Challenges for venture capital
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Challenges for venture capital

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Challenges for venture capital Challenges for venture capital Document Transcript

  • Other editions: Mobile | E-news alerts | RSS | Twitter Find it: Site Map | Coupons | Weekly Deals | Apartments | Dating | Jobs | Cars | Real estate | Classified ads | Subscribe Find what you are looking for ... Search Sponsored By: Friday, April 9, 2010 HOME LOCAL NEWS SPORTS BUSINESS MY ADVERTISER ISLAND LIFE TGIF OPINION MULTIMEDIA BLOGS/FORUMS CLASSIFIED ADS HELP BUSINESS Posted on: Sunday, March 14, 2010 Challenges for venture capital Isle summit focuses on attracting investors in tough climate Comments (4) Recommend (2) Print this page E-mail this article Share By Alan Yonan Jr. Advertiser Staff Writer Hawai'i's venture capital community is bracing for another tough year, weighed down by continued weakness in the economy and the disappearance of lucrative state tax credits for technology investment. VC investors from Hawai'i and the Mainland who gathered in Honolulu for a conference last week cautioned that the environment for capital raising probably will remain challenging for some time. Hawai'i's venture capitalists closed four deals in 2009 valued at $10.3 million, the lowest amount in five years, according to Dow Jones VentureSources. That compared with $89.7 million in 12 deals the year before. Sopogy Inc. uses SopaNova mirrored collectors on the Big Island to intensify sunlight and generate power. Nationally, there were 2,489 venture capital deals in 2009 totaling Sopogy photo $21.4 billion, down from $31 billion the year before. "I think it continues to be tough time for venture capital not just in ANGEL OR VC? Hawai'i, but around the country," said Rob Robinson, founder and managing partner of Kolohala Ventures, Hawai'i's largest venture Angel investors and venture capital providers are capital fund. similar in that they invest in growth businesses in return for an ownership stake in the company and a degree of involvement and control. They do, however, differ in Robinson, who moderated a panel discussion at the annual Hawai'i certain respects. Venture Capital Summit on Thursday at the Hilton Hawaiian Village, said the Legislature's decision last year to cut back a technology tax • Source of funds: Angel investors, acting alone or in organized groups, are usually wealthy individuals, often credit known as Act 221 dealt another blow to Hawai'i's reputation as with a successful entrepreneurial record, who invest an unfriendly place to do businesses. their own money. Venture capital funds are corporate entities that pool money from a range of institutional and individual investors. "I think the Legislature has created the impression that Hawai'i cannot be trusted as place for private investment," he said. • Deal size: The range of angel investor transactions is typically $25,000 to $100,000 for an individual, and up to $1 million, or more, when acting in a group. The "In combination with the Superferry (closure), that's created an image range of venture capital transactions is large, from that this is a terrible place to invest. I think we have to work really around $500,000 to $10 million, or above. Venture hard to overcome that impression." capital may provide second-round financing after angel investors. TWO-MINUTE PITCH • Stage of development: The focus of angel investors is typically earlier-stage businesses. Different venture The daylong VC summit, sponsored by the state-funded Hawaii capital firms focus on different stages of business development, but the unifying criteria is that they seek Technology Development Corp., brought together venture capitalists high growth companies capable of achieving exit and angel investors from Hawai'i and the Mainland, entrepreneurs strategies that meet the fund's return criteria within a and representatives from local high-technology firms and other deal makers in the sector. specified time frame. Source: LBO Advisers In a scene reminiscent of ABC-TV's "Shark Tank," entrepreneurs were given anywhere from two to 10 minutes to make their pitches in front of investors attending the conference. Each pitch was critiqued by a panel of experts. In the final round, three selected companies were able to meet one-on-one with an investor behind closed doors. In a two-minute pitch session, Justin MacNaughton, 38, laid out his company's plans to launch a car-share service that will allow visitors to rent cars by the hour via a kiosk in hotel lobbies. GreenCar Hawaii borrows its concept from Zipcar, the nation's leading membership-based car- sharing service, and adapts it to the visitor market. MacNaughton and business partner Warren Doi, 40, are moving ahead with a pilot program for GreenCar Hawaii at the Grand Hyatt Kauai later this spring that will feature a fleet of four to six Ford Escape hybrid SUVs. GreenCar will charge an all inclusive rate of $15 an hour. Venture capitalist Christopher R. Hemmeter, left, talked with Justin MacNaughton, center, and Warren Doi of GreenCar "GreenCar Hawaii is evolving a proven and successful business model by providing car-sharing to Hawaii following their presentations at the Hawaii Venture the tourism and travel industry, one of the nation's largest markets," MacNaughton said during his Capital Summit this past week in Honolulu. pitch. NORMAN SHAPIRO | The Honolulu Advertiser "We make money by providing cars for use by the hour with an all-inclusive service fee that eliminates the typical cost of paying for vehicle when you don't need it, gas, insurance and paying for parking," he said. "We're currently funded for the pilot program, but we're looking to have meetings with any of you out there to discuss a growth platform to take GreenCar Hawaii from an individual island market, through the state and beyond." Panelist Christopher R. Hemmeter, managing director of Quest Hospitality Ventures, critiqued MacNaughton's presentation. MacNaughton should have spent more time talking about some of the inconveniences in renting a car from a traditional vendor, Hemmeter said. In his two-minute pitch at the Hawai'i Venture Capital Summit, Justin MacNaughton of GreenCar Hawaii told "What I didn't hear up front is what is broken down. It's always really interesting to me when I investors he wants to meet with them "to discuss a growth platform." meet someone who can identify something about the way things are being done that's broken," NORMAN SHAPIRO | The Honolulu Advertiser Hemmeter said "That's got to get me first, and to say we can solve it in this way is the next important step." Other presenters included David Watumull, chief executive officer of 'Aiea-based Cardax Pharmaceuticals; and Jeanette Hereniko, founder and president of AsiaPacific Films.com, an online film library that streams films. STATE HAS AN EDGE Many of the morning panel discussions focused on the challenges Hawai'i faces in developing a robust venture capital community in an area so far from the established technology and financing centers. But there also was widespread agreement about where the state has a competitive advantage: renewable energy. Kolohala Ventures' Robinson said Hawai'i's progress in developing technologies to harness solar, wind, ocean and geothermal energy will help attract venture capital at a time when investors are becoming more choosy about where to put their money. More Business headlines State: Aloha Tower agency should split (6) "I think renewable and sustainable technologies is a definite bright spot for Hawai'i," Robinson said. "I think that if we're going to establish a local center of excellence in any industry, that is one Howard C. Donnelly, 90, former Waikīkī hotelier is that has the highest chance of success." Group urges fish-farming safeguards (4) Hawaiian Air most punctual in February (3) Darren Kimura, founder of the Honolulu-based solar power company Sopogy Inc., said the firm that he launched in 2002 has expanded its operations to seven western states, including a manufacturing facility in Los Angeles and a sales and marketing office in San Jose. Its research Business alerts and development operation, however, remains in Hawai'i. Enter cell phone number to get business text messages: "Because of the type of company we are, we have an unfair advantage here in Hawai'i that you ( ) - Submit don't find anywhere else in the world," Kimura said. Message and data rates may apply. To opt out, text STOP to "In Hawai'i you have access to some of the best solar radiation year round with virtually no 4INFO (44636). For more information, text HELP to 4INFO (44636). Contact your carrier for more details. seasonality. If you can solve the challenges (of remoteness) the technology will work anywhere around the world. Because of that our R&D is in Hawai'i." Sign up for more alerts » Sopogy uses mirrors to intensify sunlight and generate power as opposed to photovoltaic systems that use panels made from silicon cells that convert the sun's rays into electricity. THINKING GLOBAL Contextual linking provided by Topix William Reichert, managing director of Garage Ventures, an early-stage VC firm based in Palo Alto, said Sopogy is an example of a Hawai'i-based company that would be successful in any setting. "There are sort of two types of entrepreneurs from Hawai'i," Reichert said. "One is the entrepreneur from Hawai'i who's clearly from Hawai'i. And the business model, the orientation, the focus is, 'We've got this thing we're doing in Hawai'i and its really cool and we think we can build a good business doing this.' And from our point of view it's quite possible you could build a good business doing that but your orientation is too narrow. "The other type of entrepreneur from Hawai'i is a global entrepreneur day one. And it's a person whose frame of reference is not Hawai'i, they just happen to be from Hawai'i and they happen to have a team from Hawai'i but the frame of reference is global." Reach Alan Yonan Jr. at ayonan@honoluluadvertiser.com. HonoluluAdvertiser.com welcomes comments from readers. Please be advised that comments deemed to be vulgar, racist, spam or personal attacks will be deleted. Users are blocked after repeated violations of our posting guidelines. National Partners: Apartments.com Cars.com CareerBuilder.com Homefinder.com ShopLocal.com Metromix.com eHarmony.com 4info USA Weekend Local partners: 101 Things to Do Around Hawaii Hawaii.com Hawaii Stream HawaiiNewsNow Hawaiian105.com Home | Local news | Sports | Business | My Advertiser | Island Life | TGIF | Opinion | Multimedia | Blogs/Forums | Classified ads | Help | Site Map Terms of service | Privacy policy | Contact us | About us | Work for us | Gannett Foundation | Subscribe