Central Florida entrepreneurs have often faced near-drought conditions in the land of venture capital, those high-risk, high-payoff investments that seem to rain down on places like Silicon Valley.
But while the Orlando area historically falls short in venture-capital rankings, there is one area where it appears to keep pace with most areas of the country: family wealth. And although such money has rarely found its way to entrepreneurs in the past, other than to family-owned enterprises, there are signs that such wealth is venturing farther afield, corporate-finance experts say.
"There are 40 family trusts that I manage, and a portion of that overall portfolio does invest in venture-capital deals," said Michael Okaty, an Orlando partner in the law firm Foley & Lardner. "It is becoming a regular part of their investment strategy."
Family wealth has increased in venture-capital circles because such typically conservative investors have grown weary of being overly cautious with their money, having recovered from the market meltdown of 2008-09, Okaty said.
Many are starting to get "impatient with the negative returns they have been seeing," he said.
The challenge for Central Florida's entrepreneurs is finding a way to attract that family wealth as it becomes available —no easy task, Okaty said.
"These families are investing nationally and globally," he said. "Certainly, they might invest in local companies, but essentially they are looking for the best deals out there, not just those in a certain locality."
Putting a figure on the amount of rich-family wealth in Central Florida is difficult, as is figuring out out how much of it may be invested as venture capital locally or elsewhere. Such investments are not included in the quarterly PricewaterhouseCoopers MoneyTree survey, the country's most extensive report on money placed by professional venture-capital firms.
Experts generally agree on who holds most of the state's family wealth, spread among descendents of Florida citrus barons and real estate kingpins and generated by high-technology entrepreneurs such as the late Bill Schwartz of Orlando, widely considered the father of the region's laser/electro-optics sector.
Overall, Florida had 362,285 millionaire households as of last year — the fourth-highest total after California (716,316), New York (381,197) and Texas (381,165), according to an annual study by Phoenix Marketing International, a New York-based wealth-research firm. The study did not break out figures by metropolitan areas.
Metro Orlando had nearly 50,000 millionaire households in 2009, according to a study by San Diego-based Claritas, a research unit of the Nielsen Co. But a 2010 study by Capgemini North America Inc. concluded that Orlando lost 42 percent of its millionaires after the 2008-09 market meltdown.
Whichever numbers you look at, it is apparent Central Florida still has tens of thousands of wealthy families, some of them very wealthy, said Richard Fox, a corporate-finance expert and partner in the Astralis Group, an Orlando-based business-advisory firm.
The rich use a variety of firms, organizations, financial institutions and planners to handle and invest their wealth, he said. A handful of ultra-wealthy local families have established what is known as a "family office" firm, set up exclusively to manage their investment portfolio as well as their personal affairs, including travel, entertainment and daily appointments.
Family-wealth managers, whether hired from outside or family-office professionals, generally set up family portfolios with a typically conservative mix of assets, including cash, bonds, stocks, real estate and privately held companies, according to Fox. Some also invest a certain portion of the portfolio in higher-risk, emerging companies, similar to venture-capital investments.
"This kind of investment is extremely important for a community like Orlando and its economy," Fox said. "It can be lifeblood for new companies to develop and grow and create new jobs, in turn creating more wealth. If a community is weak in this area, its growth will be stifled and it won't have a key part of the infrastructure it needs to build the economy."
Some experts doubt that private wealth controlled by intrinsically conservative, sometimes secretive families can ever become a factor in the venture-capital market. Most family-office operations, they say, are set up explicitly to pass wealth from one generation to the next.
Bill Grimm, a veteran Orlando corporate-finance lawyer and long-time partner at the GrayRobinson law firm, said few family-office firms have ever invested locally in emerging companies. Such "angel" investments by wealthy individuals usually come from somewhere else, he said.
"In my view of it, family offices are not in the business of making angel investments," said Grimm, a professor of entrepreneurship at Rollins College in Winter Park. "They are in the business of vetoing angel investments. They focus on making sure that nothing dumb is done to lose the familly fortune."
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