Fostering Growth Revolution for Startups
By Justin Braun | Photography provided by Revolution®
Medical technology developed right here in Central Florida is about to disrupt the billion-dollar respiratory care device market. Startup company AireHealth has created a connected nebulizer with the potential to provide patient care and treatment for the 6 million children in the United States who have asthma, helping them to breathe easier.
“This summer, children will have this in their hands,” AireHealth Co-Founder and CEO Stacie Ruth said. “The current devices on the market are very large and loud, and you have to plug them into the wall. Our device is very small and not tethered in any way. It will be connected to a mobile app, and that allows us to focus less on the technology and more on the engagement of the patient.”
The technology empowers caregivers with insight into the child’s treatment, enabling them to see how much medication was delivered and when.
It won’t be long before the device is prescribed by doctors because it has been cleared by the U.S. Food and Drug Administration. “That is the biggest hurdle of any medical device. We also have a reimbursement policy in place,” Ruth said. “When you have those two things together, what you really focus on is getting it in the hands of patients.”
Startup stories like that of AireHealth can be found all over Central Florida. The region’s richness in transformational opportunity driven by new technology and trends is what caught the eye of internationally renowned Rise of the Rest® venture capital investors. Led by AOL Co-Founder and Revolution Chairman and CEO Steve Case, the Rise of the Rest Road Trip brought its tour to Orlando on April 29, with subsequent stops on the Space Coast and in Tampa, Miami and San Juan, Puerto Rico.
Rise of the Rest operates on the belief that high-growth companies can start and scale anywhere. Each bus tour visits five cities in emerging startup ecosystems located outside of Silicon Valley, Boston and New York City. While in Orlando, the tour visited local startups, heard directly from entrepreneurs and culminated in a pitch competition during which AireHealth took home a $100,000 investment from the Rise of the Rest Seed Fund.
Compared to the multimillion-dollar investments startups receive in the Bay Area of California, $100,000 can seem somewhat insignificant. But according to Terry Berland, Orlando-based managing partner of early stage venture capital firm Kirenaga Partners, that amount can go a long way for a local startup.
“The cost structure in this region gives startups a tremendous advantage,” Berland said. “That’s especially true in terms of affordable Class A office space, a deep pool of talented software designers and housing availability. What we really need is early stage money, which gives local companies the ability to build teams, prototypes and market fit. We are capital short, not idea short.”
Looking at the distribution of venture capital across the nation, it would be easy to conclude entrepreneurial innovation is only concentrated in Silicon Valley, Boston and New York City.
According to financial data and software company Pitchbook, the Southeast received 1.5% of the total venture capital deal value in the first quarter of 2019. An investment report from PricewaterhouseCoopers and CB Insights found Florida received $511 million in venture capital funding in 2018, representing 2.6 percent of the total venture capital awarded that year. For reference, California, Massachusetts and New York received $11.5 billion, $2.6 billion and $2.3 billion, respectively.
This uneven distribution of venture capital is the problem Rise of the Rest is trying to solve.
“As a city and region, it hurts us,” Berland said. “Look at the depth of intellectual property generated in the region just from its higher education ecosystem. Our VC community should be roaring with investment at different stages in the ecosystem. Just look at our competitive cities. There’s a much deeper and threaded-together VC community there than what we have here.”
Donna Mackenzie, executive director of local entrepreneurial incubator StarterStudio, has followed Rise of the Rest and has seen the impact it brings to other communities. “Having worked with more than 500 startups in the Orlando region, this is an incredible opportunity to amplify our companies to new heights,” she said.
Following the announcement that Rise of the Rest would kick off its eighth annual tour in Orlando, regional entrepreneurs submitted 152 pitches for the competition, more applications than any city in the tour’s history. Berland sees that as potentially the inflection point that changes the region’s trajectory.
“The mere fact that Rise of the Rest could pick any city, put us on the list and received more submissions from us than any other city tells me they saw the caliber of ideas here are every bit as robust as those pitched in San Francisco competitions,” Berland said.
For Orlando Economic Partnership President and CEO Tim Giuliani, the success of Rise of the Rest illustrates the strength of the region’s entrepreneurial ecosystem. “It speaks to the region and state’s strength in technology,” he said. “Orlando’s selection as a Rise of the Rest city confirms the region is part of the future of American startups. It also says a lot about our city to have this ready-to-go-to-market, FDA-cleared product that will help kids like mine who’ve had to use a nebulizer.”
Companies that participated in the competition are also benefitting. Chance Glasco, co-founder and chief creative officer of Doghead Simulations, said he scheduled several follow-up meetings with other entrepreneurs and investors he met during the tour and competition.
“I just made my pitch but have already made connections,” Glasco said. “These connections are making this even more valuable than winning.”
Rise of the Rest not only shined a spotlight on the region’s entrepreneurs but also worked to further foster the spirit of innovation throughout the local startup community. But as in any revolution, momentum must continue for it to be successful.
“The Orlando Economic Partnership is taking proactive steps to make sure that future becomes a reality, to help make today’s Orlando startups become tomorrow’s Fortune 500 companies,” Giuliani said. “But in the most successful startup cities, these initiatives are not done alone — collaboration among economic development, local leaders, entrepreneurs and employers is key.”
A lack of local buy-in is one of the biggest issues Berland runs into when raising money for Orlando startups. “When investors from outside the region look at the entrepreneurial landscape, they look for Orlando-based and -focused startup capital investments. The people who have money here aren’t investing in the VC space here. The people who are closest to that marketplace need to be willing to put money into local companies. If you want to build a cluster where capital follows you, you must do it locally.”
It’s also one of the reasons entrepreneurs seek investment from outside markets like Atlanta. The downside is that those companies then feel pressure to relocate to those markets. “That’s exactly what happens if we, as a community, don’t rally around this idea,” Berland said.
“We’ll end up with a long string of great ideas that started here and either died or moved.”
The wealth creation that occurs from venture capital investment in local startups can have broad-based impact for a region. And Berland wants to make sure the wealth effect doesn’t leave the community because the capital left the community.
“If a company goes big and moves to Atlanta, it gives Atlanta more firepower for the next idea as opposed to us,” he said. But Berland is confident companies stay and support the communities that support them and help them grow.
“That impact on an early stage company is tremendous. Local validation breeds growth. There is an amazing set of first customer opportunities in this region for so many ideas. The amount of runway companies have to validate ideas in Orlando is very large.”