Honolulu Civil Beat needs your help to raise $100,000 in reader support by September 1. Donations from readers like you remain essential to our existence.
Over the past six days we have raised $45,000 from 960 donors. Mahalo!
Hawaii may be growing into a “Startup Paradise” for new ideas and early-stage companies, but many entrepreneurs know that growing up often means moving to the West Coast.
For Scott Mercer, the founder and CEO of electric vehicle charging firm Volta, that meant moving to San Francisco when he had to raise venture capital in the beginning of 2014.
“When I founded Volta, the idea was to use our Hawaii roots as a petri dish to test whether the business model would work,” he explained. “Hawaii was small enough that we could build a network with our own funding, yet it was at the forward edge of the adoption of electric cars.”
Many entrepreneurs from Hawaii have taken a similar path. As two experts on startups explained to Civil Geeks earlier this month, moving away from Hawaii is almost inevitable for these companies. The state is simply too small of a market to give all startups everything they need to grow. But it offers a lot to those just getting started.
After that column ran, Luke Tucker, a venture associate at Sultan Ventures, shared his thoughts in a blog post about whether companies should move from smaller communities like Honolulu to a “bonafide tech hub” like San Francisco.
“My advice,” Tucker wrote, “To start, stay home. To scale, move to the hub.”
That was true for Volta, the electric vehicle charging company.
“Volta didn’t move so much as expand,” said Mercer.
He noted that Volta built its first two charging stations in a two-car garage using money he saved while working as a mechanic. Once the company proved charging stations could be lucrative advertising platforms, it started building a team in California in 2013.
“We are running our network in Hawaii, and growing it, but our ambitions didn’t end with Hawaii,” he said. “They won’t end with California either.”
“The vast majority of startups in Silicon Valley have founders that grew up elsewhere.” — Hoala Greevy of Paubox
But not all growing startups spent time growing their business in the Hawaii market first.
“The plan to move was both inevitable and necessary,” said Hoala Greevy, founder of enterprise security startup Paubox and McKinley High School graduate. “We got the major bugs in Paubox fixed in January 2015, and I moved to San Francisco the next month.”
Greevy, like other founders, knew the money the company needed for rapid growth was concentrated on the West Coast.
“As we prepared to raise our latest round of funding, we learned early in the process that investors prefer to get to know the team over an extended duration, and to see what they can accomplish with existing resources,” said Brandon Bennett, co-founder of retail personalization platform AreaMetrics. “As this happens, the investment discussion flows more naturally.”
In addition to investors, startups need customers, and there is a bigger supply of clients and buyers outside Hawaii.
“I think it’s important for startups to have national, eventually international, ambition,” Mercer added. “As long as a company has that potential, it should do well.”
Once settled in San Francisco, Hawaii startups are finding a receptive but sometimes skeptical audience.
“I get the sense that geography is quickly becoming less of a factor in the eyes of investors and entrepreneurs — rather than where they’re based, startups are being increasingly judged by their merits alone,” Bennett said. “In this sense, startups in Hawaii are perceived in the same way as startups from any other city.”
“[We are treated] just like every other startup, no special treatment,” Greevy said. “If you haven’t had an exit or graduated from Stanford or an Ivy League school, you have to work even harder for validation.”
Founders who move to California from Hawaii may not be so out of place, though.
“The vast majority of startups in Silicon Valley have founders that grew up elsewhere,” Greevy noted. “I wouldn’t take it personally.”
And despite some tough questions from potential investors, many Hawaii startups are finding success, even as small fish in a very big pond.
AreaMetrics has raised about $2.5 million and is well on its way to meeting its growth milestones for the year, Bennett said. Meanwhile, the company is developing a new suite of products for big-box retailers to forge stronger connections with customers — products that are already being tested in some top-tier stores.
Volta charging stations can now be found in Hawaii, San Francisco, Los Angeles, San Diego, Phoenix and Chicago. The company said it has powered more than 6.7 million electric free miles (and displaced over 250,000 gallons of gas). Volta recently announced plans to deploy 600 free public charging stations over the next 12 months.
Paubox was recently accepted into the 500 Startups accelerator, the first Native Hawaiian-founded company to enter the program. Greevy said his company already has over 350 customers spread across 44 states plus Guam, generating 24 percent month-over-month revenue growth in 2016 alone.
So should local entrepreneurs relocate?
“It can be tough,” Mercer said. “I think startups should locate close to their most valuable resource. … Some companies need to be within a certain talent pool or capital pool or have access to cheap trave, or to special manufacturing.”
But Hawaii is a great launching pad, he added.
“I sell entrepreneurs on Hawaii as a petri dish, a welcoming place to test ideas with great potential,” he said. “A truly great idea should spread, but they can — and should — start from Hawaii.”
This is part two of a two-part column on opportunities for Hawaii entrepreneurs and startups outside the islands. Read the first part here.