When Volta Inc. went public late last month, it was a major milestone not just for the builder of electric vehicle charging stations, but also for Hawaii. That’s because Volta was born here, funded by Hawaii investors: Hawaii Angels and Blue Startups.
Although Volta years ago moved its headquarters to San Francisco, its success shows Hawaii can produce innovative, successful companies.
That idea is especially relevant now, as the public and policymakers see the risks of relying on tourism for so much of Hawaii’s economic well-being. The Covid-19 pandemic toppled an economy that was red hot by some measures, fueled by record numbers of tourists. Hawaii’s unemployment rate was hovering around 2%, among the nation’s lowest.
Then Covid-19 came along, Gov. David Ige effectively shut down travel to Hawaii, and the Aloha State went from first to worst, with an unemployment rate of 22% when the crisis escalated in April 2020. The economic pain is clear, says Chenoa Farnsworth, managing partner with Blue Startups and managing director of Hawaii Angels.
“The pain is real, and we have felt it in many ways now,” said Farnsworth, who has been working with Hawaii entrepreneurs for close to 20 years, coaching them and helping them raise funds.
“If we’re not going to make a bold move now, I don’t know what it will take,” she said. “It should be clear, we can’t keep doing what we’ve been doing.”
Lisa Kleissner, co-founder and board chair of the business accelerator Hawaii Investment Ready, agrees. The Covid-19 crisis has shown the status quo – an economy where by some estimates half the residents struggle paycheck to paycheck — simply can’t continue.
“We have to do things differently,” she said.
Farnsworth, Kleissner and others who work with entrepreneurs point to several things that Hawaii can do differently to promote local innovation and economic development. These include buying locally made products and investing in local small companies – something that’s increasingly possible as crowdfunding tools mature.
There’s also a need for concerted public policy initiatives that encourage innovation, they said. For example, in Volta’s case, Farnsworth said, Hawaii had an aggressive electric vehicle policy that put a lot of EVs on the streets quickly and created an environment ripe for a charging company to step in.
“One important lesson to learn is that public policy can drive innovation in these areas,” she said.
As Farnsworth sees it, the University of Hawaii can play a bigger role by developing centers of excellence for industries like renewable energy and tourism. This could help develop more of the intellectual property that often serves as the foundation of companies with high growth potential like Volta, which is now valued at more than $1 billion, she said.
Tourism executives can also play a role, Farnsworth said, by vowing to support and mentor tourism industry technology startups. Some entrepreneurs would surely set up shop in or stay in Hawaii, she said.
“That would be game changing for us,” she said. “People would come here for that.”
Tiffany Huynh, director of external affairs for Honolulu’s Elemental Excelerator, would take Farnsworth’s idea a step further. Instead of focusing only on the University of Hawaii, Huynh said Hawaii should mount a concerted effort to locate a national energy laboratory in the state.
That would benefit not only UH but the state’s entire renewable energy and innovation ecosystem, Huynh said. Such a lab, she said, could be “a front door to innovation.”
But, she said, it will take the community, including business and political leaders working in concert, to land the kind of federal project that could make a big difference.
“We really need to have government backing to move the needle up a notch on these things,” she said.
Such a vision might be ambitious, but that’s typical for Elemental, which has emerged as a national leader in growing technology businesses focused on climate change and sustainability. In just over a decade, Elemental has invested in more than 100 growth-stage companies and funded more than 70 technology projects.
On Wednesday, Elemental announced it had created a $60 million venture fund, Earthshot Ventures, to finance companies that are developing technology to help save the planet.
Elemental also has launched the Elemental Policy Lab, a new initiative designed to drive “change at local, state, and federal levels by translating what entrepreneurs are learning on the ground into actionable policy solutions that inspire climate action, create jobs, and advance equity.”
“Funding is important, but so is policy,” Huynh said. “Policy is what moves markets.”
Whatever economic development policies Hawaii ultimately develops, Kleissner said the focus should be on principles that will promote things like social equity. Hawaii Investment Ready does that by supporting and investing in companies that address social and environmental issues in the islands.
Kleissner points to a recent article by the economist Michael Schuman outlining ideas on how to foster more resilient community economies after Covid. Principles include local ownership and investment, innovation and social equity.
Asked how regular people can invest in small local companies, Kleissner points to crowdfunding sites, which let people make small equity investments in fledgling firms, and endeavors like the Hawaii Food Producers Fund, which enables people to make small loans to small farmers.
Supporting locally owned businesses is important for keeping revenue and profits flowing into Hawaii’s economy instead of elsewhere.
She pointed to an oft-cited, sobering study, the ALICE Report, that found more than 40% of Hawaii residents were barely making it, living paycheck to paycheck.
“That’s the context within which we need to work,” she said.
On the ground floor of the Royal Hawaiian Shopping Center, tucked in a prime retail space once occupied by Louis Vuitton, Meli James is showing that small Hawaii brands can compete with her neighbors, world-famous brands like Tiffany & Co. and Hermes.
James’ House of Mana Up sells consumer goods from companies that James’ business and consumer brands accelerator, Mana Up, has cultivated. They include candy bars from Manoa Chocolate, scarves by Lola Pilar Hawaii and bedding by Noho Home.
Mana Up’s online business has boomed during the pandemic, James says. And Mana Up just announced a venture fund financed by big players like Kamehameha Schools and the Hawaii Employees’ Retirement System pension fund.
The purpose of all this is to keep money coming into Hawaii, Hawaii companies and workers, James says, especially money that tourists might otherwise spend on merchandise from elsewhere. But, James says, Mana Up also is showcasing Hawaii’s culture.
James, who is also president of the Hawaii Venture Capital Association, says the Hawaii brand is enormously valuable, an aspirational brand that stands for things like aina, aloha, sustainability, authenticity — things that resonate with consumers.
“It’s an aspirational brand,” she says. “It’s the spirit of aloha. It’s about Hawaii, but it’s also bigger than Hawaii.”