By Riley Kaminer
2023 wasn’t exactly a banner year for startups – in Miami or elsewhere. While US startups raised $370B in 2021 and $248B in 2022, they only raised about $149B in 2023, according to Dealroom data. Refresh Miami’s ecosystem data paints a similar picture, with startups receiving about the same amount of funding in 2023 as in 2020, but a 66% drop from 2022’s highs.
So what exactly does 2024 have to hold for #MiamiTech? We caught up with some South Florida VCs to get their perspective.
Ushering in ‘24 on an optimistic note
It has been almost exactly a year since Boatsetter co-founder Jaclyn Baumgarten stepped down from her role as the company’s CEO to invest full-time as a managing partner at IDC Ventures. The global VC firm, which has its US base in Coconut Grove, invests in early-stage fintech and marketplace startups.
Baumgarten has a cautiously optimistic perspective on what this year has to hold. “I’m feeling so much more positive than last year,” she told Refresh Miami.
“We’re starting to see some really healthy signals that the ecosystem is starting to rebound.” This can already be seen in 4Q23 investment data, plus the rise of several new billion-dollar funds such as from Coatue and a16z.
On the startup side, Baumgarten noted external factors that will enable companies to move faster and more efficiently. Top of the list: access to global talent. “Particularly at the Seed and Series A stage, it’s dropping the barriers to entry for new companies that are growing and establishing themselves.”
“It allows for more interconnection and a transformative business environment,” she added, underscoring the transformative potential stemming from the fact that startups no longer have to be based within walking distance of Sand Hill Road.
The rise of artificial intelligence-powered tools for speeding up software development tasks can be a boon for startups, in Baumgarten’s view. “This is a major tailwind because it allows startups to do more with less, in addition to a reduction in computing costs and associated energy usage.”
Baumgarten also expects valuations of AI startups, which spiked in 2023, to normalize in the coming year.
2024: Year of the IPOs?
2023 saw very few major tech IPOs apart from a few notable examples such as Instacart and Klaviyo. Yet Florida Funders partner Saxon Baum notes that a robust IPO market in 2024 will provide the much-needed liquidity to fully defrost the startup ecosystem.
“It’s a pure trickle-down effect,” he explained. “We’re not going to see any movement until the IPO market opens up,” since startups going public enables investors to recuperate their investment and redeploy the funds.
“If not, we’re in for a longer ride because LPs will be hesitant to write checks because they don’t have liquidity,” Baum said.
Baum clarified the narrative around LPs having lots of so-called dry powder is a bit overblown. “It’s not like the funds are sitting on capital – that’s not the case.” Rather, the VCs have raised the funds in the form of commitments from LPs without actually receiving the cash until capital calls, which happen over a three to five year period.
Baumgarten also emphasized the importance of the IPO market. “There is a lot of uncertainty, tremendous volatility in valuations over the last 18 months. As more investors begin to realize their returns through IPOs, it’s going to give them more comfort in investing in the private sector, knowing that there is a feasible path to an exit through IPO. And so I think that is what will grease the wheels and help us start to see far more investment and confidence in the market.”
Continued growth of #MiamiTech
Both Baumgarten and Baum forecast a year of development for the Miami tech ecosystem. “I am thrilled about what I’ve seen in terms of the spark, scale, and transformation of Miami tech,” Baumgarten, who is based in Fort Lauderdale, commented.
“The quality, quantity, and variety of founders that I’m coming across has been expanding,” she said, noting that there is still work to be done on the part of universities and coding schools to produce the pipeline of talent required for our ecosystem’s sustained growth.
For Baumgarten, Miami’s positioning as a gateway to Latin America will continue to serve it well in the long term. “We offer a unique opportunity for our investors to be able to access emerging markets and identify the top growing tech companies within Latin America. And we facilitate these companies’ expansion into the US.”
Florida Funders is looking forward to “a big year” in Miami tech. “We’re freshly deploying out of our new fund and are excited to double down on some of our winners and get into some new companies as well,” said Baum.
“We’re going to be very active this year – the kind of activity level that we had in ‘21 – and put some money to work,” he added.
Advice for startups looking to raise right now
“The days of raising money on an idea – unless you’re a successful serial founder – are long gone,” asserted Baum. “Instead of trying to fundraise, try to get some traction.”
He explained that this can come in a wide variety of forms: partnerships, LOIs, revenue, “anything to show there’s some meat on the bone when it comes to your business.”
“We are advising all of our companies to shift towards profitability,” Baumgarten said – a different mentality than the ‘growth at all costs’ concept that permeated startup culture over the last few years. Of course, Baumgarten makes it clear that startups need not eschew growth completely: “When a company has a higher growth rate, they are able to drive higher valuations.”
But ultimately, a focus on the fundamentals is always a safe bet. “If you have fundamental economics that are sustainable, there’s no shortage of investors that will want to invest in you,” shared Baumgarten.
READ MORE IN REFRESH MIAMI:
- Q&A: Jaclyn Baumgarten on her transition from startup founder to investor
- Softbank sells Open Opportunity Fund to Marcelo Claure, Paul Judge
- Bezos, Brightline, AI, a climatetech hub & more: There were many #MiamiTech wins to celebrate in 2023
- Endeavor Miami receives $500K funding commitment from JPMorgan Chase for early-stage program and more
