South Florida Startup Ecosystem Continues Pattern of Growth and Investment
June 12, 2017
The Knight Foundation plans to continue investing in infrastructure projects and organizations that help support and accelerate the growth of the entrepreneurial ecosystem.
(TNS) — Nearpod, an education-technology startup, keeps outgrowing its Aventura offices.
“We have been doubling the company every year — in people, revenue, users, all the key metrics,” said Felipe Sommer. He co-founded the company with Guido Kovalskys and Emiliano Abramzon, three Argentine friends who have worked on ventures together for more than a decade. Nearpod now employs 70 people and expects to be 100-strong by the end of the year.
“As you can see,” he said, motioning toward the dozens of workers in the spacious, open office, “we like to double.”
Now the company, which develops online lessons for students and teachers, will be doubling down on South Florida. Until now, Nearpod has kept some of its top management in Silicon Valley to tap talent and stay close to its Bay Area investors. Those employees, including CEO Kovalskys, the vice president of marketing and directors of content and product, will be relocating to Miami.
Nearpod and other South Florida fast-growing startups will be celebrated as the fourth annual eMerge Americas technology conference opens Monday at the Miami Beach Convention Center. At least 13,000 people are expected to attend the two-day conference, headlined by Steve Wozniak, co-founder of Apple; Uri Levine, co-founder of Waze; Gustavo Cisneros, founder of Grupo Cisneros; and Marcelo Claure, founder of South Florida’s Brightstar and now CEO of Sprint. eMerge will also be a show of force for the startup community: More than 125 startups will be exhibiting, while scores more will be attending.
The backdrop for the conference: a number of recent success stories in South Florida’s tech community.
In a transaction that closed last month, Dania Beach-based Chewy.com was acquired by PetSmart for about $3 billion, the largest e-commerce deal ever. Chewy CEO Ryan Cohen said the 5,000-employee unit that booked $900 million in revenue in 2016 will operate as an independent subsidiary and continue to grow in South Florida.
Modernizing Medicine, the Boca Raton health-tech company founded in 2010, raised $231 million to fund its growth. Modernizing Medicine employs more than 550 people and is booking $100 million in annual revenue.
And there’s the near-instant global technology player in cybersecurity company Cyxtera Technologies, headed by Manny Medina, who also founded Terremark Worldwide, Medina Capital and eMerge Americas. The result of a $2.8 billion transaction that closed last month, Cyxtera combines 57 data centers and four cybersecurity and data analytics companies from Medina Capital’s portfolio, and employs 1,000 people worldwide — about 100 in South Florida.
“With the major successes we’re seeing like Modernizing Medicine, Chewy.com and Cyxtera — not to mention the massive potential impact of [augmented-reality technology company] Magic Leap — we are poised to have a number of very large, global technology companies based in this ecosystem,” said Xavier Gonzalez, CEO of eMerge Americas. “These companies and many others will continue to grow, innovate and attract talent from all over the world. That talent will develop new companies and bring even more interest from investors.”
The cycle, he said, points to increasing maturation of Miami’s technology sector.
Matt Haggman agrees. He is the Miami program director of the John S. and James L. Knight Foundation, which leads the local movement to develop South Florida into a hub for technology and innovation. “Increasingly, what we are seeing is an evolution from what could be to what is now, and that is super exciting,” he said. “If you go online right now for jobs in tech, there are hundreds of jobs.”
The Knight Foundation has funded organizations and projects to develop an ecosystem since 2012, including Endeavor Miami, Miami Dade College’s Idea Center, Startupbootcamp, The LAB Miami and LaunchCode. It has committed more than $25 million in more than 200 projects in the Miami area, including recently $1.2 million to the Miami Urban Future Initiative, a joint project of Florida International University and the Creative Class Group for economic research on entrepreneurship and technology in South Florida. It also recently announced $1.2 million in new support for Code Fever’s signature event Blacktech Week, planned for September, and related programs that aim to expand opportunities for entrepreneurs of color.
The foundation plans to continue investing in infrastructure projects and organizations that help support and accelerate the growth of an entrepreneurial ecosystem.
“We’re just getting started,” Haggman said. “If this is a nine-inning game, we are at the bottom of the first or the top of the second. The important thing to understand is that it can happen.”
Recent studies shed light on the challenges of that long game ahead. South Florida is a startup and small-business factory, sprouting more new businesses every year than any other large U.S. metro area. But growing large companies has always been a challenge for the Miami area as well as for the state.
Last year, the Miami metro area ranked 39th among the 40 largest metro areas for growth entrepreneurship. Bloomberg’s 2016 U.S. State Innovation Index ranked Florida 34th. The Milken Institute’s State Technology and Science Index for 2016 put Florida in 41st place — four places lower than in 2014. Among the components of the Milken index, the state ranked the lowest, 46th, for science and technology workforce. Other indicators show the state and South Florida lagging in patent activity and venture capital. (See related data on tech and startups here.)
“If you look at startup activity in Miami — its new venture creation — it is incredibly high. When we look at growth entrepreneurship, it’s pretty low,” said Arnobio Morelix, senior research analyst at the Kauffman Foundation and one of the authors of recent reports on startup activity and growth entrepreneurship.
Another key challenge: Miami-Dade’s technology sector is dwarfed by the service economy and its low-paying jobs. Still, by number of employees, tech is growing faster than aviation, banking/finance, creative design, tourism, healthcare and trade/logistics — all industries targeted for growth by the Miami-Dade Beacon Council, the county’s public-private economic development agency.
“The tech sector is growing faster than the overall economy,” said Jaap Donath, the Beacon Council’s senior vice president of research and strategic planning. “What we are starting to see is growth subsets linked to existing sectors, such as fintech, health IT, trade/logistics and tourism.”
By number of employees, the technology sector has grown 27.6 percent from 2012 through 2016 to 10,413 employees in Miami-Dade, according to Beacon Council data. The number of tech companies, 1,654, is up 10.9 percent, and the average salary is $95,087, up 16.8 percent — the second-highest after banking/finance.
In Broward County, where technology is a much larger sector with the likes of Magic Leap, MDLIVE, Chewy and JetSmarter, 3,742 technology companies employ 44,431, and the average salary is $94,273. That’s up 19.2 percent from 2012, when the industry employed 37,266, according to the Greater Fort Lauderdale Alliance.
“The last five years have seen an enhancement of our tech ecosystem. For us, it is very exciting to see that growth, especially looking at potential scalability,” Donath said. “We’ve seen that with CareCloud — that was a local startup, and now [the health-tech company] is a mainstay of the Miami economy with hundreds of employees. Albert [Santalo, founder of CareCloud,] made a conscious choice to build and grow the company in Miami.”
This goes for companies focused on the Latin American market, too. “We’re seeing companies that come out of Latin America but find what they need in Miami to sell their products back into Latin America — a good example being Yellow Pepper, the fintech company,” said Donath. Based in Wynwood with a team of 61, Yellow Pepper is a pioneer and leading player in mobile payments and banking solutions in Latin America and has been recently valued by the Inter-American Development Bank at more than $100 million.
Community leaders point to progress on other fronts as well.
In the past year, new incubators and accelerators such as Startup FIU, Startupbootcamp and Babson WIN Lab have graduated their first cohorts, joining pioneer Venture Hive. Global fund 500 Startups has run a growth accelerator, conference and other events here; it is now planning to establish a permanent presence in Miami. An international venture-builder, with Silicon Valley veterans at the helm, will be launched in Miami and announced during eMerge Americas. Organizations such as LaunchCode and coding bootcamps train tech developers and designers and help match them with job openings.
Although the region still lags badly in venture capital investment, several new funds have been announced in the past year, including Rokk3r Fuel and Las Olas Venture Capital. Local companies are attracting investment from beyond the region. They include JetSmarter, which raised $105 million in December, and Modernizing Medicine, which last month announced an investment of $231 million. Other firms — including Boatsetter, MealPal, Nearpod, Nymbus, Altor Bioscience and F1 Oncology — have each raised well north of $10 million in the last six months.
Wynwood’s Rokk3r Labs is announcing Monday the launch of 10xU, a global educational platform focused on teaching entrepreneurs to identify and assess opportunities for fast-growing, world-changing companies, as well as the nuts and bolts of team building, raising capital, scaling and exiting. Its content and programming will also be targeted at corporations whose models will likely face disruption.
10xU will become a portfolio company of Rokk3r Labs, a company builder that has worked with more than 40 startups. In March, Rokk3r announced that it launched an investment fund, Rokk3r Fuel. It aims to raise a $150 million fund — it’s not there yet — and already has invested in startups AdMobilize, Hyp3r, Taxfyle and Emerge.me. Over the next few weeks, the fund plans to announce more capital deployments, locally and globally. A second set of investments is planned in the fourth quarter, said Nabyl Charania, CEO of Rokk3r Labs.
“The growth of an ecosystem is not an overnight thing. If we wait for someone else to come in and do things for us, we will just continue to wait,” he said. “That’s why we proceeded with Rokk3r Fuel and 10xU and will continue to co-build companies, because we believe that is the best way to help an ecosystem — providing all the right tools to build world-changing companies.”
Some local serial entrepreneurs are already beginning to sprout new ventures and invest in others. After the $2 billion sale of Terremark, Medina started eMerge, Medina Capital and now Cyxtera. The $1.65 billion sale of Mako Surgical made way for co-founder Rony Abovitz to start Magic Leap, while former Mako CEO Maurice Ferré is involved with several health-tech ventures, including running the Israel-based Insightec from Miami.
Adam Boalt sold his first company, RushMyPassport.com, in 2013. Last September, Boalt sold his second tech company, LiveAnswer.com, to Stericycle, a publicly traded Fortune 1000 company. Now he is building again.
“govWorks will be launching in January 2018 and will change the way the public interfaces with the government,” Boalt said. The platform is aimed at greatly simplifying the processes for travel visas, passports, fishing licenses and other documents by storing customer information securely. An earlier company, the original govWorks, collapsed after raising $60 million. Boalt acquired the domain name: “They had a good idea that was ahead of their time, and they had challenges executing. I know the time is right now, and we have the team that can pull it off.”
govWorks has a team of 32 in Miami, 80 percent of them engineers. Boalt expects to add 20 more software engineers and product designers later this year.
“I’ve had opportunities to be in New York and the West Coast, but this is my home,” Boalt said. “I feel like people have doubts about Miami. I hate that. I feel like I can make a difference here.”
Other entrepreneurs have been urged to move elsewhere — sometimes by their own investors. Abovitz may be the most famous of these South Florida bulls, choosing Plantation as the base for his cutting-edge, mixed-reality technology startup, valued at an eye-popping $4.5 billion with a who’s who list of Silicon Valley and global investors, even though its initial product has yet to be released. Now Magic Leap is rumored to be raising another round of funding at a $6 billion to $8 billion valuation.
In Aventura, meanwhile, above a Bank of America office, Nearpod’s bright and open offices hum with employees at work on laptops or on the phone with customers. Two years ago, the company moved into 3,000 square feet; now Nearpod has filled 9,000 square feet, and it could already use more space.
As the co-founders demo the company’s virtual reality lessons, Abramzon explains that students virtually visit sites of history or culture like the Eiffel Tower, the Egyptian Pyramids and Checkpoint Charlie to learn about the Cold War or even concentration camps. The visits are accompanied by in-app videos, quizzes and opportunities for questions and interaction with teachers. Altogether, the VR lessons, which Nearpod began offering last year, have drawn more than 6 million views.
Nearpod has users in one of every 10 schools nationwide, including more than 40 schools in the Miami-Dade and Broward County public school districts, Gulliver Prep, LaSalle, American Heritage and Pine Crest. About 4 million students worldwide view the content monthly. Nearpod also recently launched Nearpod for ELL at Miami-Dade public schools, which includes 500 ready-to-teach lessons designed specifically for non-native English speakers.
In March, Nearpod announced it had raised $21 million to fund its growth. “We are hiring for VPs of customer success and finance and a head of content,” said Abramzon. All will be based in South Florida because of its lifestyle, cost of living, diversity, growing entrepreneurial environment, strong partnerships with local schools, and support from local investors Krillion Ventures, Knight Enterprise Fund and the AGP network.
“Miami is in our DNA,” added Sommer. “We want everyone under the same roof, and that roof is going to be in Miami.”
But for all its growth, Rokk3r’s Charania believes South Florida’s startup ecosystem needs to develop more quickly: “What we need is more people from the community supporting the ecosystem. We need corporations to step into the game. We need the government and educational institutions … with a lot more impact. We’re not there yet but people are starting to pull together.”
Knight’s Haggman said it’s important to get the word out about the opportunities here: “There is still some disconnect, whether it is job opportunities, resources or funding, because there are still fixed ideas about this place, and we are changing. We are a much different place than we were, say, five years ago.”
Haggman also believes the ecosystem should connect the entire community, west of Miami’s urban corridor and well north of the Broward County line, and this isn’t the time to rest: “This is a work in progress. This is a long game.”
©2017 Miami Herald Distributed by Tribune Content Agency, LLC.
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