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Friday, July 18, 2014
HSDC Tries To Justify Hi Tech Self-Dealing
By News Release @ 5:52 PM :: 4454 Views :: Ethics, Tax Credits

MBLOOM ANNOUNCES INVESTMENTS IN FLIKDATE, OZOLIO

News Release from HSDC July 14, 2014 (Detourned to enhance accuracy)

In a press release issued on July 7, 2014, mbloom Fund I, LP announced its investment into two companies, Flikdate and Ozolio.

HSDC and RSTP Capital, LLC, the limited partners of the fund, reviewed and approved these investments independently of Arben Kryeziu and Nick Bicanic, the managers of the fund and co-founders of the two companies. These companies were formed prior to the establishment of the fund. The ability to invest in these two companies was a strong part of the investment rationale for a private investor to commit to a Hawaii-targeted investment fund.

HSDC’s investment strategy is to work with proven Hawaii entrepreneurs who have built businesses, raised capital, and are committed to building a vibrant startup ecosystem in Hawaii. HSDC believes that these proven entrepreneurs can inspire others to start their businesses in Hawaii and attract investment capital to support these startup companies. This strategy has resulted in two accelerators, two seed stage funds and one Series A fund established in Hawaii, leveraging over $20 million of private investor capital.

HSDC’s investment in mbloom is one component of this strategy, and it resulted in the formation of a $10 million seed stage fund to invest in Hawaii technology companies.

The willingness of a private investor to make a significant commitment to a Hawaii-targeted investment fund was entirely due to the skills and experiences of Arben and Nick. (LOL!) HSDC is a limited partner investor in the fund and does not provide any subsidy or incentive to the private investor. (except for that $5M you taxpayers gave us)  Arben’s and Nick’s demonstrated experience in building and growing Hawaii based technology companies convinced the investor (ie themselves) that there was potential in Hawaii to find and invest in (get taxpayer money for) globally competitive startups (which are based in California).

HSDC was aware of the private investor’s interest in Arben’s and Nick’s already existing businesses and worked with them to establish a fund governance process to review and evaluate related party transactions, if they were deemed appropriate for the fund. Through this process, Flikdate and Ozolio were approved for investment by the limited partners of the fund, and not by Arben and Nick.  (Quick IQ Test:  Do you believe this?)

HSDC remains committed to mbloom and supports the efforts of Arben and Nick to contribute to the development of a vibrant startup ecosystem in Hawaii.

The formation of mbloom Fund I will enable companies graduating from the accelerators and other early stage companies access to investment capital in Hawaii. In addition, the Maui-based fund provides a center of gravity to support the startup community on Maui. This has already resulted in the first Maui Startup Weekend and the first and second annual Maui Tech Nights (2013 and 2014) in partnership with MaiTai Global, a group of experienced technology executives and investors from the West Coast.  (Translation: We like putting on shows so we can get even more taxpayer dollars.)

---30---

As Explained: Tax Credit Scammers Find a New Home in HSDC

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Mapping the Mbloom Network

From Aloha Startups July 16, 2014 (excerpt)

Given the mbloom controversy and the myriad players involved, I thought that it would be interesting to visualize the network and connections....

LINK to map:  http://www.alohastartups.com/mapping-mbloom/

mbloomnetwork

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Feds Won't Let HI Tech Scammers Give Money to Themselves--So they Take State Funds Instead

Civil Beat July 13, 2014 (Excerpt)

In December 2013, Maui-based mbloom, an early-stage venture capital firm, secured $10 million in funding.

The Hawaii Strategic Development Corporation, or HSDC, committed $5 million to the fund, and Rosemont Seneca Technology Partners matched that commitment.

The firm that secured that money is managed by Arben Kryeziu, who lives in Maui, and Nick Bicanic, in Venice, California.

The HSDC investment is part of the Hi-Growth Initiative, a new investment program focused on “building an innovative ecosystem that supports entrepreneurial high growth.” ...

On Thursday, mbloom announced its first two investments. It will invest in Flikdate, a mobile phone-driven dating service, and Ozolio, a live webcam service. Each company received $500,000 in funding, with mbloom investing $350,000 in each and the rest coming from undisclosed third parties.

This is where things get interesting. Well, according to Hawaii business filings, Ozolio is owned by Kryeziu, and Flikdate is co-owned by Kryeziu and Bicanic.

So mbloom’s first two investments — partially paid for with public HSDC funds — are in companies owned by mbloom’s founding partners.

To complicate matters, according to Kryeziu, the investments did not include federal funds, only state funds, due to federal prohibitions on related-party transactions.

In effect, investors using federal funds via HSDC cannot invest directly in themselves — a limitation not applicable to HSDC’s state funds....

“There are procedures to deal with these conflicts,” said Karl Fooks, president of HSDC.  (Translation: Giving taxpayers' money to ourselves is what we do here at HSDC.)

Both companies were reviewed by HSDC prior to mbloom investment. “We were aware of these companies prior to the formation of mbloom,” he said.

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PBN: State of Hawaii says no reason for controversy in mbloom investments

News Release: Flikdate Raises New Round For Video Dating App

Flikdate Reviews: Google App Store

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