By Nancy Dahlberg
Coral Gables-based venture firm Ocean Azul has invested in 19 startups in three years, five of them based in South Florida.
The story of Ocean Azul Partners is as Miami as the venture capital firm’s name.
Miami was the first city that the firm’s co-founder, David Zinn, visited after the immigrant from South Africa arrived in the States on a tennis scholarship from, ironically, the other Miami University (Ohio). After college, Zinn returned to the Magic City, even though he had family in LA. “There’s just something about the Miami community and it sounds kind of corny and cheesy when you try to explain it,” he said.
Zinn landed his first job at PwC and was recruited by Arthur Andersen as a CPA. After his time there, he stayed in Miami and worked with early-stage founders for over the next 15 years, including as founding CFO of DealerUps, which was acquired by JM Family, and Activengage.
In 2017, he co-founded Ocean Azul Partners with Bill Pruitt, who was managing partner of Arthur Anderson FL and co-founded the Florida Venture Forum back in the ‘80s. The team of partners they assembled were South Floridians, including Salomon Sredni, who was CEO of TradeStation, which was acquired by Monex group. Alex Tellez built and sold Miami-based CellIT Technologies, a software company focused on call centers, and founded Neutralogistics, a South Florida logistics company. Lisette Tellez, a partner in Fund 2, previously was managing partner for Dorm Room Fund at MIT, a student-run VC fund that invests in student-founded startups.
Today, Ocean Azul is raising a $60 million fund, its second fund, and has already started deploying capital from it. Through both funds, Ocean Azul has made investments in 19 portfolio companies, including four based in Israel. Five of its portfolio companies are South Florida-based.
“We fund companies that consider the U.S. to be one of their main target markets, and we help them grow their US presence. While we mostly focus on North America and Israel, we invest globally,” Zinn said.
“As partners and former operators, we invest in early-stage companies where we see opportunities to help founders succeed. We invest based on our experience and often get expertise from our LPs.”
We reached out to Zinn to learn more about the fund and its investments. Here are excerpts from the interview.
What sectors do you favor?
We really like software technology, and we like enterprise, and because a lot of our experience is in enterprise, we end up favoring B2B solutions. But we also like deep tech. We like research teams that are actually working on the technology. And a lot of that is driven by our knowledge base and the MIT backgrounds of both Alex and Lisette.
Software or hardware is fine, but we want to see a completed MVP. We have a preference for B2B or enterprise but also invest in B2C solutions. Industries we like are broad and include FinTech, AgriTech, IoT, CyberSecurity, Cloud Automation, AutoTech, Digital Health, EdTech, VR/AR, Logistics, and Energy.
What do you look for in companies that you invest in?
We understand the challenges of building a company from the ground up so what we are looking for is people first. We invest in people and it goes beyond that.
We’ve got to see an advantage -- a defensibility or a moat -- or a differentiation where we can create a moat. And that’s critical. Whether it’s through intellectual property or another form of defensibility, we look for companies that are clear on their differentiation and how they will create and maintain a leading position in the market.
We like to go deeper on the product than most. And then it’s what we call fit, the fit for our fund and our knowledge and expertise. We don’t invest in consumer packaged goods and medical devices. If we can’t add clear and tangible value to the company, we don’t invest.
I know sometimes it can be a difficult topic to discuss but the character of the founders is important. We like to see qualities of integrity, transparency -- it’s okay if you don’t know the answer to a question -- and openness to our feedback. How founders present themselves and interact with us over time does have a significant impact on our decision process. At the end of the day, it is a very long-term investment. We will be working with the founders for many years.
We focus on Seed to Series A stage, and it is important to have a proof of concept and initial traction so we can assess whether capital will accelerate sales, development and team growth effectively. I would say enterprise software and fintech are our core competencies, and we are refining our thesis as we go. We’re Miami style, we really are in many ways.
How much do you typically invest in a startup?
Our check size ranges from $200K to $3 million. We are averaging about $1 million, that’s our sweet spot. We have the ability to go up to $3 million so we can take the lead in a larger round. We reserve funds for follow-on, but we invest when we see the right indicators -- it is not an automatic.
We have a board seat or board observer seat in every company.
Tell me about your South Florida investments and what attracted you to those startups?
Our very first fund investment was Dade Systems. No 1, it was fintech, it’s in our wheelhouse, and they had made tremendous progress. When we looked at their customers and revenue it made a lot of sense, and Dave Wilson, the founder, is a brilliant guy.
Itopia today is I believe the No. 1 desktop app for cloud automation on the Google platform. We knew the founder [Jonathan Lieberman] and a few of us were angel investors in that one. We like cloud automation and orchestration and we like the efficiency of the business model.
Taxfyle -- that was an easy one because we understood the space and the problem very well, so the idea of using the gig economy to solve the inefficiency of large companies was a good one for us. We knew we can help, as much as any company. Ricky Lavina and the team have done well. They were No. 74 on Inc 500 this year.
For BabySparks, it was the founder’s [Gustavo Rodriguez] deep knowledge of his space and he wants to make a difference -- that is a winning combination. We are looking for teams, people who can build teams and work on teams. That is what we saw in BabySparks. We love what they are doing and we see it as a great and needed cause.
Aegle Therapeutics, led by Shelley Hartman, is going to change kids’ and babies’ lives. That’s profound. We liked the local connection to the research at University of Miami and the credibility of that, combined with the cause of what they are doing and the problem they are solving. That’s what attracted us.
What were some of your most recent investments?
Simetric in Atlanta, an innovative solution for enterprises that manages all devices on one dashboard, was one of them. Our most recent is Lynq, a decentralized, flexible and rapidly deployable network capable of transmitting data over miles in a secure manner that is difficult to detect or intercept.
How was your investing impacted by the pandemic?
We did not stop investing during COVID. There was a lull in April and May, and honestly what our focus shifted to was making sure our portfolio companies were OK. We started rolling up our sleeves, getting involved on a very granular level, even helping get their PPP applications done.
How would you characterize the deal flow in South Florida, and what are you seeing in terms of trends?
It’s good. It’s easy for us to know the founders, and our deal flow often comes from our own networks. We are very actively looking at companies right now.
I think the gig economy solutions, now tagged as work from home, are trending. That may sound obvious but this is a trend we have focused on and seen momentum. We think the talent is improving in South Florida. We are seeing better quality companies.
What we see in South Florida sometimes is more of a me-too solution than an innovative one. That’s an ongoing challenge as our South Florida community grows and our talent continues to grow. And that is already happening in leaps and bounds.
Our companies are growing that we’ve invested in and others are starting up. Corporate venture is revving up, like the new $50 million corporate venture fund from Ryder just announced. That moves the needle.
I’m very optimistic about South Florida; there is already a ton of talent. It’s going to continue to grow but it also takes time.
Miami is special. I think that it's so much more robust down here than people realize.
What keeps you up at night?
One is, are we doing enough for our founders day in and day out and can we do more? I take it very personally when we invest, they are like our babies. And another thing is making sure we do a good job for our LPs and deliver success.
What are your top tips for startups that want to get in front of Ocean Azul?
I think to get in front of us is not hard because of how we operate -- we are very open to looking at everything and seeing what’s out there. We like a warm intro, but it's not criteria, it just helps us. All of our email addresses are on our website. We are very accessible.
To prep for a meeting, be well prepared with your deck, be knowledgeable on your subject matter, and be persistent. That’s a little of the old school in me. I came to the States with $400 in my pocket on a one-way ticket to achieve the American Dream. I love the American dream stories, I love persistence -- send us a deck.
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