Tom Stephenson, Managing General Partner, Verge Fund

Creating a road map with meaningful milestones for the development of your business will help you determine how much equity capital to raise and when to raise it in such a way that you maximize ownership of your company over time.

Many entrepreneurs who decide to share ownership in their companies in exchange for capital investment identify goals that substantially increase the value of their business when reached, and they schedule financing rounds to follow these achievements.

If your product requires pre-approval from a federal agency such as the Food and Drug Administration or United States Department of Agriculture, for example, clearing this hurdle represents a success that makes your business more valuable and attractive to investors. If you raise just enough money to accomplish this goal and carry you through another three months — until you can complete your next round of fundraising and deal with unexpected costs — you can increase the amount of equity that you and your earliest investors maintain in the company.

Reaching these milestones also means you’ve reduced the risk for investors and greatly improves your chances of finding new partners and greater amounts of capital.
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Tatjana Rosev, Los Alamos National Laboratory Communications Office

The gap between the early stage funding needs of a startup company and the expectations of a typical venture-capital firm can prevent many innovations from growing beyond a concept into a commercial commodity. Because venture capitalists and angel investors tend to support products and services in intermediate, less-risky stages of development, numerous government and academic institutions have created “pre-seed” or gap funds to accelerate the creation of new companies and sustain developing companies through the research phase so their owners can focus on preparing their businesses for later-stage equity investments.

Los Alamos National Security, the public-private partnership that runs Los Alamos National Laboratory, sponsors the Northern New Mexico Connect Venture Acceleration Fund to support businesses with lab affiliations. While such funding is rarely enough to carry a company all the way to profitability, it bestows credibility, public exposure and access to venture firms and allows an entrepreneur to reach critical commercial milestones that demonstrate to a potential backer how the company plans to deliver an attractive return on an investment.
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Shyla Sheppard, Associate, NM Community Capital

Looking for additional funding to launch or grow your business?  If you have the experience, skills and passion, there are a number of potential sources of private equity capital available in New Mexico. Equity capital sources can be broadly placed into two categories: Angel investors and institutional equity investors. Determining which source to pursue is largely a function of three key factors: 1) industry focus, 2) business stage, and 3) amount of money you are raising.

Angel Investors

An angel is an accredited investor who invests his or her own, personal capital in early-stage business ventures. Angels are often the bridge from the self-funded stage of the business to the point where a venture capitalist would be interested in investing. An increasing number of angel investors are organizing themselves into angel networks or angel groups.

The New Mexico Angels prefer seed and early stage investments. They consider themselves generalists and will consider investing in a wide range of industries. Initially, they were focused on technology but they now consider non-technology ventures. Initial investment amount ranges from $100,000 to $500,000.

Institutional Equity Investors

The Altira Group focuses on energy technology in early or expansion stages, although they will evaluate previously funded and later stage opportunities on a selective basis. Initial investment amount ranges from $1 million to $10 million.

Flywheel Ventures focuses on information technology, physical sciences and clean technology in seed and early stage ventures. They target innovations arising out of the region’s research universities, R&D organizations, and national laboratories. Flywheel also manages the New Mexico Gap Fund. Initial investment amount ranges from $100,000 to $1 million.

International Venture Fund/Invencor focuses on technology, preferring co-investment opportunities. They favor seed and early stage ventures and are typically one of the first venture investors in a company. Initial investment amount varies.

ITU Ventures focuses on technology ventures in early stage or seed stage. They target businesses emerging from the leading universities, research institutions and corporations. Initial investment amount varies.

Mesa Capital Partners focuses on manufacturing and service companies in underserved industries and locations. They prefer early stage ventures.  Initial investment amount ranges from $500,000 to $2 million.

New Mexico Community Capital invests in under-served areas and industries in New Mexico to achieve both financial and social returns. They do not focus on a specific industry and they prefer later stage ventures or those in expansion. Initial investment amount ranges from $500,000 to $1 million.

Psilos Group focuses on healthcare companies that improve quality while reducing healthcare costs and advancing the alignment of payer, patient and provider incentives. They prefer early stage ventures or those in expansion. Initial investment amount ranges from $2 million to $6 million.

Sun Mountain Capital manages a $60 million state investment fund. They look for co-investment opportunities and do not have an industry focus. They prefer early stage or start up ventures or those in expansion. Initial investment amount ranges from $300,000 to $10 million.

Tullis-Dickerson and Company focuses on healthcare and has a national and international presence. They prefer early stage or start-up ventures or those in expansion. Initial investment amount ranges from $500,000 to $10 million.

Verge focuses on technology in New Mexico, preferring seed stage ventures. Initial investment amount ranges from $100,000 to $750,000.

Village Ventures focuses on opportunities in emerging domestic geographies in consumer media and retail, healthcare, and financial services. They prefer seed and early stage ventures. Initial investment amount ranges from $500,000 to $1.5 million.

vSpring Capital focuses on technology – biotechnology, life sciences and information management – in seed, start-up or early stage, although they will invest in later stage companies under special circumstances. Initial investment amount ranges from $2 million to $3 million, although investments can be as small as $250,000 or as much as $5 million.

Epic Ventures, formerly Wasatch Venture Fund focuses on all sectors of technology in early stage development. Their new name reflects the organization’s evolution from a local Utah firm to a growing regional and national fund. Initial investment amount varies.

For definitions of the various stages of business development, see the glossary on the Finance New Mexico website.

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