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					         NLGA 2008
Executive Committee Meeting

         Santa Fe, NM

        December 2008

                        New Mexico Small Business
                        Investment Corporation
State of New Mexico Overview


              • Manage $15.4 billion in public funds
    State
 Investment   • 9 members from government and private
   Counsel      industry; chaired by the Governor



              • NM Private Equity Investment Program
 Investment   • NMSIC Co-Investment Fund
  Programs    • New Mexico SBIC
              • New Mexico Film Investment Program

                                                       2
Private Equity Investment Program

• In-state Private Equity Investment Program established
  in 1994 to direct investment monies towards companies
  based in New Mexico

• $400 million total program size
  – 26 total private equity funds receiving commitment


• Side letter requirements are a key component of the
  Program’s economic development success

                                                         3
Expand Venture Capital Activity




                           Direct Investment Program Initiated and
                      Private Equity Fund Program Allocation Expanded
  Source: PWC MoneyTree and Sun Mountain databases

                                                                        4
Raising the Venture Profile

 Mark Heesen, president of the National Venture Capital
 Assn., says, New Mexico's experience shows that a little
 bit of nurturing from the public sector can yield a
 powerful return.
 BusinessWeek, April 16,2008

 In New Mexico, for instance, venture capitalists put $128
 million into 21 companies in 2007, the survey found.
 Compared to the investments made a decade ago, that’s
 an increase of 600 percent in the number of companies
 and of 375 percent in the amount of funding.
 The New York Times, March 11,2008


                                                             5
Impacting the State Economy

      Investment Multiplier




                              6
Direct Co-Investment Funds

• Co-investment funds established to invest directly in
  qualified New Mexico companies
  – First fund established in 2004 with $46 million
  – Second fund established in 2007 with $90 million

• Structural features like co-investment and principle
  place of business requirements are key components
  of the Fund’s economic development success

• Top quartile financial performance per Cambridge
  Associates
                                                          7
Top Tier Co-Investors

• Proven Access to Top Tier Co-Investors*
  – Partnerships include venture capital firms, private equity
    firms, strategic investors, and hedge funds




   *Funds co-invested with by Sun Mountain in past 18 months
                                                               8
Attracting Outside Capital

• NMSIC Co-Investment Fund Investment Multiplier




  * Includes only financings directly participated in by the NMSIC Co-Investment Fund
                                                                                   9
Expanding High Wage Employment
• NMSIC Co-Investment Fund portfolio companies make
  a meaningful impact on New Mexico employment
  – Over 1300 employees with
  – Over $100 million in wages paid year to date in 2008
                            Wage Comparison
                                              $55,485
                       $34,484



                    NM Average Fund Portfolio Company
                     Wage 1        Average Wage
     1   Source: U.S. Department of Commerce, Bureau of Economic Analysis
                                                                            10
Support Systems in the State

• New Mexico Venture Capital Association
  – 16 local and regional venture capital firms

• Coronado Ventures Forum
  – Network for local investors and entrepreneurs

• New Mexico Angels
  – Organization for qualified angel investors

• Technology Ventures Corporation
  – Local technology commercialization group
                                                    11
Creation of New Mexico SBIC

• Began in 2001 with $10MM
  – Expanded over the subsequent years to $47MM

• Mandate to invest in the equity or debt of New
  Mexico small business as Fiduciary

• Program goal to enhance strength and viability of
  businesses and communities

• 7 Member Board appointed by Governor

• No direct investments – Only through partnerships
                                                      12
Create Local Delivery Systems
of Capital
• Lending Partners
  – ACCION NM (Early 2004) – The Loan Fund
      • $5,000,000 availability      • $5,500,000 availability
      • Over 1,300 loans,            • Over 200 loans, average
        average loan $8,000            size $24,000
      • Loans in every               • Statewide, minority and
        community in state             non-profit focus
                                  – WESST Corp
                                     • $375,000 availability
                                     • 15 loans totaling $125,000
                                     • Primarily Technical
                                       assistance/incubator
                                                             13
Create New Mexico Domiciled Funds

• Pre Seed Technology       • Traditional business
  funds                       growth funds
  – Flywheel Ventures         – NM Growth Fund I
      • 4 investments             • 5 investments
  – Verge Fund I & I.5        – NM Growth Fund 2
      • 15 investments            • 4 investments
• Founder-like Technology     – NM Comm. Capital
  Incubator fund                  • 7 investments
  – New Mexico Gap Fund     • Mezzanine/growth fund
      • 6 investments         – NM Mezzanine Capital
                                  • Just closed
                                                       14
Business Financial Education

• Created                       • Key presentations on
  www.financenewmexico.org capital at all Lt. Gov
   – Instantaneous, broadly       Business Tour over last
     disseminated, high quality   4 years
    business and capital          – Rural focus
    content                       – Over 30 communities
  – 30 newspapers
  – 1,000 blog broadcast
                               • One on One meetings
      • All legislators
                                 with businesses
  – 55 article archive
  – Professionally written
                                                       15
Preliminary Results – 1

• Seven equity funds now headquartered in New Mexico
  with NMSBIC commitments of $35 million
  – Total fund capital managed by funds, $90 million
  – Two second generation funds in the wings

• Equity Investments in 35 NM businesses
  – Smallest: $50,000; Largest: $3.4 million
  – ½ of companies at revenue stage
  – 4 to 1 multiplier from outside capital
  – 5 companies written off/down
  – No exits to date
                                                       16
Preliminary Results – 2

• Approximately $20 million lent to over 1,500 in every
  community by alternative lending partners

• Loan losses total $650,000 over 4 year life of lending
  program
  – Annual loan loss rate of 1.5%




                                                          17
Lessons Learned – 1

• Statewide mandate, particularly for equity, very difficult

• Collaborations and partnerships critical

• Must partner with professional capital investment
  specialist/delivery systems

• Must take long-term approach, NMSBIC really made
  first investments in late 2003, this is a marathon, not a
  sprint
                                                         18
Lessons Learned – 2

• Government must be a     • CEO, CEO, CEO
  committed partner        • Pro-forma financials
  – Economic Dev. Dept.      rarely are on target
  – NM Finance Authority   • Expect some losses in
  – NM SIC                   portfolios
  – Administration and     • Reasonable
    Legislators              expectations from all
  – State Incubators         stakeholders
  – Small Business
    Development Centers
  – SBA USDA
                                                 19
Please Contact Us

• Sun Mountain Capital
  – Brian Birk
      • 505-954-5420
      • brian.birk@sunmountaincapital.com


• New Mexico SBIC
  – Paul Goblet
      • 505-670-1329
      • thegoblets@aol.com


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