Venture Capital in Florida

The entrepreneurial quest: to make the investment sun shine on Florida startups.

Jamie Grooms is pretty darn good at making something out of nothing.

In 1998, the former tissue bank director founded the University of Florida’s most successful biotech spinout, Regeneration Technologies. He served as CEO during its uncertain infancy, raised its first venture capital (VC) rounds, oversaw its $75 million initial public offering and ultimately led it to a profitable $150 million in revenues by 2001.

Today, RTI’s implants are distributed in nearly 50 countries and used in various sports, orthopedic and trauma surgeries. Headquartered in Alachua, the Florida firm employs 1,100 people worldwide.

But Grooms is hardly a one-hit wonder. 

After he “retired” from RTI Surgical, he cofounded AxoGen Corp., a rapidly growing nerve repair company that recently closed an $18 million offering and moved to NASDAQ.

Grooms’ experiences taking Florida startups from zero to wildly profitable spurred him to take on another steep challenge: CEO of the Florida Institute for the Commercialization of Public Research, a nonprofit organization charged with promoting economic development through technology commercialization with offices in Gainesville and Boca Raton. 

Not surprisingly, there’s been more success.

The Institute provides $50,000 to $300,000 in seed funding to qualified companies based on Florida research.

Essentially, the Institute makes it easier for Florida’s next generation of plucky entrepreneurs.

The uphill battle is gaining momentum, slowly but surely.

“My frustration with raising money locally made me want to do this job,” he says. “The first money we raised was not in Florida, sadly, and it was only a $6 million round.”

Florida didn’t have much of an investment community 17 years ago, Grooms describes. There wasn’t an angel network or any easily accessible infrastructure for early-stage deals. “It was tough.”

Despite being the fourth-most populous state (and on the march to No. 3), Florida is still a small fish in a big pond when it comes to venture capital. Last year, California closed more than 1,638 VC deals worth $14.7 billion in investment, according to 2013 Money Tree Report data by PricewaterhouseCoopers and the National Venture Capital Association. New York brought in 408 deals worth $2.7 billion, while Texas finalized 156 deals worth $1.3 billion. The Sunshine State closed 49 VC deals worth $425 million — representing only 1.4 percent of the nation’s $29 billion in VC funding. Pennies compared to California’s lion’s share of 50 percent.

Where’s the money?

There isn’t an easy answer. But most industry people agree that Florida has the potential to be a much bigger fish. Last year, three Florida research universities out-invented North Carolina’s prestigious Research Triangle Park and the Texas university system, according to the National Academy of Inventors and the Intellectual Property Owners Association report. (See Page 12.) 

Florida Research Consortium CEO Jack Sullivan believes supporting the state’s public and private universities is essential for economic growth. “We expect the onward march of tech, but we fail to recognize that it comes from somewhere and requires investment,” Sullivan says, whose organization is a  strategic partnership of education, business and government formed specifically to advocate for knowledge-based economic development in Florida. “We’ve got to invest in people, ideas and capital in order to be nationally competitive.”

Florida, of course, isn’t the only state vying for the research commercialization gold mine. In 2005, Texas won headlines when it committed $500 million to its Emerging Technology Fund. Ohio’s Third Frontier program and California’s Stem Cell Research and Cures Act have followed accordingly. In comparison, the Florida Institute has garnered just $18 million in public investment for its seed capital and tech commercialization fund since it was formed by the Florida Legislature in 2007. That’s a significant sum to be sure but one that pales next to similar commercialization investments by Florida’s peers.

Florida needs to put programs like the Institute on steroids, cites Sullivan.

Grooms agrees. “I consider the Florida Institute a pilot program that has earned the right to go to the state and ask for more money. We’re doing a good job,” he says. 

The demand outstrips the supply of money. The state approved another $4 million fund this year, but 37 companies have already applied. 

The Florida Institute has funded 29 companies since inception. Its portfolio companies have leveraged state dollars to attract as much as four to five times the amounts provided by the Institute, and jobs created have average salaries of $74,000, according to Florida Institute COO Jane Teague.

“We need to increase the amount of capital available to startups so that they don’t have to leave the state to find funding, and so they can grow and create jobs here for Floridians,” Teague says.

Grooms stressed the need for patience and nurturing, but he remains optimistic the overall investment dynamic is changing. Budding organizations like the Florida Angel Nexus (FAN) are making it easier for entrepreneurs to tap into local capital, he said.

Founded in 2012 by Blaire Martin, a business development consultant at the University of Central Florida Venture Accelerator, and Michael O’Donnell, executive director of UCF’s Center for Innovation and Entrepreneurship, FAN aspires to connect qualified high-growth startups with angel investors all over the state and help members achieve higher returns with less risk. FAN reduces the amount of “legalese” angel investors have to plod through by streamlining fund administration tasks like due diligence and deal flow and providing a centralized pool of potential investors for entrepreneurs to meet. Group investments typically range from $50,000 to $500,000.

Other investor communities are maturing. The Florida Venture Forum, Florida’s largest statewide support organization for VCs and entrepreneurs, recently celebrated its 30-year anniversary. The group has helped entrepreneurs attract more than $2.8 billion to date, according to Kevin Burgoyne, president for the 300-plus member organization.

Other important organizations such as the Florida High Tech Corridor Council and GrowFL are also helping narrow the capital gap.

Grooms estimates it will take five to seven years to truly measure the value of budding investment infrastructure.

Until then, folks like Grooms refuse to sit idle.

“My objective is to help the state understand that they have these economic engines all around, and build infrastructure around these universities and research institutions, so the good work that they do translates into something that can help the Florida economy,” he says.

Grooms jokes that he has an ulterior motive to his altruistic economic development efforts. “On a selfish note, if I start up a company again, I want to have an infrastructure in my backyard that I can tap into. I don’t want to have to get on a plane,” he adds. “So for my mission for the state of Florida and also selfishly: If we can pull off this infrastructure and have this accomplished, I think Florida will not only be attracting the companies out of these universities, it’ll be attracting money from all around the world to come here. Because then we’ll have the right infrastructure to start a company.”

With that kind of steely determination, don’t expect Florida to reside in the 1.4-percent club for very long.

*This article was printed as “Pennies in Heaven.”