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Finally, Kamehameha Schools Launches a Hawaii-Focused Venture Fund

It's been a long time coming, but Kamehameha Schools is finally beginning to invest in Hawaii-based startups. For decades, large institutional investors such as Kamehameha Schools (KS) and the Hawaii State Employees' Retirement System have avoided making investments in local companies, because of venture capital's onerous regulatory environment. But late this year, Kamehameha Schools earmarked roughly $30 million (or 0.5 percent of its $6.2 billion endowment fund) strictly for investment in local companies, specifically those in "innovation industries" such as high-tech and life sciences.

illustration: Mike Austin

Kamehameha Schools Vice President for Endowment Kirk Belsby says the timing is finally right for local investment, in part because the school did about a year's worth of research into what similar institutions are doing, and because of anticipated direct returns, both in terms of dividends and through life-sciences companies that may choose to relocate to KS-owned facilities in Kakaako.

University of Hawaiis Weinman Professor of Entrepreneurship Rob Robinson says the $30 million commitment is significant in that the monies will help local startups secure larger, later-stage funding, which has typically proved challenging, since it's difficult for them to get the attention of Mainland VC funds: "We've seen a tremendous amount of growth in the last three or four years, in the availability of seed funding, but what Kamehameha Schools' effort does is help companies look beyond, to the later stage b-round type of financing, which is an area that's been lacking for a long time."

Belsby says the lion's share of the money will go into a special venture-capital fund to be created by KS, targeting local life science firms. He expects that by the time this issue hits newsstands, they will have identified a fund manager and targeted initial investment opportunities, although he says it will take closer to two or three years before the full $30 million is placed.

Belsby says a small portion of the $30 million will be invested into already established funds that may or may not be Hawaii-based, with the expectation that whatever percentage KS puts into the fund, it will see a corresponding investment into Hawaii. At the time of this writing, for example, KS was dotting the i's and crossing the t's on a contract to invest $3 million into a California-based fund. "The idea is that we funded approximately 10 percent of that fund, so we expect 10 percent of those monies will come back to Hawaii for investment, in some way," says Belsby.

Initially, Kamehameha Schools approached other institutional investors to partner in its Hawaii-focused fund, but the idea of investing monies in non-Hawaii-based funds is something other investors weren't comfortable with. "We made a small investment into this larger fund, and those monies will come back to Hawaii, but I think some of the other companies felt they would prefer to have a Hawaii-specific fund that invests only in Hawaii. So maybe our objectives were probably a little different from theirs," says Belsby. "But regardless, we do hope others will follow suit. Because we believe there is an opportunity to earn market returns here in Hawaii, and if we can demonstrate that this fund can do it successfully, others can too."

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