October 26, 2014

A Florida TaxWatch economic report

Growing Florida's Startup Companies

| 12/17/2013

Across Florida, private sector entrepreneurs and researchers at state and private universities are constantly developing products and ideas that can be commercialized, and the economic impact of developing the startup companies born from those ideas within the state can be significant. Florida is currently expanding its capacity to keep startup companies in the state and is helping develop companies that will provide high-wage jobs to Floridians.

Florida Career ConnectionsThe benefits of enhancing entrepreneurship and innovative capacity are substantial. One statistic highly noted by economic development professionals is that innovative regions (regions with high levels of intellectual property and local entrepreneurs) have 125% higher employment growth, 58% higher wage growth, 109% higher productivity, and less sensitivity to economic downturns than the average region.1 Developing these startup businesses in Florida can help diversify the economies of all regions in our state.

THE PATH OF A SUCCESSFUL STARTUP COMPANY

Innovators and entrepreneurs bring many benefits to the region: they set up small businesses that bring high-wage jobs and investment returns. Angel investor networks and business incubator networks are vital tools that enable entrepreneurs to take their ideas and inventions and turn them into profitable companies.2

Funding is typically the biggest impediment to starting a self-sustaining business. Entrepreneurs often engage in several rounds of financing, spending substantial amounts of time making the same investment pitch, using up valuable time that they could use to focus on growing their company. Angel networks help to solve this issue by bringing together potential investors and entrepreneurs, so entrepreneurs do not need to spend time pitching their business plan multiple times to multiple investors.

Share of Angel Funding Dollars (by U.S. Region)
New England
18.7%
California
17.1%
Great Lakes
14.5%
Southeast
10.1%
Great Plains
9.7%
Mid-Atlantic
8.9%
Texas
6.1%
New York
5.9%
Northwest
4.6%
Southwest 4.5%
Source: “Halo Report” Q2 2013. Angel Resource Institute

Angel investors provide the majority of U.S. startup funding in the early investment stages by filling the gap between start up and sustainability. Angel investors invest in more than 60,000 companies per year -- 22 times more companies than venture capital firms. In 2010, angel investors across the U.S. invested about $20.10 billion. Massachusetts and California lead the way, but the Southeast U.S. as a region comes in fourth according to the Angel Resource Institute. (See chart at right)

Also, unlike venture capitalists, angel investors provide experience and guidance to startups -- not just financing -- in return for a stake in the company. Since Angel investors invest in more companies in earlier stages of development, they can play a key role in boosting innovation and startups in Florida.

1   U.S. Small Business Administration, www.sba.gov
2   The October and November 2011 Florida TaxWatch Economic Commentaries, Angel and Venture Capital in Florida, and Florida’s Business Incubators detail how angel investors and business incubators work in more detail.

» NEXT PAGE: Successes in Florida and Improving Florida's Entrepreneurship Ecosystem

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