Are Hawaii's Tech Tax Credit Worth the Cost?

Comment

Comment by Bruce M. Bird on April 12, 2009 at 9:40am

Hi, John. Thank you for clarifying your point.

Comment by Bill Spencer on April 9, 2009 at 9:40am

That is why I also advise entrepreneurs to build solid management teams, hire the best advisors they can afford and empanel an advisory board.

Comment by John on April 8, 2009 at 5:42pm

Bill says "One problem I observe with entrepreneurs at all stages is not 'dreaming' or thinking big enough."

Studies show repeatedly that people over-estimate their abilities (the 'Lake Wobegone' effect). Encouraging people to think bigger is likely to increase risk because it forces the entrepreneur into a plan that they are less qualified to implement.

Comment by Bill Spencer on April 8, 2009 at 1:16pm

Attracting mainland talent is all together different than attracting mainland companies to come here to set up shop. 221 has in fact resulted in a "brain gain" especially by attracting locals back to Hawaii who had left for school and couldn't find any jobs back home that either paid a decent salary or was in line with their training. Attracting mainland investment is also different from attracting businesses to come here. 221 has been very successful at attracting mainland investment thanks to the ability to shift credits between tax advantaged and non-tax advantaged investors. These were intended consequences.

Comment by Laurence A. Lee on April 8, 2009 at 12:25pm

Bill, I'm absolutely shocked that you claim Act 221 was never designed to attract businesses to Hawaii -- especially when it's been repeatedly stated that Act 221 investments seek to attract the experience of seasoned High-Technology Investors from the Mainland.

Maybe I'm making an unconscious leap here, but I'd think that to attract mainland investors, we'd have to expect that we also need to attract mainland talent (blogged about in another thread) as well as mainland opportunities. It has always gone hand-in-hand in my mind, and that has been the only compelling reason for me to consider renewing Act 221 beyond 2010.

Comment by Bruce M. Bird on April 8, 2009 at 12:00pm

Hi, Bill. Your quote: "There is a big difference between thinking big and taking big risks" is a good one.

In his post, John mentioned the phrase "strategic risks". It's been my experience that this phrase means different things to different people. I just want to make sure that I understand his point.

Comment by Bill Spencer on April 8, 2009 at 11:44am

Thanks Bruce. I wasn't attributing this to you, just clarifying the notion that 221 was designed to attract businesses to Hawaii.

Regarding dreaming too big or motivating risky behavior. One problem I observe with entrepreneurs at all stages is not "dreaming" or thinking big enough. Investors and especially VC's want to see companies dominate a market and be shooting for revenues exceeding $100M in 5-10 years. There is a big difference between thinking big and taking big risks. Investors are all about risk mitigation. They want to know that the entrepreneur has thought about all the risks and has a plan to deal with them. Investors are risk avoidance not risk takers. 221 helps mitigate the downside risk in early stage investments. The intent of 221 was to motivate Hawaii investors, most of whom made their fortunes in real estate, to look at other types of investments, ie. high tech companies, and incent them to invest in order to build a tech sector and help diversifty our tourism dependent economy.

Comment by Bruce M. Bird on April 8, 2009 at 11:36am

Hi, Bill. I was responding to John's comment. I never stated that the "intent" of 221 was "to attract companies to relocate to Hawaii".

But, I can see how you might draw that inference.

So, please allow me to re-state my question to John as follows: Did you mean that Act 221 is attracting the establishment of technology ventures in Hawaii that are of a riskier nature than technology ventures established in other states ?

Comment by GB Hajim on April 8, 2009 at 10:58am

Well said!

Comment by Bill Spencer on April 8, 2009 at 10:22am

I would just like to point out that the intent of 221 was never to attract companies to relocate to Hawaii. That may be a consequence, but the intent was capital formation for companies already on the ground here or new local startups. The Honolulu Advertiser has perpetuated the notion that 221 was set up to attract companies to move to Hawaii. Nothing could be further from the truth.

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