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Gainesville's entrepreneurs are slipping through its fingers

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Thanks to educational powerhouses, a growing innovation focus and other resources, like low cost of living, a quaint North Florida town better known for football than entrepreneurial savvy is carving itself a reputation in the startup community.

Gainesville is poised to someday become the Silicon Valley of the South.

But before it can go down that road, it must overcome roadblocks.

Its student population is transient, access to early-stage funding for local startup companies is elusive, at best, and its location and airport isolate the city.

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Since its inception more than a century ago, UF has bestowed upon Gainesville a wealth of bragging rights. It also inadvertently created a broken hiring pipeline.

UF and Santa Fe College are assembly lines of human capital: Both institutions are batches of homegrown talent, primed to offer the fruits of their labor to the Gainesville economy after graduation. But the assembly line is faulty.

Census data from 2010 shows that 20- to 24-year-olds make up about 27 percent of Gainesville residents — the largest percentage of the population. That percentage drops 10 percent for 25- to 34-year-olds, suggesting students move on.    

Where are they going?

And of the 100 businesses recognized in this year’s Gator100, an annual ceremony hosted by the Center for Entrepreneurship and Innovation that commemorates prosperous businesses founded and/or run by UF graduates, only 12 are based in Gainesville. There are also two in Alachua County and one in Ocala.

“It’s unfortunate to let potential entrepreneurs slip through our fingers and go to another city,” said Quang Tran, a managing partner of local business incubator Starter Space.

When an entrepreneur first plants roots in Gainesville, they can bask in its low cost of living — 0.6 percent above the national average, compared to innovation hubs like Austin (10.1 percent above the national average) and San Francisco (48.8 percent above the national average). But that isn’t enough, Tran said.

As the saying goes, “It takes money to make money.” And not enough is flowing through Gainesville.

Early-stage funding, or a company’s first round of substantial investment, is difficult to find in Gainesville, said Duncan Kabinu, a board member of the Gainesville Area Technology Council, a sub-group of the Chamber of Commerce that serves the needs of the local technology industry. The funding is usually streamlined through venture capitalists — investors who are willing to pool money to support a high-risk business or business idea that has the potential to yield high returns.

Despite efforts by the technology council to assemble an angel-investor network, Kabinu said the little early-stage funding that does exist locally is spread thin and tied up indefinitely because few investors have had an “exit,” the method by which they cash out on their initial investment with a profit.  

The next logical step would be to recruit investors from outside Florida. But in recruiting those out-of-state investors, the inconvenience of Gainesville Regional Airport presents challenges, wrote Josh Greenberg, co-founder of Grooveshark, in an email. Most flights out of the one-terminal facility require transfers at bigger airports.

“When it comes to securing partnerships and relationships with out-of-town companies, that makes things a bit more difficult,” Greenberg said.

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By most accounts, Gainesville’s entrepreneurial boom began in 2007 with Grooveshark.

Between a 15-percent decline in album sales and big-name artists like Madonna and Radiohead going rogue that year, the music industry was in upheaval. Wanting to regain control over what he listened to without going the route of online piracy, Sam Tarantino, a UF student, launched a web-based music-streaming service with the help of fellow Gators Josh Greenberg and Andrés Barreto.

They called it Grooveshark, and its inception was “a huge impetus” to the startup culture that is now thriving in Gainesville, said Laura Johnson, director of entrepreneurship programs for the UF Warrington College of Business Administration.

“(The startup community in Gainesville) is growing,” Johnson said. “Even in the last five years, it’s changed so much.”

Co-working space and incubators are terms that refer to entities that benefit fledgling businesses.     

Co-working spaces are populated by independent small businesses whose employees need little more than a desk and an Internet connection to get to work. Rent varies from space to space but is typically inexpensive. Incubators are companies that help startups develop by providing services like management training, office space and equipment, usually in exchange for equity in the startup.

Gainesville is home to six incubators: the Sid Martin Biotech Incubator, the Gainesville Technology Entrepreneurship Center, the Santa Fe Center for Innovation and Economic Development, Innovation Hub, Skyward Capital and Starter Space.

Starter Space, located at 308 W. University Ave., was founded in September 2013 by Quang Tran and Payal Khurana. A self-proclaimed “community of passionate, collaborative entrepreneurs and change makers,” Starter Space is home to 11 independent ventures, whose services range from search engine optimization to on-demand T-shirt design and manufacturing. More than 30 people work or intern for startups in the building.

The co-working/incubator hybrid provides startups with affordable office space, Internet access and, most importantly, guidance. Tran said the managing partners of Starter Space strive to create a culture of community by housing only “local talent,” meaning aspiring entrepreneurs who are Gainesville-born or Gainesville-bred.

“The assumption that I have is that if you create that culture, you’ll see more thriving startups,” he said.

Along with the co-working spaces and incubators popping up, local agencies are working to support fledgling businesses.

The Gainesville Area Chamber of Commerce hosts a career fair called “Stay in the Swamp,” an annual event that kicked off in 2013. The event, which serves as an opportunity for both business promotion and networking, takes place each year in UF’s Hough Hall.

“The chamber’s vision is Gainesville as the global hub of talent, innovation and opportunity,” said communications director Alyssa Brown. “It is very much relevant to our vision to work to keep UF students and Santa Fe students here in our region after they graduate.”

Whether it’s effective, however, is up for debate.

Student turnout has been consistent, if not growing, according to the chamber. 

Other indicators of success aren’t readily quantifiable, Brown said.

But some local entrepreneurs believe the program misses the mark.

“It feels like they’re coming from a place of desperation when they talk about staying in Gainesville,” said Opeola Bukola, founder and CEO of branding company Gainesville Media. “They fail to talk enough about the values of Gainesville and the value of staying here and how awesome it is. They’re just like, ‘Look! There are jobs here!’”

Bukola, a recent UF grad, said pushing job opportunities isn’t enough. When you anchor somewhere, you’re anchoring not just at a desk or a cubicle, but in a community, too.

Not all organizations are blind to the missing social appeal. The Alachua County Emerging Leaders, for example, hosts mixers for young professionals who have outgrown the college scene, Johnson said.

But promotional campaigns designed to support startups and ramp up innovation only skim the surface, Tran said.

For Gainesville to alleviate its small-town woes and get out of its entrepreneurial rut, it needs a vote of confidence from local residents and government.

“We need capital to support entrepreneurs who are committed to Gainesville,” he said. “If you don’t invest in local talent, in your local talent, you’re screwed.”

 

Editor’s note: The writer currently works at Starter Space and is therefore acquainted with Opeola Bukola and Quang Tran.

[A version of this story ran on page 1 - 3 on 4/9/2015 under the headline “Gainesville losing its entrepreneurs”]