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Miami sees blockchain-focused venture capital deals skyrocket in 2021

·4 min read
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Many people have wondered over the past year whether Miami can become the next Silicon Valley. For crypto enthusiasts, the prospect appears likely.

The city saw a financing rush of venture capitalists piling into blockchain startups last year, with investments in the sector skyrocketing a whopping 2,061% in 2021, according to VC firm Telstra Ventures’ analysis of 40,000 startups across 28 regions. As the country’s major tech hubs, San Francisco, New York City, and Los Angeles still lead the way in blockchain investments, but the massive boom in Miami last year helped the city emerge from nowhere to take fourth place, Telstra Ventures’ “Tech’s Great Migration” report indicated.

“When you think about the opportune locations for the next Silicon Valley, we look at people and access to great talent, and I think what Miami and its mayor have done is take a strong initiative to promote Miami as a destination with a high quality of life and a culture of innovation and risk-taking,” Telstra Ventures general partner Yash Patel told Yahoo Finance.

By comparison, Washington D.C. took second place based on regional growth when it came to blockchain deals specifically, with investment in the area up 476% from the prior year. Atlanta, Austin, and Chicago were also vying to become America’s crypto capital, recording increasing inflows to the sector of 368%, 260% and 246%, respectively.

Many people have wondered over the past year whether Miami can become the next Silicon Valley. For crypto enthusiasts, the prospect appears likely.
Many people have wondered over the past year whether Miami can become the next Silicon Valley. For crypto enthusiasts, the prospect appears likely.

“Miami has been laying the foundations for this for a while in terms of cost of living,” Patel said, pointing to Florida’s lower income taxes and cheaper real estate. “All these ingredients were in place for this to happen.”

It also helps that the city’s mayor Francis Suarez has been a vocal proponent of digital currencies as part of a broader mission to make Miami the country’s crypto epicenter.

Suarez, who collects 100% of his paycheck in the cryptocurrency, has actively pushed for city residents to get digital wallets and listed paying government employees in bitcoin as a top priority on his agenda.

"It’s a little bit of a marketing gimmick, but we’ll see how much traction it gets," Patel said.

In his mayoral acceptance speech last month, Suarez called on city leaders across the country to work together to make crypto use more widespread, citing surging inflation and financial innovation as reasons to more widely adopt digital assets.

“Mayor Suarez’s bid to turn Miami into the blockchain and crypto capital of America is coming true,” Patel said. “I think he’s been really partnering with Silicon Valley VCs in particular to promote Miami as a destination to get access to great talent, and also to get these venture capitalists to actually support the local scene there.”

MIAMI, FLORIDA - FEBRUARY 15: Mayor of Miami, Francis Suarez speaks on stage during Pivot MIA at 1 Hotel South Beach on February 15, 2022 in Miami, Florida. (Photo by Alexander Tamargo/Getty Images for Vox Media)
MIAMI, FLORIDA - FEBRUARY 15: Mayor of Miami, Francis Suarez speaks on stage during Pivot MIA at 1 Hotel South Beach on February 15, 2022 in Miami, Florida. (Photo by Alexander Tamargo/Getty Images for Vox Media)

Venture capital deal volumes accelerated in Miami across other sectors as well. The total number of transactions for Miami-backed companies grew 260% year-over-year, with mobile and consumer, software and enterprise, and financial technology among the most popular investment categories.

Houston, Texas and Washington D.C. also topped the list in terms of growth in VC deals, jumping 165% and 143%, respectively. Still, the San Francisco Bay Area and New York City dominate venture capital activity by far. More than half of VC investments in major areas went to the cities. Los Angeles, Boston, Seattle, and Austin followed on the list.

“At the absolute level, San Francisco, New York, and even LA are strong in terms of the quantity of deals, but it’s interesting to see changes in cities like Miami,” Telstra Ventures’ head of data science Jonathan Serfaty said.

In terms of sector popularity, blockchain deals easily surpassed other industries. Investments in the space were up 182% year-over-year. Mobile and consumer deals and financial technology deals were next on the lineup, each category up 87%, and media and advertising and health technology came in third and fourth at 83% and 70%, respectively.

Telstra Ventures distinguished blockchain and financial technology as separate sectors but said the lines are becoming increasingly blurred among all industries as companies of all sorts rush to get in on the crypto boom.

Serfaty explained to Yahoo Finance that companies can fit into multiple sectors, but while a company like Coinbase, for example, may fall into both the blockchain and fintech categories, another financial technology companies not involved in crypto may not fit into the former.

“We might have to think about how we categorize these companies in the future a bit differently,” Patel said. “It speaks to the mainstream adoption of blockchain and crypto that is pervading every single industry out there.”

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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