2008 evalueserve venture capital research mahaveer

Business Research

Identification of
Venture Capital
Prospects
for
City of Cape Coral

May 20, 2008

Evalueserve Business Research
Study on Identification of Venture Capital Prospects for City of Cape Coral

Contents
1 Executive Summary...............................................................................4
2 United States VC Industry.....................................................................6
2.1 Overview............................................................................................................ 6
2.2 Analysis on VC Locations............................................................................... 13
3 Target Industries for VC Investments ..........................................................14
3.1 Venture Capital Industry in Florida ................................................................ 14
3.2 VC Industry Focus in Florida.......................................................................... 16
3.3 Startups in the Target Industries.................................................................... 23
4 Potential VC Resources for Cape Coral........................................................24
4.1 Venture Capital Firms ..................................................................................... 25
4.2 Angel Investors ............................................................................................... 27
4.3 Corporate Venture Capital Investors.............................................................. 28
4.4 Venture Capital Funds in Florida.................................................................... 29
4.5 Venture Capital Networks in Florida............................................................... 31
5 Venture Capital Development Plan ..............................................................34
5.1 Snapshot of Case Studies .............................................................................. 34
5.2 Primary Research Responses ........................................................................ 37
5.3 Development Plan ........................................................................................... 41
6 Appendix A – Research Methodology ..........................................................55
7 Appendix B – Select Florida Area VC Development .......................................56
7.1 Palm County .................................................................................................... 56
7.2 Gainesville – University of Florida ................................................................. 56
7.3 Venture Capital Development in Escambia County....................................... 57
8 Appendix C – VC Development Outside Florida ............................................60
8.1 Venture Capital Developments – Ohio ........................................................... 60
8.2 State Strategies for Mobilizing Investment Capital........................................ 63
8.3 The Texas Case ............................................................................................... 65
8.4 Venture Capital: Oklahoma Capital Investment Board .................................. 66
8.5 PA Public School Employees’ Retirement System (PSERS)......................... 67
8.6 Finance Authority of Maine, Maine................................................................. 68
9 Appendix D – Primary Research Contacts ....................................................70
9.1 VC Firms & Networks Interested in Discussing Cape Coral.......................... 70
9.2 Angel Investor and Venture Capital Networks Contacted ............................. 70
9.3 List of Primary Respondents.......................................................................... 71
9.4 List of Florida Ophthalmology Centers.......................................................... 72
10 Appendix E – Interview Transcripts ............................................................. 73
11 Evalueserve Disclaimer .............................................................................90

Page 2 of 90


List of Figures
Figure 1: Value of US VC Deals, 2001 – Q1 2007 ..................................................................... 6
Figure 2: US VC Investments by Stage, Q1 2006 vs. Q1 2007................................................... 7
Figure 3: US VC Deal Value– Q1 2006 vs. Q1 2007 ($ million) .................................................. 9
Figure 4: US VC Deals, Q1 2006 vs. Q1 2007......................................................................... 10
Figure 5: Top Five Sectors - VC-Backed Employment (millions)............................................... 11
Figure 6: Exit Options Exercised by Venture Capitalists........................................................... 12
Figure 7: US VC Firm Concentration (Q1 2007)....................................................................... 13
Figure 8: US VC Investments 1990-2006 ............................................................................... 14
Figure 9: Venture Capital Investment in Florida ....................................................................... 15
Figure 10: Venture Capital-backed Industry Comparison ........................................................... 16
Figure 11: Target Industries for Cape Coral VC Investments...................................................... 22
Figure 12: Source of Investment in Florida (2004–2006)............................................................ 24
Figure 13: Concentration of Florida VC Firms 2006–07.............................................................. 26
Figure 14: VC Firms Located in Florida (as of 2006).................................................................. 27
Figure 15: Suggestions by VCs for Cape Coral VC Development............................................... 38
Figure 16: Factors Important for Development of VC Investments.............................................. 39
Figure 17: Factors Important for Development of VC Investments.............................................. 42
Figure 18: Generation of Funds for VC Investments .................................................................. 48
Figure 19: Benefits from the Conference ................................................................................... 53
Figure 20: VC Investments in Cleveland ($$ Million and Number of Companies Financed) ......... 61
Figure 21: Companies by Sector Receiving VC Financing in Cleveland – 2004–06..................... 62
Figure 22: Source of Capital for Fund Generation...................................................................... 63

List of Tables
Table 1: US VC Investments by Stage – 2007 ...................................................................... 16
Table 2: Relevant Florida Research Centers......................................................................... 19
Table 3: Marine Sciences Institutes in Florida ....................................................................... 21
Table 4: Venture Capital Break-up in Florida (in $million) ...................................................... 26
Table 5: Fund Strategy – South Atlantic Venture Funds ........................................................ 30
Table 6: Florida VC and Angel Investor Alliances.................................................................. 33
Table 7: Cases and their Implications for the City.................................................................. 34
Table 8: Proposed Fund Strategies ...................................................................................... 50
Table 9: UF VC Achievements in 2005 ................................................................................. 56
Table 10: Venture Investment Program of OCIB ..................................................................... 66
Table 11: List of Florida Ophthalmology Centers..................................................................... 72

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1 Executive Summary

Venture capital financing is a significant determinant in attraction and growth of new companies in
science and technology sectors. The objective of this project is to identify and develop venture capital
financing capacity for development of businesses in the city of Cape Coral. One output of this project is a
development plan to encourage investments by different types of investors in the targeted industries that
are at development stages in the city.

The Scope of Services for this project includes:
• Identify startups in target industries that are at a stage in their development that they could be
recruited to the city.
• Identify regional venture capital resources that have interest in expanding their investment to Cape
Coral projects.
• Identify Cape Coral resources that could be transformed into venture capital resources.
• Design a venture capital development plan for the city of Cape Coral.

The research indicates that the City of Cape Coral has several options for facilitating development of
venture capital investments. These efforts can address both the supply-side (availability of VC capital)
and demand-side (companies requiring VC capital) of the venture capital equation.

Current Scenario
The City of Cape Coral, like many other cities/counties in the state of Florida, has not been successful in
attracting venture capitalists to invest in the city. The state ranks 15th in terms of VC investments, despite
being the fourth most populous state. VC investments are present in only a few counties in the state. Out
of a total of 67 counties, Hillsborough, Dade, Palm Beach, and Orange counties are the only ones with
substantial VC presence.

VC Resources for the City
VC firms are mainly based in the counties with university clusters or with an active research base. These
firms have invested mainly in software medical devices and services companies. According to the
research results, the city of Cape Coral has the following options as the most feasible resources:
• Angel Investors: To encourage VC investments the city needs to develop a network of people
who have interest in investing in business deals; such networks/associations are classified as
Angel Investors’ Networks. The city can focus on mobilizing and attracting this wealthy
population to form a network of angel investors.
• Venture Capital Networks: The city can attract existing venture capital firms/networks to invest
in city-based deals. The report identifies some of the VCs who expressed their willingness to
invest in a deal in the City (Appendix E).
• Venture Capital Funds in Florida: These funds are dedicated for VC investments. Attracting
these funds along with pension and CAPCO funds will enable the city to support early-stage
Florida home-grown companies.

Recommendations for the City of Cape Coral
The research suggests that the City of Cape Coral can prioritize its efforts for the development of venture
capital investments. These efforts can address both the supply-side (availability of VC capital) and
demand-side (companies requiring VC capital) of the venture capital equation.

Page 4 of 90


1. Create research facilities and recruit tenants, for example, pharmaceutical or clinical research
laboratories. Economic Development research continues to validate that no less than 80% of
business enterprises will not locate or expand unless suitable building space is available. The city’s
Academic Village property can be a substantial asset if it is developed in a manner suitable for
research companies.

2. Identify local, high-net worth individuals (perhaps retired executives) and mobilize this group to
support formation of a venture capital network and grass-roots resources for attraction of VC capital
and VC clients. The network can provide a platform for angel investors, VC firms, and private equity
groups to interact with entrepreneurs seeking investments in their ventures.
• Involvement as educators
• Involvement as mentors
• Involvement as entrepreneurs/investors

3. Provide Business Incentives
There has been a trend for VCs to enter a market when they have confidence in the capabilities of
entrepreneurs. To gain the confidence of VCs, the region could offer various incentives to businesses
to minimize their risks. Following are some examples of effective business incentives that could be
implemented by the City of Cape Coral:
• Learning from ‘HBITC and VC investment Tax Credit’ Indiana and others
• Marketing the city to attract investments – Learning from ‘Putting Imagination to Work’ –
Orlando
• Entrepreneur Development with the help of dedicated companies.
4. Facilitate creation of venture capital funds by offering tax exemptions that are within the jurisdiction of
the city.
• Network of venture capital or angel investments – Learning from the case of ‘Regional Business
Alliance’, Naples
• Community investment funds – Learning from the case of ‘Finance Authority of Maine”
• Pension funds – Learning from the case of State Strategies
• Attracting CAPCO funding - Learning from the case of State Strategies.

5. Host VC Conferences
• Create an entrepreneur forum.
• Hold an annual conference for business leaders and angel investors to encourage long-term
fund generation for businesses and entrepreneurs.
• Create an annual business competition allowing new businesses to present ideas to investors.
• Conferences will help to meet the following objectives:
o Provide a platform to share ideas, expertise, and experience among members
o Reduce the initial monitoring time and cost that is required when a venture capital
investment is carried out individually
o Provide an opportune platform for investors to choose from a variety of business ideas
6. Increase participation with existing VC networks and funds in the region
• Venture Capital Networks: The city could attract existing venture capital firms/networks to invest
in city-based deals. The report identifies some of the VCs who expressed their willingness to
invest in a deal in the City (Appendix E).
• Venture Capital Funds in Florida: These funds are dedicated for VC investments. Attracting
these funds along with pension and CAPCO funds could enable the city to support early-stage
Florida home-grown companies.

Page 5 of 90


2 United States VC Industry
2.1 Overview

2.1.1 VC Market – Size and Growth
The US is a well-established venture capital market. In 2006, about $28 billion was invested by venture
capitalists. Venture capital fundraising is 0.2% of the total US GDP. Venture Capital firms invested $7.1
billion (778 deals) during Q1 2007. This is the highest quarterly investment since Q4 2001. Though the
investments (value) in Q1 2007 have increased by nearly 13.5% (as compared to Q1 2006), the number
of deals has declined. This indicates that VCs prefer higher investments (value) in selective
companies/establishments rather than spreading investments across a large number of companies.1

The following figure depicts the total value of VC deals during 2001–Q1 2007

Figure 1: Value of US VC Deals, 2001 – Q1 2007

45
40.723
40

35

30
$ in billions

22.192 26.09
25
21.837
22.827
20
19.708
15

10

5

0
2001 2002 2003 2004 2005 2006

4,49 3,04 3,52
# Deals 3,086 2,904 3,041 3,107 3,522 778

Source: MoneyTree Report by PriceWaterHouseCoopers

1
Source: http://www.nvca.org/pdf/07Q1MT-PR-FINAL.pdf,
https://www.pwcmoneytree.com/exhibits/MoneyTreeReport_Q1_2007.pdf,
http://www.ey.com/global/download.nsf/International/SGM_-_VC_-_Insight_-
_May_2006/USDfile/EY_SGM_VC_Insight_Report_May2006.pdf

Page 6 of 90


VC investments declined from approximately $41 billion in 2001 to approximately $20 billion in 2003,
primarily as a result of the 9/11 attack and its effect on new businesses during that time. Post-2003, there
has been a gradual increase in investments to reach about $23 billion in 2006. The future outlook is
2
positive; and investments are expected to increase. VCs are not only investing in businesses in the US,
but also looking at investing in the emerging economies, which can provide high returns.3

2.1.2 VC Funding – Cycle1
Over the years, the pattern of VC investments has changed from providing seed capital/early stage
capital to funding companies during the growth stage. Venture capitalists have started showing
preference for investments in the later stages, as they provide easier exit routes and lower risks (e.g. the
companies are established and there is less risk of failure). This trend has also been reflected in venture
capital investment patterns during the first quarter of 2007.

The following figure illustrates venture capital investments by stage development for Q1 2006 and Q1
2007.

Figure 2: US VC Investments by Stage, Q1 2006 vs. Q1 2007

Q1 2007
169
Startup/Seed
213 Q1 2006

963
Early Stage
831

2,875
Expansion
2,565

3,049
Later Stage
2,724

0 500 1,000 1,500 2,000 2,500 3,000 3,500
In USD million


For the later stages, VC investment deals increased from 267 in Q1 2006 to 245 in Q1 2007 totaling $3
billion which is approximately 43% of the total VC investments in the US in Q1 2007. Seed and early-
stage investments have declined to $1.1 billion during the same period.

Venture capital financing for expansion stage companies has increased from $2.65 billion in Q4 2006 to
$2.9 billion in Q1 2007. The number of deals declined from 327 to 274, indicating that the investment per
project has increased.

2
Source: http://news.zdnet.com/2100-9588_22-5860055.html
3
http://nvca.org/pdf/US_VC_Rpt_06_Final.pdf

Page 7 of 90


2.1.3 Key Industry Trends and Future Outlook 1
The trend in Venture Capital investment has been changing from investment in software companies to
other industries such as biotechnology, medical equipment, media and entertainment, Web 2.0 wireless
technology, and alternative energy. However, software is still one of the favorite investment options for
some venture capitalists.

The life sciences industry, which comprises both biotechnology companies and medical equipment
companies, attracted 36% of the total venture capital investments in Q1 2007, amounting to $2.6 billion,
an all-time high. Biotechnology companies require sophisticated instruments for their R&D labs, thereby
needing huge funding.

Venture Capitalists are actively investing in this industry to help companies set up their R&D labs and
meet regulatory requirements. In Q1 2007, investment in the biotechnology industry was $1.5 billion (102
deals). This industry received the highest investments in Q1 2007. The investment on medical equipment
companies increased to $1.08 billion in Q1 2007, which is 60% higher than that in Q4 2006.

Currently, the software industry is lagging behind the life sciences industry in terms of attracting
investments. Investment in the software industry declined to $1.1 billion, registering only 193 deals in Q1
2007, when investment in the software industry was 10% less than in Q4 2006. It is to be noted that
among all industries, the software industry witnessed the highest number of deals in Q1 2007, which is
almost 25% of the total deals concluded during the same period.

Page 8 of 90


The following figure shows the value of VC deals in the US in Q1 2006 and 2007.

Figure 3: US VC Deal Value– Q1 2006 vs. Q1 2007 ($ million)

1,489
Biotechnology 878

1,098
Software 1,374

1,078
Medical Devices and Equipment
727

588
Telecommunications 581

501
Industrial/Energy
287
489
Media and Entertainment
444

358
Semiconductors 489

288
IT Services 308

275
Networking and Equipment 242

212
Business Products and Services
152

177
Electronics/Instrumentation 202

161
Healthcare Services 124

94
Retailing/Distribution 39

93
Computers and Peripherals 167
Q1 2007
77
Financial Services 183 Q1 2006
75
Consumer Products and Services 136

0 200 400 600 800 1,000 1,200 1,400 1,600


Page 9 of 90


The following figure shows the number of US VC deals in Q1 2007 and Q1 2006.

Figure 4: US VC Deals, Q1 2006 vs. Q1 2007

Biotechnology 102
94

Software 193
228

Medical Devices and Equipment 96
78

Telecommunications 63
71

Industrial/Energy 44
39

Media and Entertainment 72
69

Semiconductors 42
59

IT Services 38
43

Networking and Equipment 29
30

Business Products and Services 22
25

Electronics/Instrumentation 16
25

Healthcare Services 10
22

Retailing/Distribution 12
10

Computers and Peripherals 9
21 Q1 2007
Financial Services 17
24
Q1 2006
Consumer Products and Services 12
15

0 50 100 150 200 250


Media and entertainment is another emerging industry that is attracting the interest of VCs. In this
particular industry, the total deal value has increased by 16% to $0.49 billion in Q1 2007 over the
previous quarter a year ago. The number of deals decreased from 78 in the previous quarter to 72 in Q1
2007.

Investment in the telecommunications industry increased by 27% in Q1 2007 over Q1 2006. The total
investment in this sector was $0.59 billion, out of which $0.37 billion was invested in the wireless
communication business.

Internet-based companies (classified as companies whose business model is dependent on the Internet,
irrespective of the nature of business or industry) witnessed a surge in investments from VCs. In Q1
2007, the investments increased to $1.3 billion (167 deals), which is 31% higher than that in Q4 2006.
This has been the highest quarterly investment in this particular industry in the last five years. The change
in the VC funding pattern was also witnessed in this industry, wherein the value per deal was larger than
that witnessed in the previous quarters.

Another upcoming sector of interest to VCs is clean technology. This sector comprises companies in
power supply and energy conservation, alternative energy, pollution control and recycling. In Q1 2007,
this sector received $264 million as VC funding (23 deals), which is an increase of 42% over the previous
quarter. In 2006, the total investment in this sector stood at $1.5 billion.

Page 10 of 90


In Q1 2007, other industries including computers/peripherals, networking and equipment,
electronics/instrumentation, industrial energy, IT services and retailing/distribution witnessed increased
VC funding. However, industries such as semiconductors and consumer products witnessed a decline in
VC investments.

VC Impact on Employment
In 2005, venture capitalists financed media and entertainment and retail companies that employed over 2
million Americans, followed by the computers and peripherals industry with 1.9 million people. The
computers and peripherals industry was the leading industry with revenue worth $466 billion, followed by
the media/entertainment/retail industry with $299.0 billion in 2005.

The following figure shows the leading sectors by VC backed employment

Figure 5: Top Five Sectors - VC-Backed Employment (millions)

VC-backed Employment Sector Employment
25

20

15

10

5

0
Media/Retail Computer Energy Financial Services Software
Periherals

Source: Report on Venture Impact 2004 by Global Insight

Page 11 of 90


Exit Options Exercised by Venture Capitalists

Figure 6 depicts the exit options exercised by VCs during 1991–2000.

Figure 6: Exit Options Exercised by Venture Capitalists

18%
33%

14%

35%

Acquired Still Private or Unknown IPO Known Failed

Source: Report on Venture Impact by Global Insight

2.1.4 Industry Drivers and Inhibitors 4
Key drivers for VCs in the US include innovations in the field of biotechnology, the latest developments in
sectors such as wireless technology, Web 2.0, and media. The other drivers that facilitated venture
capital investments in the US include strong regulatory protection for intellectual property and tax
structure.

4
Source : http://www.altassets.net/news/arc/2007/nz10787.php , http://www.ey.com/global/download.nsf/International/SGM_-_VC_-
_Insight_-_May_2006/USDfile/EY_SGM_VC_Insight_Report_May2006.pdf

Page 12 of 90


2.2 Analysis on VC Locations
2.2.1 Industry Hubs
The venture capital industry is primarily located in the Silicon Valley and New England Regions. The
following figure depicts a concentration of venture capital firms regionally distributed throughout the US.

Figure 7: US VC Firm Concentration (Q1 2007)


Most VC firms are concentrated in California, with over 100 firms. Silicon Valley, being the software and
IT hub, has attracted the maximum number of VC firms. It accounts for a major proportion of VCs in
California followed by Orange County, San Diego, and Massachusetts. Florida, with 11–50 VCs, lies in
the category of states with moderate to low VC concentration.

Page 13 of 90


3 Target Industries for VC Investments

3.1 Venture Capital Industry in Florida
Florida experienced heavy investments during the IT Bubble and witnessed a huge decline in investments
after the IT Bubble burst. The trends in VC investments in the state have been similar to that of the US
VC investments, but the state has not been a favorite place of VCs. In 2004, the venture capital
investment for Florida stood at $300 million, a mere 1.42% of the total venture capital funding in the US.

The following figure shows the trend in VC investments in the US for the period 1990-2006.

Figure 8: US VC Investments 1990-2006

100,000

80,000
In $million

60,000

40,000

20,000

0
1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006
NVCA/PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report;
Data: Thomson Financial

The peak in the total venture investment was due to the IT bubble that subsequently burst in 2001. VC
investments in the US recovered and stabilized in the following years. However, the State of Florida was
the worst hit and witnessed considerable decline.

Page 14 of 90


The following figure shows the trend in VC investments in Florida for the period 1998-2006.

Figure 9: Venture Capital Investment in Florida

3,000

2,500
In USD million

2,000

1,500

1,000

500

0
1998 1999 2000 2001 2002 2003 2004 2005 2006

Year 1998 1999 2000 2001 2002 2003 2004 2005 2006
Number of
65 124 180 113 57 61 57 59 53
Deals
Source: NVCA/PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report;

The year 2007 provided a good start to VC investments in the US, with nationwide investments totaling
$7.1 billion representing 977 deals in Q2 2007 -- the highest number of deals per quarter after Q3 2001.

According to the MoneyTree report, Florida-based start-ups collected only 0.5% of the $5.8 billion funds
distributed nationally in 2005. This indicates that Florida was a less favorable place for start-ups.
However, in the last two quarters, this trend has reversed. About 15 Florida-based firms generated
$127.1 million in venture capital funding. The top three investments in the region were as follows:
• $45 million in Sirion Holdings Inc. (Sirion Therapeutics Inc.)
• $18 million in Lifestyle Family Fitness
• $12.55 million in Applied Genetic Technologies Corp.

Robin Kovelski, the Executive Director of the Florida Venture Forum, said, “Individuals are moving out of
their homes and moving to places to invest.” This is clear from the fact that venture capital funding
reached its peak after 2001 by attracting $1.7 billion representing 252 first-time deals in Q1 and $1.8
billion representing 340 first-time deals in Q2, 2007.

Some of the main highlights of the deals and investments in different stages are illustrated in the following
table.

Page 15 of 90


Table 1: US VC Investments by Stage – 2007
Stage of Investment Quarter/2007 $ Investment / ## of Deals Deal Volume%
First Quarter $1.3 billion/289 deals 34
Seed/Early Stage
Second Quarter $1.6 billion/378 deals 39
First Quarter $2.9 billion/ 287 deals 34
Expansion Stage
Second Quarter $2.4 billion/ 303 deals 31
First Quarter $3.2 billion/ 269 deals 32
Later Stage
Second Quarter $3.1 billion/ 296 deals 30
Source: http://www.bizjournals.com/tampabay/stories/2007/08/06/daily22.html

3.2 VC Industry Focus in Florida
The two sectors representing the largest share of venture-backed companies in Florida are software and
medical devices. If we look at the industry-wide distribution, the software sector managed to reach the
highest level after the ‘IT bubble burst’ and generated $1.5 billion through 248 deals nationwide. Other
industries that witnessed an increase in both the number and value of deals are as follows:
• Biotechnology
• Consumer products and services
• Networking and equipment
• Semiconductors
• Industrial/energy
• Computers and peripherals

The following figure shows the comparison between Florida and the US in terms of industries being
backed by VCs - 2006.

Figure 10: Venture Capital-backed Industry Comparison

Electronics 5%
3% US FL
Telecommunication 5%
10%
Semiconductor 5%
8%
Consumer 6%
2%
Media Entertainment 7%
6%
HC Svcs 10%
2%
Software 23%
19%
Medical Devices 25%
10%

0% 5% 10% 15% 20% 25% 30%
% Share

Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data:
Thomson Financial

Page 16 of 90


One of the most important features of all successful VC-attractive locations is that there has been
development of a specific industry cluster in these locations — Silicon Valley (technology products,
especially software); Texas (telecommunications and semiconductor); Israel (communications and
technology products); Palm Beach County (biotechnology); and others.

On similar lines, the City of Cape Coral Economic Development Office is taking initiatives to develop
sector clusters in the Pine Island Corridor, Hancock Creek and Indian Oaks Commerce Parks and the
Academic Village. Research supports a focus on the following industries in order to provide investment
opportunities for VCs:
• Life sciences
• IT
• Professional services
• Environmental and Marine sciences.

These industries can be targeted to generate VC investment in the city. These industries were identified
based on the following primary research parameters:
• Most of the primary research respondents recommended a focus on life sciences, professional
services, and retail businesses to generate higher VC investment for a city like Cape Coral.
• There are resources to support such businesses in the city.
• Venture capitalists have been targeting investments in industries such as life sciences and
marine sciences.

3.2.1 Life Sciences
According to the primary research, most VCs in Florida are seeking investments in the life sciences
sector. This sector has also been one of the sectors preferred by VCs throughout the US. In Q1 2007, the
biotechnology sector secured maximum investments with $1,489 million in the US. The life sciences
industry also includes ‘medical devices and equipment’ and ‘healthcare services’ with $1,078 million and
$161 million investments, respectively, in the US.5

In Florida, VC investment in life sciences has mainly been around university clusters or has been
associated with research centers. Business clusters in Gainesville University, University of Central
Florida, Orlando, and Scripps in the Palm Beach County are among the leading life sciences clusters in
Florida.

With a population of over 150,000, the City of Cape Coral has plenty of demand for health services. The
city provides fair opportunities for the health services business which can attract venture backed
investments.

The city also has a division of a small eye testing research center -- the Ft. Myers office of Retina
Consultants of Southwest Florida, PA and the National Ophthalmic Research Institute at Retina
Consultants of Southwest Florida, PA. There are other satellite branches at Pt. Charlotte, Cape Coral,
Bonita Springs, and Naples. This will not only help meet the growing demand for health services, but may
also be leveraged to encourage VC financing in the city.

5
Source : www.technopoli.net

Page 17 of 90


In 2006, Scripps signed an agreement with the University of Central Florida in Orlando to encourage
research cooperation in the region. Scripps Florida has been able to attract a good number of companies
in the biotechnology space in the state since its establishment in 2003. About 75% of total federal funding
(more than $54 billion) for research is generated by the National Institutes of Health (a division of the US
Department of Health and Human Services).

3.2.1.1 Importance of Regional Research Centers for Life Sciences
Absence of a research center is one of the major obstacles in attracting VC investments in the region.
According to the VCs of Florida, the presence of research centers has been one of the major factors
responsible for development of VC’s across the globe.

According to primary research with the venture capital firms, having a research center provides the
following benefits to the city/region:
• It will help in the creation of a cluster of businesses in and around the center; most VCs look for
university clusters and research centers to invest in a region.
• A research center not only helps in generating business ideas for entrepreneurs, but also
provides a talent pool for the existing businesses.

The Lee County Port Authority has concluded the RFP (Request for Proposal) process and has
successfully attracted private sector investors who have announced intentions to construct a research
park on public lands leased from the authority. If Cape Coral wishes to be a location for such enterprises,
this model is one that could be replicated at the Academic Village site.

3.2.1.2 Research Lab Attraction Targets
Research labs, (for example: clinical-research laboratories and pharmaceutical research centers) do not
necessarily require regular university assistance because some research centers are run by doctors and
hospitals associated with nearby locations or they operate as independent research facilities utilizing
funds from clients and public and private sector grants.

When considering the potential for such laboratories in Cape Coral, it is prudent to consider existing
enterprises that provide patient care linked to clinical trials and other research. The main health-related
concerns for the aging population of the City of Cape Coral are6:
• Cardiology
• Ophthalmology
• Dermatology
• Dental

6
Source : Primary Research

Page 18 of 90


Table 2: Relevant Florida Research Centers

Name About the research center Implications
The Florida Hospital, a chain of hospitals in
Central Florida, has dedicated research centers
Florida Hospital The cardiology research center
for each of the main medical departments
Institute of of the Florida Hospital can
specializing in hemostasis, thrombosis and
Translational provide a base of expertise for
cancer. The cardiology research center performs
Research 7 expanded research in these
approximately 1500 advanced cardiac
disciplines.
procedures annually, the highest number across
the US.
Tigris Pharmaceuticals, a privately held drug
Tigris development company, specializes in finding
The pharmaceutical company is
Pharmaceuticals cures for cancer patients. The company is in its
in the expansion stage, which
Inc.
8 development stage. In January 2007, the firm,
could prove beneficial for Cape
with the help of NGN Capital LLC (a VC firm),
Coral.
received funding of $16 million through private
placement of Convertible Preferred Stock.
Established in 1947, Hill Top Research is one of
the major global clinical research services
Hill Top companies operating through various research The city can use the expertise
Research
9 centers across North America. Other services of the company to deal with skin
offered by the company are CRO services for and climate-related diseases.
healthcare, personal care and oral care
industries.
This institute is based at the Retina Consultants
National The institute that mainly deals in
of Southwest Florida and serves through satellite
Ophthalmic clinical trials will not only
branches located in Pt. Charlotte, Cape Coral,
Research develop the quality of life in the
Bonita Springs and Naples. This research
Institute
10 city but will also promote a
institute works in association with Retina
talent pool.
Consultants of Southwest Florida.

(A list of other ophthalmology centers across Florida is given in the Appendix.)

7
Source: http://www.flhosp.org/services/cardio/index.htm
8
Source: http://www.tigrispharma.com/
9
Source: http://www.hill-top.com/
10
Source: http://www.nori.md/index.htm

Page 19 of 90


3.2.2 Professional Services
Venture capitalists or angel investors seek innovative avenues where they can earn a high rate of return
(at least above 25%) and an easy exit route in 3-7 years11. Professional Services, such as data
processing, equipment rental, personal and office supply services,
advertising, travel and tourism and facilities providers, are not
capital-intensive. These business services reach break-even at a
According to Florida’s
very early stage and therefore can be an option from the investors’
Department of Labor Market
money-recovery point of view.
Statistics, the business and
professional services
In the City of Cape Coral, the service industry can be of great
sector experienced a
importance because of the following reasons:
growth rate of 4.9%, leading
• Low capital intensive to the creation of 64,800
• High academic qualification is not required; vocational new jobs in 2006.
training may also help
• Acts as a support system to already-existing businesses in
and around a particular area.

Building on a core competency of professional/business services, the city could develop itself as an
outsourcing hub and be counted as a preferred location for certain back-end operations, rather than India,
Brazil or China. The benefits that businesses can derive are as follows: 12
• No foreign currency fluctuations – if compared to outsourcing to India/China
• Availability of resources - English speaking and Spanish community
• US norms – no unforeseen government changes.
•
However, to pursue this strategy, the City will need to initiate and continue regular higher-education
programs. According to a senior executive at Communications Equity Associates, supporting large
technology-based industries may be difficult for the City of Cape Coral due to the lack of opportunity for
higher studies in highly technical fields.

3.2.3 Retail Trade
Retail trade is mentioned in this report because it provides a quality of life that is demanded by advanced
technology companies and their VCs.

In the period 2003-2008, Cape Coral experienced an unprecedented increase in construction of retail
trade centers. Retail is a major employer in the region. This is important because it indicates the quality of
workforce, which is an important factor in attracting technology/life science companies and their VCs.

The financial industry is well-established in the city of Cape Coral and has private and public banks and
other financial institutions. The sectors that have strong presence in the country provide a huge potential
for various support services in the city, such as office supplies, facility providers, and courier services.

11
Source: Primary Research and Evalueserve Analysis
12
Source: Primary Research

Page 20 of 90


3.2.4 Marine Sciences
According to the report from Enterprise Florida, marine sciences are considered to be one of the
emerging technologies in the country.

Cape Coral has 400 miles of canals: Marine research institutes are usually set up in places that have a
proximity to large seas and oceans. Moreover, the ties with universities provide them with laboratories
and supporting infrastructure primarily in the areas of biology and chemistry, with special emphasis on
marine science. Several satellite centers of this type have been established in the southwest Florida gulf
coast area but increased concern about global warming and ocean health may provide a spring board for
additional such investment – with facilities in Cape Coral.

Table 3: Marine Sciences Institutes in Florida
Marine Institute Associated University Location in Florida
Center of Excellence in Biomedical and
Florida Atlantic University Boca Raton, southeast Florida
Marine Biotechnology
St. James Island in northwest
Coastal and Marine Laboratory Florida State University
Florida
Harbor Branch Oceanographic Inst. Florida Atlantic University North Ft. Pierce, Florida
Florida Institute of Sea Harbor Drive
Hubbs-SeaWorld Research Institute
Technology, UCF Orlando, Florida
Rosenstiel School of Marine and Rickenbacker Causeway
University of Miami
Atmospheric Studies Miami, Florida
Whitney Laboratory for Marine Ocean Shore Blvd.
University of Florida
Bioscience St. Augustine, Florida
Source: Enterprise Florida

Ocean science and technology is a growing national priority and there has been a growing demand for
institutes dealing with this subject in Florida. These institutes can also provide courses to students in
marine science and marine biotechnology.

One model that warrants special attention is the Florida Atlantic University/Harbor Branch Oceanographic
Institution Marine Science Building, which was built as a result of the efforts of visionary academic,
community and legislative leaders. The state-of-the-art facility received $11 million in state appropriations.
The laboratories and supporting infrastructure are primarily for studies in biology and chemistry with
special emphasis on marine science.

The 40,000 square foot, joint-use facility will provide students with undergraduate and graduate degrees,
and classes in marine biology, marine science, marine biotechnology, natural resources and
environmental education. In addition to the labs, the building includes meeting rooms that offer video
conference facilities.

Page 21 of 90


The estuary industry generated total revenue of about $111 billion
every year13 thus making this industry a major part of the marine The Estuary Industry employs
industry. An estuary is of great economic importance as it supports 28 million people in the US, in
multiple direct and support business sectors such as various direct and support
• Fisheries’ Sciences tasks, of which 1.5 million are
• Oceanographic Research and Education employed in fishing alone.
• Commercial Fishing
• Agriculture
• Tourism.

To conserve such a rich source of food, employment and revenue, the Estuary Restoration Act of 2000
allocated $275 million for a period of five years to restore the various Estuary Habitats across the US. Out
of the 102 estuaries present across the US, four estuaries are present in Florida:
• Tampa Bay
• Sarasota Bay
• Charlotte Harbor
• Indian River.

Based on primary and secondary research, Evalueserve makes the following recommendations on
preferred industry sectors that could attract VC investment to Cape Coral.

The following figure shows details of target industries for the city.

Figure 11: Target Industries for Cape Coral VC Investments

Top Scoring Industries

• Medical Devices and Equipment
• Marine Sciences
• Professional Services

Other Industries

• IT Services and ITES
• Fragmented Industries
• Media and Entertainment

Source: Evalueserve Analysis

13
Source: www.estuaries.org/?id=10

Page 22 of 90


3.3 Start-Ups in the Target Industries
The industries detailed above are those that have received VC investment in the recent past. However,
the executives from the venture capital networks and VC firms, such as the Regional Business Alliance
and the Florida Venture Forum, agreed that there has been very little VC activity in the Cape Coral and
Southwest Florida region to date. This lack of a success story in VC investments in the city will likely be a
deterrent. Around 75 respondents from various companies, venture capitalists, angel investors and
executives of VC networks held this opinion; and the research suggests that in the near future there are
no startups or existing companies expanding business in the city which require VC financing.

Nevertheless, there are a number of categories of companies we have designated as “fragmented” that
are demonstrating they can also attract venture capital.

3.3.1 Fragmented Industries14
Fragmented industries are usually labor-intensive industries with lower technical requirements and
comparatively lesser organized frameworks. The degree of competition is also not high in such industries.
Some of the common examples of fragmented industries include:
• Book Publishing
• Landscaping and plant nurseries
• Restaurant industry
• Clothing retailers
• Computer components/hardware retail
• Cement/bulk building suppliers.

Development of these industries can also be a viable option for attracting VC investments in the City of
Cape Coral. These companies are promising prospects for Cape Coral because they do not require
heavy investments for infrastructure and operations. Moreover, they are not dependent on technical
knowledge of the workforce. These are mostly region-focused companies that target local customers.

They are fragmented because of the following reasons:
• Low barriers to entry
• Highly specialized market
• High transportation costs
• Lack of standardization
• Primarily having local focus and develop more due to trust

According to primary research with local VC firms and networks, start-ups/companies in fragmented
industries are the ones that can be targeted for VC investment in the city.

14
Source: Primary Research and http://planningskills.com/glossary/186.php

Page 23 of 90


4 Potential VC Resources for Cape Coral
The major portion of venture capital investment in Florida comes from New York metro, Silicon Valley,
and the Southeast regions of the US. Approximately 7% of the total investments are from outside the US.

The following figure depicts the sources of VC financing in Florida for the period 2004-2006.

Figure 12: Source of Investment in Florida (2004–2006)

10%
10%

7%
13%

14%

15%
16%

15%

NY Metro Silicon Valley Southeast New England

DC/Metroplex Philadelphia Metro Non US Other
Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report;

The City of Cape Coral faces a challenge of limited investors for venture capital projects. According to the
research (primary and secondary), we have not identified any venture capital/angel investor network in
the city. In addition, we have not uncovered any venture capital investments in the city. This lack of VC
experience is an impediment that must be overcome.

The challenge for the city government is to encourage its wealthy, but stealthy (not much enthusiasm
about investing in businesses) population to develop a VC network that can invest in the new/existing
businesses.

The lack of deal flow for venture capital firms in Southwest Florida is a longtime concern. However,
recently there have been developments in VC investment in cities such as Naples and Fort Myers.

Following are the sources of capital that the City of Cape Coral can seek for making seed and venture
investments in its industrial initiatives:

• Venture Capital Firms
• Angel Investors
• Corporate Venture Capital Investors
• VC Funds in Florida
• VC Networks in Florida

Page 24 of 90


4.1 Venture Capital Firms
A VC firm is generally a private partnership or closely-held corporation funded by private and public
pension funds, wealthy individuals, endowment funds, foundations, corporations, foreign investors, angel
investors, etc., and venture capitalists.15 They usually invest, alongside management of potential
companies with high growth prospects, to attain considerable economic advantages in future.

The firms often adopt an active role through management participation, such as contribution through their
expertise, technical skills, and business experience gained from other ventures. Sometimes, their
contribution is limited to overseeing the venture apart from providing information to a beginning
entrepreneur.

The major sectors16 attracting VC investments in Florida are the following:
• Software
• Medical Devices and Healthcare
• Services.

The primary research shows that venture capital investment in a region is directly proportionate to the
amount of deal flow occurring in that region. Furthermore, deal flow is a result of the existing business
and research developments in the region. The other factors that VC firms usually seek before
approaching any region are as follows:
• Presence of Network and Industry clusters
• Existence of an Investment Partner
• Accessibility of the Region
• Existence of Intellectual Capital and Technology Transfer

4.1.1 VC Firms in Florida
Currently, there are about 35 venture capital firms in the State of Florida. A majority of venture capital
firms are concentrated in populated counties, such as Hillsborough and Dade.17

Similar to many other states in the US, the sectors receiving venture capital investment in Florida are
software, medical devices, biotechnology, and telecommunications. For instance, the software company,
Informa, based in Maitland in Orange County received risk capital in 2006.18

According to a Moneytree report, Florida based start-ups collected just 0.5% of $5.8 billion investments
distributed nationally in 2005. This is a clear indicator of Florida not being a preferred destination for start-
19
ups.

15
Source: http://www.indianchild.com/venture-capital-firms.htm
16
Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report
17
Source: https://www.pwcmoneytree.com/MTPublic/ns/nav.jsp?page=vcreg,
http://www.eflorida.com/ContentSubpage.aspx?id=416, http://www.businessflorida.com/leaders/venture_capital.asp
18
Source: http://www.floridatrend.com/print_article.asp?aID=46794
19
Source: http://www.tampabay.org/press.asp?rls_id=1326&cat_id=1&

Page 25 of 90


Table 4: Venture Capital Distribution in Florida (in $million)
Stage 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Seed/Early Stage 9.4 9.5 9.7 11.7 14.0 19.4 14.0 10.1 10.1 11.3 8.6 6.7

Later/Expansion 30.9 32.8 36.1 46.6 82.0 107.3 58.4 43.3 45.6 56.9 61.0 57.3
Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial

The following figure shows the concentration of venture capital firms throughout the State of Florida.

Figure 13: Concentration of Florida VC Firms 2006–07

Source: Price Waterhouse Coopers, Enterprise Florida, Business Florida

Note: There is a possibility that there are more venture capital firms present in the region, but there is no
additional information on the counties marked in white.

Research institutions are spread throughout Florida, unlike those in Massachusetts, California, Georgia,
th
and North Carolina, where research centers are well-developed and dense. Florida ranks 15 in terms of
VC investments, despite being the fourth-most populous state.

According to a senior executive at InterSouth Partners based in North Carolina, “It takes little more than a
brief car ride to see most of the investment opportunities in other states,” but in Florida, he has to spend a
good amount of time scheduling and arranging travel to have a look at the opportunities.

Page 26 of 90


The following figure shows the number of venture capital firms present in Florida in 2006.

Figure 14: VC Firms Located in Florida (as of 2006)

9
8
8
7
Number of VCs

6
5
5
4
4
3 3
3
2 2
2
1 1 1 1 1 1 1 1
1
0
i
mp
a
am nd
o ille ton ale each each akes burg sota yers ples bles land
Ta Mi Orla sonv a R a derd B B iL rs ra M Na l Ga Mait
k c u lm lm iam Pete Sa Ft. ra
Jac Bo t. La t Pa Pa M . Co
F es St
W
VC Location - Counties

Source: Business Florida

The Miami to West Palm corridor and the Tampa Bay to Orlando regions have been the hotbeds for
Florida’s VC investments. However, most primary respondents feel that there are not enough deals to
match the available wealth in the region. Recently, there has been a fair amount of investments in the
technology-oriented space. VCs are looking for companies with strong market potential and high barriers
20
to entry (patents).

The government of Florida has developed strong initiatives to encourage technological development. To
develop business incubation the State has established “Centers of Excellence” at research universities
such as Florida Atlantic University, the University of Florida, and the University of Central Florida.

According to Carl Roston, Chairman of Florida Venture Forum Inc., the dynamics of VC investment are
now focused at life-sciences with the entry of Scripps, a leader in bioscience research in the region.
Recently there has also been a spurt in investments in the medical industry, nanotechnology, retail
business, real estate support services, and online marketing. Homeland security and services for the
elderly have also witnessed growth in VC-backed financing.21

4.2 Angel Investors
According to primary research findings, attracting angel investors to the small and medium enterprises
(SME) segment can be one of the most preferred approaches to introducing VC financing in the city.
Angel investors are usually wealthy, well-educated individuals who are either retired senior executives or
who operated their own businesses at some point in time.

20
21

Page 27 of 90


Such investors typically utilize income and capital gain tax relief and seek high capital growth of about
35–40% per annum, with some active management involvement. They normally invest in entities that are
close to their home (within a 100 mile radius) and may be involved in up to four investments at one time.

Advantages of Angel Investors versus a Venture Capital Firm
• Angel investors do not invest in deals over $1 million, whereas VC firms typically do not look at
deals under this amount. Thus, angel investors can be useful for generating SME businesses.
Angels typically do not own a large stake in the company as a venture capital firm would, thus
investors willing to invest with little funds can be attracted to finance these businesses.
• A benefit of being an angel investor is the availability of certain tax incentives for investing in
American small businesses.
• Angels tend to be more involved in businesses that they invest in and provide assistance in ways
that venture capital firms do not. The city needs to attract affluent residents to be able to have good
VC development.

According to the senior executive from Crossbow Ventures, individuals are the largest source of fresh
capital in lesser developed regions. In 2005, more than half of all new venture capital raised in Canada
came from individuals who contributed $1.3 billion out of the total $2.2 billion invested. Angel investors do
not just provide capital, but also help in developing businesses with their experience, support, mentoring,
and contacts.

According to a senior executive from Communications Equity Associates, a VC firm based in Tampa, a
good number of wealthy people are present in the region that are backing businesses in their community.
From a financial perspective, it is better for a group of investors to fund different businesses, rather than
an individual investing in a single business. This helps in diversifying risk. The development of a group of
angels will not only help small and medium businesses, but also attract other investors to the region.

These angel investors prefer to invest in businesses in which they have prior expertise. They also prefer
deals where they have a fair idea of the local business and community22. Therefore, identifying such
participants from the local investors will help in creating a network of such angel investors.

The list of Angel Investor Networks based in Florida is given in the Appendix.

4.3 Corporate Venture Capital Investors23
Corporations, for pure profit motives, invest at the pre-seed stage in commercializing technologies as they
shop for new technologies to enhance their processes or launch new products. Corporate Venture Capital
(CVC) is when a company invests in emerging companies and business ideas that have the future
potential to add value to their business. Corporate Venture Capital (CVC) investors can be attracted to
the city as the city provides a good potential market.

An example of CVC is the Corporate Venture Group (CVG) based in Virginia that was formed by the
National Venture Capital Association (NVCA). CVG is a group of corporate investors who help to provide
information, education, and networking for corporations, thereby enabling them to concentrate on
innovation and achieve growth through successful strategic venturing. CVG aims to build better
communication and practical cooperation across all parties in the venture process: corporations, venture
capitalists, start-up companies, and the research community.

22
23
Source: http://www.henley-incubator.com/downloads/report_corporate_venture_survey.pdf

Page 28 of 90


Another example of CVC is the Connecticut Venture Group.24 It is a voluntary professional organization
that is committed to connecting the leading Venture Investment Professionals with high-growth emerging
companies. The key objective of the group is to assist in growing enterprises through the promotion of
capital investments in the region. CVC is funded by individual and corporate members as well as various
sponsorships.

CVCs usually invest in new regions and technologies to hedge their risk. For example, Intel and Dow
operate venture capital funds, supporting entrepreneurial ventures along with other venture capitalists, to
stay close to new developments and scout for acquisitions.

The different goals that a CVC has include the following:
• Source of new products (i.e., outsourced R&D) – this is most commonly found in the
pharmaceutical and FMCG (Fast Moving Consumer Goods) industries (mainly by Proctor &
Gamble)
• Identify emerging technologies and capabilities that directly impact the strategic focus areas of
the business
• Invest as a Limited Partner in an established VC fund focusing on a narrow area of company
interest
• Monetize internal innovations – an emerging model in the healthcare field, where the fund
invests in spin outs of internally developed products.

4.4 Venture Capital Funds in Florida
VC funds are the prime investors in early stage and seed capital investments. They
usually invest in lesser developed regions and SME businesses.

4.4.1 The Florida Opportunity Fund
On June 20, 2007, $30 million was approved by the Florida
Capital Formation Act to encourage VC investment in the state.
“Attracting such VC funds
The state has allocated $30 million to the fund. It is a fund that
will help the city to develop
consists of various smaller funds from different investors that will
initial VC investments.”
invest in other VC-backed funds, thereby minimizing the risk for
investors. According to the policy under this fund, the state will Robin Kovaleski, Executive
invest in equal proportion to that of VCs as long as it is directed Director, Florida Venture
towards companies in Florida. There will not be any support for Forum.
investments outside Florida.

Following are the specific points in the fund’s distribution:
• $4 million will be allocated for early-stage gap financing to enable research at the university level
and turn them into spin-off companies.
• $1 million has been allocated to create a platform where venture capitalists and potential portfolio
companies can meet.

24
Source : http://www.cvg.org/

Page 29 of 90


4.4.1.1 South Atlantic Venture Funds25

Table 5: Fund Strategy – South Atlantic Venture Funds

Description/Benefits
Provide capital for privately owned and rapidly growing companies located in
Objective
Florida, the Southeastern United States and Texas.
The firm is the largest VC firm in Florida and is one of the largest private equity
Capital Reserves
firms in the Southeast US with committed capital of $173 million.
The fund will generate investments from a selected group of pension funds,
Resources university endowments, foundations, and financial institutions. The fund has
some successful entrepreneurs as its Limited Partners.
Invest in private, high growth companies in a number of industries including
Investment communications, healthcare, technology, manufacturing, consumer products, and
Strategy specialty retail.
Make equity investments ranging in size from $1.5 million to $7.5 million.

4.4.2 The Cypress Equity Fund
In 1995, the Enterprise Florida Capital Partnership, Inc. created the Cypress Equity Fund as part of a
strategy to facilitate VC funding in businesses in Florida. The fund’s purpose is to facilitate initial venture
capital investments by Florida private financial institutions and institutional investors, and provide a
means to encourage national venture capital managers to consider investment opportunities in Florida.

The Cypress Equity Fund was designed as a “fund of funds” to invest in national private venture capital
Funds that, in turn, will invest in companies with high growth potential.

The Cypress Equity Fund obtained $35.5 million in commitments from 5 private financial institutions
($20.5 million) and one public institutional investor, the Florida State Board of Administration ($15 million).
The Cypress Equity Fund Management Corporation, an entity established by the Capital Development
Board, is responsible for the overall management of the fund.

4.4.3 Community Investment Funds
Community investment, also called alternative investment, is the investment in community loan funds that
provide capital to local entrepreneurs, cooperative or community-oriented enterprises (such as worker or
consumer co-operatives), regional development bonds, not-for-profit enterprises or community loan
funds. These funds use volunteer and public resources to establish funds, identify borrowers, manage
risk, and raise capital. These low-cost resources enable community investment funds to provide capital
that cannot be offered by banks and other for-profit financial institutions. They are also responsible for the
26
development of local business apart from providing training, networking, and other technical support.

Canada and the UK employ such funds to encourage SMEs in their regions.27 The community
development funds initiated in Nova Scotia, Canada and the UK have been explained in the Appendix.

25
Source : http://www.southatlantic.com/
26
Source: http://www.socialinvestment.ca/comminvestment.htm
27
Source: Development of Federal Tax Credits to support Community Investment in Canada, November 2003

Page 30 of 90


4.5 Venture Capital Networks in Florida
VC networks usually emerge from the initiatives of a few retirees and amateur businessmen. For
instance, the Regional Business Alliance in Naples is comprised of retired executives based in Naples.

Venture Capital Networks are generally non-profit organizations working continuously to help emerging
and established businesses by bridging the gap between entrepreneurs and the capital required by them.
These networks serve as a platform for the match-making of an entrepreneur and a venture capital
investor. This matching is either done online, by comparing the parameters and criteria provided by
investors and entrepreneurs, or through periodic meetings and presentation programs, like the Florida
Venture Capital Conference organized by the Florida Venture Forum.

The networks bring together angel investors, venture capital firms, and private equity groups seeking new
investment opportunities globally or in a particular region. The board of directors of such networks
consists of a few angel investors and academicians who are involved in research labs and incubator
facilities at their universities and people from the top level management of venture capital firms and
private equity groups. Sometimes, there may be representation from government bodies such as the
Economic Development Councils.
28
Besides match-making, the Venture Capital Networks perform the following functions:
• Gather and maintain information about opportunities for venture capital investment in emerging
businesses.
• Profile the active informal investors’ investment criteria and objectives.
• Provide mentorship for both entrepreneurs and investors either free of cost or for a reasonable fee.
• Maintain the database including the profiled entrepreneurs, investors, contributions from the
network, and results from these contributions
• Help in developing new entrepreneurs through various training and development programs at
regional and co-regional levels.
• Provide a platform for different investors to interact and support each other.

4.5.1 Factors for Location of VC Networks
According to a senior executive at SpringBoard Capital LLC. in Jacksonville, VC networks are formed to
serve as a community for angel investors in a particular area. These networks generally originate from the
home cities of angel investors. For example, Springboard Capital was formed to provide a common
platform to a group of 40 angel investors in 2002. These investors try to include a few VC firms and
academicians on the board and then work to create a Venture Capital Fund.

A network is also located in regions that provide attractive business opportunities, facilities such as
research labs and incubators, or the presence of some lucrative government incentives. These factors
contribute to generating and maintaining deal-flow in a particular area. According to a senior executive at
Angel Investment Forum of Florida, the forum is planning to open a new chapter in North Orlando. The
main driver behind this decision was the ‘Re-Branding Strategy to Attract Technology Companies in
Orlando’ that helped Orlando become a technology hub and thus generated a prominent deal-flow.

A senior executive at the Emergent Growth Fund said that the main reasons for locating a network in a
particular area are the presence of Attractive Intellectual Property and Business Resources. The
Emergent Growth Fund enjoys the presence of the University of Florida, which contributes to the
development of intellectual property. Moreover, various research centers have helped the area become a
hub for biotechnology.
28
Source: http://www.legis.nd.gov/cencode/t54c34.pdf

Page 31 of 90


4.5.2 Florida Angel Investor and Venture Capital Networks
Primary research has been conducted with senior officials at the following VC networks.
4.5.2.1 The Regional Business Alliance (RBA)29

• The network, established in 2004-05, consists of 250 Fortune-500 CEOs and other current or
inactive CEOs. The main goal of these executives is to attract more businesses to the region by
using the talent, networks, and experience of the members.
• The core team of 50 members monitors the working of the network. The network mainly focuses on
deals in South West Florida.
• The main goal of the alliance is to attract small- and mid-sized companies primarily in the area of
healthcare, information technology, and education.
• The goal is to develop Southwest Florida as a headquarters for small- and mid-sized companies of
the Southern US by 2015. The ultimate focus is on the diversification of the economy of Southwest
Florida.
• Due to continuous efforts by the RBA the VC fund known as Florida Gulfshore Capital (FCG) was
formed. FCG has made significant contributions in the field of consumer goods, industrial and
medical products, and business services. FCG does not prefer real estate and finance firms.
• Case Studies Demonstrating RBA’s Support
o RBA has given business groups a platform to learn about the opportunities in Naples and the
Southeastern regions of Florida as potential business destinations.
o Lehigh Technology, a New York-based rubber-powder manufacturing firm, shifted its base to
Naples due to the efforts of the RBA.
o Another example is Emerging Med, a New York-based healthcare service that operates
Florida’s cancer-trial matching service today.

30
4.5.2.2 The Gulf Coast Venture Forum

• The network, headquartered in Naples, was formed in 2001. The forum strives to develop a
platform where entrepreneurs, private equity groups, venture capital firms, and angel investors
can come together for the common goal of promoting Southwest Florida’s new and emerging
businesses.
• To increase capital investment in businesses on the west coast, the forum profiles private equity
groups and venture capital across the US.
• The forum uses the network of high net worth individuals (HNIs) to help start-up firms through
various mentorship programs. There is a separate angel club that acts as a network for HNIs.
• The board oversees the activities of the forum and is made up of local professionals, business
leaders, and academicians. The board consists of representatives from the main partners of the
firms, such as Mentor Capital Partners, Aspen Capital, McIntyre Properties, and The O'Reilley
Group.
31
4.5.2.3 The Emergent Growth Fund (Gainesville), LLC

• The fund focuses on early stage companies that innovate leading edge products or patent
technologies wherein an investor can have a quick rate of return.
• The headquarters are located in Gainesville because of the presence of the University of Florida
and the cluster of HNIs in that area.

29
Source : RBA Website
30
Source: http://www.gcvf.com
31
Source: http://www.emergentgrowth.com/public/index.asp

Page 32 of 90


• The members of the fund are business people and investors who are innovators in their fields.
The members have created a fund that is completely member-managed.
• The fund focuses on the Gainesville-Ocala area because the area is a hub for the biotech and
biomedical industries.

4.5.2.4 Other Networks Across Florida

There are a few more non-profit alliances and networks present across Florida. They are mainly located
in regions having existing deal-flow or around an area, where incubators and research labs are present.

Table 6: Florida VC and Angel Investor Alliances

Network Location Key Focus: Area and Industry
Gulf Coast Venture Forum Naples Southwest Florida; No limit to industry or size
Emergent Growth Fund Gainesville Gainesville-Ocala; Biotech and Biomedical
Southeast Florida; Mainly non-technology based such
Springboard Capital Jacksonville
as Financial Services, Retail and Consumer Goods.
Florida Venture Forum Tampa Florida State; Nothing specific
New World Angels Boca Raton Not beyond Florida; Science & Technology
Start-up Florida Sarasota Florida State; IT, Communications, and Internet markets
Treasure Coast Angel Treasure Coast & Central Florida; Medical Services, IT
Stuart
Investment Forum & Real Estate
Florida Angel Investment
Jacksonville Florida State; Nothing Specific
Alliance

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2008 evalueserve venture capital research mahaveer

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2008 evalueserve venture capital research mahaveer