Welcome to the inaugural episode of the Seedfunders podcast. In this episode, and the next few, Founder Dave Chitester sits down with host Joe Hamilton to give a 101 overview of all things early stage investing in Florida. In this episode Dave runs through the different players and their function in the startup ecosystem. Founders, mentors, incubators, accelerators, connectors and funders all play a critical role in building the economy of tomorrow. Listen to the Seedfunders podcast to better understand the important and action-packed world of startups and how you can join in.
We’re going to cover a lot of really important and fun topics with regard to seed investing and seed funding in Florida. In these first few episodes, we’re going to dig into the state of the Florida ecosystem, what’s happening, and what’s going to be happening. But before we get into that, let’s get our audience familiar with you and your background. Tell us a bit about your history in seed funding.
Sure. I am entrepreneur by trade. Actually, my first company was an engineering company. I started that in Tampa 30 some years ago, and sold that to a public company in New Jersey. I started another company called Red Vector, and doing online education for architects, engineers and contractors. I sold controlling interest in a series A and then final interests into series B. As we begin to do these podcasts, I’ll talk about details about what are series A and series B in more detail one of those things. But I just sold into series A and series B out of that. Then I just decided to start getting into investing.
Eight years ago, I launched a company called Florida Funders with the idea of using crowdfunding to invest in startups. A lot of people said it wasn’t legal. It wasn’t possible, but obviously it was very successful. I ran that for three years. At the point where it was getting to really take off, I brought in other professionals to run it. I’m a startup guy. I’m not an ops guy. I brought in other professionals; Mark Blumenthal, Tom Wallace. They’ve taken it through the roof. They’ve done an incredible job. I’m still an equity holder in Florida funders. But after taking about a year off, I decided I wanted to get back into real start-up investing.
I decided to start Seedfunders. My mission at Seedfunders is to be the first professional money that’s investing in these startups in Florida. We’re looking at pre-revenue, scalable technology with a clean cap table. What I mean by that, we won’t be the first professional investors that help these companies succeed. I launched Seedfunders three and a half years ago. Now, we are doing investments throughout the state. As part of running Seedfunders, because we were so early investing in these deals, I need to be on top of everything. I want to know who the follow-on funders are going to be. I want to know everything that’s happening in this state. In my role as CEO of Seedfunders, I really need to be on top of everything in the state. I meet with people. I go to conferences. I do everything to keep in touch, and be a leader in the state, in the area of seed funding.
When you talk about knowing everything that’s going on, that’s what would be called the start-up ecosystem. Everybody is talking now about Florida being an emerging and growing powerhouse of a startup ecosystem. Can you break down the different facets of a startup ecosystem?
Sure, there are a number of facets to an ecosystem. It starts with the entrepreneur or founder. You have to have the entrepreneurs, people who want to start companies that take that risk, and get the company started. Here we’re talking about technology companies where people want to take their knowledge and their experience, and start a technology company. You need the entrepreneur and the founder.
Then the next thing is mentors. There are a number of mentor organizations throughout the State like Venture Mentor Team out of South Florida. They actually qualify you as a mentor. They provide mentoring for these startup organizations, these young organizations. There’s accelerators and incubators. The difference really, people get them kind of confused, but an accelerator really is more of a short-term program. They bring in what’s called a cohort of entrepreneurs, and they run through a program and they graduate.
Incubator is more of a long-term type of a thing where the startup company rents space. Then there are programs. There are speakers. They bring in help to help the companies more on a longer term. That’s the difference between an accelerator and an incubator, like the Tampa Bay Wave. The Tampa Bay Wave will have an incubator where people are there, renting space and going through a program. But they also have accelerators at the same time where they bring in a specific cohort.
Then you have things like newsletters, bloggers and podcasts like the Florida Venture Sourcing or Catalyst. These entities link everything together. They bring the information of what’s happening in the State; who the entrepreneurs are, who their mentors are. Everything that’s going on in the state is through these newsletters and bloggers and podcasts such as these. Then we have conferences. There are groups that hold annual conferences. None held in the last year of course, but they’ll be starting up again. Like the Florida Venture Forum, Emerge Americas, Synapse. These are annual conferences in Florida; day, two days, three days sometimes. They bring everybody together. All the entrepreneurs with the funders and the mentors and the accelerators and incubators.
Then you have the networking entities such as Startup Grind or Venture Café. They also network with people, and bring people together. Finally, you have universities. They have startup programs, entrepreneurship programs in a number of universities throughout the state and the government entities. The government entities supply the structure or maybe the way that people can get together and understand what’s going on. We’ll talk a little bit about how that’s happening specifically in Miami.
All those entities, as you can tell, don’t provide any funding to the actual entrepreneurs. That is, to me where the most important aspect is, the funding entities like Seedfunders or DeepWork Capital or Florida Funders. Without the funding, that is the bloodline of this entire ecosystem. As the funding increases, the entire ecosystem gets better and more functional. The funding in Florida – as we’ll discuss – is really starting to take off. The funding for these startups in Florida is starting to look way better than it did even two or three years ago.
Let’s dig into that a little bit. When you take all those elements of an ecosystem and lay your Florida filter over it, what do you see?
Florida is really exploding. When you look at everything that’s happening, there’s more of all the above. Everything that I just talked about, there is more and more of that happening in Florida all over the State. When I started Florida Funders eight years ago, people actually asked me, if I’ve taken people to invest they said, “Why don’t these companies just go to a bank and get a loan?” You’ll notice, banks were not on my previous list of players in the startup ecosystems. For a bank, you have to have profits. You have to have three years of a system of success.
Banks don’t fund these entities. People who were actually saying, “Why don’t they go to a bank?” they didn’t understand. They would say that what you’re doing is illegal. You can’t invest in these companies or everybody is going to lose all their money. All that was not true. They thought eight years ago, but now there’s been a monumental change, particularly in the last three years in Florida. People now understand what the startup ecosystem is all about. They want to get involved. They want to learn about it. They want to be part of what’s going on, because things right now are going pretty well in Florida as far as the startup ecosystem.
One thing I think that might be definitely propelling that is the population growth. In 2019, there were over 380,000 new residents in Florida. That’s 1000 per day, 1000 people per day coming to Florida. A lot of these people were coming from up north, where they’ve been involved in ecosystems before. They want to be involved or they might have retired, and want to stay involved in things. This is the way that people are starting to have a real big interest in joining groups and trying to understand the ecosystem and get involved in the ecosystem.
On the other hand, in the last census California actually lost 70,000 people. The first time in the history of California that they actually lost residents. A lot of that is due to the atmosphere in California. It’s gotten to be a little unappreciative of these startups. The census show that Florida and Texas are attracting business from California and New York, because we are more business friendly. And we want these companies to come here and succeed.
When you look at this population shift obviously, a certain niche of the population are the people that are going to be investing and supporting the startup ecosystem. When you see ours growing in Florida here, how much of it is just the sheer numbers coming down from directly above in the north and how much of it is a brain drain from California?
California will always be the center of the start world. Never say always. California is currently still the center of startups, but things are changing. Things are accelerating. Here is an example. There is a company called Trust Layer, a Silicon Valley startup, just relocated to Tampa. They had raised $6.6 million in seed investment. The founder is quoted as saying – when they announced the move – that his investors were unconcerned, even encouraging about the move to Tampa. He said this was unheard of two or three years ago, where investors in California would say, “It’s okay if you move to Florida.” He’d never imagined this could have happened two or three years ago. That shows how much things have changed. And how things are changing and rapidly accelerating.
California has really become uninviting. Another example, Mark Zuckerberg made a 75 million-dollar donation to a hospital. They want to put his name on the hospital, and the local authorities objected. It is again showing the unappreciation of these startups that are in California. Elon Musk got a lot of bad press on California. He moved to Texas. It’s really incredible. That’s what’s creating this surge with this movement to Florida. The Miami mayor in the meantime is saying, “How can I help?” someone tweeted something about moving to Miami and he said, “How can I help?” he is starting to come up about and say, “Come to Florida, because we’ll appreciate you here.
Miami is really emerging as a hub. It’s attracting some big names.
Miami is incredible. Again, starting with the mayor, 43-year old Mayor Francis Suarez, National Review did an article and they called him, this season’s trendiest tech entrepreneur. In a December tweet, this is what somebody had tweeted, “What if we moved Silicon Valley to Miami?” his response was, “How can I help?” all of a sudden, he’s doing these tweets. He’s talking to Elon Musk through Twitter. Meanwhile, all these big names are moving to Miami. If you look at PayPal founder, Keith Rabois – Miami resident. Peter Thiel, tech investor has moved to Miami. John Oringer, the Shutterstock founder. Investors, you look at investor groups Paul Singer and Elliott Management, they moved their headquarters to Miami. Carl Icon moved his headquarters to Miami. Blackstone opened an office in Miami. David Blumberg from Blumberg Capital opened an office in Miami.
You look at all these people, they’re moving. Their investors are moving. They’re opening offices there, moving their office there. The biggest thing of all, Softbank just recently announced, I believe last week – a 100 million-dollar fund that’s solely going to invest in Miami technology, $100 million. I’ll read a quote here that the Softbank said when they made that investment. The startup ecosystem is quickly immersing talent and resources as the blue-chip technology and investment firms continue to announce their decisions to relocate to the magic city. Mary Suarez as part of that said, “We have reached a critical ma.ss and an inflection point.”
Being St. Pete based, I’ve got to say, I hope there’s some action happening outside Miami too. What do you think?
Sure yes. The entire state is really expanding and growing really part of this whole ecosystem. Just take St. Petersburg and the Tampa Bay area. CB Insights named Florida Funders the most active VC firm in Florida. Again, a company Tampa investor, the most active VC firm in Florida. PitchBook named Florida Funders as the top VC firm in the southeast. That includes North Carolina, Atlanta, other places. Seedfunders, in 2020 we made 16 investments. The most investments of any Angel group in Florida. Of course, we’re headquartered here in St. Petersburg.
We also have opened Orlando and Miami partnerships as well. If you look at some of the exits in the Tampa Bay area, Arnie Bellini of ConnectWise sold his company for over $1 billion. That created 70 instant millionaires. These instant millionaires then want to invest. They want to get out and start their own company or invest. That’s what an ecosystem does. That’s what’s happening. Arnie then started a new fund. He took some of his money, and he’s investing in these companies that are starting up. The same thing with Steve MacDonald of myMatrixx. Steve had a great exit with myMatrixx. He started a new fund. He is investing in these types of companies. These types of startups. That’s the thing, it’s just happening in the St. Petersburg Tampa Bay Area.
Other areas around the State. Jacksonville has just announced that Jack’s Angels has been established. There’s Bridge Angels in Sarasota. DeepWork Capital has just started a new fund, their second fund in Orlando. We started as I said Seedfunders Orlando. We’ve already done five deals out of Orlando. It’s a great time to get involved in Florida startup ecosystem all across the state.
Tell us more about that. If this is all very inspiring. We just cross the border. We can feel the sunshine and smell the oranges. How do we get involved?
Talk to me. Seriously, any of our listeners want any information on any of this or how to get involved, send me an email firstname.lastname@example.org. I will connect you. I will get you involved in where you want to be involved whether it’s a mentor or an investor or in any other part of the ecosystem. Basically, it depends on the level that you want to be. Do you want to be an investor? Do you want to be our mentor? There are different groups to be involved with, obviously? The investor side of things, there’s Angel groups like Seedfunders and others. Then you can invest in a fund. I’ll explain a little bit about the difference between that, because in a fund like DeepWork Capital or Florida Funders has started the fund. You put your money in the fund and the fund makes the decision on investing it. They pick the companies and they invest.
Angel investing however, and we’ll get a lot more into this in future podcasts. With an Angel investor, when you’re in a group, you invest your own money in the deals that you want to invest in. If you want to be an Angel investor, there are certain entities around the state. If you want to invest in a fund, you put your money in a fund and sit back and watch what happens, you can do that as well. If you want to be a mentor, there’s groups as I said. Like the Venture mentoring team run Bob Nelson in South Florida. They actually certify you as a mentor. So that you can help mentor these companies.
Accelerators or incubators all have mentors that help these companies get along or move forward. There are publications – if you want to get involved – that you can read like the Catalysts in St. Pete or Florida Ventures sourcing in Orlando or Refresh Miami. If you want to get involved, subscribe to these entities. Subscribe to these and get in touch with what’s going on. As I always said, “Send me an email and I’ll point you in the right direction.
And the website seedfunders.com. One of the things I love about being in Seedfunders, especially being as early as we are with companies, is the chance to actually get involved if you have an interest in the company and you potentially have a board seat. And really make a difference in that company’s trajectory. I think a lot of people find it very rewarding to take skills that they’ve acquired over the years, and then apply them to help these young companies. That’s a nice side benefit of being part of a group.
Absolutely, and that’s what you don’t get when you put your money into a fund or even a startup in the early stage fund, where they invest your money. You don’t get a chance to sit on the board or to actually be a consultant, or be heavily involved or even remotely involved with the companies that they invest in. That’s the benefit of seed funding and Angel investing and what I really enjoy about it as well.
A lot of great information for episode one. Any closing remarks.
Yes, we’re going to do these podcasts weekly, and in more depth on a lot of these topics. If people want to learn more, and get in more depth, they stay tuned. Again email@example.com If you want to any specific information about anything that we’ve discussed here.
Wonderful, thank you.