HI. TECH
Lack of local interest holding back high-tech investment in Hawai'i

By John Duchemin
Advertiser Staff Writer

•	Hawai'i technology on public radio Hear The Advertiser's John Duchemin and the latest Hawai'i technology news every Wednesday on Think Tech Hawai'i, 5 to 6 p.m. on Hawai'i Public Radio KIPO FM 89.3, with hosts Jay Fidell and Gordon Bruce. Tomorrow: "The Coming Wave of Biotech Investments in Hawai'i."ÊGuests are Dick Sherman, an attorney and consultant at Goodsill Anderson Quinn and Stifel, and Robin Bellas, general manager at Morgenthaler Ventures of California. Phone lines will be open for comments or questions about Hawai'i's tech industry. On O'ahu, call 941-3689. From the Neighbor Islands, call toll-free (877) 941-3689.

As in past years, the summit features all-star speakers — House Speaker Calvin Say, Bank of Hawaii chief executive Mike O'Neill, Kamehameha Schools Trustee and American Savings Bank CEO Constance Lau — and a day of panel discussions at the Kahala Mandarin.

The message is always the same: Invest in High Tech, and you're Investing in Hawai'i's Future.

So far, the results of the summit have been disappointing. Despite the presence of the Act 221 high-tech tax incentive, the advent of several new investing groups, and a growing pipeline of hopeful start-up companies, few of Hawai'i's major investors have allocated significant money to the local tech scene.

And those that have participated in deals — like Hawaiian Electric Industries, which this year started a venture-funding arm — are only making small-scale, preliminary forays into the field, rarely putting down more than a few hundred thousand dollars.

This has been the case for years. High-tech Hawai'i has frequently complained that the lack of interest by local wealth is one of the biggest factors holding back the industry's development. Without the backing of someone in Hawai'i, it's tough to attract interest from Silicon Valley and New York, where the real money lives.

Hawai'i's wealthiest investors, largest corporations and richest financial trusts all say they like the idea of a high-tech industry here. But they simply don't think the Hawai'i technology scene has advanced to the point that the risks of major local investments are worth the potential reward.

The $7 billion State of Hawaii Employees' Retirement System, for example, has long resisted legislative attempts to force it into local high-tech investments, instead choosing to allocate $200 million in "alternative investments" to Mainland ventures. ERS trustees argue that a Hawai'i venture-capital allocation would violate their fiduciary duty to protect their shareholders from unnecessary risk.

Before they invest locally, ERS and others want to see more successful local deals — which, in their terminology, means more highly profitable cash-outs for investors, such as acquisitions or initial public offerings.

The technology backers argue that they're hard pressed to deliver such successes without investment dollars. Only after you give us money, they say, can we build quality businesses.

It's understandable that the tech backers may be frustrated to say basically the same things to the same people, year after year, with little yet to show for their efforts.

Fortunately, events like the Private Equity Alternatives Summit also display the Hawai'i technology community's most admirable qualities: Optimism, idealism, and persistence in the pursuit of a dream, despite disadvantages and the skepticism of outsiders.

The community realizes that the alternative — to not hold events like the summit — would acknowledge that a venture-backed technology industry in Hawai'i isn't possible. So they soldier on in their frequently futile attempts to get some interest from potential investors.

Maybe this time around, they will be just that little bit more persuasive — or the financiers just a little bit more ready to be persuaded, and the money will really start to flow.

If not, it's back to planning for next year's summit.

Reach John Duchemin by e-mail at jduchemin@honoluluadvertiser.com or by phone at 525-8062.