UF seeks venture capitalists to scope out Florida

By: Ron Wayne

David Day wants to add Florida to venture capitalists’ GPS. Even better, he would like them to know a lot more about the University of Florida and Gainesville.

Day heads UF’s Office of Technology Licensing, which guides the patent process for inventions by UF researchers. But his work doesn’t stop there; OTL helps to find funding to develop and market most of the inventions.

He works on the first floor of the Innovation Hub, one of two UF incubators where fledgling companies find the resources they need to grow. The Hub is much younger than the Sid Martin Biotechnology Incubator, which opened more than 20 years ago in Alachua. The Hub opened in October 2011 and remains the only new building in Innovation Square, site of the former Alachua General Hospital.

So far, most of the Square, located midway between UF and downtown Gainesville, remains vacant, dotted only with streetlights, trees and sidewalks. But that hasn’t stopped the buzz inside the Hub, in the OTL offices and in the labs and offices for 30 startup companies and partners.

As these fledgling efforts begin to succeed, money is needed, and lots of it. That’s where venture capitalists come in. Unfortunately for Florida, up to 70 percent of them are in San Francisco with 20 percent or so in Boston, Day said. Florida is left with about 1 to 2 percent, he added.

“Everyone else in the country is not San Francisco or Boston, and so the numbers are small,” Day said. “We all want to be better, and we want to grow. You do what you can where you can.”

Day and others are using the leverage of the Florida Growth Fund, part of the state workers’ pension fund, to lure more venture capitalists to the state.  They looked at the VC funds that are already in the top tier of investments for all public pension funds and approached them with the possibility of investments from the Florida Growth Fund if they establish a presence in the state.

The effort has produced two so far: HealthQuest Capital and MPM Capital.

“And while they don’t focus on the early stage, the beauty of having them on the ground is that every venture capitalist will be working on a couple local projects in the early stage,” Day said. “So having these VCs here is helpful.”

MPM Ventures, based in Boston, raised a $23 million fund that has an office in the Hub with a partner who is regularly in Florida.  The fund has invested in at least two UF inventions, Day said.

Sofinnova Ventures, based in San Francisco, created HealthQuest in 2013 with representatives here and in Atlanta in response to the state’s incentive.  Garheng Kong, Sofinnova’s managing partner, had years of experience investing in the Southeast and knew there was an untapped opportunity here, according to Randy Scott, a Gainesville-based partner in HealthQuest.

“He also felt like the areas that Florida and the Southeast excelled such as medical devices, etc., were a good opportunity that Sofinnova was not currently investing in,” Scott said. “Net, it was a good fit. The potential from the Florida Growth Fund also made it attractive as raising the fund would be a bit easier.”

Total investment in HealthQuest has reached $110 million, Scott said.

So far, HealthQuest has made two investments in Florida-based companies. “Neither are in Gainesville, but I expect over time we will make investments in Gainesville,” he said. “It’s a pretty good chance those will have some tie to UF, of course.”

Scott said he’s unsure many more VC firms will locate here, but they need to be active and willing to invest in Florida.

“This will be a case of success breeding success — that process has already been unfolding,” he said. “Fifteen years ago, it would have been unthinkable that out-of-state VCs would invest here (in Florida). Now it’s happened many times, and many of those have been successful.”

Day said he’s been told the Florida Growth Fund is not interested in more health care-related VC funds because it already has two. So he’s been looking around for someone in the areas of “clean tech” technology such as environment and energy, or in information technology.

UF is a big reason for the VC firms to put Florida on their radar. It received a record $707 million in research funding in the most recent fiscal year, making it third in the Southeast behind the University of North Carolina at Chapel Hill and Duke University.

“We intend to be a billion dollar research university,” Day said. “The research is where the discoveries, the inventions and the future products come from.”

UF research that makes it to the licensing stage has spurred the creation of incubators in Gainesville beyond the ones run by the university. There are between eight and 10 here, Day said, which might mean we have more per capita than any other U.S. city.

In the 14 years Day has been at OTL, more than 175 startups have been created. “We always rank in the top 10 in the U.S. in how many startups we do,” he said. “We try not to make our scientists be the business person. We try to find business people to partner with our scientists to start these companies.”

In their earliest stages, startups in Florida benefit from the Florida Institute for the Commercialization of Public Research, which matches the first $300,000 of outside investment. It receives about $5 million annually from the state, and has helped fund about 40 companies around the state, Day said. About one-third are UF companies. “The angels (investors) are matching the state of Florida money at a 4-to-1 rate, so it’s really worked to get these companies started,” he said.

A 50,000-square-foot addition to the Innovation Hub will allow Day’s office to handle up to 20 more startups in addition to providing temporary space for new companies moving to town, and possibly corporate offices that want to work with UF.  It will possibly include a women’s entrepreneurial center.

“Generally wherever a company starts is where it stays,” he added.

Ron Wayne is a freelance writer and editor in the Gainesville region. He can be reached at [email protected]

Photo credit: Ron Wayne


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