VC in New Mexico: Yesterday, Today & Tomorrow (part V)
Fifth in a five part seriesV. Where New Mexico goes from here: A VC perspective
Like all of us here, I love being in New Mexico, and I would like to see the market grow and prosper. I would like to see our economy develop and build many more opportunities for the sons and daughters of New Mexico – so many of whom, classmates and friends of my own childhood – would love to come back, if they felt the opportunities existed. In building a New Mexico venture capital firm, focused on that part of the market – the seed and pre-seed stages – where my partners and I see both the greatest opportunity and the greatest need, we at Verge hope to create some of the companies that will become the foundation of New Mexico’s economy for the next 10, 20 and even 50 years. There is more to do, of course, and I would be remiss, with such an audience as this, to not at least humbly suggest three areas where we can all contribute to help the local economy grow, particularly the technology economy.
First, we must continue to support corporate recruitment. I become very frustrated when I hear people say that corporate relocation and expansion is dead as an economic development tool, and we should put all our efforts in our home-grown companies. I believe, and my experience working in Austin, Texas bears this out, that any successful economic development strategy must include corporate recruitment. However, we need to raise the bar for what we expect in return for our incentives and effort: not just manufacturing jobs, but the marketing, sales, engineering, finance and corporate headquarters jobs as well. The people that work at these large organizations will be ultimately build the skills to start their own entrepreneurial endeavors, and will be strong contributors to the tax base in the meantime. We also need to be thinking strategically about which companies can provide leverage in our efforts. Where are our greatest needs, and how can they be filled? We must continue to support relocation and expansion in our community.
Second, we need to grab a hold of our best local prospects and provide whatever support we can muster. Specifically, to me, that means continuing our steadfast support of Eclipse Aviation. I am not an investor in Eclipse, so I have nothing to gain directly from their success. However, there are a great many New Mexicans who have voted with their dollars and invested in the Eclipse vision of a new generation of air travel. Eclipse has a great many challenges still to overcome in an industry where you can count the survivors on one hand but you need a calculator to keep track of the failures. Not only does Eclipse have a great team, and strong prospects for success, but more importantly to me, it represents our nearest and best chance for an economy-transforming company. Just as Dell Computers redefined the local economy in Austin, Texas (where they still employ over 7,000 people today), Eclipse can bring wealth, jobs and an entirely new entrepreneurial outlook to Albuquerque. It is not the only deal that we should back; it is not the only hope for New Mexico, but it has the potential, it has the vision, and it belongs to us, now. We must support them.
Finally, and most importantly, I would challenge each of you in whatever way possible to become angel investors, and to begin to participate in private equity. I mentioned earlier that angels do over 10 times as many deals as venture capitalists. Here in New Mexico there is a dedicated, but too small, group of high net-worth individuals who make private equity investments. We need more angel investing: $25,000 or $50,000 increments represent the critical seed corn that operating companies need to first get off of the ground. More importantly these nascent entrepreneurs need the advice and support of established business professionals. Do not misunderstand me. I am not suggesting that you break the bank or cash in your retirement, but for those of you who can allocate a few percent of your net worth and have $100,000 or more to invest in a few companies – do! You might not think you know where to find deals – you do. They are down the street or here in the room; people with great ideas in need of capital. You might not think you know how to evaluate them – you do. The process will not be as extensive as with a venture capital firm, but you can tell pretty quickly if someone knows her stuff, and will be a good choice to develop a business and build the value of your investment. You might not have the technology background to understand all the bells and whistles – that’s OK. You can get experts to help with the technology, and besides, technology is only a small portion of what makes a business successful, even a technology business. You might be worried that all your deals will not be successful – they won’t. You have to be willing to invest in at least a couple of deals in order to spread out your risk. We will do our part as VCs, but we must work together to grow private equity in New Mexico. It is going to be hard, but if we can continue to increase the number of New Mexicans investing in New Mexico, and adding the other types of value; advice, support & contacts, then we will soon see the same growth as other communities in our region. We will be building the core operating companies that will increase our tax base, fill our real estate, use our retail, and which will ultimately create more opportunity – and wealth – for us, for our friends and for our families.
