Jacksonville is hot for startups

February 21, 2014: 1:15 PM ET
jacksonville kyn
Jeff Charette's startup Menuat, a digital menu for restaurants and bars, graduated from the KYN incubator in Jacksonville last fall.
NEW YORK (CNNMoney)

Jacksonville, Fla., is attempting an image change. It's hoping to swap its reputation as a stodgy old Southern city with that of an emerging hub for startups.

"Jacksonville's a hidden jewel for entrepreneurs," said Theodore Carter, executive director of the city's Office of Economic Development. "We have a young ecosystem here that's very welcoming to innovation and new business."

In the last six years, hundreds of early-stage businesses have sprouted In Jacksonville or have relocated from other states. The city's inexpensive business and labor costs and low taxes -- not to mention warm weather and availability of capital -- are drawing entrepreneurs away from hubs like Silicon Valley and New York.

"VC and angel money is coming back to Jacksonville," said Jeanne Miller, executive director of Jacksonville Civic Council. "And the city also has a growing population of high net worth retirees looking to invest in innovative companies."

She said much of the city's nascent startup activity, largely in tech, health care, and consumer products, is driven by these private-sector efforts.

"The startup culture is just starting to crystallize," said Darren Bounds, who's launched three tech startups in Jacksonville in the last six years. The first lacked traction and shut down; the second received $1.5 million from HR firm Adecco, which took it in house last year.

Bounds' third startup, SportsYapper.com, raised $10 million last spring and launched in September. The app helps sports fans stay connected with friends while watching a game and already has 150,000 users, although it's not yet making money.

"In the Valley, you're constantly competing for talent and money with superstars like Google (GOOG) and Twitter (TWTR). You can't stand out," Bounds said. "In Jacksonville, you can be a big fish in a small pond."

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Carter said the city's relatively young population -- the median age has held steady at 34.5 years for the last decade -- also fuels the startup mentality. "Young people want to control their own destiny. They're increasingly starting their own businesses here."

Elton Rivas is another entrepreneur contributing to Jacksonville's transformation.

Rivas left his corporate job four years ago to start a clean tech company. While it wasn't successful, it inspired him to co-found CoWork Jax (an incubator that housed SportsYapper.com in its early stages) and KYN, an accelerator that mentors more mature startups.

In 2012, he also co-launched One Spark, an annual crowdfunding festival to help match startups with money and resources in the area. In 2013, the five-day event drew 130,000 attendees, 20% who came from outside Florida.

"We already have 700 registered startup projects for this year and about $3.5 million in capital committed from VC firms," he said. Rivas said the success of One Spark is a testament to the changing perception of Jacksonville.

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Carter said the city is stepping up its efforts to court entrepreneurs. The city offers training grants, revenue grants and real estate tax abatements.

"We have seven major universities in the area," said Carter. "We're also trying to incentivize these schools to collaborate with business incubators in the downtown area."

But Jacksonville is the largest city by area in the continental United States, which Bounds said poses a unique challenge.

"We have pockets of entrepreneurial activity here that are very disconnected because of distance," he said.

The city is trying to address this by revitalizing the downtown area and developing more incubators where entrepreneurs can collaborate.

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