Home alone and capital impaired in New Mexico.
By Tarby Bryant
I have a great idea and I’ve been working on it for five years at the lab. The government has spent close to $10 million in development and I want to take it out to the public market and to the world. Will you give me $600,000? I am ready to meet my first venture capitalist or even an angel.
This is New Mexico and this was a recent typical request.
In 1996, $10.1 billion dollars of venture capital found its way into entrepreneurial ventures across the U.S. I estimate that three times that amount was provided to our entrepreneurs by angels (private investors) and through strategic alliances with major corporations. Venture capitalists alone in the second quarter of 1996 invested $2.8 billion, according to VentureOne.
In the third quarter 444 entrepreneurial companies received funding, according to Price Waterhouse. Northern California-Silicon Valley and the Boston area got their full share but 70 percent were located outside these two major VC concentrations. Nationally venture investments grew 25 percent in the third quarter from a year earlier.
We are without a reasonable doubt home alone and capital impaired in New Mexico. Other areas of the U.S. are flourishing fields of capital for their entrepreneurs but New Mexico languishes. We need to wake up and smell the capital.
A venture capitalist invests alongside management in a rapidly growing enterprise that has great potential.
Coopers & Lybrand suggests that venture capital companies area the engines of job creation, capitalize breakthrough in technologies and product development, boost American competitiveness and have a profound effect on the American economy.
An angel is a wealthy individual who provides capital to an entrepreneur. They often will co-invest with other angels and even venture capitalists. Angels rarely fly in formation of as a group and like to make their investment decisions themselves. They must like and respect you and have a high level of confidence in your ability.
Our New Mexico banks do not provide equity capital. They expect to make loans, receive regular payments and as agreed, get their principal repaid with interest. They also require collateral in excess of the loan amount, two and often three alternative sources of repayment, and an annual cleanup of your outstanding loans to insure that they are not your equity capital provider.
All banks and bankers are not created equal. Some understand technology and entrepreneurial lending better than others. Los Alamos National Bank gets high marks from me and from Money Magazine, which in 1995 selected it as the “Best Bank in New Mexico.” Sunwest Bank in early 1997 becomes NationsBank and I see that as a positive move because they have a documented history of technology lending in the Research Triangle in North Carolina.
Strategic alliances are the fourth and critical avenue of finance. Why would a big company be interested in my little company? The answer is: Technology and intellectual property, marketing rights, licenses, trade secrets, patents and copyrights, and technology and marketing skills that only you possess.
What would Mr. Big Company offer you besides the capital that you need so desperately? It will become your champion, give you access to consistent and recurring flows of capital, and offer you manufacturing, distribution, marketing and sales expertise that you donÕt have to hire and pay, plant and equipment and the credibility that you lack and need.
New Mexico is the Land of Enchantment and the Land of Entrepreneurs! So whereÕs the beef? Why are we home alone and capital impaired in New Mexico?
1. We have no venture capital funds, public or private, headquarted here.
2. We have no SBIS functioning today.
3. We have limited and impaired understanding of corporate finance among entrepreneurs.
4. Submitted business plans for financing are often poorly crafted.
5. We have very few entrepreneurial dept finance banks.
6. There is little support and understanding of the venture capital process and requirements at the State Investment Council.
7. There are very few entrepreneurial forums that attract real capital providers.
8. There is poor understanding of the role and process of venture capital and angel finance for entrepreneur.
With strong belief that instead of cursing the darkness, we should light a candle, Anasazi Capital Corp., a consortium of private individuals, was created last year to address the unmet capital gaps and stop the migration of our New Mexico entrepreneurs. We want you to find your wings here in New Mexico.
Mr. Bryant is chairman and chief executive officer of Anasazi Capital Corp. in Santa Fe.