Angels, SIC boost NM’s early stage capital

Albuquerque Journal – By Kevin Robinson-Avila / Journal Staff Writer

Published: Friday, February 12th, 2016 at 12:23pm

ALBUQUERQUE, N.M. — The stars are aligning for New Mexico to launch a lot more startups with a lot more seed and early-stage funding to help get them to market in the next few years, according to participants at the New Mexico Angels annual dinner conference.

The Angels’ banquet, held Thursday night at Sandia Golf Club, attracted nearly 100 entrepreneurs, investors and public officials from across the state. Participants discussed the emerging finance opportunities and startup activities now mushrooming in Albuquerque and other places.

“Many things are converging, with lots of players involved,” said Gary Oppedahl, Albuquerque director of economic development. “We’re starting to see a real ‘flywheel effect.’”

Oppedahl and Lee Rand, a partner with Sun Mountain Capital in Santa Fe, said the recent approval of a new $20 million “fund of funds” by the State Investment Council will generate more investment in grassroots startups statewide, beginning in the next few months. The fund of funds, to be financed with a combination of state, federal and private equity, will provide up to 50 percent in matching investment in up to 12 micro funds around New Mexico that will, in turn, invest in local startup businesses.

The micro funds are generally expected to raise between $5 million and $15 million from individuals, institutions and the SIC’s fund of funds, Rand said.

“Most funds will do from eight to 10 investments, so with an average of say about 10 investments by about 10 different funds, we’re talking about 100 new companies or more getting needed capital from inside and outside of their communities,” Rand said. “The money won’t start to fly out the door tomorrow, because there’s still a lot of leg work to do to set it all up. But it could be done by the end of this quarter, or in the second quarter.”

The micro funds will be geographically dispersed to get money flowing into cities and rural communities across the state, Rand said. The fund of funds, which will be managed by Sun Mountain Capital for the SIC, will encourage prospective micro funds to focus on businesses that take advantage of special expertise in their communities. That could include new technologies in things like material sciences, optics and photonics or agriculture.

“We’ll see many investment commitments being made over the next three to four years, followed by a long period of ongoing support for startups to develop and grow,” Rand said.

Investments from micro funds will probably range from $500,000 to $2.5 million, Oppedahl said. That offers a new, critical layer of assistance to build on investments by groups like the New Mexico Angels, which have picked up the slack in recent years to provide seed and early-stage capital for local startups.

“The funding won’t be in competition with groups like the Angels,” Oppedahl said. “It will be complementary.”

The Angels could well form their own micro fund with SIC assistance, NM Angels President John Chavez told the Journal. That could be a new “sidecar fund” to provide additional startup investments after the Angels have reach a pre-established level of financial commitment to a company, or a “follow-on fund” to provide growth capital for startups that meet certain milestones.

The Angels have become some of the state’s most active investors since the recession, which sharply curtailed local access to venture capital. The group invested about $1.6 million in 10 New Mexico startups last year. Over the past decade, it has committed more than $11.5 million to local companies.

http://www.abqjournal.com/723027/biz/biz-most-recent/angels-sic-boost-nms-early-stage-capital.html

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