Miami's Tech Boom Hits Snag as Money Dries Up

South Florida had become a burgeoning tech hub, as the COVID-19 pandemic and exodus from Silicon Valley had made Miami a go-to destination for startups and venture capital, but the money is drying up.

Rising interest rates, recession concerns, and Silicon Valley Bank's collapse have all hit the venture capital funding hard, forcing Miami startups to either be put on hold or go into cash-saving mode.

"The fundraising environment has changed dramatically from a year ago," Kaben Clauson, co-founder and CEO of Base, told the Miami Herald. "It's one of the biggest drops I've ever seen.

"Had we not started to get some early great traction and revenue with the company, we never would have been able to raise any money in this environment."

Miami metro saw $243 million in venture capital (VC) invested in the first quarter of 2023, which is one-tenth the amount in the same period a year ago, according to PitchBook.

"Finance — especially VC — is fundamentally prospective, and when the invisible hand that writes the rules of the market is revising them without warning, investors tend to reduce their activity until they can see at least a rough draft," according to PitchBook's first quarter report.

There were half the number of deals (70) year over year, dropping Miami metro from 7th to just 17th among venture capital metro areas, as the nation's investing fell 53.1% to $3.3 billion, according to the report.

"Right now, a lot of founders, myself included, who thought we'll just raise money on the idea, realize that we need a little more proof in 2023 than we did in 2022 to actually get capital raised," Clauson told the Herald. "We're going to see a lot more businesses being built on old-school business ideas like revenue, profitability, and gross margins versus really radical longshot ideas."

Startups are going to have to find creative ways to build efficient, perhaps a silver lining for an industry that starts on shaky ground.

"We realized we had to make changes," veteran tech entrepreneur Juha Mikkola, founder of Miami's Usko Privacy, told the Herald.

"We're not in a position that we have to raise capital this year."

Florida Funders venture capital firm VP Maria Derchi Russo said it is past time to tighten the purse strings.

"Pretend you're not going to get another dollar," she told the Herald. "What do you need to do to sustain your company and grow it without the need of outside money?"

"A lot of funds are doubling down on their winners and trying to reallocate the dollars to ensure that they can survive."

While Miami is a location that stands among the first locales tightening,, it remains a viable destination amid the mass exodus of blue states and blue cities.

"Times are tough," Florida International University's Anna Pietraszek told the Herald. "I'm positive that we are going to recover in Miami.

"People right now are looking at South Florida for what's happening."

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