State Investment Council earmarks $50M for new Roadrunner Venture Studios fund

The New Mexico State Investment Council is betting on Roadrunner Venture Studios, the startup incubator based in Albuquerque, with millions of dollars committed to the company’s efforts since its founding a year ago.

At an Aug. 27 meeting, the SIC restructured a $100 million commitment made in 2022 to America’s Frontier Fund — originally, about $10 million of that money went to Roadrunner to get the studio started — to help bolster the amount of cash available for Roadrunner to invest in the company’s it incubates.

In restructuring that investment, Roadrunner now has $50 million to invest back into the company’s operations, said CEO and cofounder Adam Hammer, and for its new investment fund called Roadrunner Fund I. That investment fund will help Roadrunner’s companies — it has a portfolio that includes Fab.AI, Hydrosonics and Inaedis — get access to capital earlier in the process, Hammer said.

“The way I put it is, we’re investing in the engine, and we’re investing in the outputs of that engine as well,” Hammer told the Journal. “Really, it’s a seed-structured fund.”

To put it more clearly, the companies Roadrunner is incubating out of New Mexico get access to advisers, product roadmapping, human resources and recruiting, legal services, and lab and office space.

With the commitment from the SIC to Roadrunner in the restructuring, those companies will now have access to pre-seed and seed investments from the studio that will allow it to “be supportive of all those companies from ideation, but also through more funding rounds for a longer period of time,” Hammer said.

The money for Roadrunner, said Chris Cassidy, director of private equity with the State Investment Council, comes from the state’s Severance Tax Permanent Fund — a $9 billion pot of money.

Cassidy and his team help manage about 9% of that money for a venture capital program “to essentially facilitate tech transfer and commercialization now to the national laboratories, as well as the state’s universities and other places here in New Mexico,” Cassidy said.

“They are investments; they’re not grants,” Cassidy said. “We are seeking a double bottom line where we have financial returns and also job and industry creation.”

For the SIC, the investment in Roadrunner fits in line with what it is trying to do in building up companies out of the labs and public universities, said Cassidy.

“We’re trying to match the world-class scientific talent we have with world-class venture capitalists/company builders that can help them build the companies because this is really hard,” Cassidy said. “The idea of leaving the lab and building a business is not easy, and so partnering with groups that know what they’re doing, or can help the best, that’s what we’re trying to achieve in this program.”

America’s Frontier Fund, which backed Roadrunner’s founding in 2023, is also using the $50 million in restructured money to help bolster some of the startups coming out of the Albuquerque-based studio, though at later stages in an investment fund called Frontier Fund Alpha I.

It’s what Cassidy calls an “opportunity fund for companies in the Roadrunner ecosystem at the late stage or series B,” he told the SIC last month.

The original commitment of $100 million to America’s Frontier Fund, now restructured, comes as it has worked with the U.S. Small Business Administration and the U.S. Department of Defense on joining a new program that would provide them “non-dilutive ... funding,” Cassidy told the Journal.

He said restructuring the commitment to America’s Frontier Fund was in the works as AFF was in line to get matching funds from the SBA.

“Given we had the existing relationship, it was a discussion about the best way to structure it with the SBA rules, (which) do create some complexity,” Cassidy said. “The SBA has created some rules around follow-on funding that could either slow down or restrict, and we didn’t want the companies to be subject to that.”