New technology, a culturally rich work force and thriving nightlife lure Internet start-up companies to South Florida's "Silicon Beach,' the telecommunication portal for Latin America.
By DAVID ADAMS
© St. Petersburg Times, published May 14, 2000
MIAMI BEACH -- They are mostly young, single and up all night.
But they are not your usual Miami Beach party animals.
Instead, what is drawing this crowd is South Florida's latest self-reinvention -- this time as the Internet capital of Latin America. They're calling it Silicon Beach.
Miami has long considered itself the gateway to the Americas for everything from air travel to commerce and banking. The Latin American Internet boom now seems set to further cement South Florida's role as the region's hemispheric headquarters.
New billion-dollar underseas fiber-optic cables are being laid to beef up international telecommunications capacity. The system also will link with Florida, providing faster and more reliable Internet access statewide.
Sophisticated data switching stations packed with "next generation" computer networks are being built, expected to make the Miami Beach area more attractive for Internet businesses that need to be close to their high-tech support systems.
New Internet start-ups appear almost every week here, providing a job market for a talented mix of bright, young computer programmers, Hispanic entrepreneurs and Ivy Leaguers.
"It's definitely the new shining star of the Miami Beach business community," Mayor Neisen Kasdin said.
Kasdin realized its impact recently when he was walking to lunch with an Internet executive along Lincoln Road, a trendy pedestrian-only street that is fast becoming the beach's new cyber strip.
"I'm the mayor of Miami Beach but he was saying hello to more people than I was," Kasdin said.
Industry experts estimate that 70 to 80 dot-com companies have set up in South Florida in the past 18 months, mostly on the beach.
"We needed to be in a place where our programmers could walk out the door at 3 in the morning and still find life around," said Gustavo Morles, senior vice president at Yupi.com, one of the industry leaders with 4.1-million users. "Miami Beach was a natural."
Created three years ago, Yupi offers Spanish-language Web surfers in the United States and Latin America links to news, business and sports sites, as well as chat rooms and free e-mail.
Employees who live close by come to work at Yupi on inline skates and skateboards. There's a bicycle rack in the street outside the new offices just off Lincoln Road.
For those on a frequent "all-nighter," David's Cafe next door offers thick, sweet Cuban coffee. The nearby Pizza Via Da Leo offers a daily Yupi special: salad, pizza and a soft drink.
Yupi, with 300 employees spread throughout Latin America and $110-million in investment capital, was among the first to set up on the beach. "We are the local boys. We created a trend," said Venezuelan-born Morles, 45, who grew up in Miami and studied engineering and economics in the United States and Paris.
While older than most dot-com employees, Morles' background is typical of the kind of international talent on Silicon Beach.
"We are Mexicans, Argentinians, Dominicans. In Yupi, everyone's a minority," he said.
Not everyone is Hispanic. Some companies have located in other parts of Miami, or farther up the coast in Broward County, home to a host of big technology firms.
Computer scientists David Cole, 33, and Sunil Guptha, 37, of LearningSoft were conducting brain-mapping tests in Fort Myers when they came up with the idea for jugamos.com, an interactive Web site for children.
Gregg Keough, 33, founder of zonafinanciera.com, a financial services Web site, moved to the Internet after serving with the CIA in El Salvador. He says peace in Central America made work at the CIA dull. He enjoys the excitement of the Internet. "It's like the CIA when the wars were going on," he said.
Nathan Clement, 32, of LatPro.com, an online recruiting center for Spanish and Portuguese-speaking job-seekers, is a former smoke jumper for the U.S. Forest Service who grew up in Seattle. He and his partner -- LatPro CEO Eric Shannon, 31, from Delaware -- both learned Spanish while working overseas.
Frustrated by bureaucracy and other obstacles in their home countries, Latin American entrepreneurs have flocked to join the U.S. Internet frenzy. "Miami is where it's going to grow," said Adriana Lozada, 28, chief creative officer at loquesea.com, a popular youth site whose Spanish name translates as "whatever.com." With cropped blue hair and pierced nose bridge, Lozada feels at home on Miami Beach.
"There's a very young and budding creative community from all over Latin America, as well as U.S. Hispanics who grew up here and have that Spanglish mix of U.S. and Latin culture," he said.
Lozada started the company in Caracas, Venezuela, as an offshoot of a weekly youth magazine. It recently won $13-million in investment financing and now has 170 employees in seven cities.
Argentine Marcos Galperin, founder of mercadolibre.com, an Internet auction site, forged his idea with friends while studying for a business degree at Stanford University. "We were typical Latin Americans seeing all the money flowing around Silicon Valley," he told a packed meeting of First Tuesday, a monthly gathering of dot-coms at a Miami Beach nightclub.
"It made me sad to go back to my own country and know I wouldn't be able to trade stocks online anymore."
He graduated last June and launched the site in Argentina in August. The headquarters moved to Miami Beach in January.
Since then, Galperin has been on a roller-coaster ride, typical of the frenetic business style of Internet start-ups.
"It's been very stressful. The ups and downs have been incredible," he said.
It's a fast-paced life, with no time for family, friends and hobbies. At Stanford, Galperin got his golf handicap down to three. He hasn't played since. "It's a completely different life."
Miami's Internet boom has also begun to attract veterans of California's Silicon Valley, lured by the potential they see in Latin America. They can relate to what Miami is going through.
"It's the beginning of an Internet culture. You have to be open to ideas, take risks and move quickly. It's exhilarating," said Peter Campbell, 39, who moved to Miami from Silicon Valley to join guby.com, one of Latin America's largest Internet search engines.
"I have seen from Silicon Valley that there's a certain critical mass that develops. It's clear to me that's beginning to happen in Miami."
But experts warn that few, if any, of the Silicon Beach companies are making money.
Only about 10-million of Latin America and the Caribbean's more than 500-million people are online, engaging in less than $200-million in e-commerce. By comparison, the United States (population 275-million) has 106-million Internet users and $74-billion in e-commerce.
The number of Internet users in Latin America is expected to surge to 66.6-million by 2005, according to the research company Jupiter Communications.
But with only one telephone line for every 10 people in Latin America, growth may be slowed by the region's technical deficiencies. Underdevelopment and a lack of education means the majority of Latin America's poor has little idea what a computer can do, let alone the money to buy one.
The future of e-commerce, the economic engine that many Internet companies hope to drive them into profitability, may be even bleaker.
Surveys show Latin Americans, even more so than U.S. users, are reluctant to disclose personal information via the Internet. Interest rates are so high across the region, few can afford to carry a credit card. Delivery of goods also is a problem because of import duties, customs delays, theft and corruption at local airports, as well as the lack of regional carriers.
But habits are beginning to change. Some Internet services in Brazil, such as online banking and supermarkets, are already ahead of the United States. Online income tax payment has been available there for five years. Last year, 85 percent of federal taxpayers filed electronically.
Even so, competition means many smaller companies will fall by the wayside. Despite the huge amounts of investor capital being sunk into the new companies, it may be years before some of the larger sites make money.
When Starmedia Networks, one of the biggest Spanish-language Internet companies, went public last year, it offered this risk analysis to future stockholders: "We have never made money and expect our losses to continue." It quoted a $96-million deficit.
The company also warned that political instability in Latin America and social unrest could affect its operations. "Our stock price is likely to be highly volatile and could drop unexpectedly."
It has -- recently falling to $21 a share from a high of $70 last year.
In the meantime, there's no sign enthusiasm is waning.
"We all believe the Internet is going to be enormous in Latin America, but it will take time to develop economically," Campbell said.
Latin Americans are fast learners, increasingly attuned to the U.S. way of doing things. "The Internet is very Latin American. It's very spontaneous and creative," Campbell said.
Perhaps the most positive sign is the colossal investment being made by the telecommunications industry. In response to the projected demand for high-speed Internet links, major firms are spending as much as $5-billion in underseas fiber-optic cables, the vital infrastructure that will soon link South Florida with the consumer capitals of South America.
The new lines will improve connectivity in the region tenfold. One company, GlobeNet Communications, is laying a 13,950-mile underseas cable loop, Atlantica I, connecting Boca Raton and Brazil.
"Miami has a lot going for it," said Eldon Blust, a senior vice president at GlobeNet. "It will be a watershed event when all this capacity becomes available."
Just as the airlines have made Miami a major international hub, Blust thinks Silicon Beach will become the telecommunication portal for Latin America. "There's a lot of confidence that this development is something big."