The Business Side of Paradise
Maui's high-tech infrastructure and tax incentives make this Hawaiian paradise an ideal place to set up shop.

By Marlene Piturro
for Office.com

What type of incentives would convince you to relocate your business to a different city or state?

Oct. 9, 2000 In 1998, Joe Gleason sold his Michigan-based educational software firm for $3.5 million and celebrated the sale with his wife on a Maui vacation. "We fell in love with the place and decided to stay," he says. When surf, sand and barhopping on this idyllic Hawaiian island got old in a few months, he sought mental stimulation and a new challenge wouldn't a dot-com be just the thing? Like other entrepreneurs, Gleason checked out Maui's feasibility for high-tech business and found an excellent fit.

What makes Maui an attractive place to set up shop goes far beyond the palm trees and the beaches. With some New Economy foresight, Maui's economic development board, or EDB, started an effort six years ago to build a high-tech infrastructure to support "industry-specific synergies" in target industries. The industries Maui's EDB wants to target include defense, environmental and natural-disaster management, biotech and telemedicine, the arts and entertainment and Web and software development.

"Our remote location and small population (120,000) rule us out for factories and warehouses with hundreds of people," says Loren Malenchek, an EDB manager. "However, for New Economy businesses, we felt we could compete with mainland cities."

More Than Just Beaches
Maui's competitive strategy was to get wired, laying the groundwork for high-tech firms to flourish on an island 2,397 miles southwest of Silicon Valley, Calif., and smack dab in the middle of the Pacific Ocean between Los Angeles and Tokyo. The strategy is proving to be stimulant for New Economy growth. Maui's telecommunications base includes fiber-optic cables, SATCOM ground stations and a video-teleconferencing center.

All of the advanced infrastructure can be found in these three complexes: The Maui Research and Technology Park, or MRTP, the Maui High Performance Computing Center, or MHPCC, and the Maui Space Surveillance Complex.

MRTP, which was built on 415 acres in Kihei, Maui's county seat, was specifically designed for the New Economy. Housing a business incubator, an advanced telecommunications infrastructure, office and leisure facilities and support services, it is home to more than 30 companies employing more than 350 people. The park also contains the MHPCC supercomputer, established in 1993 by the University of New Mexico and the Air Force Research Laboratory. MHPCC has 1,200 users from the Department of Defense, government, business and academia.

The MHPCC supercomputer allows tenants to leverage its firepower to build their businesses using scalable parallel computing. One of the tenants, Cislunar Aerospace Inc., headquartered in Napa, Calif., is one of the businesses taking this advantage. A small engineering firm specializing in fluid dynamics R&D, it creates portable wind tunnels that improve design and performance of moving vessels, from yachts to spacecraft. Jani Palis, Cislunar's CEO, says, "The availability of Maui's superprocessor allowed us to expand our number of clients and provide quick project turnaround."

On top of these incentives, capital is available to encourage pension plans and individuals to invest in New Economy firms. There are also funds for marketing and promoting e-commerce initiatives, a $1 million e-enterprise initiative at the University of Hawaii College of Business Administration and $3 million in funding to upgrade the communications infrastructure as needed.

Maui's incentive programs aren't what made Joe Gleason invest $1.5 million of his own money in his startup, WebNow.com. "I have no patience for that stuff. It's a waste of time," he says. On the other hand, "the high-tech park was a dream come true. It's a great office facility, a 10-minute commute, with excellent telecommunications and an environment that's conducive to work."

WebNow.com allows a small-business owner to establish a Web site in less than 10 minutes, free of charge, and it provides other services and tools for a fee. The firm has been so successful that it has added 25 operators to the five it started off with in 1999 at its call center. The number of staff is expected to grow to 70 by the end of the year. Gleason is pleased with WebNow's growth and says, "This is the best location I could have picked."

Life Beyond Goodies
Just how expensive is that great location? Surprisingly, living and working in paradise has a reasonable price tag. According to the corporate relocation firm Runzheimer International, based in Rochester, Wisc., if the cost of living in Standard City, U.S.A., is $100, here's how high-tech meccas compare: San Jose, Calif., $158; Seattle, $118; Boston, $118; Maui, $110; and Austin, Texas, $95. Unlike Silicon Valley, an average house on Maui can be purchased for $250,000, and there are lots of gradations as you move up. While food and household items may cost more than on the mainland, many prices have dropped since Costco recently came to town.

Paradoxically, the greatest challenge to Maui's growth may be its high quality of life. It attracts dropouts from the competitive, stressful, herd-driven and expensive lifestyle of Silicon Valley, Route 128 and similar places. So assembling core talent involves separating those willing to work from those permanently vacationing.

To keep New Economy companies thriving, Maui has had to expand its talent pool. To that end, its Department of Education has awarded grants from $100,000 to $1 million for educational initiatives and scholarships.

"There's a lot of tech talent hanging around the cyber cafe," WebNow's Gleason says. "But it's hard to find the right combination of technical skills and great work ethic to form the critical mass of talent you need to run a dot-com." The going is so tough that WebNow's chief financial officer, head of marketing and other key people are based in Michigan.