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Around the State- Southwest/ Tampa Bay- June 2000

Half-Empty or Half-Full?
A huge amount of money is flowing into Tampa's VC market, but the region still falls short in key areas.

By Stacie Kress Booker

When H.C. Wainwright & Co., Boston's venerable investment banker, set up shop in Tampa this spring, the area's venture capital market got a major dose of both credibility and capital. Wainwright plans to act as a merchant banker for venture capitalists in the region as well as to set up its own $30-million to $50-million venture capital fund. It joins more than a half-dozen venture capital firms in Tampa, including both newly created CAPCOs such as Advantage Capital Partners and Stonehenge Capital, as well as traditional firms like Lovett Miller & Co.

With $4.5 billion in investment funds, Wainwright brings additional clout to a market that's already built up a good head of steam. Bay area deals totaled close to $9 million in the fourth quarter last year, and there are several on deck for the second quarter this year. "Tampa is one of the top growing (venture capital) marketplaces in the Southeast," says Pete Peterson, managing director of Wainwright's new office. "There's a tremendous amount of deal flow."

The region is riding on some pretty big statewide coattails. Last year, Florida hit an all-time high of $725.6 million in venture capital funding, up 140% from the previous year. A quarterly survey by PricewaterhouseCoopers credits several large later-stage investments, more venture capital funds on the scene and the state's new CAPCO program, which is beginning to have an impact on the statewide growth.

But despite the momentum and the dose of new capital, the Bay area still must overcome some important obstacles before it can become a major player -- including a shortage of management and entrepreneurial talent to move startup businesses forward.

One of Tampa's oldest venture firms, South Atlantic Venture Funds, thinks there is too much money chasing too few good deals. The firm believes it can no longer continue to generate the 35% annualized rate of return that made it famous; in March, South Atlantic announced that it would close out its existing funds. "It's a great time for the entrepreneur to raise money, but I think it's going to be a little more difficult for investors," says Chairman Don Burton.

Other venture capitalists don't agree, however. They say that while Tampa is not as mature a venture capital market as New York or Boston, it can continue to generate success stories, including home-grown firms like Intermedia Communications and Z-Tel Communications.

Marty Traber, a partner with the law firm Foley & Lardner in Tampa, represents more than $250 million in newly created investment funds targeted for Internet and technology startups. Traber says the biggest obstacle to further growth in the VC market is the lack of a business incubator, which can be a crucial information clearinghouse hooking up investors and companies. Orlando, Miami and Jacksonville all have incubators.

An incubator could provide entrepreneurs with a safe harbor in which to grow their businesses. In addition to providing low-cost office space, the incubator can provide critical business development guidance from local experts.

In the News

Clearwater -- Tampa Bay Water gave consultants the go-ahead to prepare feasibility studies for a second desalination plant intended to provide the additional 20-million gallons of water needed to meet the region's estimated needs by 2007. The plant could eliminate three proposed groundwater pumping sites. Construction on the region's first desalination plant in Hillsborough County is to begin this fall and come on line in October 2002.

Lakeland -- A recent survey concludes that new and expanding businesses in Lakeland are more likely to lease rather than purchase commercial property. The report, published by the Society of Industrial and Office Realtors, says lease rates are unchanged while sales prices and construction costs are up $1 to $2 per square foot. The survey also found that construction of high-tech and R&D real estate failed to meet the 6% to 10% projected increase, coming in at less than 5% of new commercial construction.

Attorney Ronald T. Murphy will spend 13 months in prison for selling unregistered securities in NOPEC Corp. Murphy, who pleaded guilty, had served as corporate counsel to the company until 1997. NOPEC raised more than $20 million through stock sales, primarily to Florida investors.

Naples -- Downtown Naples is seeing a resurgence in medical practices moving back to the area. A doctors group, Specialists in Urology Building Partnership, recently purchased the Panda Pavilion, a 5,500-sq.-ft. building on Tamiami Trail North, for $1.3 million. Naples Community Hospital's redevelopment of its Grand Central Station complex is spurring the relocation of medical offices, but a no-growth county commission could slow redevelopment plans.

St. Petersburg -- Source One Mortgage Corp. has a new name: CitiMortgage. Last year it joined the empire of international financial services giant Citigroup when it was purchased by St. Louis-based Citibank Mortgage. The name change, however, did not occur until April.

Raymond James (NYSE-RJF) faces a $40-million fine for breach of contract and fraud in a case stemming from a 1994 agreement with Covington, Ky-based Corporex Cos. The case involved two Raymond James subsidiaries, RJ Mortgage Acceptance Corp. and Raymond James & Associates. Raymond James plans to appeal the decision.

Tampa -- Intermedia Communications (Nasdaq-ICIX) signed a deal to provide bundled high-speed Internet, data and voice services to the Charles E. Smith Commercial Realty portfolio of office buildings, comprising 17 million square feet. Charles E. Smith Commercial Realty is the largest commercial property owner/manager in the mid-Atlantic. In a separate deal, Intermedia has added Los Angeles to the list of cities where it offers DSL service. The others are Atlanta, Austin and Dallas in Texas, Boston, Chicago, New York and San Francisco.

Florida 2012, the group trying to coordinate the region's bid to host the 2012 Olympic Games, has raised nearly $9 million and has upped its fund-raising goal to $11 million. Big-ticket donors pledging $200,000 include Outback Steakhouse, the Tampa Bay Buccaneers and Sykes Enterprises. Florida 2012 must submit its bid by mid-December. Finalists will be announced in spring 2002.

The developers who brought to fruition the Channelside waterfront retail development, scheduled to open this November, are setting their sights even higher. The Hogan Group wants to build an office complex in downtown Tampa consisting of three 40-story skyscrapers, an amphitheater, a park and a covered walkway that would connect to Channelside. Price tag on the project: $200 million. First, however, to secure funding the firm must line up tenants for about a third of the 500,000 square feet of new office space.

A Uniroyal Buy

SARASOTA -- Uniroyal Technology Corp. (Nasdaq-UTCI) is buying Sterling, Va.-based Sterling Semiconductor, a developer of silicon carbide technology and materials used in wireless communications, industrial process controls and optoelectronics. Uniroyal, which was a plastic products manufacturer until 1997, now makes high-brightness light emitting diodes (LEDs) at its Tampa optoelectronics facility. The deal gives Sterling 1.46 million shares of Uniroyal stock. Uniroyal also will assume Sterling's $4 million of long-term debt.