For the venture capital industry nationwide, 2014 was the year of the megadeal, and Magic Leap, which is creating augmented reality technology in Dania Beach, brought in the third-largest financing round of the year. It’s $542 million venture round last quarter, with investors including Google, Andreessen Horowitz, Kleiner Perkins and others, was only eclipsed by two $1.2 billion rounds by Uber, the ride-sharing company.
Magic Leap was also the youngest of the megadeal getters. The company has been in ultra-stealth mode developing what it calls its “Cinematic Reality” but is believed to be building a large team in its offices in Dania Beach, Silicon Valley and even New Zealand. Magic Leap, which was recently advertising 100 open positions, joins more well-known names like Snapchat, Airbnb and Dropbox in the top 10 deals, all above $320 million.
In Florida, venture capitalists injected $862.5 million into 45 Florida funding rounds in 2014, more than twice the dollar total of 2013 and the strongest year since 2001, according to the MoneyTree Report by PricewaterhouseCoopers (PwC) and the National Venture Capital Association (NVCA) released Friday. To be sure, Florida’s take is still a tiny slice of the total venture capital pie in 2014, just 1.8 percent for the country’s third most populous state, up from 1.4 percent in 2013,according to MoneyTree numbers. In the fourth quarter, South Florida companies reaped $560.1 million of the state’s $580.2 million, which was the fourth highest state total.
Seven of Florida's top 10 venture capital rounds of 2014 came from South Florida, and nearly all are healthcare companies. In addition to Magic Leap’s $542 million mega round and its earlier round of $50 million, they include: MDLive, the Sunrise-based telemedical software company, $23.6 million; Riviera Beach-based biotech company Sancilio & Co., $20 million; Tyrogenex, a biotech company in West Palm Beach, $15 million, Cantex Pharmaceuticals, a Weston biotech company, $13.5 million, and Hollywood-based Pure Life Renal, a dialysis company, $10.5 million.
“Magic Leap has provided evidence to the rest of the VC community that there are big opportunities in Florida,” said Jonathan Cole, an attorney with Locke Lord LLP and a founder and director of New World Angels based in Boca Raton. “The key question now is whether most of that investment will be deployed to build the company’s operations in Florida, or elsewhere. If the funding stays in Florida, it could have a dramatic impact on the broadening and deepening of the technology talent pool in the state,” said Cole, who is in charge of his firm’s Florida offices.
Nationally, venture capitalists invested $48.3 billion in 4,356 deals in 2014, up 61 percent in dollars and 4 percent in the number of deals over the prior year, according to the MoneyTree based on data from Thomson Reuters. In Q4 2014, $14.8 billion went into 1,109 deals.
Internet-specific companies captured $11.9 billion in 2014, marking the highest level of investments in this sector since 2000. Annual investments into the software industry also reached the highest level since 2000 with $19.8 billion flowing into 1,799 deals in 2014, up 77 percent over 2013.
Dollars going into software companies accounted for 41 percent of total venture capital investments in 2014, the highest percentage since the inception of the MoneyTree Report in 1995. Overall, investments in 2014 in the life sciences sector rose to the highest level since 2008 with $8.6 billion invested into 789 deals, a 29 percent increase in dollars. Both are also strong sectors in South Florida.
With valuations climbing in Silicon Valley, there is already talk of a venture capital bubble. Having been active in the VC investment community for more than 40 years, Cole said he knows there are cycles and believes venture capital is in bubble territory now. Still, “there is every reason to think that 2014 was a break out year for VC activity in Florida. And 2015 should be even better,” he said.
Cole cited progress such as the Florida Institute for the Commercialization of Public Research getting another appropriation from the Legislature, bringing its Seed Capital Fund to near the $20 million level. The agency has invested in about 30 companies so far, including several healthcare companies spawning from the University of Miami, all of which have attracted matching private funds. The state’s Department of Economic Development doubled to $500 million the allocation to the Florida Growth Fund for investment in later stage opportunities, he said. Cole also cited the growing network of angel investors available to Florida-based companies and the efforts of eMerge Americas, Endeavor, Knight Foundation and many other groups “to vault Miami into the consciousness of the U.S. and Latin investment community as a viable community to start a company or to seek investment opportunities.”
Developing a funding network has long been cited as one of South Florida’s challenges as it works to develop a tech hub. Last year, a handful of new funds launched or opened offices in Miami including Medina Capital,Richmond Global Ventures, Scout Ventures, Krillion Ventures and Thesis Ventures. At the same time, South Florida’s angel networks expanded. Organizations such as the Knight Foundation and the Accelerated Growth Partners angel network are launching investor education programs to try to lure a sliver of South Florida’s significant wealth into tech. Investors will gather Jan. 29 and 30 for the Florida Venture Capital Conference in Hollywood.
Nationally, too, the influx of new investors has been cited as a reason for the bigger deals.
“For the first time in MoneyTree history, we saw two deals exceed one billion dollars and more than 40 megadeals — which are investments exceeding $100 million,” said Mark McCaffrey, global software leader and technology partner at PwC. “In addition, there’s been an influx of private equity investors at a level we’ve not seen previously.”
The MoneyTree Report can be found at: http://pwcmoneytree.com andwww.nvca.org.
Follow Nancy Dahlberg on Twitter @ndahlberg.