To view the original article click here.
By James S. Cassel
Special to the Miami Herald
February 15, 2015
With a growing entrepreneurial community in South Florida and increased access to a wide array of funding sources, companies seeking to raise capital have no shortage of options and resources locally and nationally. The key is creating a compelling investment story and setting realistic expectations regarding the time it will take and the valuation you will receive.
Governmental and nonprofit entities are encouraging the creation of new businesses. South Florida has a growing number of early-stage funding options including incubators, accelerators, angel groups, individual angel investors, and strategic business partners. Identifying the best-possible partners/investors is critical to your success. Doing so requires knowing which qualities will complement your goals, strengths, weaknesses and verticals. By researching the possible funding sources, you can better position yourself to find the right investors. Not every type of deal is good for all investors. For example, investors who like technology deals might not like biotech deals.
In South Florida, there are various places you might look for funding. The oldest local angel group is New World Angels. There’s also Accelerated Growth Partners, Scout Ventures, and Krillion Ventures. Venture Hive may supply small grants, office space and mentoring, while Rokk3r Labs might supply development, skill and technical expertise. There are later-stage investors like H.I.G. BioVentures, a life sciences fund, and Medina Capital. This is the tip of the iceberg.
Businesses are also participating in early-stage investing to stay on top of emerging trends. Strategic business partners can be solid mentors. For example, Kaplan Inc. invests in entrepreneurs through its Kaplan EdTech Accelerator, primarily in the education space.
South Florida is a good place to start, but smart entrepreneurs will look beyond the local market to find the right financial partner or investor. The National Venture Capital Association provides many entrepreneur resources, including lists of investors. Active local investors from out of town include Arsenal Venture Partners and Summit Partners.
Before contacting investors, entrepreneurs should develop a strong investment thesis and set realistic expectations. Fundraising takes time and involves many ups and downs. Entrepreneurs should be open to all partners, advice and offers. After many meetings and ideally multiple offers, they may be in the position to begin selecting the right financial partners. Often we see entrepreneurs regretting their decisions to reject strong offers that they had received early on when their valuation expectations were unrealistic.
Again, the investment story differs from the customer story. For first-time entrepreneurs, mentors may help with crafting the investment thesis. South Florida has a strong and growing mentorship ecosystem. The Knight Foundation is funding mentorship organizations such as Endeavor and the Enterprise Development Corporation. Smart entrepreneurs might seek out the many local events and cafés where early-stage investors congregate.
Nothing helps valuation and palatable deal terms like tangible validation such as revenue and customer agreements. We recommend self-funding (bootstrapping) or asking family and friends to provide support before seeking outside funds. Working entrepreneurs who want to start businesses should consider keeping their jobs while building their businesses on the side.
Another consideration is where you’ll be located. Until recently, it was assumed that success required a Silicon Valley or Boston home base. That’s no longer the case. Abundant and generous local resources are changing the dynamic of uprooting and are helping keep startups in South Florida.
When you’re considering where to locate your company, remember you’ll also need to tap into quality intellectual talent. The good news is South Florida’s brand, lifestyle and tax rates are attractive to a high-quality talent pool that continues growing, especially as the region continues gaining visibility and positioning as a tech hub.
It’s also not uncommon for companies to establish headquarters here and have team members based throughout Eastern Europe, South America or other places to take advantage of lower costs of quality labor and development so they can come to market less expensively and more quickly. South Florida can be a great point of entry to the U.S. market.
Given the variety of options for funding startups, the decision-making process can be overwhelming. Do not marry the first financial partner who serenades you or say “no” after one date or two — take the time to identify the right partners and confirm whether you need any partners at all. It’s always smart to seek assistance from consultants with deep experience in your industry and in guiding companies through the funding process.
James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle-market companies. www.casselsalpeter.com