New Mexico Access to Capital Report

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1 New Mexico Access to Capital Report This document is designed to assist the New Mexico small business community in their pursuit of capital. There are many options to consider when an entrepreneur is seeking access to capital. This tool is designed to assist entrepreneurs to be successful in this area. This tool will help the entrepreneur in three primary ways: 1. To understand the various stages in the life cycle of a business and what types of funding or capital are generally available given the maturity of the business; 2. Determining the appropriate kind of capital they require for their business; and 3. Identifying local sources for that specific type of capital. Numerous professionals from the local private equity community, alternative lender, accelerator, incubator, co-working space and banking sectors were involved in the creation of this tool. This environment is constantly growing and changing. Therefore, you are strongly encouraged to use this information as a starting point to do your own research and to make the proper connections. Step 1: Determining the stage of the business in the life cycle. During the growth of a small business, a company will go through the stages of the business life cycle and will encounter different challenges that require different financing sources. The primary stages are as follows: development/seed stage, startup, growth, expansion & maturity. As the business matures, the strategies will also change from market penetration, to business development, to retaining market share. Obtaining the right funding partners and/or early customers is critical for the success of the business. Each company has a unique set of challenges that will drive the amount of time they will be in a given stage and the type of financing that is best for the particular business concern. You are encouraged to approach these issues with care and to seek guidance from the support organizations in your community. Step 2: Setting funding expectations and articulating your value Proposition. If your company is at a very nascent stage you may have limited options for funding sources. Furthermore, if your company does not fit into specific criteria, such as future growth potential, an entire class of capital may not be available to you. Regardless of growth potential and stage, any investor or lender will expect you to make a business case for your company. Traditional businesses invested in a business plan; there are numerous resources to assist you, such as the Small Business Development Centers and SCORE, located around New Mexico. Most innovators have moved away from the business plan approach in favor of the Lean Startup type approach. The Lean Startup consists of these three parts: 1. The Business Model Canvas - to frame hypotheses 2. Customer Development/Customer Discovery- to test those hypotheses in front of customers 3. Agile Engineering - to build Minimum Viable Products to maximize learning & rapid iterations

2 Business life cycle & funding Proof of Concept/R&D Feasibility Product Development Introduction Expansion Ready for IPO IPO VC: Round 1/A VC: Round 2/B VC: Round 3/C Mezzanine Early Stage VC: Seed Capital Angels, FFF Gov't Funding: Contracts & Grants Micro /Alternative Lenders Step 3. Understand the difference between the various types of funding. Thanks to some innovation in the field to meet the needs of the entrepreneurial community, there are more financing options now than ever. The appropriate source of capital for your company depends upon a number of factors, which is why employing the services of a qualified financial manager is recommended, even for a young company. It also helps to fully understand why you need capital. Sometimes this is not as obvious as it may first seem. Having a good business strategy will prevent you from early missteps. Angel investors invest in early-stage or startup companies in exchange for an ownership stake in the company. The best angels have strategic experience in the field of technology, so they can benefit the company from a strategy, development, growth and access to later stage investment perspective. Angels New Mexico Angels John Chavez (505) jchavez@nmangels.com nmangels.com

3 Venture capital (VC) is a type of private equity, a form of financing that is provided by firms or funds to small, early-stage, emerging firms that are deemed to have high growth potential, or which have demonstrated high growth (in terms of number of employees, annual revenue, or both). Venture capital firms or funds invest in these early-stage companies in exchange for equity an ownership stake in the companies they invest in. Venture capitalists take on the risk of financing risky start-ups in the hopes that some of the firms they support will become successful. The start-ups are usually based on an innovative technology or business model and they are usually from the high technology industries, such as information technology (IT), social media or biotechnology. Private Equity: Venture Capital Firm in New Mexico Stage Firm Electronics Food & Ag Life Science Healthcare Optics Other Power & Energy Security Software Telecom/IT Pre-Seed Seed Development Expansion Growth ABQid Fund I, L.P. ARCH Ventures Camino Real Capital Partners, LLC Cottonwood Technology Fund Epic Ventures Flywheel Ventures International Venture Fund New Mexico Community Capital Phoenix Venture Partners Psilos Group Verge Fund Private Equity: Venture Capital POC List Firm Contact Contact Phone Contact Website NM HQ ABQid Fund I, L.P. John McDermott john.mcdermott@ @icloud.com abqid.com X ARCH Ventures Tom Brennan (505) tbrennan@archventure.com archventure.com Camino Real Capital Partners, LLC Lucrece Borrego (505) lborrego@trnco.net caminorealcap.com X Cottonwood Technology Fund Dave Blivin (505) dave@cottonwoodtechnologyfund.com cottonwoodtechnologyfund.com X Epic Ventures Katie Szczepaniak Rice (505) katie@epicvc.com epicvc.com Flywheel Ventures Trevor Loy (505) trevor@flywheelventures.com flywheelventures.com X International Venture Fund Richard Harding (505) kanrich@ix.netcom.com invencor.com New Mexico Community Capital Michael Schafer (505) michael@nmccap.com nmccap.com X Phoenix Venture Partners Zach Jonasson (650) Phoenix-vp.com Psilos Group Verge Fund Tom Stephenson (505) tstephenson@verge.com Vergefund.com X Pending or Showing Interest in NM Arrowhead Innovation Fund Estela Hernandez (575) estelah@nmsu.edu arrowheadcenter.nmsu.edu/aif/ Perpetua Partners Steve Lucero (650) Steven.lucero@perpetuapartners.com pertetuapartners.com Signal Peak Ventures spv.com Tallwave Capital Nathan Mortensen info@tallwavecapital.com tallwavecapital.com Tullis Health Investors tullisfunds.com Wasabi Ventures Jeff Abbott (520) jeff@wasabiventures.com Wasabiventures.com

4 Sun Mountain Capital Brian Birk (505) sunmountaincapital.com Sun Mountain Capital is a private equity and venture capital investment firm that provides fund investment advisory services for public and private entities and manages direct investment funds. Their investment focus is not on specific industry sectors or in a particular stage in the investment cycle. Rather, they are on indigenous businesses to the State and are diversified by both stage and sector. Sun Mountain Capital will manage the newly created New Mexico Catalyst Fund, LP ("Catalyst Fund") which is a $20 million fund-of-funds investment vehicle. The Catalyst Fund will invest in emerging and existing venture capital funds in New Mexico (collectively the "portfolio Funds"). These Portfolio Funds will focus on making seed and early stage venture capital investments in startup companies in the State of New Mexico. Other Resources Coronado Ventures Forum Gary Seawright (505) info@cvf-nm.org cvf-nm.org Start-Up Factory I & II John Chavez (505) jchavez@nmangels.com NMSUF.com NM Small Business Investment Corp. Russ Cummins (505) russ.cummins@nmsbic.org NMSBIC.org NM State Investment Council (505) sic.state.nm.us Nm Tech Council Nyika Allen (505) nyika@nmtechcouncil.org nmtechcouncil.org Debt financing takes many forms and can be extremely useful in a variety of applications. Banks and non-bank lenders may provide most of the services ( facilities ) you might need; however, there are other entities, such as micro-lenders who provide similar services, as well as technical assistance that are very useful. Locally, ACCIÓN, WESST Corp, and the NM Community Development Loan Fund provide a range of services, as well as debt capital. Debt: Non-Bank Lenders Firm Contact Contact Phone Contact Website ACCION New Mexico Gabriela Marques (505) gmarques@accionnm.org us.accion.org The Loan Fund Leroy Pacheco (505) leroy@loanfund.org loanfund.org WESST Julianna Silva (505) jsilva@wesst.org wesst.org Alternative financing options: Crowdfunding and Factoring/invoice advances are types of alternative financing. Crowdfunding on sites such as Kickstarter and Indiegogo can give a boost to financing a small business. These sites allow businesses to pool small investments from a number of investors instead of having to look for a single investment. Factoring/invoice advances is a process where a service provider (like Fundbox) will front you the money on invoices that have been billed out, which you then pay back once the customer has settled the bill. This way, the business can grow by providing the funds necessary to keep it going while waiting for customers to pay for outstanding invoices.

5 Grants & Contracts: Many businesses focused on science & technology and/or early stage research may be able to get grants and contracts from the government. Federal Grants are issued to accomplish a public purpose; advance a national objective; address a public problem or stimulate a particular activity desired by the awarding agency. Grants are generally flexible, allowing latitude to the Principal Investigator. Both are highly competitive environments, but the upside can be beneficial. These benefits include: the small business can retain full data rights to the IP such as under the Small Business Innovation Research (SBIR) program and the funding is non-dilutive to the business. Step 4. Understanding the potential funding sources process. Typically, you don t get many chances to make a first impression. The reference information listed in this document is not meant to enable mass-solicitation of potential investors; rather it should provide you with an efficient way to determine who might be interested in hearing your pitch. The value of research cannot be overstated. Understanding your market, the areas of interest of potential investors and what they have funded in the past will only aid you in your quest. Once again, referral is a powerful ally. The investment community in New Mexico is small and most investors are generally very accessible. One should not approach them casually; however, because it is such a small community, you must be impressive first time around. Even if your company isn t something they are interested in funding, the quality of your pitch might inspire them to refer you to someone who might be interested.

6 Resource List & Citations. Abbott Jeff Wasabi Ventures (520) Adkins Lisa FatPipe (505) Ashley Charles Cultivating Coders (505) Benak Benak Asset Performance Technologies, Inc. (505) Birk Brian Sun Mountain Capital (505) Blivin Dave Cottonwood Technology Fund (505) Borrego Lucrece Camino Real Capital Partners, LLC (505) Bradshaw Eakes Holly Finance New Mexico (505) Chavez John New Mexico Angels (505) Chavez Lawrence Lotus Leaf Coatings (505) Cummins Russ NM Small Business Investment Corp (505) Haines Yatskowitz Anne ACCION New Mexico (505) Hansen Kathy NMSU Arrowhead Center (575) Harding Richard International Venture Fund (505) Hernandez Estela Arrowhead Innovation Fund (575) Hunter Todd Technology Ventures Corporation (505) Johnson Webb Pajarito Powder & ABQid (505) Johnson Debbie CNM (505) Jonasson Zach Phoenix Venture Partners (650) Kathleen Gardenswartz Sandia National Laboratories (505) Kuegler TK Wasabi Ventures (603) Kuuttila Lisa STC.UNM (505) Loy Trevor Flywheel Ventures (505) Lucero Steve Perpetua Partners (650) Mayfield Dan Carroll Strategies (505) Noonan Agnes WESST (505) Pachecho Leroy NM Community Development Loan Fund (505) Romero Aaron Sandia Federal Credit Union (505) Rose Stuart The BioScience Center (714) Salazar Andrew Technology Ventures Corporation (505) Schafer Michael New Mexico Community Capital (505) Sinsabaugh Jennifer MEP (505) Sommer Francine Village Ventures (505) Stephenson Tom Verge, LLC / Pajarito Powder (505) tstephenson@verge.com Szczepaniak Rice Katie Epic Ventures (505) katie@epicvc.com Talbert Lonnie Southwest Capital Bank (505) lctalbert@southwestcapital.com This New Mexico Access to Capital Report was derived from many resources in the community and from various websites & other public domain data. That being said, we want to give credit to the list of resources herein. The intended use of this information is for entrepreneurs throughout the state of New Mexico to use this information as a starting point to guide their paths toward financing solutions. Each business and circumstance is unique and the environment is constantly changing, therefore, this report should not be relied on solely for any business seeking access to capital. Rather, it is intended to be a good starting place for the small business entrepreneurs in our community as they start to explore their funding options.