and mentor with the South Florida chapter of Entrepreneur’s Organization, one of the nation’s largest chapters. For GridGlo, his fourth start-up, Sudit has so far raised $1.2 million — from a research institution in the energy space in New York.

In New York, he says, entrepreneurs can find multiple levels of funding — and multiple levels of sophisticated help. “That part is missing in Florida,” said Sudit. “It’s frustrating. I see some really good companies, and I see how much they struggle to convince the few angels we have here.”

GarrBrian Garr knows that struggle well. In early 2010, he founded Boca Raton-based LinguaSys to develop a sophisticated language translation software service. He started with Japanese to prove it worked and then moved on to Thai.

He also spent the good part of his first year in business “driving all over the state meeting with angels.” Not fruitful, but he persisted. The only Florida group he found receptive was Gulf Coast Venture Forum in Naples, and he eventually was able to raise his first $300,000 from two angels in that group and three investors in the Washington, D.C., area.

Now, 2 1/2 years later, the news is sweeter for Garr, whose company now has nine employees on four continents and about 10 Fortune 200 customers. He has just closed on $750,000 from “a well-known billionaire” investor in the tech space, he said.

To be sure, there have been other funding success stories. Open English in Coconut Grove, Carecloud in Miami and OrthoSensor in Sunrise have all raised in the tens of millions of dollars from venture capitalists in Silicon Valley, New York and other places. Third Solutions, based in Miami Beach, has raised $4.5 million, and Senzari, with offices on Brickell, has raised $4 million.

On the angel front, there are a few formal and informal groups in the area — and more are forming. Accelerated Growth Partners — co-founded by investors Juan Pablo Cappello, Jonathan Mirabito, Andrew Sturner and Marco Giberti — came together this spring, and now has about 45 members. The group meets monthly and invites start-ups to present, and members decide individually whether to invest. Cappello said all but one of the invitees so far received some level of funding — some received in the hundreds of thousands of dollars.

Not all AGP investments are locally based, but South Florida startups LiveNinjaMy Mela and Bescover received funding, said Jose Ignacio Rasco, also an investor in the group. Sturner also invested in Third Solutions. Separately, Cappello said he hosts “Wall Street in the Tropics” dinners so that investors in the community can meet one another and learn what is going on.

The Miami Innovation Fund, 20 accredited investors who meet monthly, hear pitches from very early stage South Florida companies and decide as a group whether to fund them. The Micro Venture Capital Club brings investors and entrepreneurs together regularly at open-to-all meetups in the Miami Beach Chamber conference room for pitching and networking.

Other sources of capital are opening up. The new Launch Pad Tech Accelerator, run by University of Miami’s Launch Pad, an entrepreneurship career center, will be giving grants of $25,000 in seed capital to its companies that are accepted into its classes. Incubate Miami, which is now conducting programming for its fourth class of startups in downtown Miami, began offering investor funding as an option for the first time this fall. The Technology Business Incubator in the Research Park at Florida Atlantic University is exploring adding an investment fund, where any returns would be incorporated back into the incubator, said Andrew Duffell, president and CEO of the research park.

There are a few established angel funds in the area that invest in early-stage companies, including the 35-member New World Angels in Boca Raton. The fund has invested in nine South Florida companies since 2005, including VirtualWorks, Citrix co-founder Ed Iacobucci’s newest venture, and Aplicor, said Rhys L. Williams, co-founder and president. There are some newcomers like Caerus Ventures in Palm Beach County. The Florida Venture Forum, started in the ‘80s to promote entrepreneurship, produces an annual Early Stage Conference to shine a light on Florida startups.

Local angel and VC networks are important because they track the market and will often partner with investors from Silicon Valley or other areas. Once more funding networks form — or outside networks put offices here — others will follow.

“There should be 20 angel groups," said Cappello. “If that happens, the funds start to compete for deal flow and that makes it a sellers market, an entrepreneurs market.”

Peter Kellner co-founded the global nonprofit Endeavor that accelerates entrepreneurship in emerging markets. He also founded Richmond Global, a venture fund investing in early-stage software technology, in 1999, now with offices in Miami Lakes, New York and San Francisco. Though the fund invests around the world, some of its biggest holdings right now are in Asia, Kellner said. He succumbed to Miami’s lifestyle attractions and moved here from New York six months ago.

“We’re hoping to do something in venture and technology in South Florida so I have been learning as much as I can since getting to town,” Kellner said. “I’m quite aware what is happening in South Florida, I think it is wonderful, I think it is timely. It’s an exciting time.”

He believes once Miami shows it has a few “big wins,” the venture money will follow.

“Capital formation is not something you should worry about ... It begins with identifying those high-potential entrepreneurs and getting a handful of them to scale, and if we can do that, every thing else is going to fall into place.”

(Photo of Intellocorp's Morten Bjoern is by The Miami Herald's Marsha Halper. Second photo of LinguaSys's Brian Garr, with Andrew Duffell of the Research Park at FAU, by Charles Trainor Jr.)

Follow Nancy Dahlberg on Twitter, @ndahlberg

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Fundsfla

Most businesses seeking funding will just flat out be denied by a bank due to underwriting limitations that automatically preclude the establishment of any meaningful lending facility. And if the business is startup, in business less then two years, or is not generating over $35,000 month in business revenue, the business is just not fundable and the owner is left to using his own money and borrowing on their own personal credit which usually destroys their FICO score creating a catch 22 because without good personal FICO, they will close off even that avenue to working capital. One thing any business can do is see what their business credit asset looks like and if it even exists. There is a free test at www.businessfundability.com/driscoll that gathers the proper information and informs a business owner what their business credit score is and what needs to happen to create or improve it.

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