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Investing In Miami’s New Asset Class

As it emerges as a technology hub in the Americas region, investing in tech startups in Miami can be a lucrative business.
Written by Cityscape magazine

Miami,-Florida

Tech startups are increasingly beginning to resemble contemporary art as an asset class that provides another good way of diversifying personal or corporate wealth. As with investments in art, investments in tech startups can be modest or substantial. It all depends on what the startup has to offer and the appetite and financial capacity of the investor.

At the two-day eMerge Americas conference in Miami in April, attendance was capped at 13,000 people due to the size of the space at the Miami Convention Center which is being refurbished. Attendees from 60 countries circulated among three main stages with often simultaneous speakers, areas for early and later stage startups competing for investment dollars as well as exhibitions from major technology companies like Citrix, EMC and Microsoft.

Technology is central

The third eMerge Americas confirmed founder Manny Medina’s vision when he decided several years ago that Miami could become a hotbed of new technology. Medina was a developer who turned to technology with Terremark, an Internet connection point for Latin America that he sold to Verizon in 2011 for USD 1.4 billion.

At a news conference, Medina mused about what eMerge had achieved. It’s “only a platform,” he explained, “priming the ecosystem” of technology companies in South Florida. “Art Basel [Miami] jelled something that was already happening. We have the same hope for eMerge.”

The importance of technology in Miami and around the globe for every industry is obvious. Among founding exhibitors at eMerge who attended in 2014, 2015, and again in 2016 are the Miami Association of Realtors (MAR) – the largest chapter of the U.S. Association with 42,000 members – and EWM, a residential brokerage allied with Christie’s International and belonging to Warren Buffet’s empire that does USD 3 billion annually.

Christopher Zoller, Broker Associate with EWM, said: “The art of real estate is going mobile and high tech. With cell phones, our business is one of demand and of the moment.” Lynda Fernandez, Senior Vice President of Public Relations & International at MAR, added: “We definitely support high tech. We’re a global city so something like this makes sense.”

An April report from CBRE titled The technology sector increases its footprint states: “Office leasing by South Florida tech firms doubled between 2013 and 2015.” For biotech and manufacturing companies, the increase was tenfold. Every year over the past three years workspace companies have signed new leases for more than 100,000 sq. ft.

Quinn Eddins who wrote the report is CBRE’s director of research and analysis. He notes that the region’s ability to attract a multilingual talent pool and the ability to code is a “powerful combination.” As tech companies in the U.S. choose South Florida over other areas, Latin American firms are targeting Miami as their home base.

The growth of shared workspaces is evident. WeWork, for example, has leased 40,000 square feet in Miami Beach and will open another centre in downtown Miami. Pipeline and Büro cater primarily to startups and creative-oriented firms. Airbnb is located in Büro in the Midtown section of Miami.

Venture capital investments

According to the CBRE report, South Florida firms received USD 301 million in 2015, making the area 21st among U.S. metropolitan areas in venture capital investment. Funding went to 26 firms. Most were in biotech and healthcare: USD 50 million for MDLIVE, a tele health company; USD 38 million for Modernizing Medicine, a medical records software company; USD 22.9 million for Orthosensor, an orthopedic medical device producer.

However, the star among young high tech companies in South Florida is Magic Leap, focused on virtual reality and 3D software. It received USD 542 million in 2014, the largest single amount for any company. Last year, Magic Leap was responsible for the largest office transaction when it leased 260,000 sq. ft. for its new headquarters.

So far, no startup at eMerge has ever found this level of investment. However, Mediconecta was selected as the later stage winner of the 2016 Startup Showcase and received USD 100,000. The company is a Latin American tele health innovator that provides on-demand medical consultations via video conference using an in-house network of physicians and a proprietary platform.

In addition, Cetus Labs and Tinker.build were named early stage and university startup winners. Judges included NBA player Elton Brand and Investor Jose Antonio Hernandez-Solaun, who as judges committed to investing in the winning company.

Representatives of venture capital firms are becoming regulars at eMerge. Susan Lyne, Founder and President of BBG Ventures, heads an early stage fund that focuses on women entrepreneurs. So far, BBG has collected 30 startups in its portfolio of consumer internet and mobile startups with at least one female founder.

Among the speakers at eMerge were Ray Kurzweil, Futurist, founder of Singularity University and Director of Engineering at Google; Steve Case, Chairman and CEO of Revolution LLC and Co-Founder of America Online (AOL) and Bibop Gresta, COO and Deputy Chair at Hyperloop. All three are or have been associated with venture funds and have invested directly in startups and young companies as well. Their participation was public unlike Amazon Founder and CEO Jeff Bezos who was spotted in stealth mode among the startups.

Another trend is for major tech companies to field their own venture capital funds. William Crowder heads the Catalyst Fund at Comcast Ventures. He said Catalyst has funded more than 60 startup companies in the past four years.

Funds like Catalyst ensure that the parent – in this case, the media conglomerate Comcast – stays in touch with new technologies.

Some Hollywood, music, and sports stars have begun to invest in tech startups. The actor Ashton Kucher who portrayed Apple co-founder Steve Jobs in a film is a co-founder of A-Grade Investments that funds early stage companies. eMerge veteran and investor, the singer Pitbull, always attends the conference, this time appearing with Cesar Conde, Chairman of NBCUniversal International Group and NBCUniversal Telemundo Enterprises, and Mark Hoffman, President of CNBC. He didn’t speak at the conference or take any public role.

Finally, for small investors, crowd funding may be a good way to enter the startup arena. Kickstarter, Indiegogo, and GoFundMe are some of the best known.  Announced around the time of eMerge is Idea.me which started in Latin America – Argentina, Brazil, Chile, Colombia, Mexico, and Uruguay – and is now coming to the U.S. via the Create Miami campaign.

Up to now, the crowd-funding platform has supported more than 1,700 projects with money from 110,000 people in these countries. “Our goal is to engage and connect the Greater Miami community,” said Director Alejo Nitti. “We want to partner with passionate entrepreneurs to take their creativity around tech and innovation to the next level.” Very likely the investors will be watching.

Nidal Al-Shaker