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We have brought on a new CEO, currently in Seattle. He makes a strong case for relocating the company to Seattle. I'd rather not go, but will do what is right for the company.

He will be here next week for a few days while we meet with the Hawaii Angels and other potential investors. Obviously Act 221 is in our favor, but beyond that I need to demonstrate to him other advantages of basing the company here.

In particular, what organizations or people should I arrange for him to meet while he is here (already in touch with Enterprise Honolulu, HVCA, HTDC, HiBeam, Hawaii Angels and Kolohala Venture.

Any other ideas?

Thanks,
Ken

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Hi Ken,

Perhaps you can share a few points of your new CEO's case to relocate. This may help us offer more specific and relevant advice.

Best,

John
OK, Here’s the deal. Things are going very well. We’ve signed a customer. We’re closing an Angel round in 2 weeks. We’re looking at a major Series A closing this summer. There are two options for the Series A: half from Hawaii and half from the mainland, perfect for Act 221. The other option is all of it from the mainland. Our new CEO is confident we can raise the whole thing on the mainland; we don’t necessarily need Hawaii money.

We have all agreed that having the company in one location is the best; it is much easier than running a distributed company, regardless of new technologies. So the question is where. Our CEO believes that Seattle is the best location due to our contacts there, density of engineers, reduced cost (and time) of travel, etc, all the usual reasons. The only reasons for a Hawaii location are Act 221 and the fact that I am here already.

He and his wife could move here (kids are grown), and we do have talent here. We certainly can do it here but we need to do a sell job on the CEO. He’s here next week for a due diligence meeting with Hawaii Angels and others (and we have had good reception from these organizations. I am confident that if do raise half our money on the mainland these folks will put up the other half).

He is very senior, has run multiple companies, has raised funds before, etc. So he’s going to take a very business-like approach to making this decision.

That's the basic, this is a bit too much of a public forum to post much more detail than this, but you get the idea. We have set up meetings with Enterprise Honolulu, HVCA, and HiBeam. Other ideas are much appreciated.

Ken
I am not sure if mainland people will buy the Seattle is not much bigger than Honolulu argument. I mean, technically San Francisco has less people than Honolulu too.

The value is not so much the population but the density and quality of the technology talent there. Seattle has 50 times or more the tech talent of Honolulu despite the similar population.

Seattle has Microsoft and Amazon and when you have 2 of the biggest tech companies in the world that is going to happen. Also, by one listing I found on line, Seattle has 64 Web 2.0 companies.

I'm not saying you should leave Hawaii but I do think you need to be careful about picking your points as to maximize your persuasiveness.
Daniel,
While I appreciate your enthusiasm for Hawaii, the numbers don't really add up. The Seattle area (including the East Side) is quite a bit bigger (approx. population 3.2 million) - and supports a much much large ecosystem of tech jobs.

Take a look at this recent article in the Seattle PI:
http://seattlepi.nwsource.com/business/368176_cybercities24.html

Here are a few notes:
# Seattle led the nation in the number of software-publishing jobs, with 43,600 workers.

# The Seattle-area high-tech payroll was $12.3 billion in 2006. (Ranked eighth)

# There were 4,900 high-tech establishments in the Seattle area in 2006. (Ranked 15th)

# The Seattle area had 18,800 jobs in telecommunications services. (Ranked ninth)

It is true that we have a few success stories, and perhaps hundreds of high tech companies, we are not in the same league as Seattle (let alone the Bay Area).

It is true that we are a gateway to APAC and that is a strong selling point. It is also true that VCs seem to care less about distance than they used to.

I firmly believe that being successful means that you have to accurately identify the reality of a situation. That doesn't mean give in, it means understand your weaknesses and strengths - but don't fool yourself!

Ken
Have you quantified the projected economic benefits of 221 in comparison to relocating to Seattle?

How much is that worth in extra funding, lower dilution or lower operational costs? If your CEO is going to look at this purely from a business perspective, quantifying that benefit would be key.

Conceivably you could make the argument, "Seattle might be better in some respects but 221 decreases our cost/burn by X% more than offsetting the gain in going to Seattle, etc."
Yes, 221 is a very powerful incentive and that is our strongest reason for staying in Hawaii. We are evaluating it very carefully and in the end it may win.

Ken
Hey Ken & John,

I guess this is what I get for quickly posting random thoughts to a public board :-) I wasn't suggesting Honolulu has more engineers than the Seattle area. That would obviously be a ridiculous assertion. I lived and worked in the Bay Area and have done business in Seattle. I'm well aware of how they compare. My point is that Hawaii does have an increasingly vibrant technology community, some advantages due to the location, and that building a technology company here is not as crazy an idea as some folks from the mainland would have you think for the reasons I enumerated.

You are right. My first example was a poor choice because its playing on the size of Seattle (the city) versus the Seattle area and doesn't account for the more important factors of concentration of engineers and the amount of money sloshing around. Feel free to replace #1 with "$5 billion in military spending, including numerous sizable R&D projects that utilize local technology firms."
Hey Ken,

This point has been mentioned but not emphasized: Hawaii is a great place to get military contracts. I don't know a lot of people in the area, but I'd recommend you talk with a guy named Rick Hess. He's a very helpful guy who also writes checks for CEROS (ceros.org); if his organization isn't a match for your company, he might be able to help you identify other potential grantmakers.

-Shawn
I agree that Hawaii is a great place for military contacts. I have benefited from Hawaii military projects in the past myself.

The question I have is how valuable are military contacts for startups. In many areas, military oriented projects wind up being limited to military use. This is nice if you want to build a company that services the military but if you want to build a product company that sells to the commercial segment, I wonder how helpful this is.

Specifically, I am thinking here of software development companies (especially web 2.0 companies). For most software applications, I do not see Hawaii's military being of much use.

Similarly, my understanding is that Ken's products are more oriented towards the consumer/commercial market. As such, I am not sure how he or others like him could benefit from military contacts.

That being said, I think it's great to leverage military contacts and I think companies can make a nice living off of it - I just wonder how broadly the military can be used by Hawaii's entrepreneurs.
"How valuable are military contacts for startups" -- definitely a key consideration. From what I know, I wouldn't be interested in using a military contract as the basis for a web company; they're the diametric opposite of "release early and often".
The question I have is how valuable are military contacts for startups.

It really depends on the startup. My first company in Hawaii (Tollan) was basically built on a military contract. Tollan did early work on intranet software and also did professional services. Many local tech startups target the military or dual use areas. HTDV is specifically setup to help small tech businesses work with the DoD. Ian's DualUseHawaii is another good place to find information.
My major concern is that military customers often want you to focus on building products that mainstream commercial customers do not want. As such, military customers can be a hindrance in actually building a commercially viable product.

I have worked with the military both here locally and in DC (once building appliances, once developing software). In both cases the military was an excellent customer, paid well and good to work with.

The main problem was the functionalities the military needed were so specific and sophisticated that commercial customers found little value in them. As such, every project for the military created a tension between building products for our commercial customers and our military client.

While the US military is large, missing out on the worldwide commercial market makes it very difficult to grow a successful company. Being military focused, you may generate nice revenue and sell for a modest premium to a defense contractor but you are generally capping your upside.


Now, of course, it depends. Some startups will not get caught in this trap. Nevertheless, this issue is a common risk for many military focused startups.

My point then is that the military sector can have significant downsides to young tech companies and entrepreneurs should carefully weigh such risks.

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