A quarterly survey shows that venture capital outlays in Florida totaled $192 million in the first half of the year, 27 percent more than in the same period last year and the biggest six-month total since 2007.
Mike Seemuth
2011-08-17 12:00:00 AM
Scientist and serial entrepreneur Leonard Pinchuk runs a medical device company that attracted $2 million of fresh venture capital this year and could have gotten much more — part of a broader increase in VC investments statewide.
A quarterly survey shows that venture capital outlays in Florida totaled $192 million in the first half of the year, 27 percent more than in the same period last year and the biggest six-month total since 2007. The survey by the National Venture Capital Association and professional services firm PcW shows that venture capital sources invested an average of $6.85 million in 28 Florida deals from January through June.
One of those VC deals was engineered by Pinchuk, co-founder and chief executive of Innfocus, a Miami company that is developing a drug-eluting stent inserted in the eye to treat glaucoma.
"We think we have the world's best treatment for glaucoma," he said, and some VC investors apparently agree.
Pinchuk said after he made a presentation at an investment conference last January, several venture capital firms offered to pay $10 million to $15 million for control of Innfocus. "The venture community began to realize that we were going to win this war on glaucoma, so they started throwing money our way," Pinchuk said. Innfocus is working closely with the Bascom Palmer Eye Institute at the University of Miami on clinical development of the company's glaucoma treatment device, which could be approved for sale in Europe before the end of the year.
But rather than sell control of Innfocus for more money, Pinchuk agreed to a $2 million follow-on investment by Saints Capital, a San Francisco-based venture capital firm that already had invested in the private Miami company. Pinchuk said he and other Innfocus insiders personally invested $300,000 in the company at the same time. Pinchuk said the company declined offers from other VC firms because they wanted to "dilute you by 75 percent and then fire you and your vice presidents … We decided not to take their money."
Deal Velocity on Rise
Along with institutional VC firms that seed Florida enterprises, some individual investors of venture capital, commonly known as "angel investors," are becoming more active, too.
New World Angels, an angel fund with about 40 individual investors in South Florida and the Tampa area, recently led an $8.3 million Series A capital raise for VirtualWorks, a private Boca Raton software company. VirtualWorks is led by Edward Iacobucci, co-founder of publicly held business software developer Citrix Systems in Fort Lauderdale.
Jonathan Cole, a co-founder and director of New World Angels, said the investor group also plans to close a $3.5 million investment in another South Florida company and a $1.2 investment in a Gainesville business by year-end.
"We have seen an increase in deal flow, which means we have seen an increase in the number of applicants and an increase in the quality of the applicants," said Cole, senior partner in the Fort Lauderdale office of law firm Edwards Angell Palmer & Dodge. Like other funds that provide venture capital, New World Angels is likely to hold onto equity positions for years. Investors in the fund "are looking for a liquidity exit within five to seven years," Cole said.
Mature companies may be attracting more venture capital than young startups.
"There is so little capital available for early-stage investment in Florida," Cole said. "There is more money available for expansion capital."
An investment in expansion could happen later this year at CareCloud, which sells information technology services to small businesses in the medical services industry. Started in 2009, Miami-based CareCloud has raised about $8 million from angel investors and has expanded its operations to 20 states.
Albert Santalo, CEO of CareCloud, said the company plans eventually to operate in all 50 states and to finance growth by raising another $8 million or more from an institutional venture capital firm.
"There is a lot of interest right now from the venture capital side," Santalo said. "There will probably be an institutional investor here shortly … We're bringing on states very quickly."
FoxyP2 Inc., a Miami company that provides English instruction online, got a $4.25 million follow-on investment in the spring from Flybridge Capital Partners, a Boston-based VC firm. FoxyP2 is "in a growth phase. The revenues are growing nicely," said John Karlen, general partner of Flybridge Capital. "This capital is being used for a couple of purposes: to fill out the [management] team and to expand aggressively across Latin America."
Karlen said five-year-old FoxyP2, doing business under its trade name Open English, is one of many technology-oriented companies in the Sunshine State that could qualify for further VC investment: "I probably am in Florida every two months, three months, meeting with companies. I just view it to be a really interesting market."
Karlen will be one of the speakers at a venture capital conference that Florida International University will host in November. More than 300 people are expected to attend the second annual Americas Venture Capital Conference Nov. 16-17 at the Biltmore Hotel in Coral Gables.
Money seekers and sources also will convene next Jan. 31 to Feb. 1 at an annual statewide venture capital conference in Naples organized by the Florida Venture Forum, a not-for-profit group.
Stanley G. Jacobs, a shareholder in the Fort Lauderdale office of law firm Greenberg Traurig, said participants in the Florida Venture Forum conference earlier this year were more optimistic than they were in 2010 and 2009 because the pace of VC deal-making has picked up.
"There is a lot of momentum toward getting [venture capital] deals done," said Jacobs, whose practice centers on VC investments and other types of financial transactions.
"I'm seeing a lot more early-stage companies come back to the market and look for capital," Jacobs said, citing venture capitalists' interest in companies that focus on "social media, health care and anything that's a business in the 'cloud,' as they call it."
Robin Lester, executive director of the Florida Venture Forum, said more investors have accepted venture capital investment as a viable alternative to holding such mainstream portfolio assets as stocks, mutual funds and real estate.
At the same time, however, many venture capital firms appear to be taking a more incremental approach to investment.
"A lot of people are playing it safe … The old $5 million round [of venture capital financing] is now a $3 million round," Lester said. "The old $10 million round is probably a $7 million or a $5 million round."
Lester said economic uncertainty and volatility in securities markets also have rattled some individual investors: "I had an angel investor who told me, 'You know, I used to be able to write a check for $50,000. But now I have to ask my wife for permission.' And I think that says a lot about what has happened to all of our 401(k)s."
the pace of VC deal-making has picked up
A quarterly survey shows that venture capital outlays in Florida totaled $192 million in the first half of the year, 27 percent more than in the same period last year and the biggest six-month total since 2007. The survey by the National Venture Capital Association and professional services firm PcW shows that venture capital sources invested an average of $6.85 million in 28 Florida deals from January through June.
venture capital conference that Florida International University will host in November. More than 300 people are expected to attend the second annual Americas Venture Capital Conference Nov. 16-17 at the Biltmore Hotel in Coral Gables.
Money seekers and sources also will convene next Jan. 31 to Feb. 1 at an annual statewide venture capital conference in Naples organized by the Florida Venture Forum, a not-for-profit group.
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