Builders VC sets up shop in Hawaii

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Builders VC Hawaii Program Director Johnny Chankhamany and Analyst Stephanie Ren.

More than five years in the making, a San Francisco venture capital firm has opened a permanent office in Hawaii. Leading the local charge, a born-and-raised Kalihi kid who grew up in public housing and graduated from UH business school.

Builders VC, launched in 2018 four years after its genesis as operational investment firm 11 Ronin, today helps founders modernize antiquated industries, "investing in those bold enough to solve the biggest technology challenges."

The Builders VC portfolio of companies includes more than 50 firms in health care, agriculture, real estate, construction, and heavy industry, and as I learned, the company has several Hawaii connections.

Builders VC held its official Hawaii kickoff last week with a high-level CEO Summit. But by all accounts, the VC firm is committed to spending time on the ground and out in the local community.

Extending the runway

The Builders VC CEO Summit Kick-Off Dinner in Waikīkī. More photos here.

Hawaii has an extraordinarily diverse mix of resources to help people launch companies, from INPEACE guiding people to start small businesses to a number of accelerator programs hoping to invest in founders of meaningful but scalable solutions to big problems.

Without a doubt, the Aloha State is far better equipped to help an entrepreneur get started today than it was a decade ago.

But sit in on any local startup panel or interview a Hawaii founder who is more than a few years into their journey, and you'll hear a familiar story about a common gap in our innovation ecosystem: follow-on and Series A funding.

If you've got a great team and a decent idea, you have a fair chance of raising your first five, six figures in Hawaii. Friends-and-family funding is a huge part of that, but there are a variety of seed and angel funding opportunities if you are hungry and relentless and know where to look.

But the first real, big leap, Series A? You'll need to grow fast and execute even faster. Raising $2 million locally is not unheard of, but most startups (and other investors) are looking for a target closer to $10 million or more. And when Hawaii startups find themselves standing at that precipice, the most survivable path forward takes them out of the islands.

There's a reason they call that gap the "valley of death."

Not that there's anything wrong with leaving. A successful Hawaii business doing well on the mainland is still a success story. (See Paubox and Volta.) But it's hard to stay rooted in Hawaii and still get quickly to scale.

There are a few venture capital firms active in Hawaii. Startup Capital Ventures with its links to Silicon Valley Bank has an office here. Their main focus remains Silicon Valley, but their Hawaii principals like Donovan Kealoha and Tim Dick are very active in the islands. And the Sultan family runs Sultan Ventures, though they are more recently active in the accelerator and pre-seed phase.

So Hawaii has a VC pulse, which powers groups like Hawaii Angels and the Hawaii Venture Capital Association. But it's faint.

The entry of Builders VC should amp things up a bit.

Johnny on the spot

Chankhamany at Blue Startups' Cohort 14 Open House yesterday. More photos here.

Entrepreneurship runs in Chankhamany's family, originally from Laos.

"My parents were immigrants to Hawaii, with the exodus after the Vietnam War, and they didn't speak a lick of English," he recalls. "My father did speak French, though, because the French colonized Laos."

While they worked multiple jobs, they lived in public subsidized housing — Kam IV Apartments, specifically — with a dozen other family members.

But Chankhamany said his parents believed in the "whole American dream story."

"My parents were just entrepreneurial," he says. "They were wanting to start their own business, and they experimented with a lot of different things."

Those things included selling southeast Asian delicacies... like balut.

"My father imported in an egg incubation machine from Asia and tried to incubate stuff here, but the electrical requirements didn't work very well in Hawaii," he explains. "Every time he touched that machine, it electrocuted everyone, so that didn't work very well."

Next up was meatballs.

"Everybody loves phở in Hawaii," he said. "He tried to do a meatball production factory, but he just wasn't happy with the recipe, it never came out quite right."

Expanding their scope, Chankhamany's family began looking to buy an operating business. They negotiated a deal to take over a meat market at Maunakea Marketplace in Chinatown in Honolulu, but that fell through.

Someone on Maui heard they were in the market and summoned them over to buy their Thai restaurant. That deal fell through, too.

But someone else on Maui heard they almost bought a Thai restaurant, and extended another invitation.

"Lo and behold, we bought a Thai restaurant on Maui after one day of due diligence," Chankhamany said. "We ran it for 35 plus years — right up through the height of the pandemic a year and a half ago."

The family didn't stop at one restaurant, either.

"At one point, my family ran the majority of the Thai restaurants on Maui," he said. "Six or seven, up to ten of the 12 Thai restaurants on Maui."

The franchise approach allowed Chankhamany's family to bring more family to the U.S. from Vietnam.

"My parents would bring over a family member from the old country and take them through the restaurant, get them experience, help with their visa work, and then when they were good to go, we would help them with getting their own location and starting up their own restaurant," he said.

His family's experience, and their humble beginnings, instilled a strong sense of entrepreneurship, and a fearlessness when it comes to hard work.

"Growing up in Kam IV housing, my grandmother would throw me into the dumpster to collect cans to recycle," he recalls.

"That's the thing I look back on all the time," Chankhamany continues. "I don't care what work I do, as long as I'm working and getting paid, I will never be dumpster diving ever again — I will never be that poor again ever in my life."

While in Hawaii, the Builders VC team volunteered in the local community.

He graduated from Lahainaluna High School on Maui, then attended the University of Hawaii's Manoa campus, traveling back and forth to Maui each weekend to help with the family business. While he knew he was interested in computer science, there was no computer science program at the time, so he enrolled in business school (before it became the Shidler School of Business).

"My final semester, I finally read one of the weekly emails from Director of Career Services Rick Varley, and I saw, 'Asia focused financial analyst training program,'" he said. "I called the number, and the gentleman on the phone said, 'The first class is tomorrow, you're in luck, come on by.'"

This was the early 2000s, when hedge funds were big, and Chankhamany was sure he'd discovered his purpose.

"From that moment on, I was like, 'This is my calling in life, my passion, I want to do this, I want to be in finance, this is what I want to do,'" he said. "But applying for jobs, everybody was telling me — at least those that returned my calls or emails — 'Sorry, you're too late.'"

He jumped in one semester before graduating. He had no experience. He did no internships. His GPA wasn't high enough.

"That was just heartbreaking," he said.

"My mission became preventing other people to come after me and be told that you're ineligible for your dream because you didn't fill out the form in time," he continues. "It became trying to help as many people as possible to figure out what it is that they want to do."

To accomplish this, while in and after college, Chankhamany worked at the nonprofit AKAMAI Foundation. While he did a lot of financial work there, he also worked with students, teaching, and serving as a mentor, helping them develop their resume, practice for interviews, and placing them in internships.

He's been there 12 years. And he's still there, now as president.

It was in that foundation leadership role that he attended an investment manager conference in New York in 2019, along with a few students. There he met a general partner from Builders VC who noticed that he was from Hawaii. They stayed in touch, including when she visited the islands. He would occasionally send her resumes of promising interns.

"Then last year, she just called all the blue and said, 'I've got something that I want to chat with you about,' and I'm always open to having a chat and meet with anybody," he recalls. "She explained the direction they wanted to take and what they wanted to do with Hawaii."

His mission? Work with the firm and portfolio companies to see if there are business development opportunities in Hawaii, and meanwhile engage with and support the community and host events.

"As long as I meet their goals, then the world is my oyster — I can craft the Builders program in Hawaii however I want," Chankhamany says. "Sign me up!"

The Builders Hawaii connection

Builders VC is connected to the islands for both personal and institutional investment reasons.

"The focus and the commitment to Hawaii comes from a couple of our general partners who either have family here, and grew up here visiting their family every every year, or who have business interests here," Chankhamany explains.

Lead founder Jim Kim, for example, runs a winery and stores a fair amount of inventory in Honolulu for Lei Wine, which is available for distribution exclusively in Hawaii.

"The other big point is that we've got a lot of local investors that do make up a significant portion of our funds, our assets under management," he adds. "The biggest local investor is the Hawaii ERS, the pension fund for state workers, and that's through the high tech program."

Between an affection for the islands and a desire to do right by their local clients, Builders VC started planning a Hawaii office as early as 2016. And Chankhamany notes that Hawaii does fit the profile of a Builders VC market.

"It's all about the investment thesis of looking where other VCs don't go, that contrarian view," he says. "Two thirds of our portfolio is outside of Silicon Valley and your traditional tech hubs."

In other words, he says, places like Hawaii have appeal in part because nobody else is looking.

"Hopefully you will get to that critical mass where the eyes are now beginning to shift, where everyone sees there are good companies coming out of Hawaii and more funds and funders are looking at Hawaii as a viable place to source deals," he says. "All of a sudden they're going to be coming to Hawaii saying, 'All right, we're here with our checkbooks, what do you got, Hawaii?'"

Chankhamany and Kim.

Chankhamany says that Hawaii is getting a unique amount of attention from the firm, as Builders VC doesn't have someone like him in many or any of their other investment markets.

"They really don't need to go through the expenditure of having me here, boots on the ground, if they just wanted to check the box on helping the community — they could just write a check to Blue Startups or the Hawaii Community Foundation or they could just phone it in," he says. "But for them, it wouldn't have the impact of having someone local that understands the community, understands the scene, and can bring everyone together to hopefully push things forward."

And pushing things forward means working beyond the local startup scene.

"I want to be able to leverage the network, the resources, the name of Builders for the benefit of Hawaii," he says.

Chankhamany sees the University of Hawaii as an important part of the conversation.

"It's always a shame because we've always been really good at getting that grant money, but never been good at commercializing," he says. "We need the university involved, because if the university is not involved, it's going to be well near impossible to build our innovation ecosystem any any more than it already has been — that whole ecosystem, it starts with the education system."

He also thinks that Hawaii can benefit from best practices proven elsewhere.

"I love all the local accelerators and other programs that are out here and have been working really hard for the past more than a decade, but not all knowledge is taught in one school, right?" he notes. "I would like to bring in more people with varied experiences from outside and introduce them to the local folks, and maybe they'll gain something out of it."

Developing local talent, and bringing local talent back to the islands, is a difficult but long-term goal, Chankhamany says.

"On one hand, we're struggling to find skilled labor here, so the bulk of the labor is coming from the outside, but meanwhile our local young people are cleaning hotel rooms and serving dinners for all the wealthy folks coming in," he says. "How can we create jobs in Hawaii that will keep our alumni here, and hopefully one day we'll be able to bring more more of our alumni back home?"

He acknowledges that filling the talent pipeline will take longer than it took to build the startup and innovation community we have now.

"My focus at AKAMAI has been mainly on the education side, developing the talent pool, so that if and when an industry does take root, we will have qualified, experienced individuals able to fill those jobs," he says.

"Really, it's all about improving the quality of life for the people of Hawaii," he adds.

Chankhamany says he's open and eager to meet with anyone.

"I'm literally jumping up and down with my hands in the air saying, 'I've got all of this stuff, let's sit down and have a chat and see how can we combine our resources to push this ball forward,'" he says. "Whoever wants to put me on the team, coach, I'm right here — I look forward to meeting anybody and everybody that is willing to work with me."

Contact Johnny Chankhamany by email at jchankhamany@builders.vc or connect with him on LinkedIn. Tell him Ryan sent you!