Talent roadmap — it can be done. Or not.
Last Sunday’s Insight section commentary, “Restoring Hawaii’s Health: Roadmap offers solutions for economic recovery,” discussed a multisector partnership to spur economic recovery. “Technology, including IT, biotechnology, and clean energy occupations” were highlighted as a sector where significant growth could occur. Efforts to grow this sector over the last three decades have been attempted in Hawaii with limited success.
As Hawaii recovers from the pandemic’s toll on the tourism economy, it needs to develop a serious attempt at building a high-tech component to a diversified economy. Past attempts, such as Act 221, were poorly thought out and flawed in execution. Tax-incentive-based programs do not build sustainable businesses. If they did, every city and state would be a high-tech mecca.
However, a significant high-tech community can be built if we choose to follow some very simple ideas.
As companies encourage more knowledge workers to work at home, or at least work remotely, Hawaii can be an attractive place for people in Silicon Valley to escape the high cost, environmentally challenged cities between San Francisco and San Jose. There are between 1,000 and 1,500 former Hawaii residents who work in Silicon Valley, with strong ties to Hawaii. They have pau hana groups that tailgate at University of Hawaii sports events, hold luaus, and many would return if there were opportunities for them here. Many are middle- and upper-officers and managers at some of Silicon Valley’s most valuable companies.
It requires three concepts to bring them home.
First, is convincing them that this time, we are serious about supporting a high-tech community. In order for them to risk returning, they need to be convinced that they will have access to capital to provide the resources they require to build a business or develop their intellectual property.
Second, they need affordable housing — and third, is easy access to an industrial park where they can access state-of-the-art laboratory and office space.
At first glance, this seems like a fantasy wish list.
Here is how to do it. Most high-tech companies offer their employees incentive stock options (ISO). The options usually are priced in pennies or low dollars. As their companies develop and grow, those ISOs can become valuable. Those options become valuable when there is a liquidity event — acquisition, public offering, etc.
If Hawaii had a couple of venture capital funds, they could trade for some of those options with cash before the ISOs achieved their liquidity value. That would enable entrepreneurs to exercise (buy) some of their options for pennies or low dollars and then trade (tax free) those options to a local Hawaii venture fund for a significant cash profit. If a few of those entrepreneurs combined their profits, they could have enough capital to seed-fund their company and to subsidize their housing.
More and more entrepreneurs are using their profits from their ISOs to invest in other startups or to start their own companies. They just are not doing it in Hawaii. For Hawaii to participate in this entrepreneurial cycle, we need two to four venture funds that can buy these options and recruit these experienced high-tech teams that have ties to Hawaii and want to return home.
Each of those funds need to be capitalized at $25-$40 million drawn down over four years. Each fund could provide start-up capital for 10-15 companies.
Everyone recognizes having a high-tech community means high-paying, clean and rewarding jobs — and attracts the best and brightest to remain in Hawaii and return to Hawaii as a matter of choice. We just have to decide if we want to talk about it, or do it.
Barry Weinman, the retired founder of AllegisCapital/AllegisCyber, is a local philanthropist whose Weinman Foundation funds medical scholarships as well as cancer research.
