Posted on: Friday, October 5, 2001
State hires managers for venture financing
By John Duchemin
Advertiser Staff Writer
Two former Kamehameha Schools Bishop Estate portfolio managers are now in charge of millions of dollars in state investments in local venture-capital funds.
Bruce Nakaoka and Eric Martinson have signed a contract to manage venture financing for the Hawai'i Strategic Development Corp., which has committed $13.5 million to venture firms investing in Hawai'i start-up companies.
Nakaoka, 44, and Martinson, 38, managed Kamehameha Schools' real estate and financial portfolios in the mid-1990s. They hope to use their professional contacts to raise tens of millions in additional venture financing for Hawai'i companies in need of capital.
Their firm, MN Capital, will manage a "fund of funds," which would place investors' money in about a half-dozen Hawai'i-focused venture funds. This would give venture investors a more diverse portfolio — and hopefully attract larger-scale investors than the individual funds could handle on their own, Martinson said.
"This type of structure could help tip the scales in favor of investing for those who were on the edge of doing so before," Martinson said.
Managers add to high-tech infrastructure Several observers said Martinson and Nakaoka add another piece to the professional infrastructure that is slowly building around Hawai'i's small high-tech scene. In recent years, increasing numbers of lawyers, accountants, investors and professional groups have attempted to support entrepreneurial start-up companies.
Start-ups and supporters alike have been deterred, however, not only by a shortage of good deal prospects, but by a lack of venture capital — speculative money that finances promising companies in expectation of high returns. The local venture scene, despite some improvements, consists of a few funds with a few million dollars each — most of it already spoken for.
The state has financed companies in Hawai'i for years, but Martinson and Nakaoka bring a new level of sophistication, said John Chock, who runs the Hawai'i Strategic Development Corp. for the state.
Kamehameha Schools backgrounds Martinson, a Kamehameha Schools employee from 1984 to 1996, at one point managed the nonprofit estate's substantial financial holdings, which included a multibillion-dollar interest in Goldman Sachs. He holds a bachelor's degree from University of Hawai'i-Manoa and a master's in business administration from the Fuqua School of Business at Duke University.
Nakaoka worked for Kamehameha Schools from 1987 to 1996, and in 1990 became manager of the estate's domestic and international real estate portfolio, which included the largest private land holdings in Hawai'i. He holds bachelor's and master's degrees in business from UH.
The pair started MN Capital in 1997 as an investment and real estate consulting firm.
State venture financing dates back to the mid-1990s, when the Department of Business, Economic Development and Tourism formed the Hawaii Strategic Development Corp. The corporation has tried to increase the amount of venture capital available to Hawai'i technology companies.
HSDC did so by funneling money to local venture capitalists, who invested the money in start-up firms.
Among those financed by state money was Digital Island, a company that went public in 1999 and soared on the stock market. The state's return on its Digital Island investment exceeded $50 million at one point, though by the time it "cashed out" that return had dropped to several million dollars.
Meanwhile, private venture capital financing has jumped from virtually zero to tens of millions of dollars for small local tech firms — plus the occasional big deal. Pihana Pacific, a Honolulu-headquartered data center company, raised more than $230 million in venture funds last fall.
