Surf's Up for Hawaii Startups?
WHY YOU SHOULD CARE
Because the irony of a tourist heaven is that the locals might not love it quite so much.
By Sanjena Sathian
Volcanos generally make people run away. In Hawaii, they have more of a come-hither effect. And explosive tectonics are just part of the 50th state’s allure. With the hibiscus and red ohia and other alien-beautiful flora (not to mention all those beaches), Hawaii seems a paradise for tourists and anyone with eyes in their head. Then there’s hipster-entrepreneur Chris Bailey, who sees it as a whole other brand of paradise: for startups.
Tourist-heavy Hawaii might be the last place you’d associate with faux rugged beards, ironic plaid shirts and hand-woven dental floss, but 29-year-old Bailey, who splits his time between Honolulu’s Kaka’ako district and Portland, disagrees. Today he’s part of an increasingly lively scene, with more businesses run by young people, new residential developments, expanded mass transit, farmers markets, you name it. The same hot spot for the fast-growing field of alternative energy innovation has also seen a surge in startup activity: Hawaii ranked 12th on the Kauffman Foundation’s analysis of startup growth by state last year, just below New York and above California, up from 14th the year before. As in Silicon Valley, rents are soaring — in Waikiki, two-bedroom apartment rentals cost an average of $3,000 last year, up some $1,000 since 2009.
Some of the surest indicators, though, are the little visual cues — like the bourgie tap rooms next to the gleaming coffee shops and appropriately grungy tattoo spots, and the co-working space BoxJelly, where entrepreneurs like Bailey gather. A weekday afternoon there finds no shortage of outsiders and hoodied young locals at work, from a surfing-product startup to an architect from the mainland running his business from his laptop. The locals are younger than they might have been in the past, says Nicole Velasco, executive director of the Office of Economic Development in Honolulu.
Honolulu lacks the “stay here, we’re cheap!” argument a Pittsburgh might make.
Indeed, Velasco, a Princeton graduate who returned to her hometown, describes her peers likewise heading home to the islands after college on the mainland — and perhaps a few years working in the Bay Area or on the East Coast — in part because of the startup bug that’s hit the rest of the country. (Some 15 percent more people become entrepreneurs every month now than in 1998, according to Kauffman.) Other people, like Bailey, would tell you it’s because of their parents; still others, a desire to have kids in this highly pleasant place.
Honolulu’s is the story you seem to hear in every city on the planet, from the Rust Belt to the Bible Belt: Please, please stay here. And please, please don’t go to Silicon Valley or New York or Chicago, cities like Atlanta and Pittsburgh, and even Bangalore and Melbourne, seem to beg their hometown kids. But the extent to which this is pronounced in this once-colonized state (whose culture has long been threatened by encroaching outside forces) is unique. After all, Hawaii is isolated from New York and D.C. by a crippling six-hour time difference, alternates between being a five-star destination and surprisingly like a developing nation and is aging at a frightening rate — a 2013 state report predicts that by 2035, nearly 30 percent of the population will be over 85 if things don’t change fast.
Limitations are obvious enough. For starters, there’s a lack of tax incentives to make businesses stick around, says Robbie Melton, CEO of the High Technology Development Corporation, a state agency, and Honolulu lacks the “stay here, we’re cheap!” argument a Pittsburgh might make. This actually reflects a major anxiety on the island about its self-sustainability. You see it everywhere, from fish ponds where islanders point out how much fish is imported (57 percent, according to a University of Hawaii study) when, well, you’re on a freaking island, to grocery stores where a local mango costs $7 (around $1 on national average, according to a recent USDA report).
Startuppers also need cash. Melton, a Hawaii native who worked in D.C. on and off for many decades of her career, says angel investors here have money and now need to get pumped up, learn the ways of the investing game and, crucially, get some practice at it. At the same time, the city is going to have to keep Williamsburg-ing Kaka’ako.
Nonetheless, Honolulu’s embarked on its quest for attempted success. First, it’s trying to make sure the Internet works, even if fixing the bandwidth on an isolated island is a huge project ahead, Melton points out. The city is also launching a mega rail-transit system, set to open in 2018. And overall, in Kaka’ako, things today look blissful, wealthy, comfortable. On the main drag, between Popsicle shops and sweet parks and bars, one boutique boasts expensive women’s clothing, with the motto painted on the window: “Made in Paradise.”