Tough Times for Tech in Hawaii

On the way back from Ryan's Geek Meet yesterday Mika and I noticed three more small businesses in our neighborhood, the east side of Kaka'ako, shuttered. We must have lost 1/3 of the small family owned restaurants and shops in this area over the past two years. I know some of the owners, and it breaks my heart to see businesses that families worked hard for years to build go under. Its starting to look like a ghost town littered with empty buildings covered in graffiti. The Economist predicts 3% growth in the US economy this year. I hope they are right, and I hope small businesses in Hawaii see the benefits soon.

The tech sector and entrepreneurs in general have seen additional hardship with a schizophrenic legislature doing everything it can to ensure investors can never trust our state's tax policies and general attitude toward entrepreneurial businesses. What happened to our grand vision of an innovation economy? Regardless of your feelings about 221, almost everyone in the business world agrees that capital flees from uncertainty. Our state government has done a great job of creating uncertainty at every opportunity. With the Superferry, Act 221, the crippling of our school system and all the other craziness over the past few years investors from the mainland and Japan aren't exactly lining up to do business in our state.

Last year we lost a lot of tech businesses, some of them relatively high profile. Others moved their development shops out of state. This year many of the businesses that received funding in 2007 and 2008, the last years of substantial tech investment in Hawaii, are struggling and unable to close new rounds to compensate. The result will be layoffs and closures. I know dozens of top notch independent developers, systems engineers and PMs who have moved to the mainland over the past two years looking for work. We are losing a lot of great minds. There are a few bright spots, such as Avatar Reality's $4.2M round last month and recruitment of top talent from California, but we need a lot more in 2010 if we are going to have any hope of creating the type of tech ecosystem required to fuel an innovation economy. From our school system to support for local entreprenuership, our government is failing us. Now more than ever, we need real leadership in the governor's office and the legislature.

I'm interested to hear how the economy has affected TechHui members including employers, employees and independent contractors.