Hawaii has become fertile ground for starting technology companies in recent years, according to a new report, but a state initiative that helped achieve this by investing in tech ventures is almost out of money.

Gov. David Ige urged Hawaii lawmakers in his State of the State address to direct $30 million in taxpayer money to private tech ventures over six years so that the state stays on the national map for tech startups and investment.

Two bills in the Legislature offer a slimmer version of Ige’s plan — $25 million over five years — for tech-industry investments through the Hawaii Strategic Development Corp., a state agency that has put about $20 million in federal and state money into venture capital funds and other tech enterprises over the past four years.

HSDC has only about $700,000 left to spend on what it calls the HI Growth Initiative, so officials are concerned that momentum in the fledgling local tech startup landscape will dry up without a new capital infusion from the state.

“This will provide a powerful signal to our entrepreneurs and investors that Hawaii is serious about growing our economy and retaining and attracting successful businesses to our state,” Luis Salaveria, director of the state Department of Business, Economic Development and Tourism, said in written testimony on one of the bills advancing in the Legislature.

“For successful Hawaii companies to stay and grow here, the state must provide a long-term commitment to programs such as the HI Growth Initiative that help Hawaii companies to start up and grow and that attract more private capital investment to Hawaii,” said Salaveria, whose agency oversees HSDC.

An economic impact study released last month by the University of Hawaii Economic Research Organization concludes that investments by HI Growth have been instrumental in helping start more than 40 companies that created 154 to 180 local jobs and attracted roughly $75 million to $135 million in private investment.

Additionally, the startup companies have spent about $11 million in the local economy, the study said.

UHERO said Hawaii’s environment for tech startups has gone from virtually nothing four years ago to being recognized nationally and referred to by some as “startup paradise.”

“The HI Growth equity investment program has successfully catalyzed the development of an innovation ecosystem,” the report said.

HI Growth has put money primarily into three areas: “accelerators” that help entrepreneurs form companies and attract investment capital, privately managed venture capital funds that invest in startups, and events for investors and entrepreneurs.

The accelerators, which also have their own affiliated investment funds that put money into companies they help form, are Blue Startups and GVS Transmedia Accelerator. The state owns close to 50 percent stakes in the two accelerator funds through HSDC, and thus owns small stakes in a variety of startups.

Among companies backed by the state through Blue Startups, run by Honolulu- based entrepreneur Henk Rogers, are a global-positioning locator service for pets called Gibi, the Volta network of charging stations for electric vehicles, the FloWater water-bottle refilling machines, an app-based treasure hunt for real money called Xmap, and an app game called Huedoku where the challenge is to arrange squares on a grid by hue.

A variety of projects

GVS Transmedia, which is run by Hawaii island-based filmmaker David Cunningham, is geared toward film and other media startups. GVS-funded enterprises include a motion picture, comic and app game called Kite Kids about kiteboarders competing on Maui, a Web or TV series called “Surf Break Hotel” about a washed-up surf pro who teaches surfing at a Maui hotel, and a feature film, graphic novel and video game about a former British army officer captured by pirates while sailing on the Pacific Ocean.

HSDC has put about $3 million into GVS and about $2.5 million into Blue Startups.

Venture capital funds that HSDC has put money into include Maui-based mBloom, California-based Startup Capital Ventures and a fund managed by the University of Hawaii Foundation called Upside Fund II.

HSDC owns about 50 percent of mBloom, which received $5 million, 22 percent of Startup Capital, which received $4.5 million, and 50 percent of Upside, which received $3 million.

Through the three venture capital funds, HSDC owns stakes in companies including Ala Wai Pharma, developer of an influenza drug- delivery system; medical-imaging firm Kineticor; website security firm WhiteHat; video-advertising software VideoAmp; high-definition webcam streaming service Ozolio; and e-commerce platform ReadyCart.

Events sponsored by HSDC have included competitions where entrepreneurs pitch plans to venture capitalists, networking meetings and educational sessions about starting and financing tech companies.

UHERO’s report said HSDC’s method of investing state money through privately managed funds avoids having state officials pick winners.

That’s in contrast to the state retirement fund, which does try to pick winners among local tech companies. Recently it came to light that the state Employees Retirement System deemed as worthless a $2.5 million investment it made in biomass power plant developer Hu Honua Bioenergy. ERS has a $25 million program that invests in Hawaii enterprises with a goal of stimulating technology and other investment, creating jobs and producing a financial return. Overall, this program has achieved a 10.6 percent rate of return that produced $4.8 million for ERS.

HSDC’s HI Growth program traces its genesis to 2011, when the agency won a competitive award for $13 million from the U.S. Treasury Department to help small businesses. After that, the Legislature contributed $8 million to the initiative.

Of the $21 million, HSDC has distributed or committed to distribute all but $700,000.

Karl Fooks, HSDC’s president, said HI Growth investments are targeted to facilitate economic development by helping start companies and create jobs as opposed to earning a financial return for the state. But he said that over a 10- to 12-year investment cycle the agency expects to receive financial returns and recycle capital into more ventures.

One of the bills to add $25 million more to HI Growth over five years — House Bill 2288 — has garnered strong support from the Chamber of Commerce of Hawaii, Ige administration officials and companies that have benefited from HI Growth.

Michael Lienau, president of Ring of Fire Films Inc., said in written testimony that HI Growth introduced him to investors and sponsors and helped employ more than five people over the past year. “This program has been a huge boost in launching our creative media business and franchise through the GVS Transmedia Accelerator,” he said.

A growing community

Beth Carvin, co-founder of a new tech venture called Jambios Inc., said that 15 years ago, when she started another firm called Nobscot Corp., she had to staff it primarily with mainland talent but that last year she hired two software developers who attended a software coding boot camp sponsored by HI Growth.

“I have seen how Hawaii’s technology community has begun to flourish thanks in part to the HI Growth Initiative,” she said in written testimony.

HB 2288 passed a House Economic Development and Business Committee Feb. 5 and has been referred to the Finance Committee where it has not yet been scheduled for a hearing.

A companion bill, Senate Bill 2817, has not been heard.

Two other bills, HB 2219 and SB 2504, propose to create a fund for HSDC to loan money to tech startups. The bills each passed initial committee assignments, though the amount of money for the fund hasn’t been specified.