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Florida Sees Sharp Shrinkage In Startup Funding 

Startup funding can be a lot like the tide: It rises and then rapidly recedes. Lately, it’s been receding especially fast in the beachy environs of South Florida.

Sun, sand and no personal income tax were among the allures that drew venture investors and founders to Florida after the pandemic disrupted their usual commutes. That influx, plus greater recognition and backing for the state’s homegrown startup scene, contributed to a couple of record-setting years for investment.

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To wit, at Crunchbase News, we published a series of articles in the past couple of years highlighting the state’s growing clout as a startup hub:

  • In early 2021, we looked at Miami’s rising star among relocating VCs and techies who were firm in their insistence that it was not a retirement decision. Funding to startups in the metro area hit a multiyear high the prior year,
  • A few quarters later, we talked about how the hype around South Florida as an up-and-coming startup hub wasn’t just hype. Early-stage funding to the state quadrupled in 2021. Big rounds piled up in sectors from crypto to logistics to health care.
  • Things were still pretty heated for much of 2022. That year, we reported, Florida saw the biggest percentage increase of any state in annual venture capital investment.

So that was then.

Now, we hate to put a damper on the party. But the data has spoken. Florida in 2023 is not a growing startup funding ecosystem. It is a shrinking one — with funding statewide receding even faster than it is nationally.

Florida’s quarterly funding drop exceeds U.S. declines

For a sense of how far things are down, we charted out seed through late-stage funding to Sunshine State companies for the past six quarters below:

As you can see, investment hit its peak early last year. Funding has mostly headed lower ever since.

So, you may be thinking that this is not a Florida-specific phenomenon. Venture funding, after all, is down sharply worldwide, including across the U.S.

This is true. However, the Florida shrinkage from the peak to this year is more dramatic than what we’ve seen nationwide.

Across North America, venture funding was down 46% year over year in Q1 2023, per Crunchbase data. But in Florida, funding was down an astonishing 81% from the year-ago quarter.

Annual comps look bad too

Annual comps also look discouraging. For perspective, we charted out annual seed to late-stage funding for the past five calendar years below:

As shown above, the state is nowhere near on track for a repeat performance of 2021 and 2022. Funding looks a bit closer to 2020 levels, when buzz around South Florida’s startup scene was just beginning to take off.

So who is and isn’t getting funded?

Still, while funding is down this year, deals are getting done, including some good-sized ones.

So far in 2023, the largest funding recipients include:

Notably, we’re no longer seeing the kinds of supergiant financings that closed in 2021 and early 2022. Those included companies like Yuga Labs, of Bored Ape NFT fame, MoonPay, a crypto payments company, and Magic Leap, the VR unicorn. The three collectively raised over $1.5 billion in those two years.

Causes for a pullback

It’s difficult to pinpoint Florida-specific causes for a pullback in funding to the state. However, there are a lot of factors impacting startup funding everywhere. This includes falling unicorn valuations, lower investor enthusiasm for once-hot sectors like Web3, fintech and consumer products, and a shuttered IPO market.

Is politics a factor too? Florida’s rightward political shift, and the attention-seeking antics of Ron DeSantis, the Republican governor and potential presidential candidate, have certainly been in the headlines lately. However, I didn’t find documented evidence 1 in recent months of a startup founder or backer changing a decision around investing, expanding or relocating in the state based on political considerations. We’ll see if that changes going forward.

Given that a single massive round or two can significantly impact the totals, it’s also quite possible we’ll see some deals emerge that change the narrative around Florida’s above-average investment declines. At this point in the year, however, the numbers indicate that the Sunshine State startup scene is a lot less buzzy than it used to be.

Related Crunchbase queries

Illustration: Dom Guzman

  1. While I didn’t find a specific startup example, Florida’s political shift is having some documented impact on businesses with environmental, social and governance policies. In December, for example, the state’s chief financial officer said his department would pull $2 billion worth of its assets managed by BlackRock due to opposition to the asset manager’s ESG policies. ESG policies and strategies are also widespread among startup investors and startups themselves.

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