Len Rand, Guest Columnist, New Mexico Business Weekly

When people think of venture capital, New Mexico is not necessarily the first region that comes to mind. The San Francisco Bay Area/Silicon Valley region is by far the most notorious community of technology investors.

Austin and San Antonio have active venture circles. And there's always Boston.

The fact is, New Mexico is a small market and the number of firms in the region managing more than $20 million in funds is but a handful. While the funds are on the smaller side, New Mexico has the key ingredients required to develop a healthy venture community that can support the state's growing cluster of technology-based businesses.

In fact, by developing strategic partnerships with outside venture capital firms, the local firms can gain access to the large pods of capital required to finance startups from the early stages through maturity -- and there are numerous reasons why an outside VC would invest in New Mexico.

First, there is some interesting research happening in New Mexico. In fact, the research labs are the pulse of the region, with Sandia National Laboratories and Los Alamos National Laboratory playing key roles in commercializing a number of differentiated technologies developed in the labs, including those in areas like security, material science and semiconductor processes.

The labs identify technologies that can serve a commercial purpose as well as work with entrepreneurs to start companies around those technologies. Both labs have active entrepreneurial leave and technology transfer programs that encourage researchers to enter the private sector to stimulate entrepreneurial growth.

The private sector also plays a role in New Mexico's development as a technology region. Once the labs have identified technologies and entrepreneurs are in place, Lockheed Martin's Technology Ventures Corporation helps to package new ventures for presentation to investors.

Local technology companies like Intel Corporation also generate a skilled pool of technology and managerial professionals who can help lead new ventures. Private sector growth will only encourage the proliferation of technology in the region. Still, there are a few challenges to developing the region, and this is where I believe outside investors can play a crucial role.

As the number of startups increases, so will the demand for managers who can build sustainable businesses. This demand will likely exceed the supply of good managers available in the private sector. Local firms can leverage their partnerships with firms in regions like the Bay Area and Austin for access to managerial executives who are willing to relocate for the higher quality of life and lower cost of living.

Growth also will increase demand for service providers, and outside investors bring contacts in law and accounting that specialize in working with technology startups and can help to develop a support infrastructure for the evolving region.

Finally, investors from other regions have the senior level contacts within leading technology companies, startups and other venture firms to facilitate introductions that can lead to new sales channels, strategic partnerships, follow-on financing, and M&A opportunities. Developing this secondary infrastructure of services, support and influential networks is as essential to growing a vibrant technology cluster as finding the employees and managers to run it. A wise VC will see New Mexico as a region of opportunity and will embrace these challenges.

There are other advantages to investing in the New Mexico region that will attract outside VCs who want to play in this fertile ground. Competition for deals in San Francisco, Boston, and other high-density venture communities can be fierce. New Mexico presents an under-developed community with a smaller number of venture capitalists whose approach to investing is both cooperative and inviting. And the region presents opportunities for outside VCs to partner and develop synergistic investment strategies that stimulate innovation and catalyze growth.

The state of New Mexico has been instrumental in making the State Investment Council a local support structure for early venture capital investment that has helped the region blossom into a viable market. The innovation and commercialization of new applications that create new technology-oriented companies holds the promise of generating higher paying jobs that will, in turn, generate a higher quality of life.

The work of the public and private sectors, combined, has put New Mexico on the map as an emerging center for innovation and entrepreneurship.

As with any new venture or growing development, there is a lot of work to do if we want to build the New Mexico Technology Cluster into a world-class community that can prosper into the next decade. I encourage the local VCs to develop the kind of synergistic partnerships with peers in other regions that will support the transformation of New Mexico into a leading technology community.

A good outside partner, one who truly takes interest in the region and is willing to commit to the effort, will bring with him a set of professional contacts key to building new companies and developing a secondary infrastructure. In addition, he will bring the experience and financial support required to develop sustainable businesses.

I encourage peers from outside New Mexico to take a serious look at the technology being developed within the state and find creative ways in which to partner with this fertile local venture community.

Len Rand, a managing director at San Francisco-based venture capital firmGranite Ventures, can be reached at 415-591-7700.

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© 2004 American City Business Journals Inc.