Making the world a better place through business requires two key ingredients: a good idea and money. Yet, the economics and investments in businesses are always in a state of flux. Everything from a company’s position to its revenue generation can impact whether or not an investor will look close enough or even give it a second thought. This matters to all types of businesses, including those hoping to make the world a greener, better place – such as with Hawaii’s growing clean energy sector. A key organization in this push is the Hawaii Venture Capitalist Association (HVCA), which held a luncheon yesterday focusing on the state of startup investments in the islands. Here are the highlights:
Steve Markowitz is an Angel Investor with Angel.co and sits on the organization’s Board of Hawaii. Angel.co holds a direct line for Angel Investors, who provide financial backing for small startups and entrepreneurs. Markowitz described how Angels get 23% of company regardless of capital raised by that company to date. The average high investment is around $1.2m, while the lowest and most common is around $250k. One thing to note is that more often than not small startups fail due to under funding.
Traction trumps everything for follow-on funding. – Steve Markowitz
Markowitz described the necessity for Angels to work and collaborate with other Angels moving forward on best investments. His own niche investment is for cannabis legalization in the state of Hawaii. This is currently valued at $7b which is only 10% of the potential for the marijuana industry.
Tim Dick, Startup Capital Ventures (SCV) Director, presented facts and figures based on the latest trends for investments. Startup investment is in decline for early stage startups but remains constant for later stage startups. What this means is that if you are thinking of starting a business now, make sure it’s a great idea and you have the connections. Angel.co has the largest equity finder with $160m for potential investments. Angels today are investing less in software and more in healthcare and commercial companies. SCV is tracking 150 deals, with eight near closing. However, since 2008 there have been zero Initial Public Offerings (IPO) from company transitions.
Vijoy Chattergy, Chief of Operations at Hawaii Employees Retirement System, stated that 600+ companies are starting in Hawaii and are at various stages. This shows Hawaii’s potential as the epicenter for growing businesses in the energy and technology industry. Omar Sultan of Sultan Ventures, XLR8UH, and the Upside Fund mentions their accelerator’s new cohort of 15 new companies was decided through 100 applications, with 80% having been local to Hawaii. The projected valuation from the University of Hawaii level, where XLR8UH requires school affiliation to apply, is as high as $500MM for R&D and funding (commercializing IP).
So what’s the big picture you ask? More investment in the state will come from big success stories for startups. Over the next 5 years there are a few things to keep your eyes on:
- “Re-efficiency” from limited resources (such as aquaponics and agriculture)
- More activity coming from online companies
- A continuing software platform boom
- Solving infrastructural issues with alternative energy and transportation
- The need for tax credits to get institutions more involved in investments
If you have a company that you’d like to apply for an investment and be a part of a cohort in Hawaii, then Energy Excelerators applications are still open here at energyexcelerator.com/apply.