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Venture capital investing sets new lows in Florida

Drip … drip … drip …

If venture capital investing in Florida firms made a noise, it would sound like a garden hose slowly running out of water. It fell to historic lows last year, whether measured by dollars invested or number of deals.

Overall, venture capital nationwide suffered a weak 2012 but nowhere near the declines registered in Florida, according to the MoneyTree report assembled by PricewaterhouseCoopers and the National Venture Capital Association, which began tracking such investing in 1995.

Venture capitalists put $26.5 billion in 3,698 U.S. deals in 2012, says the MoneyTree report. Last year, Florida captured just $203 million in 34 deals.

Put another way, Florida was home to less than 1 percent of the deals and dollars invested nationwide. Silicon Valley, venture capital's ground zero, alone received $10.8 billion in investments in 2012. But Florida was outclassed last year by such states as Colorado ($560 million) and Texas ($924 million) and even by metro areas like metropolitan Washington, D.C. ($725 million) and Philadelphia ($399 million).

Uncertainty — in elections, taxes, government policy and spending — played a "huge factor" in whether to invest or not, says Tracy Lefteroff, head of PWC's private equity and venture capital practice. "All of these impacted investors' decisions to invest, and venture capitalists weren't any different in that environment."

Florida's anemic share of venture capital was far lower than it was in 2011, when $347 million was invested in 55 deals. And 2012's numbers are a shadow of the all-time high numbers of $2.7 billion invested in 190 Florida deals in 2000.

Oddly, the dropoff of venture capital in the Sunshine State comes just as Florida is showing other signs of economic recovery. Unemployment is falling, though slowly. The roughed-up housing market appears to be turning the corner. And experts forecast that the number of people from other states starting to move here would revive after several stagnant years.

Unfortunately, the scarcity of Florida venture capital also comes just as more people and energy are pouring into projects to spur business startups in Florida and the Tampa Bay area. Universities here are jumping into entrepreneurial programs for their students. Business accelerators (basically boot camps for startups) are on the rise while incubators, co-working space, the arrival of local affiliates of national startup networks and "startup weekends" are flourishing.

But they will all be hard pressed to deliver viable startups that create jobs if venture capitalists — those who accept the risk of funding young firms in exchange for a piece of the action or the promise of big returns later — invest their money elsewhere.

Of Florida's 10 biggest 2012 deals funded by venture capitalists, only one landed in the Tampa Bay area. Tower Cloud, a St. Petersburg wireless telecommunications company founded by former Progress Telecom executive Ron Mudry, received commitments topping $17 million from five venture capital firms.

National Venture Capital Association chief Mark Heesen predicts venture capitalists will remain picky when it comes to funding, preferring veteran entrepreneurs. Says Heesen: "There are an awful lot of companies sitting on the sidelines wanting to acquire more companies."

Mark, send them our way.

Five biggest Florida venture capital deals

CompanyCityWhat they doInvestment
OpenEnglishLLCMiamiMedia/

entertainment
$28 million
LensAROrlandoMedical devices$24 million
Pentaho Corp.OrlandoIT services$23 million
Tower CloudSt. PetersburgWireless

telecom
$17 million
Kony SolutionsOrlandoSoftware$15 million
CompanyCityWhat they doInvestment
OpenEnglishLLCMiamiMedia/

entertainment
$28 million
LensAROrlandoMedical devices$24 million
Pentaho Corp.OrlandoIT services$23 million
Tower CloudSt. PetersburgWireless

telecom
$17 million
Kony SolutionsOrlandoSoftware$15 million

Source: MoneyTree report

Venture capital investing sets new lows in Florida 01/23/13 [Last modified: Wednesday, January 23, 2013 7:48pm]
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