State pumps $40M into venture investments - Albuquerque Journal

State pumps $40M into venture investments

The New Mexico State Investment Council unanimously approved another $40 million from the Severance Tax Permanent Fund Tuesday for venture investments in local startup companies.

The money will help replenish the SIC’s Co-Investment Fund, which makes direct investments in startups in partnership with venture capital firms. The new money raises SIC cash commitments to the fund — managed by Sun Mountain Capital in Santa Fe — to about $190 million to date.

It’s the first injection of new cash since 2014, when the SIC pumped $40 million into the fund. At that time, the council agreed to consider new contributions every three years to keep investments flowing, said Greg Kulka, the SIC’s director of private equity.

“It’s sort of a refresher,” Kulka told the council. “The fund has become an important part of the ecosystem in New Mexico that has helped attract more outside capital to the state.”

Since its launch in 2007, the fund has made nearly $116 million in direct investments in about 20 local startup companies, according to Sun Mountain Capital. That, in turn, has helped generate more than $1 billion in additional investment from other venture funds, or nearly $9 for every $1 in SIC commitments.

By law, the SIC is allowed to invest up to 9 percent of the Severance Tax Permanent Fund into the New Mexico Private Equity Program, although the council has set a lower target of just 5 percent. That includes investments in the Co-Investment Fund, plus commitments to independent venture firms that agree to pump money into local companies.

In recent years, the SIC has committed $27.5 million to three independent funds, including $7.5 million approved in September for Trinity Investment Capital, which provides debt-based funding for venture-backed firms seeking growth capital. That makes a new type of financing available to local startups, which often have difficulty accessing traditional credit.

“Funds like Trinity are common in places like the Silicon Valley, but they’ve been untapped until now in New Mexico,” Wollmann said. “It’s another reflection that the ecosystem here is growing more robust.”

A steady stream of new, quality startup companies is emerging in New Mexico, spurring more investor interest, said Sun Mountain managing partner Brian Birk.

“We’ve seen a surge of new, interesting companies coming out of local business accelerators, incubators, and tech-transfer programs,” Birk said.

Meanwhile, Sun Mountain is now evaluating the first potential investments from a new $20 million “fund of funds” that the SIC approved early this year. That fund, which includes $10 million from the state and $5 million each from the federal government and private investors, will provide money for new “micro funds” around the state that invest in local startups.

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