The launch of Orlando Opportunity Fund in November established a connection between the technology and real estate markets that may unlock Central Florida’s potential as a breeding ground for successful technology startups, while revitalizing communities in need of economic development and job creation.
The concept centers on Qualified Opportunity Zones created in 2017 by the Tax Cuts and Jobs Act, which designated thousands of communities across the nation as “economically distressed” – including nearly 200 throughout The Corridor’s 23 counties. According to the Internal Revenue Service (IRS), this designation will spark economic development by providing tax benefits to investors in property and other assets located within the Qualified Opportunity Zone.
Specifically, investors who contribute a recent capital gain to a Qualified Opportunity Fund – an investment vehicle designated solely for this purpose – will become eligible for tax deferment on that capital gain. The longer an investor holds their capital gains in the fund, the greater tax benefit they receive; investors who stay in the fund for at least 10 years owe no taxes on their capital gains once the asset it sold.
Qualified Opportunity Funds exist throughout the U.S., but to the knowledge of Orlando Opportunity Fund Co-founder and Chief Strategy Officer David Brim, no other fund is designed to support both technology startups and real estate investments. “The first full wave of opportunity funds were all real estate funds. Our model combines the best of both worlds.”
Orlando Opportunity Fund’s unique model leverages the investment of capital gains to not only acquire real estate assets in Qualified Opportunity Zones throughout Central Florida, but also to provide anywhere from $250,000 to $500,000 in angel funding to technology startups in Orange, Seminole, Lake, Osceola and Volusia counties. The fund has been raising capital since its launch in November and will begin distributing funds in early 2020. Entrepreneurs may learn about eligibility requirements and request information on the Orlando Opportunity Fund’s website.
The Orlando Opportunity Fund represents a convergence of two passions for Brim, who for over 10 years has been an active member of the region’s real estate and entrepreneurial communities. In 2008, while the University of Central Florida alumnus was raising capital for one of his first software-as-a-service business ventures, he realized the area was home to an abundance of capital, but few investors were willing to assume the risk of investing in a technology startup.
“They were very comfortable when it came to real estate investments,” said Brim, who has served more recently as a consultant for second-stage CEOs through GrowFL and the Edward Lowe Foundation, and in 2016 founded OrlandoEntrepreneurs.org. “Even when I would have certain wins or couldn’t personally invest back into my business, I would sometimes take the chips off the table and buy real estate. So, I learned to understand both asset classes and I have always been trying to figure out a model of how to incentivize real estate investors to invest in tech.”
The risk-averse investment approach Brim described could be a culprit for Florida’s continued struggle to join the ranks of states such as California, New York and Massachusetts, which have attracted the lion’s share of venture capital activity for years, according to PwC and CB Insights’ MoneyTree reports. Since 2011, Florida has ranked consistently among the top 15 states with the most venture capital activity – both in terms of deal volume and cash value – yet experts agree there is work to be done to make more startup funding available.
According to Michael Gerrity, a veteran real estate, media and technology entrepreneur who served with Brim as a panelist at Synapse Orlando in October 2019, “A glaring mark against Orlando is the lack of investor confidence to fund startups. There’s a lot of money here – mainly tied to real estate – but the investors need to build confidence.”
Brim and his team are betting on the Orlando Opportunity Fund to help investors build confidence. Their hope is the potential returns of a relatively stable real estate market will outweigh concerns investors might have about technology company investments, which are known to produce much more unpredictable returns. Available to individuals and corporate entities, the fund is ideal for investors who want to have startups as part of their portfolio, but are not familiar with how to invest in the sector and want to limit risk.
“We’re focused on producing returns that they’re used to receiving from real-estate investment, plus there’s the chance for wild appreciation on the tech startup side – all while getting tax incentives. It’s also a way to improve the community by creating jobs, rehabilitating antiquated properties and through other positive impacts.”
Orlando Opportunity Fund leaders together share nearly 80 years of experience developing, advising and financing companies in technology and real estate. Along with Brim, they include:
- John Cooper, president of startup investments, who has led or participated in the financing and merger and acquisition activities for more than 200 technology companies;
- Vince Wolle, president of real estate investments, who is an experienced commercial real estate executive, broker and investor with over 20 years of experience; and,
- Donna Mackenzie, chief financial and operations officer, who for the past four years as executive director of StarterStudio, was involved in more than $90 million worth of startup and early growth-stage company investments.