With all of the controversy surrounding mbloom, the Maui-based venture fund with $5 million from the State of Hawaii’s HSDC and currently embroiled in a conflict-of-interest scandal, they released a statement today on their blog in an attempt to clear the air. Similarly, HSDC also offered a statement articulating their take on the situation.
Mbloom’s statement references a “fund governance process that reviews and evaluates any of these so called related party transactions,” yet they fail to explain that process or, just as importantly, who is involved.
HSDC’s statement mentions that they were “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.” However, HSDC fails to explain why they would agree to this or why, if it was only the “private investor’s interest” in flikdate and Ozolio, HSDC would allow their money to be commingled in a deal that was sure to raise questions.
Key questions remain unanswered (at least for me):
- Who is on the investment board that approved these deals?
- What’s the criteria that flickdate and Ozolio met that made them good investments?
- Why would HSDC invest in mbloom knowing that these investments were required?
Want a fourth question: Who would ever think that announcing these deals as the first use of State tech investment money was a good idea?
The crux of the scandal, as I see it, is that neither mbloom nor HSDC have explained their investment criteria and who is on the investment board which made the decision to invest in startups run by the fund’s founders. These investments are still clouded in mystery. Sure, mbloom is private, but they have some public money. Like it or not, that opens you up to a higher level of scrutiny, which you’re now experiencing.
Adding to the mystery, HSDC’s president was quoted this weekend as saying, “The review process is private and specific to mbloom.”
That’s the issue! Just tell us what the process is and who’s involved.
So, to review, mbloom took $5 million in taxpayer money, invested some of that money in two startups run by mbloom’s founders, and then tells the public to trust them because “…a condition of [the matching fund’s investor’s] investment was to have the fund be able to invest in a few of our personal portfolio companies that they found attractive (subject to appropriate oversight and due diligence).”
How convenient. (Yes, that’s snark. Yes, that’s me being negative and petty and not a team player and not backing something that, on the surface, looks to be good for Hawaii. But, I’m curious about that “appropriate oversight” part. Help me understand.)
HSDC and mbloom both, in their statements, avoid key questions, which only adds to the mystery. Releasing statements that boil down to “trust us” and “we do a lot for Hawaii” and “this was part of the deal” do little to appease the masses.
Based on social media, at least some in Hawaii’s tech ecosystem wants answers. Whether or not we ever get them is up to mbloom and HSDC.