Throughout the pandemic, few cities have been heralded as the next hot tech hub like Miami. It’s one of the places said to be benefiting from the outmigration of tech companies and workers from the San Francisco Bay Area. But is Miami’s tech hype just that—hype? We take a closer look at Miami’s tech scene and explore the challenges Miami must overcome to compete with cities like San Francisco for tech’s future.
Learn more about the tech policy landscapes of San Francisco and Miami by watching sf.citi’s Mapping the Tech Exodus conversation with Refresh Miami Executive Director, Maria Derchi Russo, below.
PROMISING SIGNS FOR MIAMI’S TECH FUTURE
Miami has certainly experienced some tech “wins” in recent years, including during the pandemic. Miami-based pet product retailer Chewy raised over $1 billion in its 2019 IPO offering. REEF Technology, another Miami startup, raised $700 million in 2020. In fact, 2020 turned out to be a good year for Miami capital as a whole. The city raised $1 billion in venture funding, representing Miami’s highest dollar value in the last five years. Tokyo-based SoftBank, meanwhile, is seeking up to 100,000 square feet of Miami real estate and recently committed $100 million to startups in the region. Combined with a 26 percent increase in South Florida tech jobs over the last decade, there’s definitely a strong case to be made that Miami’s tech scene is growing.
Despite these advances, Miami’s tech ecosystem still pales in comparison to San Francisco. Venture capital investment in San Francisco reached $20 billion in the first quarter of 2021. And the San Francisco Bay Area accounted for nearly 40 percent of the country’s total venture capital investment in 2020. Furthermore, several San Francisco tech companies, including Airbnb and Snowflake, had wildly successful IPOs in 2020, suggesting that San Francisco’s tech dominance shows no sign of slowing during and after the pandemic.
In a conversation with Maria Derchi Russo of Refresh Miami, we learned about a few of Miami’s qualities that are fueling South Florida’s tech momentum and how they stack up to San Francisco.
Enthusiastic Government Support for Tech’s Growth
Cities across the country have watched the rise of San Francisco’s tech ecosystem carefully. And while many of them would like to emulate the Bay Area’s robust network of tech-focused universities and unmatched capital, they are eager to set themselves apart from San Francisco when it comes to the tone of local politics vis-à-vis the tech industry. As we’ve written before, San Francisco has not exactly embraced tech with open arms. If anything, some local politicians have lambasted tech for housing affordability, income inequality, and a host of other issues in San Francisco (all of which existed long before tech arrived).
Nashville and Miami are among many cities eager to demonstrate that their political leadership welcomes tech companies. And few have done this as visibly as Mayor Francis Suarez of Miami. During the pandemic, he’s become something of an internet sensation for his outspoken willingness to connect with and support tech founders relocating (or considering relocating) to Miami.
We’ve benefitted from a tremendous migration of talent and capital from the Bay Area and the New York area, particularly in the last few months. It seems like a tsunami or tectonic shift of people who are looking at Miami as a place where you can do serious work that can have a significant foothold in the knowledge-based economy.
—Francis Suarez, Mayor of Miami
In addition to creating an environment that’s “inviting and welcoming to innovators,” Mayor Suarez plans to maintain a business-friendly tax structure that accommodates an economy increasingly dominated by tech. While this approach to taxes marks a stark contrast from San Francisco, not everyone approves. Some people in Miami do not share Mayor Suarez’s confidence that tech can solve Miami’s challenges—especially those related to climate change—nor uplift the economy without displacing longtime residents.
The potential tax benefits of operating in Miami versus San Francisco have not gone unnoticed by Bay Area businesses. According to the San Francisco Business Times, 40 Bay Area firms conducted meetings with the Miami Downtown Development Authority (DDA) over the last six months, compared to just five meetings between October 2019 and September 2020. Some of Miami’s appeal may be driven by a new DDA initiative called Follow the Sun, which offers up to $150,000 in economic incentives to businesses creating jobs with a minimum annual salary of $68,000 in downtown Miami.
On top of all this, Mayor Suarez is determined to make Miami the most crypto-forward city in the nation. At a recent event hosted by sf.citi, he announced that Miami adopted legislation allowing employees to receive a percentage of their salaries in Bitcoin and pay fees and taxes in Bitcoin.
History of Remote Work and Connections to Latin America
Due to a historic shortage of local talent, early Miami tech founders began hiring remotely way before it became normalized by the COVID-19 pandemic. In some cases, said Russo, founders hired outside of the country, dipping into the tech talent pools of Colombia and Argentina.
This touches on another advantage of Miami: its proximity to Latin America. Home to the fourth-largest regional online market in the world, Latin America carries undeniable appeal for tech companies. With three-quarters of South America’s population connected to the internet, Latin America has become a popular “testing ground for new products before launching them in other markets,” writes LatamList. Investment in Latin America rose to $4.6 billion in 2019, and the region produced 17 of the world’s 300 startup unicorns between 2017 and 2019.
Of course, the San Francisco Bay Area itself has no shortage of international connections. More than a third of Bay Area startup founders are immigrants, as is 57 percent of the Bay Area’s tech workforce. The Bay Area’s historic and robust community of immigrants has, in fact, played a critical role in turning San Francisco into the tech powerhouse it is today. As tech sets its sights on emerging innovation markets, both San Francisco and Miami’s connections to regions beyond the U.S. will prove especially valuable.
CHALLENGES MIAMI MUST OVERCOME TO COMPETE WITH SAN FRANCISCO
Building a tech ecosystem to rival that of San Francisco is no easy feat. As highlighted in sf.citi’s Tech Migration event, a true tech hub requires at least three companies valued at $10 billion or more. New York City only just reached that threshold, revealing that Miami has a long way to go before it can really give San Francisco a run for its tech money. Continuing our conversation with Maria Derchi Russo of Refresh Miami, we discussed the key obstacles Miami must overcome to accelerate its tech growth.
Brain Drain, Tech Talent, and Capital
According to Russo, talent and capital have been the barriers most-cited by tech founders hoping to start and grow their business in Miami. In many ways, said Russo, tech talent and venture capital are still challenges in Miami today. What’s changed in the last five years, however, is that it’s no longer considered essential to be in the Bay Area if you want to get tech funding or launch your career in tech. In fact, the shift toward decentralization has allowed some Miami founders to move back to their hometown, said Russo.
At the same time, Miami struggles to hold onto tech talent. Russo explained that Florida International University (FIU) graduates plenty of engineers each year, though most leave Miami after graduating. She also noted that Miami has two coding schools creating a lot of entry-level tech talent. Along with connecting FIU engineering graduates to Miami’s startup community, Russo wants to see more established Miami tech companies hire and train Miami’s stock of entry-level engineers. To further address concerns over talent and ensure Miami can produce enough homegrown talent to support its growing tech ecosystem, the Knight Foundation committed $14.3 million to FlU and the University of Miami.
Miami, like most cities, lacks the Bay Area’s decades-old, symbiotic relationship between its renowned universities and its local tech community. One factor that has always made San Francisco a natural hub of tech innovation is its proximity to two of the best engineering schools in the country: Stanford University and the University of California, Berkeley. As we’ve written previously, these two universities helped give rise to Silicon Valley. In turn, top tech talent continues to flock to these schools, in large part for their ties to the forward-thinking companies located less than an hour away.
Competitive Tech Salaries
One area in which Miami has consistently struggled to compete with more established tech hubs is salaries. San Francisco may be known for its high housing prices, but it’s almost just as notorious for its generous tech salaries. In list after list, the San Francisco Bay Area boasts the highest tech salaries of anywhere in the country. That’s certainly helped a lot of San Franciscans keep up with the high cost of living. According to San Francisco Chief Economist Ted Egan, in fact, the growth in median household income exceeded the growth in housing costs for most San Francisco income groups between 2012 and 2018.
Russo acknowledged that the salaries in Miami have been lower than in other cities. This is particularly problematic since the price of real estate has steadily increased over the last few years. At the same time, Russo said remote work could help change the dynamic between Miami salaries and housing. With more Miami workers accepting remote jobs for national companies that pay higher salaries, Russo is hopeful that local companies will follow suit to remain competitive.
MIAMI DOES NOT WANT TO BE THE “SILICON SWAMP”
Miami is determined to preserve its unique ethos despite an influx of newcomers from the San Francisco Bay Area. Echoing sentiments expressed by Brian Moyer of the Greater Nashville Tech Council, Russo said, “We’re not Silicon anything.” To avoid inheriting or recreating a tech culture too reminiscent of Silicon Valley, Refresh Miami teamed up with the Miami-Dade Beacon Council, local community leaders, and tech founders to create the MiamiTech Manifesto. The manifesto articulates the distinct Miami values the city has been working to uphold while expanding its tech ecosystem.
A Miami-infused tech community highlights one of the most exciting opportunities of a decentralized tech economy that can bloom in cities across the country. Speaking to tech CEOs who have fully embraced the hub-and-spoke work model, we heard one consistent theme in their logic: diversity. Silicon Valley undoubtedly has the nation’s highest concentration of innovation. It’s also a bubble—of thinking, political inclinations, socio-economic backgrounds, and races. Looking ahead, we are excited to see tech grow and transform in the San Francisco Bay Area, just as we are excited to see the industry as a whole become more representative of our magnificently diverse population.