MIAMI is sometimes dubbed the unofficial capital of Latin America, or Gateway to Latin America. But more recently it has earned a different moniker, Silicon Beach.

According to the 2023 Global Startup Ecosystem Report, Miami is among the top 30 global ecosystems, occupying position number 23, which represents an increase of ten positions compared to last year. While the city occupies number 15 globally for its performance, and number 20 in the investment category.

Miami is in fourth place for start-up hubs in the United States. Preceded only by San Francisco, New York, and Los Angeles. In Miami, venture capital funding — the money given typically to start-ups or accelerated-growth companies — grew from $1 billion in 2013 to $3.3 billion by 2019.

The story of Miami is also the story of Florida. The Venture Monitor report (Q1 2023) highlights that start-ups in the Miami-Fort Lauderdale area attracted $300 million in venture capital financing, through more than 72 deals, in the first quarter of 2023 alone. Currently, Miami is the hub with the greatest growth in venture capital.

According to a report from the trade group CompTIA, Florida added 2,715 tech businesses in 2021 — ahead of both Texas and California. In that same year Florida had the second-highest number of tech jobs added at 10,522 — second to Texas which gained 10,851 positions, but significantly ahead of California which added 5,165. Much of Florida’s tech growth was concentrated in Miami, which added 2,072 positions in the field last year.

A March 31, 2023, study by CBRE (Coldwell Banker Richard Ellis) showed overall moves from San Francisco to the Miami metropolitan area jumped by more than 49 per cent year-over-year.

CEOs led the charge

In 2020 Keith Rabois, renowned technology executive and investor (former VP at LinkedIn and executive VP at PayPal), member of the Paypal Mafia, told Fortune magazine that he was relocating from California to Miami. His comments on Miami’s (and Florida’s) advantages over California raised interest from other tech entrepreneurs and venture capitalists. Rabois is currently a partner at Founders Found, a San Francisco-based venture capital firm formed in 2005 and has roughly $11 billion in total assets under management as of 2022.

In the same year, Jonathan Oringer, founder of Shutterstock, left the Bay Area for Miami, as did David Blumberg, founder and managing partner of Blumberg Capital, Jon Oringer, co-founder of Reddit and other tech giants started expressing plans to move to South Florida.

It started with a Tweet!

On December 4, 2020, mayor of Miami, Francisco Suarez, responded to a tweet by Varda Space co-founder Delian Asparouhov’s idea of moving Silicon Valley to Miami, asking “How can I help?”. Mayor Suarez’s response: “How can I help?”

This response was picked up by major news and accelerated interest in Miami. Mayor Suarez realised that moving quickly and decisively was the key to turbocharge the interest and relocation of more tech companies. He brought together local players and government to capitalise on the messaging and emphasised the city’s support for helping companies find locations for sale or lease, talent hiring and understanding Florida’s tax environment (more on that below) and created Venture Miami, an office within the city of Miami focused on creating tech opportunities, jobs, and support for innovation. He also participated in numerous tech events, promoting Miami as an ideal location for tech companies.

Venture Capital and New Firms

Venture capitalists were already present in Miami, raising capital and taking equity stakes in start-ups, newcomers and existing Florida tech firms. But that tweet and the initiatives taken subsequently by local government, associations, Miami-Dade Beacon Council and other entities cemented the city’s commitment to making it a reality.

Venture capital in the Miami-Fort Lauderdale area attained a new record in 2022, according to a report released by eMerge Americas. Last year, $5.8 billion flowed into South Florida companies across 426 deals, up from 2021’s $5.3 billion. In 2022, the Miami metro area ranked seventh in the nation.

Florida also had an outstanding year with $8.1 billion invested across 703 deals. That was up from $7.1 billion in 2021. Florida’s results tied for No 6 in the nation.

Hypersonic Growth

At a tech conference in Miami (which has become the preferred location for tech conferences in the past few years), Mayor Suarez highlighted “24 months of hypersonic growth”.

For the first nine months of 2021, there was a funding deal announced, on average, nearly every weekday — 179 funding deals total for start-ups and growing companies. Those deals brought the tech investment surge in the Miami-Fort Lauderdale metro area to $2.4 billion in the first three quarters of the year, according to venture capital reporting firm CB Insights.

COVID further

Tech (and finance) executives doing remote work or looking for warm weather during COVID arrived in South Florida to find private schools that cost 40 per cent less to attend than schools in Silicon Valley, and two-bedroom homes that are a fraction of the cost of a tiny apartment in New York. They found Miami’s restaurants full, Ft Lauderdale’s beaches were full and an economy that was weathering the pandemic better than most. Regardless of political positions, Miami’s more relaxed COVID-19 policies made it an appealing location for many.

Florida’s Taxes and Incentives

Florida’s tax advantages and incentives are compelling and business-friendly, but they are also some of the best-designed in the US.

California’s 8.84 per cent corporate income tax rate and average combined state and local sales tax rate of 8.82 per cent makes it one of the most expensive states to do business. By comparison, Florida’s 5 per cent corporate income tax and average combined state and local sales tax rate of 7 per cent makes it less expensive to do business. Florida also does not have personal income taxes and no state property or limited partnerships taxes.

Every state in the US offers incentives, but Florida’s are among the most well-designed. Participating businesses pay their taxes up front and receive partial refunds — if and when they live up to benchmarks outlined in the contract they’re required to sign when they apply for benefits. The benchmarks are based on the number of jobs created, amount of capital investment, average wage paid, and the type of industry being incentivised. Incentives can be customised commensurate with the level of benefit to the state of Florida and the specific jurisdiction within the state, there are also a number of game-changing statewide programmes which have been particularly effective such as:

• The Capital Investment Tax Credit (CITC). It provides benefits of an annual credit provided for up to 20 years and used against corporate income tax.

• Quick Response Training (QRT) which provides grant funding for customised training to new or expanding businesses. Reimbursable training expenses include: instructors’/trainers’ salaries, curriculum development, textbooks/manuals, and materials/supplies.

• The Incumbent Worker Training (IWT) provides employers with funds to train currently employed workers in an effort to keep their firms and workers competitive.

• Sales tax exemptions. Florida offers sales and use tax exemptions on a variety of business purchases, including machinery and equipment used by a new or expanding manufacturer, research and development equipment, and certain other items.

• Research and development tax credits, and expedited permitting assistance, just to name a few.

Economic Development Agencies

Florida also benefits from economic development agencies which boast robust business development teams that can incorporate an end-to-end knowledge of how businesses make decisions — and know how to appeal to them.

Some of these vaunted EDOs include Enterprise Florida which advocates for investment in the entire state of Florida and the regional EDOs which are laser-focused on their cities and counties.

Some of the agencies which stand out are Miami-Dade Beacon Council, JAXUSA Partnership (Jacksonville), Tampa Bay Economic Development, Orlando Economic Development Commission, Broward County Economic Development Office, Ocala Metro Chamber and Economic Partnership, and Volusia County Economic Development Agency.

Lessons for other regions

Whether we are looking at Miami or Florida as a whole, the lessons for countries and cities in Latin America and the Caribbean are clear. To attract the type of long-term investment and capital which can spark sustainable economic growth and well-paying jobs, economic development organizations or investment promotion agencies need to craft action-driven and operational initiatives, with real cooperation from mayors, governors and private sector associations to make their location attractive.

Florida and its various cities have certainly become the standard for how a location can attract massive amounts of investments in just a few years through vision, purpose and most importantly, definable and leader-driven action.

About the author: Nicholas Sutherland is a foreign direct investment and trade development professional with extensive experience in Latin America and the Caribbean. He is a graduate of the Pontificia Javeriana in Bogota, Colombia, with a BSc in Marketing.