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New Mexico Attracting More VC Dollars because of aggressive State programs.

Here come the investors.

Despite a slumping economy, New Mexico has seen an upswing in the last year in interest from venture capital firms. That’s thanks to aggressive state programs aimed at attracting investors, as well as a growing tendency for New Mexico’s startup scene — bolstered by millions in federal research dollars infused in the state’s labs and universities — to pop up on the radar screens of out-of-state investors, say local industry experts.

By:
Andrew Webb
New Mexico Business Weekly
Albuquerque, NM
http://www.bizjournals.com/albuquerque

"We have a waiting list now," says George Friberg, director of project development and business assistance for Technology Ventures Corp., a Lockheed Martin-funded nonprofit that aims to help small businesses connect with potential investors. TVC offers space to investment firms in its Albuquerque office complex. "There’s a lot of folks inquiring about New Mexico. I’ve heard rumors that some people who’ve left the state are thinking of coming back."

Indeed, Friberg says a Denver venture capital firm focused on energy-related investments, Altira Group, LLC, is expected to move a representative into its new Albuquerque office in the next two months. And Utah-based Wasatch Venture Fund, (see related story at left) which has long maintained an office in Albuquerque, recently hired its first full-time associate to staff it. That brings to more than a dozen the number of venture firms represented in New Mexico.

"I’ve been surprised at the strength of the interest," says TVC President Sherman McCorkle. McCorkle cites the State Investment Council’s 10-year-old regional investment program, which allows the council to invest state money into venture capital firms, provided those firms establish and maintain a local presence and invest in New Mexico companies.

"That’s a strong enticement," he says.

Greg Kulka, alternative investments portfolio manager for the State Investment Council, agrees.

"I’ve talked recently with probably a couple dozen VC firms outside of New Mexico interested in our regional program," he says. "We expect to have a few of those that we will make commitments to in the next few months."

He says the program could soon be beefed up by pending legislation that would allow the state to invest 8 percent of the market value of the severance-tax permanent fund, which totals more than $3 billion. Currently, the council can invest 3 percent of that value in venture capital funds. A typical venture capital fund totals between $50 million and $100 million, and the state usually invests about $10 million in such funds.

Traditional hotbeds of startup activity like Silicon Valley and Austin are drying up, further encouraging venture firms to seek deals in uncharted territory, McCorkle says.

"Those rich feeding grounds are now an empty trough," he says. "So if you’re an equity investor or VC you have to look somewhere else."

The post-bubble economy has changed the way the game is played for many investors, says Tom Stephenson, a local partner with Houston-based Murphree Venture Partners.

"In the midst of the bubble, it was all about speed and how quick you could get a product to market, and the investment market reflected that," he says.

"The emphasis is now on building companies for the long haul. In a slower growth period, there’s much more emphasis on profitability. In terms of market share, that’s were New Mexico excels. We have strong companies with strong technology. I think that’s why you’re seeing increased interest."

But don’t expect a rash of new deals any time soon, Stephenson says.

"The uncertainties associated with current economic conditions keep people slower," he says. "VCs are devoting a tremendous amount of attention to existing companies. I think it will be a good year, but it’s going to be slow growth. That’s going to be a reality, probably for a while."

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