Venture capital firm TampaBay.Ventures has made its first investment and it’s with a new St. Pete startup.
TampaBay.Ventures, founded this year with an initial $20 million seed fund committed to investing in Tampa Bay-based technology companies, announced this week that it is leading a funding round for Procoto.
Procoto is a startup that focuses on procurement autonomation processes that can be easily accessible for smaller companies.
“The product itself is very compelling but to be honest when you are investing in this stage, the team accounts for more weight than the idea does. The founding team is the center point that takes in data, analyzes the data, and then turns it into the product,” TampaBay.Ventures General Partner Andreas Calabrese told the St. Pete Catalyst. “It’s the team you are really betting on as an early-stage investor.”
The amount of the funding round was not disclosed; however, it is a six-figure deal.
TampaBay.Ventures plans to lead investments for 15 to 20 companies over the next five years with companies similar to Procoto.
“Tech companies are the best vehicle for us. Tech companies can grow and can become candidates for IPOs [Initial Public Offerings] in eight or nine years. What’s a good fit for us are companies that have a digital component, or are in advanced materials or research spinouts,” Calabrese said.
The venture capital group typically scouts out the startups by word of mouth from its founders, its research and attending events.
The investment follows Procoto becoming a graduate of the Silicon Valley program Y Combinator, a prominent seed money startup accelerator that launched in 2005. It has been used to help launch more than 2,000 companies including Airbnb, DoorDash, Instacart, Dropbox, Twitch and Reddit.
Procoto is the first Y Combinator graduate that’s located in the Tampa Bay area.
“Andreas had his eye on us before the Y Combinator announcement. The rumors tend to get out that a company is involved in Y Combinator before there’s any formal release about it. We were on their radar early this year and the formal announcement was the trigger,” Procoto Co-founder Michael Otis said.
Procoto Co-founder Michael Otis. Photo: Procoto
Calabrese connected with Otis weeks after the company launched in St. Pete.
“We did some additional research into the software procurement space, which was fragmented and didn’t serve small to medium size businesses,” Calabrese said, explaining Procoto delivered a solution to a growing need.
The six-figure funding round is expected to close by the end of this month, Otis said.
“It [TampaBay.Ventures] was a great fit in terms of its background, experiences and own successes in the past. We want to be a local company and if we partnered with investor XYZ in San Fransisco, it wouldn’t have been the same experience,” Otis said.
Otis co-founded the startup with Ryan Muckel, a childhood friend he grew up with in Philadelphia. The friends splintered off in different directions as Muckel was working in England and Otis was working in Atlanta.
“I got really frustrated that there were only solutions built for the bigger companies,” Otis said about working in the space and the motivation to form his own business.
“The original game plan was for Ryan to move to Atlanta, where I started to build up a startup community,” Otis said, explaining the plan changed.
“We got into the Y Combinator last year and now have relationships all over the country. At the same time, the Covid-19 pandemic was taking place and we were running operations remotely,” Otis said. “We are both beach people and we knew didn’t want to be five hours from the nearest beach, but we didn’t want to locate in Miami.”
The duo chose to move to St. Pete last year due to the surrounding beaches, relaxed vibe of the city and the potential there was for more startup activities.
“We knew there was a growing tech community here and that was valuable. Tampa Bay is in the midst of growth like what Atlanta experienced over the past decade,” Otis said.
Procoto does not have a physical office space yet, but the founders are interested in coworking spaces in St. Pete.
“We see the value of having some face time especially as we are an early-stage company and would love to find the right local talent,” Otis said. “We want to be a St. Pete company, not just two guys working out of their apartments.”
The company, which currently is run by the two co-founders, is in the process of hiring two senior engineers and is planning to hire for several more positions.
A shot in the dark
A major pivot for Procoto was becoming accepted into the Y Combinator.
“It wasn’t even on the radar, it was beyond aspirational,” Otis said, providing an analogy of how it seemed so far out of reach.
“I grew up playing baseball and always dreamt of becoming a professional baseball player, and by the time I got to late high school, I know I was good but not good enough. My future wasn’t getting paid to play a sport, and that’s how I viewed Y Combinator. It’s this far-reaching thing that only the best of the best get to do. It was something else that others got to experience,” he said.
As Procoto gained traction, Otis decided to vie for the opportunity and secured an interview.
“The reaction was ‘oh, we actually have a shot at this,’” Otis said.
“It was a shot in the dark. Such a low percentage of companies are accepted,” he said, recalling his disbelief when getting a call about Procoto’s acceptance into the program.
“A big benefit of being in YC is you are exposed to a lot of investors, seed funds, venture capital, and angels out West. For a lot of investors, it’s a numbers game. A certain percentage of YC companies will become unicorns someday,” he said.
Now with the backing of TampaBay.Ventures, Procoto is cautiously propelling forward.
“Over the next two years, we will be conscious of our spending. While it’s encouraging that we have the support of investors, it doesn’t make sense to burn through cash. We will let our progress dictate how we go forward,” Otis said.
Procoto and TampaBay.Ventures will be speaking at Embarc Collective today from 4 to 5 p.m.
Otis said he would love to help others in the local startup community.
“There’s a close-knit relationship with the Y and it’s an incredible value. I would love to be part of that community here and help other companies apply,” Otis said. He would like to give tips, advice and conduct mock interviews to better equip the local startups.
Those interested in connecting with Otis can reach him via email at [email protected].
