Tuesday, July 25, 2017

 

Star-Advertiser columnist documents reasons why tech firms generally must (I repeat, must) flee Hawaii


by Larry Geller

It feels great to be validated from time to time. I’ve been pressing on this issue since 1989 and in this blog for more than a decade. It seems obvious to me: Tech firms almost inevitably find they have to relocate in order to succeed.

As a result, our state government spends a fortune promoting “high tech” only to see successful firms (or firms that want to be successful) pull up stakes and head to the Mainland.

And that’s just what those firms should do.

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Usually I write something like this: “One day the bean counters will come knocking at the CEO’s door and let him know that it is not in the stockholder's interest to keep the operation in sunny Hawaii.”

Of course, that applies also to privately held operations. It doesn’t matter how much the founder likes surfing, hiking or snacking on our wonderful mangos or lychee.

That knock will inevitably come.

In today’s Star-Advertiser (paywalled) Mike Meyer relates in his Tech View column how a startup thrived after moving to San Francisco in 2015. A snip from his column:

Q: Does the San Francisco Bay Area make sense for local companies that have decided to make the move to the mainland?

A: If you are a B2B SaaS (software as a service) startup like we are, then yes, without a doubt.

Q: Can you provide some metrics as far as growth and sales that have occurred after your move?

A: Our staff grew from three to 12, and we’ve gone from six to 700 customers since moving to S.F.

Hawaii does have some financing options, but the article points out that there are more in SF. Even if a startup is backed by a Hawaii venture capitol company, the funders will expect their investment to succeed, basically. If that means the startup moving to the Mainland, then the funders will at some point push for that. So Hawaii backing doesn’t mean the entrepreneur is going to be able to enjoy surfing here forever.

Customers, suppliers, engineers, scientists, and a robust support structure are there, not here.

There’s not much to be done about Hawaii’s isolation. Nor is Hawaii unique. I imagine a tech startup in the middle of Wyoming faces similar prospects—move or stagnate. Move or close up. Wyoming probably has a lower cost of living, though. Our high costs work against tech companies remaining or relocating here.

One thing I learned from the article: Hawaii is a great place “to develop code in relative secrecy.” Ok. That might also apply to Wyoming, though.

Poor tech opportunites impact our public school and college graduates as well. STEM programs are great, and certainly, every student is entitled to have the best education. Those who become enthusiastic and those who excel in science and maybe graduate at or near the top of their class face pressure to move to the Mainland for job opportunities—shattering the strong cultural preference to keep families together.

Sure, there is some high-tech here. No contribution to our economy should be discounted. But the basic impediments remain.

And no matter how good our educational system might become, or how much we can improve venture capitol opportunities, the knock will still come one day on each door.

I often add to my many articles that there does not seem to be a solution in sight. Islands in middle of the ocean usually don’t do well. Maybe they have guano, but that doesn’t last long.

So thank goodness we have a thriving tourism industry. Or we’d be trading stone money for those mangos and lychee.

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