In May, Miami hosted a startup conference that featured the Miami-born superstar Pitbull, venture investor Steve Case, former AOL CEO, and Imogen Heap, a classically trained English singer-songwriter with a blockchain venture. More than 16,000 people from 40 countries came, business executives, investors and entrepreneurs.
It was the latest attempt — and a successful one, seemingly — in Miami’s push to become a global startup hub centered on Latin America. It’s an ambitious goal for a city that only recently has emerged as a national business center, ranking with New York and Los Angeles as among the hottest in the country for startup activity. But in an age where national governments seem increasingly dysfunctional, cities are the places to watch for all kinds of innovation.
And — witness the lineup at the startup event — Miami is fascinating because of its glitzy improbability. The modern tropical city that looks to have dodged a hurricane is somehow an emerging hub for Latin America without actually being in Latin America. From a capital of white collar crime in the 1980s, it wrested for itself an image as one of the world’s great, growing immigrant cities. And there’s the perpetual question of whether the sea will swamp it (Miami voters recently voted to pay higher taxes to shore up the city’s defenses).
“We have our fair share of challenges,” says Felice Gorordo, the CEO of eMerge Americas, which put on the startup show. “Part of our secret sauce is that we’re a city built by immigrants. Miami is a very young city, But we have the grit and resiliency of those people. Miami is a startup in and of itself. If you’re willing to roll up your sleeves, you can make it here.”
Seven years ago, Cuban entrepreneur Manny Medina, who sold his data center company, Terremark, to Verizon for $1.4 billion, decided Miami needed an ecosystem builder. eMerge is a conference company with an affiliate philanthropic arm; the company’s equity investors include Pitbull, whose real name is Armando Pérez, and baseball player Alex Rodriguez. In June 2018, Medina recruited entrepreneur Gorordo to be CEO.
Something is working. From 2010 to 2014, Miami was one of five metro areas – New York, LA, Houston and Dallas were the other four — that accounted for 50% of all startups in the United States, according to the Economic Innovation Group.
South Florida ranked No. 1 in startup activity in the U.S. in 2017, according to the Kauffman Index. On the software startup scale, it’s likely smaller: In 2018, Miami ranked 11 in terms of investment dollars, $1.4 billion, according to Pitchbook. A study by the Martin Prosperity Institute in 2016 put it at 15th in terms of VC dollars, with .98% of the U.S.’s total venture capital investment. Silicon Valley, New York and Boston still take the lion’s share of VC investment.
If you look at the combination of business startups and the growth in VC (mostly tech) investment in Miami: Impressive.
One of the questions that’s hanging over the entire business world right now is whether the cultural centers of American business are shifting. Silicon Valley emerged as the cold heart of American capitalism in the past few decades, but ruthlessness is going out of style. The “Acela corridor,” meanwhile, lies squarely under the black cloud of the American political system. There are still plenty of deals and good work being done on the coasts, but, even with the advantages that accrue from the past, do the East and West coasts embody the future?
Miami has its doubters, too. Just a few months ago, sociologist Alejandro Portes declared Miami NOT a startup hub, at least not on a global scale, because it doesn’t have top-notch universities.
“The one element that is not a key pillar, despite much hoopla about it, is high-tech industry. Miami does not compete with Silicon Valley or Austin or even the Research Triangle in technological innovation,” he told Richard Florida on citylab.com.
What Is A Startup Hub, Anyway?
His comment and the conversation with Gorordo got me to thinking about the differences between a startup hub and a tech startup hub, and what defines each: Is it innovation, as Portes suggests? The number of venture capital deals? The rate of startups? Jobs in the tech sector? The extent to which entrepreneurship is available to anyone, regardless of income or their status in the patriarchy?
I’ve been covering startups and cities for years, and believe there isn’t a definitive answer or one measure that tells the story. Venture capital is likely to be less important as a measure as time goes on. The line between software startups with fast-scale models likely to be funded by venture capital is blurring with startups (pretty much every startup is a tech company these days).
The question is really this: How do you package the assets of a place so people believe in its power?
Here are some factors that suggest Miami will continue climbing, and what could hang it up.
The Strength Of An Immigrant City
Miami has a rising and foreign-born population. Immigrants start businesses at higher rates than native-born people, and the energy that arises from a mixture of cultures helps, too. (Richard Florida — who called Miami enigmatic — has ascribed Silicon Valley’s strength as coming from the presence in San Francisco of a counter culture). Miami-Dade County has a population of 2.76 million; the population has grown 10% since 2010, and 53% of the population is foreign born. Median household income is $43,000.
The thing with immigrant cities is that they keep their ties through diasporas to other parts of the world — and startup activity can flow along those links. To try to capture that data, eMerge recently started a semi-annual report to illustrate the connections between Miami and the startups in Latin America. To begin with, Gorordo noted, some American investors and researchers don’t even track Latin America. “CBInsights — they think the only thing happening is in Sao Paolo. If you look at Pitchbook’s publications, Miami doesn’t get the attention it deserves.”
“Miami has benefitted from the booms and busts of Latin America and also the political turmoil,” he said.
Miami is already a financial hub for Latin America. The Brickell financial center has the second largest concentration of international banks outside of New York, Portes told CityHub.com. Money for startups doesn’t only come from venture capitalists. Like Dubai, another global hub that is probably more important than we realize, Miami also has a large “informal economy.” Translation: there’s fraud and white-collar crime — which makes it hard to tell how much economic activity is actually going on.
Many of Miami’s startup stories so far have been immigrant-started companies — though one of its biggest successes, Magic Leap, is an augmented reality company founded by an American. It’s raised more than $2.3 billion, according to published reports.
Medina, who is now working on a cybersecurity company, Cyxtera, was born in Cuba. Gorordo who started and sold a company in the immigration services sector, Clear Path, is the son of Cubans. Nubank, reportedly worth $4 billion, was founded by a Brazilian, Colombian and an American. There’s recently been an influx of Venezuelans, said Gorordo, who expects to see startups coming from that community.
As startups grow in importance in Latin America, Miami will benefit. One example of the buzz around Latin America: Softbank in March announced a $2 billion fund to invest in Latin American startups, and in May, an AI hub in Miami. Two private equity firm CEOs have told me Brazil has been their single most profitable geography.
But the divisions within Latin America mean Miami serves as a sort of neutral territory, says Gorordo — and eMerge takes it work south, to, for instance, sponsor pitch competitions at universities in South America.
“It has been easier to get a Colombian to come to Miami than to Sao Paolo,” says Gorordo. “Latin America can be very insular. Part of the work we’re doing is break down barriers.”
Aspiring to be a global hub has its risks, however. What happens to Miami’s aspirations if China’s economy slows even more than it has, and therefore its investments in Latin America slow? Most Americans haven’t realized how much Chinese investment has powered developing world economies.
The Business World Is Changing
Gorordo says elements of the city’s leadership are united around a common vision. “More than venture-backed mega-funding and large scale exits, what makes a city like Miami a tech hub is if it has a thriving innovation and entrepreneurial ecosystem that draws on the support and collaboration of all the tentpoles: from government to higher-ed, startups to investors, corporate enterprises to media,” said Gorordo.
“What I believe we all strive for is a hub that offers every entrepreneur with a good idea, who is willing to work hard and do what it takes, to have a fair shot at attracting the capital and talent they need to make it a reality.”
Then, of course, there’s the rising sea, which could change everything — the city’s brush with Hurricane Dorian is a reminder of the size of that problem. A couple of years ago Miami voters decided to tax themselves $400 million to try to figure out solutions, and pay for them them. One of the best strategies may be recruiting entrepreneurs to help figure it out.
Originally published on Forbes.com, Sep. 2019