Ask any entrepreneur in South Florida what’s the biggest hurdle to their success, and the answer will almost certainly be access to capital.
But in the past year, a new form of investment has appeared. And it’s been crucial to backing the region’s burgeoning startup scene: corporate venture capital.
Though it isn’t quite local, it’s helped the South Florida economy witness “wins,” or successful acquisitions or major share purchases of its companies. As opposed to regular venture capital, which is usually one or more private individuals putting up their own money, corporate venture capital involves larger, often publicly traded companies setting up investment funds that usually have a much narrower focus and are less tolerant of risk.
The two most prominent Miami recipients of corporate venture capital have been Oasis, which lets guests stay in homes curated by experts, and digital communication management company LiveNinja.
In both cases, neither company was actively seeking out corporate venture capital, but they’d both managed to position themselves into attractive positions for these investors.
Oasis CEO Parker Stanberry told Startup.Miami that international hotel megachain Accor had received a mandate from its management to look for investments in alternative accommodations; it ended up taking a 30 percent stake in Oasis last year.
“We weren’t out there. It wasn’t the avenue we were thinking about,” Stanberry said.
Accor was focused on seeing a clear path to profitability and strong underlying fundamentals, he said. Having been around since 2009 and having established a niche that clearly set it apart from Airbnb, Oasis met both of those standards.
LiveNinja was also the beneficiary of two megacompanies that recently added venture wings: Citi and Comcast. The investments helped raise LiveNinja’s profile, and the company was ultimately bought out by multi-million dollar firm IDT in January, according to LiveNinja CEO Will Weinraub.
A nationwide trend
According to local investor Marco Giberti, dozens of corporations are now adding corporate venture capital arms – 86 were created in 2015 alone in the U.S. As Startup.Miami wrote in January, LAB Ventures, of which Giberti is a backer, is now specifically going after corporate venture capital partners.
Giberti says that for corporate VCs, the “thesis,” or plan for return on investment, usually involves the target fitting into their existing in business in some way. This often means targeting a business’ principal innovation, while traditional VCs are frequently industry neutral. Corporate VCs also take a longer view of the return.
Tigre Wenrich, the head of The LAB, said that while there are still not a lot of formal corporate VC funds in South Florida, he expects to see more in the near future. The LAB is hosting an event on corporate venture capital in May that will feature Stanberry and Weinraub, with Andrew Romans, an investor who literally wrote the book on corporate venture capital, as keynote speaker.
The Miami connection
Miami-based corporations are still wading into venture capital. The most prominent example has been Watsco, Inc., a publicly traded air conditioning company worth billions that is now investing in technology startups through its Watsco Ventures unit. The goal is to invest in companies and technologies that can provide innovative solutions to Watsco’s main business.
The Miami Herald’s Nancy Dahlberg recently reported that Watsco’s tech team has grown from 60 to 175 people in the past five years.
“A lot of young people who want to work in startups only think about the path of joining a new startup. But if you want to be part of a startup culture and build new products and disrupt, then corporations are an alternative,” Ivan Rapin-Smith, Watsco Ventures’ managing director, told her. The company continues to hire for several tech related positions.
The other prominent Miami business getting into venture funding is Miami Children’s Health System and Nicklaus Children’s Hospital, whose investment fund Startup.Miami profiled last month. It’s most prominent backing has been for Startupbootcamp’s Miami office, which focuses on health tech.
“Startupbootcamp has really brought to life the technology startup scene in Miami,” System CEO Narendra Kini wrote in December during Startupbootcamp’s Demo Day. “By focusing on health it is really building out the ecosystem for innovation. We hope to see the next major healthcare players originate in Miami.”
Giberti says that for businesses looking to target corporate venture capital funds, the main difference in approach should be tailoring the pitch the the corporate’s main areas of interest, like a financial technology startup going after a bank.
A business can expect the corporate to help with initial pilots, industry expertise and coaching, and getting the product in front of initial customers, Giberti says.