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Orlando Named a Tech “Hotbed” by Forbes

It appears that Silicon Valley is losing a bit of its luster when it comes to STEM-related jobs. That’s good news for the rest of America, and even the world. According to Forbes*, the most recent data on STEM jobs suggests that tech jobs, with some exceptions, are shifting to smaller, generally more affordable places.

 In the last two years, according to numbers for the country’s 53 largest metros, the STEM growth leader has been Orlando, at 8%, three times the national average.

Coming in behind Orlando are San Francisco and Charlotte (each at 7%); Grand Rapids, Michigan (6%); and then Salt Lake City, Tampa, Seattle, Raleigh, Miami and Las Vegas (5%).

Silicon Valley still remains the tech epicenter for the foreseeable future, especially as all or most of the capital resides in that area. Most VC’s hear your Company is in another market, let alone in Orlando, and they’re quick to tell you to get out and head west. But, maybe that freeze is starting to thaw?

Why the changes?

Housing costs are likely one factor. The cost of living is astronomically high in the valley, leaving the median wage to obtain affordable housing at more than $200,000?!? These costs, coupled with far less onerous state income tax structures, are making these millennials consider moving out of the area (or not moving into it at all) in the next 5 years. These growing STEM markets have also invested heavily into amenities to lure this STEM talent. Orlando is a great example – professional sports, beautiful weather, and a beautiful arts center make the area known for more than just Disney. Frankly, people that live in Orlando loathe their city for just being thought of as the hometown to Disney. Unless you have kids, it’s unlikely you even go there.

An interesting development also points to this shift – not just the tech companies and talent are coming to these markets, but the support vendors are also making the move. Recently Deloitte and ADP announced large shared services centers to be opened in Orlando – leveraging the tech talent to fill high-wage jobs in support of the industry and the area’s population growth.

It’s All About the Capital

Until the venture capital starts to flow out of the west coast, beyond middle-market investment, these areas are likely to see their growth stay in the single digits. Hopefully a few success stories will show that these zip codes should be taken more seriously, and we start to see more capital come in from the major west coast investment firms. But, in the meantime, it’s great to see this type of press from a major publication. Single digit growth is still forward progress – as they say, even slow progress is still progress.

 

*To read the full Forbes article: Forbes, “Tech’s New Hotbeds: Cities With Fastest Growth In STEM Jobs Are Far From Silicon Valley”

Key Due Diligence Topics

When buying a business, due diligence is EXTREMELY important. This is where most deals fall apart – the proverbial skeleton is discovered in the closet – the value of the business isn’t what buyers perceived it to be, so they walk away.

Before committing to a deal, buyers want to know the asset they’re getting is not impaired due to unknown issues.

Due diligence is especially important in private company transactions, as they are not subject to regulation and their information is not public. Most companies engage an M&A specialist to help with due diligence, as it is an exhaustive process and they know what to look for.

Below is a list of the most commonly analyzed areas in due diligence:

  • Financials – reviewing to ensure the validity of profits and cash flow
  • Technology & Intellectual Property – review IT infrastructure and any patents, trademarks, etc.
  • Customers & Sales – understand the company’s customer base and retention
  • Strategic Fit – how will the pieces work together once merged?
  • Legal & material Contracts – review of all material legal contracts of the business (i.e. lease, debt agreements, employee agreements, etc.)
  • Employee Issues: assess health of the HR function and employee relations
  • Litigation: review any open/pending litigation for contingent liabilities post-close
  • Tax Matters: determine any open liabilities or any carry-forward assets
  • Regulatory Issues: ensure compliance and evaluate completeness of adherence
  • Insurance: is the business properly protected against risks and will additional coverage be necessary post-close
  • General Corporate Matters: review organizational documents and corporate records
  • Environmental Issues: audit for risk of hazards or noncompliance
  • Related Party Transactions: any direct or indirect interest by an owner or other stakeholder in the business
  • Government Compliance & Compliance with Laws: audit for completeness of compliance
  • Property: review of all real estate, leases, land, etc.
  • Operations or Production Issues: evaluate workflows, key vendors, processes, etc.
  • Marketing: review marketing strategy, vendors, channels, etc.
  • Competitive landscape: review company’s market share and industry landscape
  • Online Data Room: secure, shared, cloud-based storage of all due diligence files to ensure all parties can access and review
  • Disclosure Schedule: Seller’s schedule identifying any exceptions to the company’s representations and warranties or diligence disclosures.

As you can see, this is an extensive list, requiring many, many hours of preparation. Get started as far in advance of a transaction as possible, as it will cut down costs and speed time to close. It also protects transaction value – if a buyer is unclear or has any doubts over key strategic areas of cash flow and value, it will likely lower the amount they’re willing to pay, or they may walk away all together.