Investors leaving California create opportunity for Orlando tech sector - Orlando Business Journal (2024)

California venture capitalists are flocking to cheaper Sunbelt cities, and many want Orlando to get in on the action.

The Bay Area is hemorrhaging residents, losing 45,000 people in 2020 per a report by real estate brokerage Redfin Corp. Among those leaving the high-tax, high-cost metro are the investors who make Silicon Valley the world’s venture capital mecca.

Meanwhile, Orlando picked up more than 60,000 new residents last year, the third-most among U.S. metros. Central Florida may have a chance to land some of these venture capital firms and investors, which would bring critical investment capital closer to the local tech sector.

“Clearly, Orlando should try to attract these,” Ben Patz, managing partner of Orlando venture capital firm DeepWork Capital LLC, told Orlando Business Journal. “It's easier to get to the rest of the state from Orlando than anywhere else, and is even easier to get to the rest of the Southeast in general.”

Orlando's advantages

The flood of people from California may lead to an unprecedented event this year. Investment data firm PitchBook predicts the Bay Area’s share of U.S. venture capital deals in 2021 will fall below 20% for the first time ever.

Although the greater San Francisco area leads all U.S. markets by a wide margin, its share of venture capital deals has been falling for 15 years, PitchBook analyst Kyle Stanford wrote in a report. “The Covid-19 pandemic and subsequent exodus from San Francisco will only exacerbate this trend.”

That opens up a big opportunity for the cheaper Florida markets. So far, Miami has received the most attention from Golden State investors. For example, Keith Rabois, general partner of SpaceX and Airbnb investor Founders Fund, left San Francisco for Miami late last year. The Magic City already is the leading Florida metro for venture capital, with its companies raising just over $1 billion in 2020, according to PitchBook. Orlando was second with $325 million.

However, Orlando’s location makes it more suitable for investing in U.S. companies, Patz said. “I suspect what folks will find is that locating in Miami might make sense if the primary focus is Latin American investing, but if the primary focus is Florida and the Southeast, then there is likely to be insufficient deal flow in that narrow market and one will have to look to all of Florida and possibly slightly beyond.”

Orlando’s advantages over other low-cost Sunbelt cities include its robust airport, access to Cape Canaveral’s aerospace industry and the hub of tech firms at Central Florida Research Park, said Orlando Economic Partnership CEO Tim Giuliani.

“The fact that VC and other investors are looking more broadly, and are finally tapping into what we believe has been an undervalued market in Orlando, is a hell of a good story.”

'Weakness' in local tech

The partnership does not employ a specific approach to attract venture capital firms. Instead, it’s part of the organization’s larger three-year-long push to grow the tech industry, said Giuliani, who leads the local public/private economic development group. That includes bringing venture capital-backed pitch competition Rise of the Rest to Orlando in 2019 and last year launching partnership program Tech Connect.

More investment dollars for local tech firms would further accelerate the local industry after a year that Giuliani said may have been a banner year for the sector. Specific successes include Orlando-based Luminar going public in December after a $3.4 billion dollar merger, and Tennessee investment firm Greater Sum Ventures making a majority investment in Orlando-based Fattmerchant that same month, Giuliani said.

Orlando needs to make a strong push to land venture capital players and not lose them to other cities, according to a Feb. 18 report from economic diversification nonprofit Orlando Innovation Economy Group. The group, made up of local executives, investors and academics, has tracked 12 investment firms and venture capital-backed startups that moved to Miami and three venture capital-supported companies that moved to Tampa. However, the group does not know of any that moved to Orlando.

“Just as the Covid-19 pandemic exposed a regional Orlando economy dangerously out of balance, the tech migration it spurred has exposed the weakness of Orlando’s tech ecosystem,” the report read. “As a result, Orlando is missing this historic tech migration.”

Bringing more venture capital to the region would be critical for startups and early-stage companies. It funds companies as they scale while also providing business expertise and industry connections. In turn, those companies may create high-wage jobs.

Orlando tech jobs pay an average annual salary of $88,759, according to Los Angeles-based commercial real estate brokerage CBRE Group Inc. (NYSE: CBRE). That's more than metro Orlando's average annual wage of $46,140, according to the U.S. Bureau of Labor Statistics.

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