The term “vanity metrics” was coined by Eric Ries, founder of the Lean Startup movement. It refers to impressive numbers that don’t correlate to the soundness of your business model and may be easy to manipulate — like registered users or unique page views. Ries argues that companies must track and be focused on the numbers that are true measures of their success, such as customer acquisition costs, active users, revenues and profits. The same concerns may be raised about the interesting statistics that are often tied to South Florida and what they actually may mean in understanding our entrepreneurial climate.
What are South Florida’s vanity metrics?
• International City. South Florida’s population of foreign-born residents is the largest per capita in the world at a regional level, and Miami is the highest at the city level. Truly an international city, we welcome newcomers with open arms. People come from all over the world to see if they can call Miami home. The problem is that we are also the most transient region in the U.S., with West Palm Beach — Boca Raton ranked third. So they check us out and don’t find what they are looking for — opportunities, a sense of community, whatever it may be. Even worse, they may have bad experiences here, which are then recounted to others. The Miami brand is constantly tarnished because everyone “knows a guy” but may not be able to vouch for his ethics.
Takeaway: Let’s work on brain gain! When great people come here, help them make Miami their home. Check their references with care so you can wholeheartedly open your connections to them. Your endorsement should be based on trust. Even background checks are appropriate if your new friend may potentially be working with your personal or business finances. If someone is representing you for raising an investment, any questionable activities they have done may affect you. No matter how cool and connected someone seems, spend the time to complete a proper due diligence to avoid disaster later.
• Access to Capital. Want to make entrepreneurs drool? Read this aloud: “South Florida ranks highest in individual purchasing power in the United States, fifth in the world.” If you are seeking investments to buy real estate, there is no better place. If you are raising funds for your tech startup, you may have a challenge. The educated tech investor understands there will be multiple rounds, that connections and experience are more valuable than money in some situations, and that employee stock options create the next wave of angel investors. Even investment funds targeting tech entrepreneurs here have predatory term sheets; one asked an entrepreneur to give up voting rights for a $7K investment. The majority of our residents are focused on the returns of deals or yearly income and not the long-term ROI of building a foundation and creating a community with transparency and sustainability as core values.
Takeaway: Win-win is a best practice for everything. As an investor, if you want to maximize returns, give entrepreneurs the room to do follow-on rounds while keeping their incentivizing stake. As an entrepreneur, understand you are marrying your investors. It is sometimes impossible to get rid of them if things go sour. Know who they are and what they are like to work with/for. While certain investors attract other investors because of their track record, others can repel. Know that their backgrounds may play a role in how you are seen. Are they considered reputable locally? What about in other communities? If you can’t find anything that doesn’t mean they are clean. Get enough data so your decisions are based on your gut AND the facts.