Miami Just Rolled Out Its Newest Red Carpet To The Tech World. Are San Francisco And Austin Paying Attention?

From two blocks away, REEF Technology’s “ghost kitchens” appear through a maze of palm trees like a technicolor aluminum herd, sleepily huddled in a parking lot next to a Metromover overpass at the apex of two of Coconut Grove’s busier streets.

Yet, as you get closer, a buzzing hive of tourists, foodies, picnic tables, bougainvillea planters, and UberEats and GrubHub scooters coming and going somehow miraculously have brought this formerly vacant asphalt polygon back to life.

REEF, whose headquarters is a few miles away in downtown Brickell, calls what I’m standing in the middle of “proximity as a platform”. And if Miami’s current political class has anything to do with it, the start-up’s pandemically turbo-charged, on-demand logistics model could shape a new national template for smart, sustainable cities and the future of everything from restaurants to retail to healthcare delivery forever.

It could also keep tipping America’s innovation power balance geographically from Silicon Valley to South Florida for years to come.

Late last month, Miami’s now-celebrity Mayor Francis Suarez and its five City Commissioners officially passed a one-year pilot ordinance that formally acknowledges and legally zones what are technically called “mobile operation units”, or MOUs for short—which in addition to REEF’s current ghost kitchens has the potential to ignite an infinity of other deconstructed, on-demand businesses built around revitalizing wonky slivers and triangles of underutilized urban real estate into pop-up, neighborhood hubs for curated, locally-sourced goods, services, and experiences.

According to REEF, other tech-driven, app-based businesses that Miami’s new law eventually could green light include last-block retail delivery depots, mobile medical and wellness clinics, vertical farmers markets in neighborhoods lacking fresh food, electric vehicle charging stations, and micro-mobility stations for bike and scooter shares—all of which by REEF’s calculus has the potential to unleash a hidden real estate logistics ecosystem in hundreds of neighborhoods around the country for the principal benefit of its residents.

“With policies like these, Miami is setting a global example on how to work in partnership with technology start-ups and innovators while also meeting the evolving needs of the community, creating a win-win,” says REEF’s founder and CEO Ari Ojalvo. “By working collaboratively with city leaders like Mayor Suarez and City Commissioner Ken Russell, and the support of the rest of the Commissioners, along with businesses and community groups, start-ups like ours can reimagine and rebuild our urban spaces for people, not just cars, and help our cities become more sustainable and inclusive centers of community and opportunity.”  

REEF’s neighborhood hubs also have the potential to create thousands of well-paying engineering, technology, creative, and logistics jobs in local communities while simultaneously helping small, independent businesses to grow more efficiently and reach wider markets with less overhead compared with the slow, precarious cliff-jump of expanding through traditional brick-and-mortar storefronts.

Perhaps most importantly, Miami’s newest piece of legislation is another loud, cracking shot across the bow of traditional innovation hubs like Palo Alto, Boston, and Austin about the city’s global ambitions to become the most technology, disruption, and venture capital friendly destination in America when it comes to legislation, zoning, tax policy, and business regulation—particularly on the backside of the pandemic which has set South Florida’s real estate and commercial office markets on fire.

“It’s incredibly important as we recover from COVID that Miami comes out swinging,” Mayor Suarez tells me, “Particularly in the case of innovation and how we as a city define ourselves because we believe that the tech economy and the knowledge-based economy are the future of the world economy. So for Miami to position itself right now after the pandemic with legislation like this, delivering local meals, supporting the start-up technology community, and expanding the capabilities of our small restaurants that are still struggling is a win-win for business and our community and shows that we can originate innovative ideas and public-private partnerships here in Miami that are scalable worldwide.”

If you ask Ojalvo, Suarez’s vision of worldwide scalability wasn’t part of his company’s initial business model—though I suspect the 40-year old entrepreneur would be happy to take the compliment.  

REEF’s ‘proximity-as-a-platform’ business model got its start back in 2013 when the company formerly was called ParkJockey, providing hardware, software and management services to parking lot owners and management companies.

Over time, however, Ojalvo epiphanized that parking lots weren’t actually serving their highest and best use just temporarily storing cars. So he asked himself a simple question: What if all those thousands of acres of flat, strategically-located, and horrifically-underutilized real estate could be re-positioned for the benefit of local communities in cities all over America?

What if parking lots could become urban farms and pop-up restaurants and logistics hubs to help local businesses reach more customers with fewer operational friction points while returning greater, more sustainable value to their property owners?

Nearly eight years later, Ojalvo’s parking lot epiphany now comprises a global ecosystem of more than 5,000 asphalt swatches, garages, and otherwise empty plots across 45 U.S. States, seven Canadian Provinces (plus two Territories), and the UK, along with a team of 15,000 full-time employees, making the Miami-based start-up the largest operator of mobility and logistics hubs and neighborhood kitchens in America (200 at last count including 15 in Miami that are now legally zoned thanks to the city’s new ordinance).

REEF also just recently closed a $700 million round of fresh funding from a syndicate led by SoftBank and the Mubadala Corp along with investment firms Oaktree, UBS Asset Management, and the European venture capital firm Target with the intent to scale to 10,000 new locations across North America and transform the company’s real estate holdings into the world’s largest sustainable network of “neighborhood hubs” over the next three years.

From a start-up standpoint, if REEF’s vision sounds grandiose, it is. Transforming the habits by which products and services are fulfilled for consumers doesn’t happen overnight (ask Jeff Bezos). From a practical standpoint, however, the company’s fundamental business model sits on solidly simple footing despite its nine-figure valuation and global intentions—all of which have been accelerated by the on-demand, stay-at-home delivery economy spawned by the pandemic.

REEF leases the parking lots and real estate it operates, upgrades it with basic infrastructure (i.e., ADA compliant ramps and essential utilities), and either leases it out to other occupants or operates the pop-up businesses themselves, including designing, outfitting, and mobilizing all of the trailers and shipping containers required to do so in a kind of temporary, asphalt raft-up—typically going operational within a few months.

In the case of REEF’s ghost kitchens, the company usually houses a half dozen restaurants on each of its lots and covers all of the operating costs, food safety permitting and health licenses, staffing, marketing, raw material deliveries, food prep, delivery management, and even manages the chefs doing the cooking. Full-time employees also are given vacation time, health insurance, paternity leave, and in some cases stock options.

In return for REEF’s real estate and back-of-house support, the company’s restaurants and brand partners pay a revenue share of gross profits off the top ergo if REEF’s partners don’t make money REEF doesn’t make money—so everyone has the same incentive to keep things running smoothly, maintain quality, and project brand consistency.

From a real estate, sharing economy standpoint, if all of this whiffs a little like WeWork as well, it should—at least on face value.

Leasing someone else’s un-used stuff (i.e., a parking lot), carving it up into smaller, shinier pieces, and re-leasing the parts at a profit—a.k.a “arbitrage”—is well known in commercial real estate to be potentially risky business. It was partly responsible for the Great Recession and why WeWork’s still a mess today no matter how much new capital gets pumped into it.

Yet, REEF’s business model differs in several important ways.

First, nothing about the company is particularly overt or outwardly flashy with banners, promotions, signs, or logos at its sites shouting “who we are”. All of which says a lot about REEF’s core business philosophy. It resists overspending on things that don’t enhance operations. Nor is its purpose to replace brick and mortar storefronts through remote operations and delivery systems, but rather to help those businesses to better adapt to the future through technology and reach the end consumer more efficiently and effectively.

The second difference is that REEF typically provides not only the physical real estate for its tenants (i.e., the arbitrage), but also the expertise, networks, business support, and labor to allow them to scale, increase revenues, and compete with larger, legacy brands through outsourced operations as well.

“REEF levels the playing field,” says the company’s Head of Communications, Mason Harrison. “For small businesses this kind of model is essential to giving local brands what the big companies already have: the tools and resources for rapid expansion into bigger markets. As a policy framework for the future, we’re full-throated supportive of what Miami is doing by setting a new standard and rethinking the vast swaths of under-utilized space that already exist in every city to help to make that happen.”

All of which brings us back to Miami’s new MOU ordinance, America’s most famous Mayor, and why any of this matters in the first place.

While red-tape, zoning announcements generally aren’t needle movers when it comes to flash mob media, Miami’s new legislation sends a much louder message about the political and legal intentions of the city to provide a fertile environment for the next generation of disruptive, technology-based start-ups to get off the ground.

“Through Miami’s new legislation, REEF is providing the first legislative platform for innovative new food brands to scale and thrive,” says REEF’s Ojalvo. “And now Miami has created a clear policy framework for regulating delivery-only kitchens, making it easier for these types of food concepts to expand their reach into new neighborhoods while putting vacant, underutilized real estate that’s a drag on local property values to better use. Ultimately, it creates a paradigm for every other city in the world to make it easier for brands to reach customers.”  

Equally as important, says Ojalvo, is that Miami’s new legislation also establishes a center of gravity for other future phases of tech-driven, on-demand innovation, which in turn attracts the capital and infrastructure to bring those visions to life. Silicon Valley and Austin started doing something similar decades ago—bit by bit revising and restructuring small, seemingly meaningless zoning, financial, and business regulations to turn their cities into the technology and venture capital epicenters of the world.

“One of the great challenges with creating new businesses is that regulations are often slow to catch up,” Ojalvo explains. “Most cities have regulations governing brick and mortar establishments and food trucks, but no existing framework in place for what falls in between. With this policy Miami is setting a global example and showing that it is willing to take bold steps to support and champion innovation. This is our hometown, and it is also where we incubate and pilot new products and initiatives—from restaurant brands to robot delivery—and maintaining the support of the community as we’ve experimented and innovated has always been incredibly important to our growth. The City of Miami and its leadership are showing that they are serious about supporting startups and embracing innovation. Combined with all the highly talented people moving to Miami right now as a result of the pandemic, this cooperation between public leaders and the private sector should be a model for every city in the world to follow.”  

Fortunately for Ojalvo that political support so far appears to be unwavering, although no one in the tech world is debating that Miami’s a little late to the party. At the rate the city’s catching up, however, people are already wondering when South Florida is going to mint its second billionaire unicorn (REEF was the first).

“Legislation like this tells the tech world that we’re willing to do whatever it takes to be the innovation capital of the world,” says Mayor Suarez. “It’s a signal to the rest of the world that if you come here with innovative businesses and technologies we’re willing to innovate as a city around you and your technology to make sure that it works, that it’s given the support it needs to thrive, and that Miami is one of the most business friendly environments for the knowledge economy in America and the world. We continue to look for opportunities in the crypto space, in the biotech space, and attracting and building the best high-end educational, engineering, and STEM facilities in partnership with the private sector and with companies like REEF.”

As for the future of proximity-as-a-platform, ghost kitchens, and pop-up last-block retail hubs, the smart money doesn’t seem to be betting against REEF’s new micro-logistics, on-demand economy. If anything, it’s consolidating.

In part thanks to SoftBank’s funding, REEF recently partnered with international logistics giant DHL, last mile delivery start-up Bond, healthcare services provider Carbon Health, and EV charging start-up Get Charged. Along with robotics startup Cartken, REEF recently began carbon-free autonomous deliveries in Miami.

The company is tapping into the growing Millennial demand and political tailwinds for more sustainable, walkable, and connected cities as well, including turning some of its locations into sustainable, neighborhood, carbon-neutral hubs for grocery, food, and package delivery, using e-cargo bikes and low speed vehicles to fulfill orders from temperature-controlled shipping containers directly to customers’ homes.

More technically, REEF is also fielding inquiries from data and telecoms companies to support 5G expansion and host remote cloud computing hubs that can power the connectedness of every neighborhood and city in the U.S. on a street-by-street level to the world.

“Data and infrastructure is a huge part of our neighborhood hub (concept),” Ojalvo recently wrote in Tech Crunch. “It’s like electricity. Without electricity and connectivity, we don’t have the world that we want to see.” 

Sustainability wise, REEF is partnering with vertical farming companies like Crate to Plate on urban, hydroponic agriculture initiatives in empty lots which use recycled shipping containers to achieve the same production as an acre of farmland, using less energy and 96% less water than traditional methods. A single 40’ shipping container, for example, has the potential to produce over 3 tons of leafy greens every year for the surrounding community, says Ojalvo, which could revolutionize food deserts for communities that don’t have access to fresh, healthy produce.

Finally, this summer, REEF is launching the first of its open-air entertainment experiences in Austin, cracking up an entirely new sector for the company’s pop-up logistics and operations capabilities.

As for Miami as America’s next great tech hub?

“Miami is competing with global tech and innovation hubs for talent and companies,” says Ojalvo. “This legislation is really just the beginning of a journey towards reimagining underutilized urban spaces, and creating a zoning framework that supports mobile, modular and micro enabled zoning that can create more vibrant and walkable neighborhoods while also continuing to seed Miami as a global epicenter for innovation.”

Translation: Austin, Boston, and Silicon Valley should expect more shots across the bow in the future.