Veteran investors say stagnation in venture activity could pose a major problem for emerging, grass-roots initiatives in
To succeed, startups from those programs will need access to a lot more venture capital -- particularly in the early stages of development -- than is currently available in the local market.
Expectations will rise
"As these initiatives gain force, the startups that emerge will need capital to grow," said
"Today, there are already some very active incubators in
Local venture activity only began to build significantly in
That attracted many venture capitalists to
But after the economy tanked, local venture investment plummeted to just
In contrast, while the VC industry nationally also contracted dramatically during the recession, investment in places like
Last year, total investments nationwide reached
U.S. bouncing back
"Other places bounced back because they already had a big base of equity," said
VC firms nationwide generally have retracted to their traditional bastions, said
"Since the recession, it's become much more geographic in nature on the coasts and in places like
In addition, a hiatus in new SIC commitments to venture funds from late 2008 to 2012 contributed to the industry decline here, as did a decision by the
Both agencies are authorized to commit capital from the severance tax permanent fund to venture activity. But while the SIC began investing again in venture funds last year, the SBIC has said it will avoid such commitments for the foreseeable future.
The capital crunch has made it much more difficult for local startups to get funding. That's particularly true for new companies that need smaller amounts of money to further develop their products and businesses to the point where out-of-state investors are willing to step in with larger rounds of investment.
Later stage funding
Early stage capital has contracted because most venture firms are pumping larger follow-on investments into existing companies to ensure their success, rather than spend scarce dollars on new startups.
"There's just not enough proactive investors in the market now looking to invest in the next crop of startup companies," Blivin said.
The problem has been offset somewhat through seed funding from the New Mexico Angels, a group of about 70 high-wealth individuals who pool their resources. That group has committed about
Other seed sources also are available, such as
But such seed investments generally range from tens of thousands to a few hundred thousand dollars. Early stage investments of perhaps
'A real challenge'
"It's a real challenge for companies seeking money in that range," Chavez said.
Most have to go out of state to get funding. Many have succeeded, but only top-notch startups with the most-promising products usually get funded, and many feel pressured to relocate to other states.
Filling the early stage gap will be critical for projects like Innovate ABQ, said UNM Chief Economic Development Officer
"We're building a pretty strong pipeline of local startups," she said. "The question is whether we can attract the early stage funding to capitalize on all those opportunities."
Nevertheless, things could soon get better. For one thing, Innovate ABQ, the ABQid initiative and
"We're building a real buzz," Oppedahl said.
In addition, some homegrown, venture-backed startups were acquired by big firms for substantial sums since last year. That's a huge magnet for national investors, because it shows
Such exits include the sale of biometric identification firm
Moreover, as venture investors look closer at
"Venture capitalists will go where there is good deal flow," Birk said. "With the opportunities now emerging in
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