We all know the San Francisco Bay Area is home to Silicon Valley, but a few cities and states around the country are trying to recreate the region’s success. In Nebraska, you have Silicon Prairie, then there’s Silicon Alley in New York City, Silicon Roundabout in London, and Silicon Beach in Venice, California. Many of these have popped up in just the past few years, and some states are beginning to realize the importance of supporting these new innovation hubs.
Among these is one of the most isolated states, geographically speaking: Hawaii. Working with the local community, the government has been pursuing efforts to establish a tech hub that is being dubbed Startup Paradise. During my last visit to Hawaii, I spoke with Governor David Ige and others about the initiative, which is meant to further diversify the Aloha State’s industries and retain its talent.
Diversifying the economy
Image Credit: Edmund Garman/Flickr
“I’m an electrical engineer by profession, a University of Hawai’i [alumnus], and I graduated in that first boom of tech,” Governor Ige said. “When I graduated…I had 41 job offers, 40 of them were on the mainland, and they were from everyone. My first time out of state was a job interview with Intel, IBM, and Hewlett Packard in Silicon Valley. So fast forward, once I became a legislator, I was on a mission to create more job opportunities for tech people and engineers…out of five friends in my EE class, four of them went to the mainland and never came back.”
Finding a thriving tech ecosystem in Hawaii is really difficult — I tried. During my trip, I sought out people I knew to see if maybe there was a startup market that remained relatively off the radar. Though there are accelerators, such as Blue Startups and Elemental Excelerator, and innovation centers, it’s rare to see a local startup make it big in Hawaii. But efforts are now being made to change all of that.
When I graduated from the University of Hawaii (UH), working in tech didn’t seem like a viable option — the focus was on travel and hospitality at that time. And unlike Stanford, Caltech, MIT, and others, Hawaii’s universities are perhaps known for their strong international business and research programs. So how can the state offer its young tech workers and entrepreneurs a reason to remain in Hawaii and contribute to the local economy?
During his time in the legislature, Governor Ige wrote all of the state’s venture capital laws, including creating the Hawaii Strategic Development Corporation (HSDC), which is tasked with making investments to boost economic development. “When I started, we had zero venture investments in the state of Hawaii..people weren’t interested in making this kind of investment,” he said. “We’ve had great tech successes, when you look at UH and the kind of things that started and evolved here, what should have been and could have been, but there was really no environment. When you talk about the ethernet and the core, it really started at UH. AlohaNet and the Aloha Protocol was really the beginning of TCP/IP — it’s the basic underpinning of the internet. None of it comes back to Hawaii, but it definitely was started here.”
Above: Hawaii Governor David Ige
Image Credit: State of Hawaii/Flickr
He continued, “Clearly for me, now as governor, it really is about how we can complete the environment. How can we create opportunities for people so that the electrical engineering graduate from UH today has 40 local job offers and 1 from the mainland? Because that’s really what we want. And if you look at our economy from the 30,000 feet level, the hospitality industry is number one. We started this transition in 1950 when we knew that sugars, plantation, and big agriculture growth was limited and we started to think about the next economic driver in our community.”
Image Credit: Mike Mozart/Flickr
While Hawaii is still largely focused on tourism, some believe diversification is the key to supporting the state’s economy, and the governor subscribes to that idea: “The challenge for us is that we’ve pretty much hit that ceiling to expand, and creating more jobs in the visitor industry really places too much of a burden on the natural resources that impact the community. So what’s the next great job creator for our community? It’s about innovation.” He alluded to how payment tech company Verifone got its start in Hawaii in the 1980s before eventually settling in San Jose, Calif. “If we had the right ecosystem and they stayed here, that definitely would be a great job creator,” he said.
Starting in Hawaii but ending on the mainland
Make no mistake, there are startups in Hawaii, but there are nowhere near as many as you’d find in cities known for being technology hubs. Startups based on the islands are not necessarily concentrated on consumer applications, but are more in tune with “non-sexy” technology fields, such as energy, biotech, and medicine, areas Hawaii is known for.
But, as the governor said, talent is escaping the islands and as people leave, so do the startups. To counter this trend, Hawaii is working to aggregate enough venture capital to incentivize entrepreneurs to stay. Last year, Governor Ige proposed that there should be consistent state investment in private equity and risk capital. He wants to have the HSDC work alongside accelerators and venture funds to invest in projects.
“Yes, it’s a big challenge,” he acknowledged. “I do think it’s about creating an ecosystem…I think it’s about creating an environment. I really do believe it’s a state of mind. People leave because they believe they have a better shot at being successful by going. I think it’s really about getting the startups here and it really takes just one that really commits to staying here. We have a couple of serial entrepreneurs that are committed to Hawaii. To me, that’s just as important as getting the equity. I mean, you want those business owners and entrepreneurs to be invested in Hawaii and really want to have their headquarters here.”
Some of the people I spoke with described a less-than-ideal venture capital environment and said that local investors tended to be gun-shy about putting money in unless they can get a mainland firm like Kleiner Perkins Caufield & Byers, Sequoia Capital, or Andreessen Horowitz to participate.
“It’s on us to show the world that we can create that quality, competitive company here. We have to create enough companies [in Hawaii] that a VC will see a pattern or trend,” said Chenoa Farnsworth, the managing director of Blue Startups, one of the more active startup accelerators in the state.
Governor Ige remains optimistic: “I do think that it’s a matter of mindset and if we can nurture enough of these startups and get them to the brink — and it’s really about getting one…