Posted at 6:47 p.m., Sunday, December 9, 2001
Ventures well rooted in new Hawai'i economy
By Laurie Foster
The stock market jamboree is over—at least for the time being. The bursting of the dot-com bubble, the implosion of Nasdaq and the sobering events of Sept. 11 have changed our perspective on the New Economy.
As New York Times reporter Steve Lohr said in a recent article, "The new economy theory requires some revision, to put it kindly."
Where does the revised New Economy theory leave Hawai'i?
Despite the gloom of the daily news, I'm confident many of the local startups that represent the core of our new economy will prosper. If there's a silver lining at all, it's that some Hawai'i companies actually stand to benefit from this post-Sept. 11 world. These are firms that were already developing viable products or have quickly adapted to the exigencies of the new world order.
Hawai'i's defense-oriented contracting companies, which make up a significant portion of our tech sector, are the first group in this category. Many are clustered around the Pacific Missile Range Facility on Kaua'i or are associated with the Maui High Performance Computing Center. A few are here on O'ahu. The unifying factor for many of these enterprises is that they develop products that may help detect and fight terrorist threats or are coupled to satellites or missile technologies.
These enterprises include STI, a Honolulu firm that, among other things, develops imaging systems; Detection Limit Technologies, from Kailua, which develops sensing gear; Orincon, another Kailua company, which produces software for military applications; Oceanit, a Hawai'i research-and-development firm that has a number of government contracts including an Air Force space-scanning telescope; Trex, a Maui company that develops sensors and optical systems; and Novasol, a Honolulu firm that specializes in electrooptical devices and data systems for military and civilian applications.
Whatever the specific defense niche, there's an opportunity for these types of local firms to get a boost from a beefed-up defense budget.
That Hawai'i's defense-oriented companies could get a helping hand from Uncle Sam is a no-brainer. However, what about local tech companies in the biotech arena or IT startups with consumer or business applications?
To large degree these companies face an even stiffer challenge. With Mainland venture capitalists reluctant to pour money into unknown Hawai'i companies and with local capital scarce, traditional Hawai'i startups must focus like a laser beam on the post-Sept. 11 realities.
Fortunately there are some well-managed local companies with good business plans that are ready to make an impact nationally.
Hawai'i Biotechnology Group couldn't be in a better place, at a better time. This 'Aiea firm, founded by University of Hawai'i scientists, is developing a vaccine to prevent dengue fever. Not only has the local dengue outbreak posed a threat to Hawai'i but this nasty mosquito-borne virus is ubiquitous throughout the tropics.
With a worldwide market to tap, this company is poised to do great things.
The Twin Towers tragedy not only took lives but effectively wiped out telecommunications in Manhattan by destroying fiber optic cables. Some companies, such as Merrill Lynch, responded by deploying free space optics, which are lasers that can transmit data for several miles between offices and are ideal for disaster-recovery scenarios.
This type of technology, which has been developed by larger firms such as Cisco, is being deployed locally by a Honolulu technology firm called Century Computers.
Another local company called Loea Communications (a spinoff of Maui-based Trex) is developing its own proprietary broadband wireless communications spanning distances of up to 10 miles. Loea is targeted primarily at the hotel industry but is also ideally suited for disaster-recovery scenarios.
AssistGuide is a Honolulu company specializing in Web development services to the long-term care industry. They also offer an online resource for disability, long-term care, senior and health-care providers. With the graying of America, this startup has terrific long-term prospects.
Guide.net is a Honolulu Internet infrastructure company founded by Rich Halverson, a former UH professor. The company specializes in hosting interactive Web sites and has developed e-commerce applications and proprietary database solutions.
This homegrown company derives revenues from the travel industry and the military. Guide.net's technology has been used by the Navy, and their nonmilitary clients include some of the top hotels in Hawai'i as well as the Hawai'i Visitors & Convention Bureau.
Then, there's our own company, hotU. Founded by Punahou graduate Walter Roth, and financed by local investors and Silicon Valley venture capitalists, hotU enables businesses to get direct access to highly targeted groups of students nationwide through Web-enabled software.
Instead of relying totally on face-to-face meetings, the software allows corporate recruiters to communicate with students online through interactive virtual forums. Given the current environment, which does not favor airline travel or the expense associated with campus visits, our products and services are a perfect fit for cash-strapped universities not to mention financially squeezed corporations.
Many articles have been written about what the state needs to encourage the growth of so-called New Economy companies, but let's look at what advantages we have in place.
The boom in fiber optic connectivity over the last few years has left us with tremendous bandwidth—communications resources that are crucial to a high-tech industry. We've got it in spades. This has enabled local businesses to leverage the Internet chiefly for e-commerce and marketing solutions. It's also been a potential magnet to draw in companies from the Mainland.
Hawai'i Venture Capital, while still not significant, is nonetheless growing. Serious angel investors and venture capitalists are here and they are working together. Fortunately there's also institutional money available as well as private investors. Both of these categories of people need to be educated about the opportunities for investing locally. This will take time but it will happen.
Along with venture capital, the industry is also attracting talent. Successful kama'aina who have excelled on the Mainland or overseas are coming back home and bringing their skills with them.
Hawai'i also has newcomers with know-how and Silicon Valley connections. They are bringing with them a critical mass of talent and relationships vital to building a new economy.
Finally, we've got some incredible tax incentives that our Legislature has created over the past few sessions. According to "Blue Wave Millennium" author Tony Clapes, a former top lawyer at IBM, we've got some of the most progressive high-tech tax credits in the country. This is aimed squarely at local investors. Our Legislature and Gov. Ben Cayetano deserve credit for their commitment to our industry.
The new UH biotech research center planned for Kaka'ako is further proof that our leadership in this state understands the importance of economic diversification.
Hawai'i is being hurt by the downturn but those of us in the technology community are looking beyond the current business cycle. With our tourism-based economy in the tank, it's very apparent that we need to move toward a more diversified solution.
Hawai'i's new economy will not occur overnight but rather evolve day by day. Fortunately, we're getting there.
Laurie Foster is president of hotU, a Honolulu-based, venture-funded high-tech company that provides businesses with direct targeted access to university students nationwide.
