Venture Funding in N.M. Tumbles


Venture capital investment in New Mexico companies fell by 33 percent last year, reaching its lowest level since the recession in 2009, according to the latest survey by the New Mexico Venture Capital Association, released Tuesday.

Venture firms committed $39.9 million to 22 startups in 2012. That’s down from $60.3 million in 22 companies in 2011.

“2012′s financing total is the lowest – other than in the depths of the recession in 2009 – since the NMVCA began collecting statistics in 2005,” said Sally Corning, an NMVCA board member and a partner in Sun Mountain Capital.

The decline reflects a severe shortage of capital in the venture industry, which has contracted dramatically since the economy tanked in 2008, said Michael Schafer, managing director of New Mexico Community Capital. Since the recession, the number of venture funds operating nationally has dropped by more than a third, and fund raising by venture firms has become much more difficult.

“Last year was the third year in a row that venture capitalists invested more money than they raised,” Schafer told the Journal. “That shows that venture capital as an asset class has fallen a little out of favor, and capital is going elsewhere.”

That’s forcing existing venture-backed companies to do more with less, which could become a problem over time.

“Clearly, companies in New Mexico are managing today with less capital, which has the potential to slow their growth over time and potentially impact their viability,” Schafer said.

It also means new startups will have a harder time finding seed or early stage investments to begin operations, as money left in current venture funds gets earmarked for follow-up investments in existing portfolio firms.

Only one new company got an $800,000 seed investment in all of 2012, according to the NMVCA. Another eight startups shared in $4.4 million in early-stage investments.

All remaining funds went to later-stage financing for existing firms. In fact, just two companies – the medical diagnostics firm Exagen Diagnostics and Aspen Aviation – together accounted for $18.1 million, or 45 percent of all venture capital invested in New Mexico last year.