One of the most frequently asked questions posed by clients is this: How did Kamakura choose Honolulu for its head office location? This post explains.
Kamakura was founded in the seaside town of Chigasaki in Kanagawa Prefecture in Japan on April 1, 1990. Besides being a beautiful place to live, Chigasaki was a great location for Kamakura Corporation because it made it possible for our software developers and other staff to avoid the crushing commute into central Tokyo. Almost every other major firm in Japan with a high intellectual content to its work (pharmaceuticals, engineering, software, etc.) had a similar suburban location for its staff.
Kamakura Corporation was extremely successful in the Japanese market, but efforts to internationalize the client base were hindered by our Japan location. After seven years, we were growing rapidly but our clients were concentrated in Japan and the United States. We needed to take further steps to internationalize the company. At the same time, one of our key developers, Bill Hall, expressed a strong desire to relocate to Hawaii for the sake of his Japanese wife and his children.
This prompted a big debate among the senior partners at Kamakura about the pros and cons of a second office and where it should be located. The Japanophiles among the non-Japanese staff were the ones who were most opposed to any activities outside of Japan. We looked at locations including Singapore, Los Angeles, San Francisco, and Seattle, in addition to Honolulu. New York and London were not considered, because they had the same problems as Tokyo; they were big, expensive places to work with long commuting times. Even firms headquartered in New York, like Riskmetrics, were forced to have development offices thousands of miles away. We wanted a location where the CEO and the head of development were literally sitting next to each other.
As part of the process of evaluating these potential office locations, we spoke to managers of large software groups in each city and found some interesting results. Software companies in Los Angeles, San Francisco, and Seattle were having great difficulty in hiring and retaining talented developers. In Honolulu, however, David Houle (then chief financial officer of Bank of Hawaii) and entrepreneur Peter Kay gave us lots of confidence that the talent pool consisting of people either (a) in Hawaii already or (b) eager to relocate to Hawaii was very large.
In June of 1997, Bill Hall was sent to Honolulu to open the firm’s office in the State of Hawaii-run high technology center called the Manoa Innovation Center. After comparing costs daily with Bill, it became obvious that our Japan location made no sense for any administrative function that was portable. On December 15, 1997, my family and I made the move to Honolulu and began building the administrative staff there. By 1998, our software developers also made the move and Tokyo was left as a key marketing office. We completed the legal change of domicile for the parent company from Japan to Delaware with the help of Morrison & Foerster on March 15, 2001.
The Honolulu headquarters location has proven to be enormously successful for us. As of the date of this blog, Kamakura has clients in 32 countries instead of the 2 countries we had with a Tokyo head office. Since our move, the State of Hawaii named Kamakura as “Governor’s Exporter of the Year” and “Governor’s High Technology Exporter of the Year.” The State of Hawaii also passed legislation known as Act 221 which provides powerful tax incentives for high technology companies. Qualified high technology companies receive a 20% research and development subsidy from the State. The exercise of stock options in a high technology company are exercisable free of state taxes. In addition, investors in a qualified high technology business have the right to write off their investment against state tax liability, and this right is transferable. That means non-Hawaii investors can receive benefits from this tax advantage by selling these tax privileges to another investor with taxable income in Hawaii.
The greatest advantage of our Honolulu head office has been the reaction of our clients and staff. We have the most talented and most loyal staff in the risk management business, and they have made our success possible. Our clients from around the world visit in person very often, as you might expect, and we are in constant face to face contact via high quality two way video conferencing from Vidyo. In short, our Honolulu headquarters has been a huge success. We only have one question. Why haven’t firms like Oracle and Microsoft and SAP recognized these same advantages and moved their development staff to Hawaii?
Donald R.van Deventer
August 20, 2009