Young Miami tech companies draw record amount of venture capital amid global tech upheaval
Laura Levros, 35, a self-taught web developer and entrepreneur, recently stopped by the popular weekly Wednesday happy hour at the Freehold restaurant in Wynwood that’s become a mainstay for techies and investors to mingle since the pandemic sparked a migration of technology and finance intellectual firepower to Miami.
A friend urged the native Miamian to attend the gathering where entrepreneurs, investors and others enjoyed spicy sausage pizza, truffle fries and a variety of beverages. Her previous startup company fizzled, she said, after she couldn’t tap enough capital because “I didn’t have relationships in place.”
Like the hundreds at Freehold that night in early December, Levros, who was there for the first time, has reasons to be optimistic. She learned about vital resources that may be available for her upstart business. Not every young tech operator can say that these days.
The tech sector throughout the United States and globally dealt with major upheaval in 2022. The market for initial public stock offerings went cold, stock prices of public companies and valuations of private companies plunged, and venture capital investment for startups nationwide dropped sharply.
Despite that shellacking, Miami held its own, showing a resilience that belies short-lived fads. In this city known for hype cycles, evidence is mounting that growth in the tech scene is enduring. That’s in contrast to better known and larger U.S. tech hubs, such as the San Francisco Bay Area, New York, Boston and Austin, Texas.
Indeed, last year through November $5.3 billion of venture capital was invested in Miami startup companies, a 15% increase over the full year 2021, according to data provided by the research firm PitchBook to the Miami Herald.
There were 384 deals last year, 4% more than in the previous year. The venture investments and deal figures in 2022, even without December numbers, were each South Florida records, according to PitchBook.
Perhaps more importantly, last year was also the first time since PitchBook started tracking the data in 2014 that total venture investments and the number of deals in Miami each increased in two consecutive years.
“The runway for tech job growth is very strong here,” said James Kohnstamm, executive vice president of economic development at the Miami-Dade Beacon Council, the county’s economic development publicprivate partnership.
Examples of the burgeoning tech scene abound. Here are a few:
Last month, Techstars, the startup accelerator born in Boulder, Colorado, held its inaugural Demo Day in Wynwood for its first batch of Miami startups selected last year.
In November, Caribu, the video-calling app for
AAkids and families developed in Miami, was acquired by Mattel Inc., the iconic global toy maker based in California.
In July, Gemini Sports Analytics, which provides data analytics to professional sports teams and was founded in 2021, raised a $1.5 million seed financing round co-led by Florida Funders and the Florida Institute.
Miami, however, wasn’t immune to the tech industry’s big missteps last year. For example, it got caught in the cryptocurrency implosion due to its connection to FTX, the once highflying crypto trading exchange that abruptly failed in November and then filed bankruptcy. Its former
CEO Sam Bankman-Fried faces criminal fraud charges.
FTX’s name still dots the Miami Heat’s arena, under the defunct company’s
$135 million naming-rights deal inked in 2021 with Miami-Dade County. County officials and FTX are trying to officially end the 19-year arrangement as part of the bankruptcy. FTX
Aalready paid $20 million on the Miami-Dade deal, with another $5.5 million payment due in January.
“Some components of Miami tech maybe were driven by momentum,” said Francisco AlvarezDemalde, co-founder and managing director of growth capital investment firm Riverwood Capital.
“The correction crypto has had is going to impact some of the activity you see in terms of conferences and disposable income of some people,” in South Florida, he said.
Still, Miami tech is proving to be more than digital currency. The Tech Starts event in December boasted startups in healthcare, cloud computing, and one offering education to students in Africa.
Ryan Rea, director of growth for Miami Tech Life and a self-described ambassador for Miami’s tech scene who arrived here in 2017, said, “the end of 2020 and 2021 were absolutely crazy and off-thewall insane” and that
“there were a lot of wild ideas.” The craziness combined with effectively free money due to low interest rates then early in the ongoing coronavirus pandemic that began in March 2020.
But attending the Techstars Demo Day last month, he came away impressed. He sees one big change now.
“Companies are a little less exciting, but are much better companies,” Rea said. “They have real products and real revenue.”
FOUNDERS, INVESTORS MOVE TO MIAMI
Alvarez-Demalde of Riverwood who in 2021 left New York to open his firm’s office in Aventura, said, “When I look at a business based out of Asia or Israel or Latin America and then they want to really come to the U.S., Miami is not the only option, but it’s one of the good options. I think that’s going to continue.”
According to Pitchbook’s data of venture capital invested last year nationwide, the Miami metropol
itan area ranked No. 7, behind Seattle and Chicago, but ahead of Austin and Raleigh.
The Bay Area still leads as young companies there brought in roughly 14 times the capital invested in Miami last year. That difference narrowed though from 2021. New York, Boston, and Seattle also saw their venture investment differentials with Miami shrink last year, although that could change once December 2022 figures are released.
“We see more tech companies, we see more founders, we see more tech executives that are living here, and also we see more teams being built, in terms of having people on the ground really doing the work and building technology,” Alvarez-Demalde said.
Among the new arrivals are Ana Cristina GadalaMaria. She moved here In November as a principal at QED Investors, a global American fintech venture capital firm. She relocated to Miami from Alexandria, Virginia, where the firm is based.
“There’s a lot more happening relevant to the work we do,” she said of her migration south.
In September, Tiburon, California-based Partners for Growth, a firm which provides debt capital to startups, opened an office in Miami. They have so far financed four companies in Florida and are working on a fifth, said Julia Figueiredo, the company’s director of Latin America.
Why set up shop in Miami? For some investors, it’s the quality of companies being started in South Florida. For others like Riverwood and QED, both long active in Latin America, they increasingly see Miami as strategic in a global context.
GROWING PAINS PERSIST
All the Miami moves notwithstanding, South Florida’s tech sector faces several challenges. The surge in activity has come with growing pains. Cost of living, especially housing, skyrocketed in 2021 and 2022. Last week, a new report by RentCafe said Miami-Dade was the “most competitive” metro area in the nation last year to find an apartment or house to rent.
“The question is where’s the tipping point,” said Kohnstamm, of the Beacon Council.
He said that “we are hearing from companies that in talent recruitment, that cost of living and cost of housing specifically, is becoming a concern that they’re wanting to address.”
Also, a racial gap persists among tech entrepreneurs who raise capital, say people who closely follow the issue.
“Even with a record year we have yet to reach parity,” said Leigh-Ann Buchanan, president of Miami’s Aire Ventures, a firm that focuses on closing diversity and inclusion gaps in the area’s broadening tech hub. A data-based report her firm compiled early in 2022 concluded that, “We’re not effectively supporting women entrepreneurs and Black ecosystem leaders,” and a gap exists between talent and companies seeking to find new talent.
For all the networking events and cocktail hours and parties Miami’s tech scene hosts, she would like to see ones more tailored around addressing trust and access to capital for women and minority entrepreneurs.
“I love a good happy hour,” Buchanan said, “but happy hours are often blind to the fact that when we’re trying to connect minority founders with investors, it’s not enough to just put people in a room and expect magic to occur.”
‘SHOWING UP IS A WAY TO OPEN DOORS’
This is the supreme challenge that Levros’ latest company Miami Tech Crawl, which she co-founded with Laura Getro Naissance and Darnell Boursiquot, is hoping to help address.
She grew up in Little Haiti and never finished college. The lack of degree limited her when she worked as a contract worker for Oracle in 2017, helping the company implement software. She could only find work as a contractor, she said, rather than get hired full-time by the software giant. Now her startup business seeks to match those looking for tech jobs with employers.
“A lot of companies are saying they are struggling to find diverse talent,” Levros said. “And there are people looking for work in tech who are finding it hard to get doors opened for them.”
The company intends to connect hiring managers and recruiters with job seekers, especially those without a college degree. It will hold an event in April and hopes to launch its website soon.
“There is a gap, and it needs to close because you have people who are native to South Florida where the median [annual] income is like $41,000, and these tech jobs pay much more,” Levros said.
“We’re trying to help people not get priced out
[of living here], particularly natives of South Florida,” she said.
There are other similar efforts, too, such as one at Miami Dade College. And several of the new arrivals to South Florida are trying to help teach locals the necessary skills for tech employment, and the chance to forge careers earning high salaries. That’s one reason for Buchanan’s optimism.
“A lot of folks moving are moving to Miami to build the [tech] ecosystem, and so, they want to ensure that opportunities are available for everyone,” said Aire Ventures’ Buchanan.
She cited Ruben Harris, founder of Career Karma as one example.
Levros, for her part, said after attending the Wednesday tech happy hours in December, she’s still learning how to find angel investors willing to bet on her company. “I feel like there’s a lot of gatekeeping even today,” she said.
She plans to keep attending the weekly Wynwood gathering of technies and investors. “Showing up is a way to open doors,” Levros said.