Part Two in a Series:
This is the second in a series of posts that deal with whether startup founders need to move their company from Florida in order to receive investor-backing. In the first post, I outlined why I moved a company from Florida to Boston in 2008, at least in part, in order to be viewed differently by venture firms. I offered that the anti-Florida bias that exists in the financial centers is genuine–but can be overcome. I also alluded to my conclusion that, in 2013, it is generally not necessary to move to a more trendy startup location like SF, Boston, NY, or Austin in order to get financed. However, I also noted that those who keep suggesting that there is no benefit to moving from Florida in order to get funded are probably misinformed or simply Pollyannaish.
In this post, I will address why the amount of money your startup needs to raise is the first step in deciding if funding can be done well in Florida. Because of the VC anti-Florida bias, your Florida-based startup is going to have to be better than it would need to be in NY, SF, Boston or Boulder in order to get funded by large VCs. The first question to ask is: who cares? Most startups do not need funding from large VCs. We needed $7 million in our A round. If your startup needs less than $1.5 million, don’t even worry about what large VCs will or will not do. Your funding sources are probably going to be angel investors, angel groups and small VCs. You may have to combine several or even dozens of investors in order too get what you need, but Florida does angel investing increasingly well.
Florida’s angel investor community is potentially very large, due to a large population of high net worth individuals, but it has historically not been very active in private equity. Florida’s high net worth investors have traditionally favored real estate investments and “hard” assets. After the bubble burst and banking abuses showed that real estate is not all that safe, that has started to change.
In the recent past, even Florida’s “angel groups” were not very active and served more as an exclusive Moose Lodge than a genuine source of capital. However, some groups are now really doing deals. Tamiami Angels in Naples has invested in six companies since its formation in 2010. New World Angels boasts a ten-company portfolio. venVelo is a relatively new fund that has already become a player in this space. Other similar funds and investor groups are on the way in Florida. UCF has established its Florida Angel Nexus in order to bring organization to both the deal-flow and investor side of angel investing. Several out-of-state angel groups and small funds now see parts of Florida as attractive.
All of this is to say that if you are raising less than $1.5 million (and arguably less than $2.5 million), I now see leaving Florida as affirmatively disadvantageous. In my experience, angel investing is mostly a local phenomenon. Angel List may change all of that with its celebrity angel rounds but I doubt that the local connection factor will change all that much. In fact, I think crowdfunding is going to make angel investing even more local (yes, the irony of the Internet driving local investment is not lost on me). Florida has as many “local” accredited investors as you will find anywhere if you do the head count in the winter. Investors are already active at those levels in Florida and I believe that the deal-flow in Florida is increasing smaller than the investor appetite. If your startup needs more money in a more traditional A or B round, there are other factors to consider. More on that in a later post.
I think the exception is where your startup is in a specific industry that has a developed cluster in another part of the country. The benefits of finding educated investors, access to talent, access to strategic partners and the like may make moving sensible even if you only need a modest amount of cash. Otherwise, for rounds below $1.5 million, I think Florida is as good as almost anywhere right now.