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For capital-hungry Florida startups, a new way to attract investors emerges

David Etheredge, left, CEO of SavvyCard, is working with David Chitester’s Florida Funders, which pools investors’ resources to help fund startups like Etheredge’s. SavvyCard offers members of businesses and organizations a sophisticated online business card that can link potential customers directly to products and services.

MELISSA LYTTLE   |   Times
David Etheredge, left, CEO of SavvyCard, is working with David Chitester’s Florida Funders, which pools investors’ resources to help fund startups like Etheredge’s. SavvyCard offers members of businesses and organizations a sophisticated online business card that can link potential customers directly to products and services.

MELISSA LYTTLE | Times
Published May 2, 2014

Venture capital — the early funding that can make or break business startups — remains about as common in Florida as icebergs.

Its scarcity is the Achilles' heel endangering entrepreneurs who start businesses here but feel pressured to move their companies to other states where capital is more plentiful.

A fresh idea out of Tampa wants to change that and persuade more businesses that start here to stay here.

A company debuted last month that, like an online dating service, aims to connect Tampa Bay and Florida entrepreneurs with wealthy investors. Called Florida Funders (floridafunders.com) and co-founded by entrepreneur David Chitester, the service aims to package moderate-sized investments into pools of capital that fund individual companies.

Think of it as a critical building block that may help fill the missing link — money — in Florida's slowly emerging "entrepreneurial ecosystem."

"We had firsthand experience in how hard it was to raise funds," recalls Chitester, 61, who with wife Kathleen started and sold Chitester Management and Tampa online education provider Red Vector, among other startups.

Thanks to the Internet and a boom in entrepreneurs, Chitester says the volume of startups is soaring. But venture capital to back these young businesses here is not keeping up.

Traditional venture capital investors tend to look at more mature startups with track records in selling their products. Even some "angel investors" known for funding younger companies are banding together and shifting their money to more established businesses. What's lacking is a source of funding right after a startup grows beyond its earliest source of financing, typically known as "family and friends."

"There is a need for what Florida Funders hopes to do in connecting more sophisticated investors to startups with less than $1 million in sales," Chitester says. His goal: to keep more entrepreneurs in the state.

Florida Funders was created after Congress passed the Jumpstart Our Business Start-ups Act, or JOBS, which eased the rules that govern how to connect investors and startups.

Four companies currently are on view at the Florida Funders website as potential investments. Chitester says several dozen more startups from around the state are in the process of applying to appear on the site.

One startup called SavvyCard, based in downtown St. Petersburg, will be the first to receive funding via Florida Funders. SavvyCard offers members of businesses and organizations a sophisticated online business card that can link potential customers directly to products and services. Real estate agents in Florida, for example, are using SavvyCard to link home buyers directly to specific houses for sale and video that showcases a home's details.

David Etheredge, SavvyCard co-founder and CEO, says Florida Funders allows startups to tap a type of investor that's been largely inaccessible. To invest directly in SavvyCard requires a minimum amount of $50,000. Casual investors are an administrative headache for startups and a turnoff for big investors.

By tapping Florida Funders, however, accredited investors can commit as little as $1,000 and still invest in the company as long as their combined investment tops $50,000.

Etheredge, 48, says his fast growing, 18-employee firm has close to $60,000 committed from Florida Funders and expects to top $100,000 before the current capital-raising effort closes on May 15.

In the bigger picture, this sum does not represent big bucks for SavvyCard, which is in the process of raising $1.5 million and plans another funding round later this year. But it is a nice addition that could grow as a funding source once Florida Funders can prove it can deliver investors to startups and show investors that startups featured online tend to be worthy, longer-term investments.

Another startup that appears in a "preview" mode on the Florida Funders site is Palm Harbor-based Alorum. The business, which offers enhanced online marketing tools, was co-founded by Daniel James Scott, a prominent player in the regional startup community who also teaches entrepreneur studies at USF St. Petersburg.

"I believe that the concept of crowdsourcing equity funding" — as Scott characterizes the capital-raising role of Florida Funders — "is the future," he said. "I could not be more thrilled to see visionaries such as David (Chitester) and his team stepping up to the plate to advance our ecosystem."

Chitester's job at Florida Funders is a twofold challenge: He must find quality startups in Florida willing to raise funds via his online service; and he must find wealthy and accredited investors willing to consider putting at least a slice of their investing funds into promising Florida startups.

That's not a slam dunk. These investments are higher-risk-for-higher-gain opportunities. That's why only wealthier and presumably more savvy investors are allowed to participate. Florida is home to 500,000 SEC-accredited investors.

Florida Funders makes money by taking a percentage of any gain in the funds created for its investors.

Says Chitester: "We have to find companies that will be successful or we get nothing at all."

The same might be said of Tampa Bay's still-unfolding startup community.

Robert Trigaux can be reached at rtrigaux@tampabay.com.

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