Karl Fooks, new Director of HSDC, gave an excellent overview of promising options for promoting venture capital investment in technology companies in Hawaii at the HVCA luncheon talk yesterday. Here are some of the main points I noted down from Mr. Fooks presentation:
1. Angel investment tax credits: perhaps a continuation of Act 221; 16 other states have similar tax credits, averaging about 50% of invested amount, and capping total tax credits that can be taken.
2. State funds-of-funds to encourage and leverage private capital for venture funds: Utah has a model like the Act 215 SPIF; Pennsylvania's program uses loans from insurance companies guaranteed by state tax credits to directly invest in targeted venture funds; and Tennessee has launched its program to raise a fund by selling off state tax credits and placing investments with venture funds on a competitive bid basis.
3. Entrepreneurs in residence: drawing upon the expertise of successful tech entrepreneurs to guide venture funds and state and federal grant feeder agencies.
4. Equity/debt venture funds: there is interest in mezzanine financing through bridge loans convertible by a call on equity in the event of successful exits.
5. Local venture funds partnering or syndicating with Mainland funds for broader deal opportunities and heightened levels of domain expertise.
Mr. Fooks brings a depth of experience to his HSDC role from his prior stints at JP Morgan's M&A division, and demonstrated a big-picture view of venture capital development in Hawaii that was positively refreshing! He stressed the importance of the tech community and tech industry advocates to try to reach consensus on what we would like to see implemented in Hawaii in order to support effective legislative action in the next legislative session.