On the Money Trail
Finding private investors is an ongoing challenge for many young Florida companies.
Though they hardly know each other, Michael James and Eduardo Hauser have much in common. Both self-funded their respective companies. Both have grand plans for national expansion. And both now are searching for venture capital to fund that growth.
James, CEO of Informa Software in Maitland, is looking for up to $5 million to build a national sales and marketing team for his five-year-old document management business. Hauser, CEO of DailyMe.com in Hollywood, needs $2 million or more to roll out his upstart Internet news delivery service.
"So far, we've been funded by cash flow," says James, who hyped his relationship with document company HP and unique position in the small business space during his 12-minute pitch at the Florida Venture Forum conference in Boca Raton. "This is the right time to roll it out nationally, but putting together a national sales team requires significant investment."
|Venture Capital Investments in Florida
'97 -- $548 million
Source: PricewaterhouseCoopers MoneyTree Survey pwcmoneytree.com
"If we're successful, this will be our first round of institutional venture funding," offers Hauser, a veteran VC solicitor who worked on the initial funding of AOL's Latin American division in the 1990s. "We're not 100% reliant on venture capital. But I believe our goals and the VC's goals can be very closely aligned."
Though small by national standards, venture capitalization is alive and well in Florida.
This February's Florida Venture Forum in Boca Raton entertained a record crowd, says Robin Kovaleski, executive director for the Tampa-based organization. Some 26 presenters -- like James -- made their pitch to some 200 venture capitalists, up 10% from last year, Kovaleski says. One walked out with four term sheets or offers, she adds. "These companies are going to get funded," she boasts.
Last year, Florida had 53 deals worth a combined $304 million, notes Susan O'Dwyer, with PricewaterhouseCoopers. The firm compiles the annual MoneyTree report, a survey of more than 1,000 VCs nationally. Florida's pot of VC capital comprises a meager 1.2% of all venture capital invested nationally and is down dramatically from 2000 when the state attracted $2.6 billion.
In 2006, Florida's top categories for funding: software, medical devices and telecommunications. Almost half (48%) of last year's funding went to "later stage" companies, like Informa, but several, like DailyMe.com, were early stage companies, says O'Dwyer.
Networking and Selling
Pitching a business to the VC community is a never-ending process, Kovaleski says. It starts with networking at meetings of investors and connected individuals, and continues by constantly strengthening the VC relationship. James and Hauser also work with attorneys trained in equity funding.
Entrepreneurs should have realistic expectations about what they'll have to give up in terms of control and ownership to get the financing. And they shouldn't exaggerate the value of their businesses. "It's always dangerous coming in saying, 'My business is worth $100 million, and I have no competition,' " says Craig Burson, managing director with H.I.G. Ventures LLC, Miami, and incoming chairman of the Florida Venture Forum. "They'll turn VCs off, and we'll say 'see you later.' "
In the end, VCs like to see a bit of humility, Burson says. "You can't be threatened to have smart management around you," he says. "At the end of the day, we're betting on management."
For his part, Hauser with DailyMe.com remains a realist. He met several VCs and is talking with three he met at the forum. "The funding
might not come immediately," he says, "but we're building the relationships."
|Where to Start the Hunt for $$|
Looking for an angel?
The Florida Venture Forum
University of Central Florida Venture Lab
Florida High Tech Corridor Council