Can “Miami Tech” Overtake Silicon Valley?

“Miami is the next Silicon Valley,” tweeted investor Aneel Ranadive, managing partner at the San Francisco-based venture capital fund Soma and one of the owners of the NBA franchise Sacramento Kings. In his message, last January 30th, Aneel states that “ I haven't seen so much excitement among so many brilliant entrepreneurs happy to go to one place since I started working in startups in San Francisco. In 2005, there wasn't one in San Francisco, they were all in South Bay – Mountain View, Cupertino, Sunnyvale, etc.” 

It may just seem like an exciting opinion from a major player in the tech sector, but he's not the only one who thinks so. Anthony Pompliano, an investor specializing in early-stage startups, echoed Ranadive's message saying that “Miami will eventually be bigger than San Francisco's tech landscape. The first is growing exponentially and the second is collapsing.” 

It was precisely through Twitter, just over a year ago, that the local tech movement gained scale and notoriety when Founders Fund director Delian Asparouhov asked on the network: “what if we moved from Silicon Valley to Miami?”. The almost immediate response of Miami Mayor Francis Suarez was to place the attraction of technology companies and industry events as one of management's priorities. 

In 2021, the city saw some local startups surpass the $1 billion market cap, joining the select club of “unicorns”. This is the case of Aleph Holdings – founded by Argentine Gastón Taratura and which has established itself as a global platform for online advertising. And also from Pipe, which left LA for Miami and took just over a year to reach a valuation of $2 billion with a platform that funds other startups with a recurring revenue model (SaaS). 

According to Randy Bullard, partner at M&A firm Morrison and Foerster, “ the pandemic created the Great Scatter, spreading tech talent around the world, and one of the biggest winners of this phenomenon is Miami.” In an article published by the Daily Business Review, he points out that it was “the city that received the largest annual migration of technology workers of any other city in the US, compared to the same period the previous year. 

This “Great Scatter” has been an opportunity for several other regions: Salt Lake City had the largest (16x) increase in unicorn startups in the country compared to 2020, while Pittsburgh has become a reference in the development of autonomous technologies, points out Dealroom 2021 report. According to this study, Miami saw a 15% increase in the number of tech workers last year, the highest result in the country. For companies, one of the attractions is that the cost of labor, even with an increase in the salary level throughout 2021, is $92,000 per year – still below the American average ($104,500).

Challenge Is To Create A Base to Fund the Next Generation of Startups

In Bullard's view, the challenge is to sustain this wave of growth. “The interest of the Miami financial community will depend on how many successful exits companies will produce for their investors. They need to achieve growth at scale with reliable and profitable business models – this is key to attracting continued investment from venture capital and private equity firms and creating a local investor base that can fund the next generation of startups.”  

So far, the trend is up. According to the Crunchbase platform, tech companies across the state of Florida received $1.3 billion in early-stage rounds between January and October 2021. This represents four times the volume of funds received in 2020, which was $277 million. . The number of investments, which averaged 40 per year, exceeded 60 in 2021. 

One of the bets for capital to continue moving towards South Florida is to strengthen the region as a cryptocurrency hub. Miami was the first city to develop its own virtual money and bitcoin fund to help finance public spending. Since last year, it has become the home of some of the most important cryptocurrency, NFT, and blockchain conferences in the US.

And it has created new businesses with this focus. Like Eaglebrook Advisors, a Miami-based technology company that offers a cryptocurrency-focused platform, which received a $20 million investment in January from various funds interested in expanding this market. 

Whether that will be enough, as investors Aneel Ranadive and Anthony Pompliano point out, overcoming San Francisco, only (some) time will tell. But the way is open.

Article Courtesy of [Experience Club] US