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CiTy HubS for Entrepreneurship SERIES A Platform to Accelerate the Development of Local Entrepreneurship Ecosystems Case: Miami, Florida a report from:

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2 / City Hubs for Entrepreneurship Series: Miami, Florida

“Cities don’t work like perpetual motion machines. They require constant new inputs in the form of innovations based on human insights.” – Jane Jacobs

City Hubs for Entrepreneurship Series: Miami, Florida / 3

FOREWORD January 2014

We are pleased to present the “City Hubs for Entrepreneurship Series” diagnostic assessment of Miami’s entrepreneurship ecosystem. The findings in this report are the result of six months of research conducted by Endeavor Insight, Endeavor’s internal research group. This research included interviews, surveys, and focus groups with dozens of Miami-based entrepreneurs, investors, government officials, and leaders of local entrepreneurship support organizations. The project is also informed by Endeavor’s experience working with over 800 high-impact entrepreneurs in more than a dozen countries during the last 16 years. While the analysis in this document shows that there are a number of important challenges that slow the growth of local entrepreneurs, it is clear that there is a tremendous opportunity for entrepreneurship in Miami. Along with our fellow founding board members of Endeavor’s new affiliate office in Miami, we are excited to work alongside so many other committed organizations and partners, as we support local high-impact entrepreneurs. We look forward to helping Miami reach its potential to become a global hub for entrepreneurship.

Sincerely, Adriana Cisneros Co-Chairman, Endeavor Miami Vice Chairman of the Board and CEO, The Cisneros Group

PHOTO ON COVER: FLICKR USER hcabral  •  PHOTO ON LEFT: FLICKR USER Xynn Tii

Daniel Echavarria Co-Chairman, Endeavor Miami Director, Organización Corona

4 / City Hubs for Entrepreneurship Series: Miami, Florida

EXECUTIVE SUMMARY Miami’s Unique Context:

Many Miami residents are now launching startups, but the number of large businesses in the Miami area has decreased significantly since 2000. This indicates that few local companies are achieving significant growth. Studies have shown that fast-growing firms are a key driver of job creation. Between 1994 and 2006, for example, the fastest-growing 2-3% of U.S. companies accounted for nearly 100% of the net new jobs in the country. As a result of these factors, Miami-Dade County has 30,000 fewer jobs than it did six years ago, and unemployment in Miami is significantly higher than the national average. This indicates that Miami needs to improve its entrepreneurship ecosystem.

Framework for Action:

Cities that wish to become hubs of entrepreneurship must enable high-potential companies to access resources, such as talent and financing. This requires fostering the growth of the local entrepreneurship ecosystem, which is made up of individuals, companies, governments, and other organizations that interact to influence the development of local entrepreneurs and their firms. Successful ecosystems follow a specific cycle of growth, in which local entrepreneurs who succeed in building scalable firms go on to reinvest their financial, intellectual, and social capital into the next generation of local entrepreneurs and companies to create a virtuous cycle of support and success.

Diagnostic Assessment:

Miami’s entrepreneurship ecosystem already has a number of strengths. Entrepreneurs in the Miami area report that access to customers is high and the local quality of life is effective at attracting and retaining successful founders and companies. However, Miami’s leaders must address four major weaknesses that slow the growth of Miami-based companies and the development of the local ecosystem: poor access to earlystage financing, poor access to human capital, low levels of mentorship among successful entrepreneurs, and a lack of promotion of local entrepreneurs as role models.

PHOTO: FLICKR USER Xynn Tii

Plan for Improvement:

There is a clear and demonstrable need for Endeavor to work in Miami. Endeavor’s new office will select local high-impact entrepreneurs and support their growth with programs that increase their access to talent, capital, and mentors. It will then promote successful entrepreneurs as role models for the next generation of founders in the community. In collaboration with local stakeholders, Endeavor Insight also identified additional initiatives that can complement existing programs and help address Miami’s challenges. We recommend that Miami’s leaders implement four programs that have been successful in other cities: an early-stage investment education summit, a recruiting program for entrepreneurial firms, an award that promotes local mentorship, and a program to highlight examples of local high-growth companies.

City Hubs for Entrepreneurship Series: Miami, Florida / 5

Methodology The findings in this report are based on data from over 100 early-stage and growth-stage companies, as well as interviews, focus groups, and surveys of entrepreneurs, investors, policymakers, and other entrepreneurship stakeholders in Miami conducted between April and September of 2013. A partial list of participating organizations is shown below. Comparison data and benchmark programs used in this report are drawn from previous Endeavor Insight research in more than 100 cities across the world. This report was funded through the generous support of Knight Foundation and created in October and November of 2013 by Fernando Fabre and Rhett Morris. They wish to thank John Bowman and Shantanu Garg, who assisted with this research, as well as Matt Haggman, Kito Cetrulo, Ben Wirz, Laura Maydon, and Joanna Harries, who provided critical input and feedback during the research process. Richard Florida also generously shared his perspective on the local ecosystem and his expertise on the development of cities across the world. For additional information on this report, please contact Rhett Morris at rhett.morris@endeavor.org.

Special Thanks to Participating Organizations Representatives from the following companies and organizations generously contributed their time to participate in interviews, focus groups, and surveys. Accelerated Growth Partners

Lead Creations

The Knight Foundation

AdMobilize

LearnerNation

The Lab Miami

Aranda Software

LiveNinja

Ashoka of South Florida

Medina Capital

The Launch Pad at The University of Miami

BrokersWeb.com

Merchandize Liquidators

The LeVine Group

Caerus Ventures

Mia Senior Living Solutions

The Retail Outsource Companies

Campo Alto

Miami Innovation Fund

The University of Miami

Care Cloud

Network for Teaching Entrepreneurship

TradeKing

DoYouRemember

New Wave Surgical

Tritoncorp

Elebev

New World Angels

Trivest

Enterprise Development Corporation of South Florida

Ocean Star International

Unified Payments

Open English

Venture Architects

Entrepreneurs Organization of South Florida

Peoplefund

Venture Hive

Pipeline Brickell

Veramiko

Pkolino

Vinyify

PMI Quality

Voike

Premium Blend

Zumba

European Wax Center Fitting Room Social Florida Atlantic University Florida Growth Fund Fly in Style GO.co Greenberg Taurig HIG Capital Incubate Miami Institute for the Commercialization of Public Research Intermark Foods Kairos Kaufman Rossin Kleo

RBB Public Relations Refresh Miami Republica Richmond Global Rokk3r Labs Senzari Shooger Small Business Administration, South Florida Solstice Benefits Sutton Ferneries The Fresh Diet

6 / City Hubs for Entrepreneurship Series: Miami, Florida

MIAMI’S UNIQUE CONTEXT Miami Needs to Improve Its Entrepreneurship Ecosystem to Create Jobs and New Economic Pillars. Jeff Bezos, the founder of Amazon.com, grew up in Miami.1 So did Sheryl Sandberg, the COO of Facebook, and Blake Ross, the co-founder of Parakey, which was Facebook’s first acquisition. 2 Jason Baptiste graduated from the University of Miami and launched an award-winning tech company, Onswipe, but quickly relocated it outside of Miami.3 These are just a few of the former residents who have left South Florida to start entrepreneurial careers in places like Seattle, Palo Alto and New York. In the past, Miami was not seen as a place where the entrepreneurship ecosystem supported young companies’ growth. In the mid-2000s, Paul Graham, the founder of Y-Combinator and a well-known writer on entrepreneurship, included Miami on a list of cities that were “toxic to startups” due to “the microscopically small number, per capita, that succeed there.”4 These challenges negatively affected the development of Miami’s entrepreneurial companies, which had a significant impact on the community. Miami’s unemployment rate has remained higher than the national average over the last several years. Data from the Bureau of Labor Statistics also shows that in July of 2013 there were 30,000 fewer jobs in Miami-Dade County than there were six years earlier — even though the labor force has grown by approximately 90,000 people during this time.5

Figure 1: Total Employment in Miami-Dade County: July 2007 – July 2013 (in thousands). 1,080

1,070.3

1,060 1,039.1

1,040 1,020

Miami-Dade has 30,000 fewer jobs compared to 2007 — even though the labor force grew by ~90,000 people.

1,000 980 960 940

2007

2008

2009

2010

2011

2012

2013

920 Source: Labor Market Report, Miami-Dade County, August 2013.

Today, Miami is a very different city than it was a few years ago. Civic leaders have recognized that entrepreneurship is critical for future growth. In the 2013 State of the County Address, Mayor Carlos A. Gimenez of Miami-Dade County spoke of the importance of entrepreneurial companies, “I am interested in adding a few more pillars to the framework of our economy — forward-thinking businesses that will give Miami a competitive edge,” he said. “We must focus on fostering growth in technology and entrepreneurship.” Community organizations, such as Knight Foundation, have also supported the launch of new programs, like the Lab Miami, which provide support for founders of early-stage companies in the city.6

City Hubs for Entrepreneurship Series: Miami, Florida / 7

Many Startups Are Now Launching in Miami, but Few Are Scaling Up. The most recent metropolitan-area data available suggests that many Miami residents are launching new businesses. Annual startup activity more than doubled between 2000 and 2012, as Figure 2 shows. A recent report from the Kauffman Foundation also noted that Miami had the highest rate of new business formation among the 15 largest U.S. metropolitan areas in 2012.7

Figure 2: Number of Companies Founded in the Miami Metropolitan Area: 2000 vs. 2012.

Unfortunately, very few of these new businesses are growing into large firms. Academic research has shown that fastgrowing companies that scale up to become large firms are among the most effective mechanisms for reducing unemployment. (See “Evidence Shows That High-Growth Companies are Critical for Job Creation” below.) These companies also produce the successful entrepreneurs who are critical to the growth of healthy ecosystems.

30,000

50,000 40,000

20,000 10,000 0

2000

2012

Note: Excludes self-employment; Source: NETS Database based on Dun & Bradstreet data.

Figure 3: Change in the Number of Companies by Size in the Miami Metropolitan Area: 2000 - 2012. 250% Micro-businesses (2–9 employees)

200% 150%

Small businesses (10–99 employees)

100% Medium businesses (100–499 employees)

50%

Large businesses (500+ employees)

2011

2012

2010

2009

2007

2008

2005

2006

2003

2004

-50%

2002

0% 2001

These facts indicate that significant challenges currently exist within Miami’s entrepreneurship ecosystem. The next six pages share the results of a diagnostic evaluation that assessed the strengths of the local ecosystem, as well as the weaknesses that slow its growth.

In 2012, Miami had the highest rate of new business formation among the fifteen largest U.S. metro areas.

60,000

2000

As Figure 3 illustrates, the number of companies employing 500 or more workers in the Miami area dropped by more than 20% between 2000 and 2012, while the number of local micro-businesses increased by more than 200%. The number of small- and medium-sized firms also increased, but only at rates similar to the 15% growth rate of the population in the metro area.

70,000

Note: Excludes self-employment; Source: NETS Database based on Dun & Bradstreet data.

Evidence Shows That High-Growth Companies Are Critical for Job Creation. Research has shown that high-growth small- and medium-sized companies scaling up to become large businesses create significantly more jobs than other types of firms. •

A 2008 study found that the fastest-growing 2-3% of companies accounted for nearly 100% of the net new jobs in the United States between 1994 and 2006.8

In Miami, on average, one high-growth small business that becomes a large firm creates more jobs than 160 new micro-businesses or 20 new small businesses.9

Employees at larger companies are also more economically productive and receive higher wages than those at smaller firms.10

8 / City Hubs for Entrepreneurship Series: Miami, Florida

FRAMEWORK FOR ACTION Successful Entrepreneurship Ecosystems Follow a Specific Growth Cycle. Successful entrepreneurship ecosystems enable high-potential entrepreneurs to access the resources they need — such as talent, financing, and access to customers — and build companies that create jobs and value for their communities. Entrepreneurship ecosystems are made up of individuals, companies, governments, and other organizations that interact to influence the development of entrepreneurs and their firms in a single metropolitan area or region. Ecosystems can exist within specific local industries or across all industries in an area. Their participants include entrepreneurs, investors, customers, suppliers, employees, policymakers, and many other individuals and institutions. While there are many actors in an ecosystem, successful ecosystems follow a specific cycle of growth that depends on one group in particular — successful local entrepreneurs who build scalable firms and go on to reinvest their financial, intellectual, and social capital into the next generation of local entrepreneurs and companies. In Silicon Valley, for example, hundreds of companies can be traced back to a single firm, Fairchild Semiconductor, a highly successful business founded in 1957. After Fairchild achieved success, its founders and employees invested their funds and experience into launching over 20 new tech companies, including Intel, and co-founding two venture capital firms, Kleiner Perkins Caufield & Byers (KPCB) and Sequoia Capital.

Figure 4: Network Map of Relationships in Buenos Aires’ Tech Sector. The Impact of the Top 3 Companies

1

2 3

The entrepreneurs from the three most influential companies are very successful in their own right. 1) Patagon: Sold to Banco Santander for $750M in 2000 2) Digital Ventures: Sold to Fox Entertainment in 2007 for an undisclosed price 3) MercadoLibre: Went public on the NASDAQ in 2007

Legend: Size of circle reflects the influence of the entrepreneurs at each company based on their number of outgoing connections.

MENTORSHIP INSPIRATION INVESTMENT FORMER EMPLOYEE FOUNDER

Source: Endeavor Insight analysis.

These entrepreneurs influenced 80% of the other firms in the network, highlighted here in light orange.

City Hubs for Entrepreneurship Series: Miami, Florida / 9

These new companies and investment firms fueled the growth of other actors in the ecosystem and supported the development of new high-growth companies. Intel is now worth more than $100 billion, and more than 70 of its former employees have started new companies. KPCB and Sequoia were early investors in AOL, Apple, Cisco, Compaq, Electronic Arts, Google, Netscape, LinkedIn, Oracle, PayPal, Sun, Yahoo!, YouTube, and more than 500 other companies. Many entrepreneurs they supported also became active mentors and investors, including Steve Jobs of Apple, who mentored Facebook’s Mark Zuckerberg, and Marc Andreessen of Netscape, who has invested in Skype, Twitter, and Zynga.11 The same cycle has fueled the growth of a very successful ecosystem for tech companies that emerged in Buenos Aires. During the last 20 years, entrepreneurs in the city have faced significant challenges, including the devaluation of Argentina’s currency, but the local tech industry has produced several firms that achieved exits of more than $100 million, and it now employs thousands of people.12 Google even located its third international headquarters office there in 2007.13 Endeavor Insight conducted a detailed study of the tech sector in Buenos Aires and found that the entrepreneurs at successful companies frequently served as mentors, investors, and role models for other local founders and companies, as Figure 4 illustrates. For example, Wences Casares, the founder of Patagon.com, which was sold to Banco Santander for $750 million, is an active mentor and angel investor in local firms. Ariel Arrieta, a co-founder of Digital Ventures, which was sold to Fox Entertainment, launched a local accelerator, and Hernan Kazah, who co-founded the NASDAQ-listed company, MercadoLibre, also co-launched Kaszek Ventures, the largest venture capital firm in Latin America. Together, these three entrepreneurs touch more than 100 other tech companies in the city, as the right panel of Figure 4 shows.

Figure 5: The Growth Cycle of Successful Entrepreneurship Ecosystems. Growth Cycle Steps & Sub-Components: 1

2

3

4

New entrepreneurs seek to build scalable companies in the local area

Entrepreneurs are able to grow their companies and reach scale

Successful entrepreneurs stay in the local area and remain engaged in the ecosystem

Successful entrepreneurs reinvest in the next generation

Local quality of life

Entrepreneurial ability

Local quality of life

Mentorship

Access to markets

Inspiration & ambition to reinvest

Angel & VC investing

Inspiration & ambition to grow

Access to talent

Role model promotion

Access to finance

Other (e.g., serial entrepreneurship)

2

Support the next generation

Build scalable companies

1

3 New Entrepreneurs

Successful Entrepreneurs

4

The Growth Cycle of Successful Ecosystems Has Four Steps. The stories of Silicon Valley and Buenos Aires are not the only examples of the growth cycle of entrepreneurship ecosystems. Additional examples of this cycle can be found in a variety of other successful ecosystems, including fashion companies in Paris, healthcare companies in Nashville, and even high-end restaurants in New Orleans.14 The growth cycle has four steps, as illustrated by Figure 5. It begins with local entrepreneurs who seek to build scalable companies. This requires that they have the desire to live in the local community and the ambition to build a scalable company. The second step is reached when their companies begin to grow significantly. To do this, entrepreneurs must possess the ability to achieve their vision. Research has shown that this also requires that companies have access to markets, talent, and finance.15 The third step of the cycle occurs when entrepreneurs who achieve significant success — taking a company public, selling a firm or reaching significant scale (e.g., $100 million or more in revenue) — choose to stay in the community and remain engaged in the ecosystem. The cycle culminates when successful entrepreneurs reinvest their financial, intellectual, and social capital into the next generation of local entrepreneurs and companies. The most common ways that successful entrepreneurs reinvest are by acting as mentors, venture capital or angel investors, and role models. Reinvestment can also occur when entrepreneurs and employees from successful companies choose to launch new firms.

10 / City Hubs for Entrepreneurship Series: Miami, Florida

DIAGNOSTIC ASSESSMENT: MIAMI’S STRENGTHS Endeavor Insight identified four strengths of Miami’s entrepreneurship ecosystem. These strengths support the first three steps of the growth cycle. Each finding is based on interviews and surveys of stakeholders in Miami’s entrepreneurship community, and each has been confirmed in discussion groups with entrepreneurs, leading investors, and representatives from major local entrepreneurship organizations. A selection of quotations from stakeholder interviews and discussion groups is also presented to provide additional context.

Figure 6: Strengths within the Components of Miami’s Entrepreneurship Ecosystem. Growth Cycle Steps & Sub-Components (Areas with strengths highlighted in green.): 1

2

3

4

New entrepreneurs seek to build scalable companies in the local area

Entrepreneurs are able to grow their companies and reach scale

Successful entrepreneurs stay in the local area and remain engaged in the ecosystem

Successful entrepreneurs reinvest in the next generation

Local quality of life

Entrepreneurial ability

Local quality of life

Mentorship

Inspiration & ambition to grow

Access to markets

Inspiration & ambition to reinvest

Angel & VC investing

Access to talent

Role model promotion

Access to finance

Other (e.g., serial entrepreneurship)

MIAMI

Source: Endeavor Insight analysis.

Local Quality of Life: Miami Can Attract Growth-Oriented Entrepreneurs. The first stage of the ecosystem growth cycle requires that entrepreneurs seek to build scalable companies in the local community. Miami has a unique advantage in this area. One-third of Miami-based entrepreneurs leading scaleup firms — growing companies with the potential to become large businesses, such as those listed on the Inc. 500 — identified in this study had never attended university or worked in Miami before founding or relocating their companies in the area. In fact, a recent study ranked Miami as one of the top ten municipalities for attracting founders of rapidly growing companies.16

33

%

One-third of Miami entrepreneurs at scaleup firms identified in this study had not worked or studied in the area.

“I actually started in Boston during my MBA and then my co-founder and I decided to move to Miami.” –Entrepreneur

“I am a typical Miamian. I grew up and went to school in Europe, started my first company outside of Florida and then moved here to start my second.” –Entrepreneur

City Hubs for Entrepreneurship Series: Miami, Florida / 11

Entrepreneurial Ability: Local Support for Entrepreneurs Has Increased Significantly in Recent Years. More than 12 investment firms, accelerators, and coworking spaces have launched or opened offices in Miami since 2009. Together, these organizations support hundreds of companies, with a strong emphasis on those in the startup phase. The rapid development of these investors and organizations provides support for entrepreneurs at the second stage of the ecosystem growth cycle and also indicates that significant change with Miami’s entrepreneurship ecosystem is possible in a short period of time.

12+

More than 12 investment firms, accelerators, and coworking spaces have opened offices in Miami since 2009.

“We are seeing a lot of activity that wasn’t there just a few years ago in our entrepreneurship community.”

“We have a lot of challenges, but we’ve come very far as a community in just a few years.”

–Support Organization

–Entrepreneur

Access to Markets: Entrepreneurs Report That Customers and Suppliers Are Available in Miami. Companies that seek to grow into large firms need access to customers and markets. Few cities can compete with Miami’s ability to act as a global hub. The Miami International Airport hosts more international flights than any other single airport in the U.S., and the city’s port is one of the country’s largest.17 Consequently, over 60% of the entrepreneurs we interviewed at scaleup companies reported that access to customers was available or very available in the Miami area. Entrepreneurs frequently reported specific advantages for reaching Florida’s internal market and Latin America.

60

%

More than 60% of entrepreneurs at scaleup companies stated that customers were easily accessible in Miami.

“Miami is a great hub for wholesalers. South America is close by. There are a lot of vendors and activity at the port.”

“There are strong marketing and advertising businesses as well as businesses targeting Hispanic community, like Univision.”

–Entrepreneur

–Entrepreneur

Local Quality of Life: Scaleup Entrepreneurs Enjoy Living in Miami and Value the Amenities It Offers. The third stage of the ecosystem growth cycle requires that entrepreneurs choose to remain in their local community after they become successful so that they have the opportunity to reinvest their financial, intellectual, social, and cultural capital into the next generation of local entrepreneurs. Fortunately for Miami, growth-oriented scaleup entrepreneurs highly value the city’s culture and quality of life. Many of the most common reasons they gave for starting a business in Miami were those related to lifestyle, such as Miami’s culture, weather, and beaches.

34

%

Thirty-four percent of entrepreneurs at scaleup companies cited quality of life as a reason for starting a business in Miami.

“Miami is a paradise. I would not go anywhere else.” –Entrepreneur

“In Miami, I have great quality of life, great friends, and great weather. It’s a great place to raise a family.” –Entrepreneur

12 / City Hubs for Entrepreneurship Series: Miami, Florida

DIAGNOSTIC ASSESSMENT: MIAMI’S WEAKNESSES Endeavor Insight identified four major challenges within Miami’s entrepreneurship ecosystem. These weaknesses affect the second and fourth steps of the entrepreneurship ecosystem growth cycle. Each finding is based on interviews and surveys of stakeholders in Miami’s entrepreneurship community, and each has been confirmed in discussion groups with entrepreneurs, leading investors, and representatives from major local entrepreneurship organizations. A selection of quotations from stakeholder interviews and discussion groups is also presented to provide additional context.

Figure 7: Weaknesses within the Components of Miami’s Entrepreneurship Ecosystem. Growth Cycle Steps & Sub-Components (Areas with weaknesses highlighted in orange.): 1

2

3

4

New entrepreneurs seek to build scalable companies in the local area

Entrepreneurs are able to grow their companies and reach scale

Successful entrepreneurs stay in the local area and remain engaged in the ecosystem

Successful entrepreneurs reinvest in the next generation

Local quality of life

Entrepreneurial ability

Local quality of life

Mentorship

Inspiration & ambition to grow

Access to markets

Inspiration & ambition to reinvest

Angel & VC investing

Access to talent

Role model promotion

Access to finance

Other (e.g., serial entrepreneurship)

MIAMI

Source: Endeavor Insight analysis.

Access to Talent: Human Capital Is a Major Challenge for Local Firms. Access to talent is critical for entrepreneurs seeking to grow their companies, but Miami-based entrepreneurs leading companies in the scaleup phase rated talent as the least available resource within the local ecosystem. Several entrepreneurs interviewed for this project had relocated a significant portion of their workforce outside of Miami because they could not recruit adequate local talent. The most difficult positions to fill varied by industry, but middlemanagement executives and software engineers were mentioned consistently. Though local universities produce a large number of engineers and graduate-level management students, university representatives reported that most of these graduates are focused on corporate recruiting programs and do not have exposure to opportunities at younger entrepreneurial companies.

36

%

Only 36% of entrepreneurs at scaleup companies agreed that talented employees were available in Miami.

“Most graduates think they have to work in big companies and don’t think of entrepreneurs.” –Entrepreneur

“We based our operations center outside South Florida because the talent we need isn’t here.” –Entrepreneur

City Hubs for Entrepreneurship Series: Miami, Florida / 13

Access to Finance: Funding Is Not Readily Available for Growing Firms. Access to finance is one of the most important resources for growing companies at the second stage of the ecosystem growth cycle. Unfortunately, the majority of local entrepreneurs leading companies in the scaleup phase reported that access to capital was not readily available. There are only a handful of local investment firms currently making early-stage, series-A-level investments in Miami. The most recent state-level data shows that venture capital investment in Florida is only $10 per resident, which is well below the US average of $71 per resident and significantly below states like Massachusetts, where the average is $330 per resident.18 Local investors also reported that many Miami-based entrepreneurs are poorly educated on the investment process. A prominent angel investor stated that he spends 70% of his time with potential investees explaining the meaning of specific deal terms.

$

10

Venture capital investment for the state of Florida is only $10 per resident vs. $71 for the U.S.

“Access to finance is the biggest challenge in Miami.” –Investor

“I was on the Inc. 5000 for four years in a row and no one would fund me.” –Entrepreneur

Mentorship: Growth-Oriented Entrepreneurs Lack Local Mentors and Are Not Mentoring Others. Mentorship is one of the most important ways that successful entrepreneurs reinvest their knowledge and social capital into the next generation of entrepreneurs. Unfortunately, local entrepreneurs at scaleup companies are more likely to have mentors from outside of Miami than inside it, and most of these entrepreneurs do not mentor others themselves. Miami also has a wealth of retired entrepreneurs and executives who could play valuable roles as mentors for local companies in the scaleup phase, and it has a number of entrepreneurs at young, growing companies who could be valuable mentors to local startups. Participants in our focus groups highlighted the lack of a “central clearinghouse” to connect potential mentors with high-potential entrepreneurs who could benefit from their advice.

59

%

Fifty-nine percent of the mentors of scaleup entrepreneurs in the study do not live in Miami.

“Not enough successful retirees are being tapped for advice and board roles.”

“I know I should be mentoring others, but I don’t do it.” –Entrepreneur

–Entrepreneur

Role Model Promotion: Successful Entrepreneurs Are Not Promoted as Inspirational Examples within Miami. Entrepreneurs in healthy ecosystems often report that they have been inspired by the success of other local entrepreneurs and companies. This is not the case in Miami. Most of the entrepreneurs leading companies in the scaleup phase did not report being inspired by local founders who had achieved success. The participants in our focus groups noted that Miami is made up of many different communities, which are often geographically and socially isolated from one another. Because of this, the success stories of each community often do not spread to other groups.

63

%

Sixty-three percent of entrepreneurs at scaleup companies were not inspired by another entrepreneur in Miami.

“Many parents in Miami, even if they are self-employed, don’t want their kids to become entrepreneurs.” –Educator

“Inspiration is probably the thing we need the most.” –Support Organization

14 / City Hubs for Entrepreneurship Series: Miami, Florida

PLAN FOR IMPROVEMENT There Is a Clear and Demonstrable Need for Endeavor to Work in Miami. The major weaknesses of Miami’s entrepreneurship ecosystem — poor access to early-stage financing and human capital, low-levels of mentorship, and a lack of promotion of local entrepreneurial role models — closely match the challenges that are addressed by Endeavor’s model. There is also ample evidence that local entrepreneurs who are able to overcome these challenges can grow their companies quite rapidly. Here are two recent examples: • In 2012, Unified Payments, a North Miami company, was the fastest-growing firm on the Inc. 500 list of rapidly growing companies in the United States. The company, which was founded by Oleg Firer, grew from less than half a million dollars in revenue in 2008 to $59.5 million in revenue in 2011. It now processes $10 billion in annual transactions, and it was acquired by Net Element International earlier this year.19 • Open English, a Coconut Grove-based company, was founded by Andres Moreno (who also sits on Endeavor Miami’s board) and Wilmer Sarmiento in 2006. Today, it provides live, online English-language classes to more than 70,000 students in 22 countries. Moreno and Sarmiento now employ more than 2,000 people and have raised over $110 million in financing from investors, such as Kazsek Ventures and Flybridge Capital. 20 Given the demonstrable need for the services offered by Endeavor as well as the potential represented by local entrepreneurs like those listed above, Endeavor opened a new affiliate office in Miami in September of 2013. The Endeavor Miami team, led by Managing Director Laura Maydon, will work to implement Endeavor’s model, which has been launched in 19 countries and over 40 cities across the world. Endeavor selects local, high-potential entrepreneurs into its network of entrepreneurs. In total, only 3% of the applicants are invited to join the organization. Once selected, entrepreneurs have access to programs that increase their access to capital, talent, and mentors. These include participation in events hosted by Endeavor’s Investor Network, which has helped 72 companies raise over $300 million in the last two years, as well as fellowship programs with corporate partners, such as Ernst & Young and Bain & Company, and custom-built advisory boards of executive-level mentors. Endeavor also provides entrepreneurs with training opportunities at universities that include Stanford’s Graduate School of Business. The Endeavor affiliate in Miami will encourage the entrepreneurs it supports to become mentors and investors for other companies as they become successful. Worldwide, more than 65% of Endeavor’s current entrepreneurs act as advisors and investors for other entrepreneurs in their communities. As the network of Endeavor-supported companies grows in Miami over the next few years, the Endeavor Miami office will also promote its entrepreneurs in order to inspire potential founders in the community. Miami’s geographic and cultural ties to Latin America make it an ideal location for Endeavor’s first U.S. affiliate office. The city is home to a number of key mentors in Endeavor’s global network, and many Endeavor-supported entrepreneurs from South America have opened satellite offices in the city. Endeavor’s connections to the Miami community have helped to bring together a strong contingent of local business leaders who will support the work of the Endeavor Miami affiliate office. The founding board of directors for the new affiliate office is co-chaired by Adriana Cisneros, vice chairman of the board and CEO of the Cisneros Group, and Daniel Echavarria, director of Organización Corona. Also serving on the board is Peter Kellner, who co-founded Endeavor Global and is now managing partner at Richmond Global; Ernest Bachrach, CEO of Advent International; serial investor and entrepreneur Alberto Beeck; Alberto Chang Rajii, president of Grupo Arcano; Matt Haggman, Miami program director of Knight Foundation; Manny Medina, managing partner of Medina Capital Partners; Andres Moreno, mentioned above; and Sean Wolfington, co-founder of the Wolfington Companies.

City Hubs for Entrepreneurship Series: Miami, Florida / 15

Successful Programs from Other Cities Can Help Address Local Challenges. Endeavor Insight worked with local stakeholders to identify successful programs from other cities that can complement the Endeavor model and existing local programs to help address Miami’s challenges. The following four initiatives are drawn from previous Endeavor Insight research on ecosystem best practices in more than 100 cities across the world. We recommend that these programs be duplicated in Miami as independent efforts or through incorporation into existing initiatives to accelerate the development of the local entrepreneurship ecosystem.

Early-Stage Investment Training Workshop (Angel Resources Institute) The Angel Resources Institute (ARI), a non-profit dedicated to supporting early-stage investing, conducts one to two day training programs in cities across the world for active and potential angel investors, as well as entrepreneurs who plan to raise angel or series A financing. The staff at ARI develops content for each event, working with input from local angel investors. Attendees at ARI events receive instruction on the investment process, valuation, term sheets, the post-investment relationship, and due diligence. Some sessions are attended jointly by entrepreneurs and potential investors, while others are taught separately to each group. Invited attendees should include experienced entrepreneurs from groups like Young Presidents’ Organization and Entrepreneurs’ Organization, who are ready to start investing in other local companies and, in doing so, participate in the final step of the ecosystem growth cycle. 21

Job Fair for Entrepreneurial Companies (NYC Startup Job Fair) The NYC Startup Job Fair connects job seekers with entrepreneurial firms in New York City. It hosts events semi-annually and it facilitates additional connections via an online job board. Entrepreneurial companies are accepted based on the following criteria: 1) quality, quantity, and sustainability of jobs offered; 2) level of funding and current number of employees; and 3) media presence and other qualitative factors. During a recent event in New York, the NYC Startup Job fair connected approximately 1,000 potential employees to 80 companies. One hundred jobs were filled through this process. Though the event is branded as a program for startups, it also serves scaleup businesses, such as Gilt Groupe and ZocDoc, which increases the program’s ability to support entrepreneurs at the second step of the ecosystem growth cycle. 22

Entrepreneurship Mentor of the Year Award (Monosson Prize) The Adolf F. Monosson Prize for Entrepreneurship Mentoring celebrates individuals and organizations that have made significant contributions to young entrepreneurs in the Boston area via mentoring. The prize is awarded annually by the Martin Trust Center for Entrepreneurship at MIT. Nominations for the award are collected from local investors, entrepreneurs, and other stakeholders. A committee from the Martin Trust Center evaluates each nomination, and the prize is awarded at a large entrepreneurship awards dinner. The following day, a press release announces the winner of the prize to the media. Past recipients mention the award prominently in their official bios and on their websites. 23

Local Awards for High-Growth Companies (The Dallas 100) The Dallas 100 is an annual list of the fastest-growing companies in Dallas, Texas that promotes successful entrepreneurs as role models. Though many cities have lists or awards for prominent local businesses, the Dallas 100 is unique. Its rankings are based on companies’ growth rates and it promotes its results very effectively. Companies included on the list are recognized at an annual awards celebration attended by over 1,100 executives, investors, university leaders, government officials, and journalists. Companies listed on the Dallas 100 are also featured in a publication of the event’s media partner and receive invitations to participate in events with government leaders and other organizations that wish to engage with high-growth entrepreneurs. Companies on the list also highlight this accomplishment prominently in their marketing materials. 24

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ENDNOTES 1. Luisa Yanez, “Jeff Bezos: A Rocket Launched from Miami’s Palmetto High,” Miami Herald, 5 August 2013: Web, 10 August 2013. 2. John Dorschner, “Sheryl Sandberg: From North Miami Beach High to Facebook’s No. 2,” Miami Herald, 2 February 2012: Web, 4 August 2013. 3. Jason L. Baptiste, “Jason L. Baptiste,“ n.d., LinkedIn, 4 Aug 2013 <http://www.linkedin.com/in/jasonlbaptiste>; Donna Fenn, “Jason Baptiste and Andres Barreto, Founders of Onswipe,” Inc. Magazine, 27 June 2011: Web, 4 August 2013. 4. Paul Graham, “A Student’s Guide to Startups,“ October 2006, PaulGraham.com, 4 August 2013 <http://www. paulgraham.com/mit.html>. 5. Robert B. Cruz and Robert Hesler, “August 2013, Release,” Labor Market Report Miami-Dade County, August 2013: 2-3. 6. Carlos A. Gimenez, “2013 State of the County Address,” Miami-Dade County, Caleb Center Auditorium, Miami, FL, 28 February 2013. 7. Robert W. Fairlie, Kauffman Index of Entrepreneurial Activity, (Kansas City: Kauffman Foundation, April 2013) 3. 8. Zoltan J. Acs, William Parsons, and Spencer Tracy, High-Impact Firms: Gazelles Revisited, (Washington: Small Business Administration Office of Advocacy, 2008) 2. 9. Endeavor Insight analysis based on 2012 NETS Database data for the Miami-Fort Lauderdale-Pompano Beach Metropolitan Statistical Area. 10. Gary Kunkle, Building Scale and Sustaining Growth: The Surprising Drivers of Job Creation, (Cassopolis: Edward Lowe Foundation, February 2013) 3. 11. Endeavor Insight analysis for an upcoming publication on entrepreneurship ecosystems; based on data collected from numerous historical sources. 12. Endeavor Insight analysis based on interviews with more than 200 entrepreneurs in the Buenos Aires tech sector as well as data drawn from numerous publications. 13. Ariel Torres and Ricardo Sametband, ”Google Instaló en la Argentina Su Tercer Centro de Operaciones,” La Nacion, 13 April 2007: Web, 4 August 2013. 14. Endeavor Insight analysis for an upcoming publication on entrepreneurship ecosystems; based on data collected from numerous historical sources. 15. George Foster et al., Entrepreneurial Ecosystems Around the Globe and Company Growth Dynamics, (Geneva: World Economic Forum, September 2013) 13. 16. Kate Maxwell and Samuel Arbesman, The Ascent of America’s High-Growth Companies, (Kansas City: Kauffman Foundation, September 2012) 10. 17. Doreen Hemlock, “Miami Passes New York’s JFK in International Flights,” Sun Sentinel, 30 April 2012: Web, 10 August 2013; Charles Rabin, “Miami-Dade and Broward Ports on Edge as Union Strike Looms,” Miami Herald, 23 December 2012: Web, 10 August 2013. 18. Beacon Council Economic Development Foundation, One Community One Goal: Competitive Assessment, (Miami: Beacon Council Economic Development Foundation, 1 December 2011) 70. 19. “The 2012 Inc. 5000 List,” Inc.com, 2012, Inc. Magazine, 5 August 2013, <http://www.inc.com/inc5000/list/2012>; Douglas Hanks, “Net Element Acquires Unified Payments,” 15 March 2013, The Starting Gate, 5 August 2013, <http:// miamiherald.typepad.com/the-starting-gate/2013/03/net-element-acquires-unified-payments.html>.

21. Endeavor Insight interviews and analysis. 22. Ibid. 23. Ibid. 24. Ibid.

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20. Nancy Dahlberg, “Miami-Based Open English Raises $65 million in 4th Round of Funding,” Miami Herald, 30 April 2013: Web, 4 August 2013.

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About Endeavor Endeavor is leading the global high-impact entrepreneurship movement to catalyze long-term economic growth. Over the past ten years, Endeavor has selected, mentored, and accelerated the best high-impact entrepreneurs around the world. To date, Endeavor has screened more than 30,000 entrepreneurs and selected 800+ individuals leading 500+ high-impact companies. These entrepreneurs represent over 225,000 jobs and over $6 billion in revenues in 2012 and inspired future generations to innovate and become entrepreneurs too.

About Endeavor Insight Endeavor Insight, Endeavor’s research arm, studies high-impact entrepreneurs and their contribution to job creation and economic growth. Its research educates policy makers and practitioners and helps them to accelerate entrepreneurs’ success and the development of entrepreneurship ecosystems around the world. In 2013, Endeavor Insight joined with the Kauffman Foundation and the World Bank, to co-found the Global Entrepreneurship Research Network.

About the John S. and James L. Knight Foundation The John S. and James L. Knight Foundation supports transformational ideas that promote quality journalism, advance media innovation, engage communities and foster the arts. The foundation believes that democracy thrives when people and communities are informed and engaged. For more, visit knightfoundation.org.

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Contact: Anusha Alikhan, media@knightfoundation.org, 305-908-2646

Endeavor Insight January 2014 Copyright Š Endeavor Global www.endeavor.org/insight /endeavorglobal @endeavor_global /endeavorglobal


City Hubs for Entrepreneurship Series