HI. TECH
Companies don't always need big venture capital money to succeed

By John Duchemin
Advertiser Staff Writer

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The intensive focus on venture-funded entrepreneurialism is as real in Hawai'i as in Boston, Austin, Texas, or Palo Alto, Calif. In this state, where high-tech companies frequently complain about the lack of available capital, those that do attract big money — like Digital Island founder Ron Higgins, who took his company public, and Lambert Onuma, who procured $240 million for his Pihana Pacific — have become celebrities.

They have been praised as high-tech catalysts, toasted at gubernatorial banquets and highly sought after on the speaking circuit. With Digital Island and Pihana clearly in mind, Hawai'i technology leaders have organized lawyers, accountants and potential investors intent on pumping out more businesses with such global potential — and getting them on track for the venture market.

But the sharp decline in speculative investments since 2000, and the high-profile struggles hitting celebrated venture-funded firms in Honolulu and elsewhere, are prompting some in the industry to wonder whether Hawai'i needs to broaden its concept of role models.

Most Hawai'i technology companies have never seen venture money and probably never will, so shouldn't some attention also go to those who succeed in spite of such capital limitations?

This year, hundreds of Hawai'i entrepreneurs are working on their high-tech dreams, but a mere handful have actually attracted venture investments in significant amounts.

Many of those companies have proven to have sound business plans, and some have "made it big" without ever touching venture capital.

ISDI.net, a Honolulu developer of real estate software, was bought in January by Fortune 500 company Fidelity National Financial Inc. for cash and stock worth $4 million, a few months after founders Michael Sklarz and Jon Agsalud failed to raise venture money from local investors.

Sklarz now is chief valuation officer of Fidelity National Information Services, managing about 50 employees in Hawai'i and a staff spread across the Mainland.

Nobscot Corp., in Kailua, has signed up about a dozen high-profile clients including Campbell's Soup, Fortis, Sabre and the Missouri Department of Transportation for a Web-based exit-interview service.

Co-founder Beth Carvin, a human resources expert, says her company is growing "at just the right pace" and sees no need for venture capital.

Net Enterprise, a system integration firm that runs an Internet data center in downtown Honolulu, is one of the hardier survivors of the telecommunications sector. Founder Burt Lum, whose business occupies roughly the same market niche as Pihana, has led his company through the ups and downs of the Internet bubble relatively unscathed, though the lean market has recently forced him to pare the employee count.

Lum's company expanded through mid-2001, when many competitors were declining, and he says it has been consistently profitable — a rarity among data center operators — despite never having received a venture investment.

Such unfunded companies continue to be the backbone of high-tech Hawai'i, even as many venture-funded companies like Pihana, Digital Island, and WorldPoint have faded or collapsed.

This takes nothing from Onuma and Higgins, who showed skill, drive and vision in bringing massive investment dollars to Hawai'i. Venture-funded companies will likely play important roles if the technology scene is to advance beyond its state of perennial nascence.

But attention also should go to the contributions in jobs, ideas, and image to entrepreneurs who succeed outside the venture network. They are helping prove that a technology industry is possible in Hawai'i, regardless of our shortage of high rollers.

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