Entrepreneurs see end to drought in venture capital

By Sean Hao
Advertiser Staff Writer

After a several-year downturn that hurt Hawai'i entrepreneurs, Silicon Valley's investment climate is improving, according to venture capital executives coming to O'ahu this week.

"The investment level in the valley is picking up significantly, and the expectation is that (the) increased level of activity will continue into next year," Federman said.

"The challenge for the entrepreneur in Hawai'i is to build an umbilical cord to this financial infrastructure on the Mainland."

Developing that connection is one of the issues to be addressed during the panel discussion. Another topic deals with how entrepreneurs can pitch their ideas to potential investors.

According to a Enterprise Honolulu study this year, Hawai'i companies will need to attract $138 million from venture capitalists outside the state during the next five years. To draw venture-capital interest, some local companies such as networking equipment maker Firetide Inc. have shifted some Hawai'i employees to California.

But Hawai'i's geographic isolation is less of a issue today for companies looking for Mainland investors than it was even a decade ago, said Federman, general partner with U.S. Venture Partners in Menlo Park, Calif.

"The Hawai'i entrepreneur is a very young organism," he said. "I think to some extent we're dealing with a state of mind.

"This is not the industrial age. We live in a global economy, and we communicate a lot more effectively today by e-mail than we do by telephone."

As part of an effort to attract Silicon Valley's attention, Hawai'i needs to build an entrepreneurial climate and increase access to early stage investment capital, Federman said. Doing so will allow companies to grow large enough to draw venture-capital investment.

"I think if there's enough money to seed these companies, that will be OK," he said. "There has to be a way to get these two-, three- and four-person groups presentable to the venture-capital community."

In addition to capital, communities with a thriving population of entrepreneurs have educational institutions that focus on marketable research, a pool of experienced executive talent and local examples of rags-to-riches success, said panel member Andreas Stavropoulos, managing director with Draper Fisher Jurvetson in Redwood City, Calif.

"If you look at what it takes for an area to take off, it's a combination of things," he said. "No one region has a monopoly on talent or entrepreneurs. It's just a matter of time that everywhere that has access to one of these things develops the rest of them."

Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.