Planting the Seeds for Venture Capital in New Mexico
Dave Durgin recently published a book, "Entrepreneur to Investor the Hard Way," which includes both his personal experiences with high-tech companies and investing in New Mexico, as well as the larger history of the region's business development from the 60's. The creation of Verge is also covered in the last chapters.
The Verge Fund may have only been in existence for 4 years, but its team has very deep roots in both New Mexico and venture capital. Managing general partner Tom Stephenson has been working in VC for 12 years, for example, and general partner Dave Durgin says he has been involved since 1969, when he first spun a company out of Sandia National Laboratories.
All of the 7 team members, including the 6 partners and entrepreneur in residence Paul Short, have long histories in the state, either growing up here like Tom, or working in New Mexico for many years.
When founding partners, Tom, Dave and Ray Radosevich recruited the 3 additional partners to the Verge team, Bill Bice, Ron McPhee and Jim Higdon, they overcame the skeptics who predicted failure for the new enterprise.
"When we started Verge we said we would focus exclusively on investments in New Mexico, but we got a lot of push back from people that thought there weren't enough deals," Tom says. Dave adds, "We overcame a lack of confidence and raised the money, but people said even if you can do that, there's no deal flow."
Today Verge has 13 active investments in the state, with 9 generating significant revenue. The partners see this as an indication that the market opportunity does exist to support their original goals, and they're very gratified by that.
"Verge came together around the idea that the missing opportunity in New Mexico was the ability to do true seed investing," says Tom. Many VC firms invest in early stage companies, but often not as early as the seed stage. Verge focuses further, pinpointing its efforts exclusively on seed stage technology companies based in New Mexico.
Part of the Verge philosophy is to have a very deep level of involvement with their portfolio companies, becoming active in the companies' management.
A Building of Their Own
The Verge Building allows the team to achieve their goals. The remodeled historic building in downtown Albuquerque offers shared resources such as conference rooms, office equipment and a receptionist, a boon for startups. It also allows the Verge team to be close to the 6 portfolio companies that currently choose to take advantage of the incubator-like space.
"I love being able to work with companies and not spend time traveling. The level of interaction is deeper and happens with more regularity," says Verge partner Bill Bice. "There's that natural water cooler effect of being together that's very valuable."
The Evolution of VC in New Mexico
Dave, Tom and the other Verge partners have seen the New Mexico VC environment evolve over the years. The notion that there would be about 35 VC-backed companies in New Mexico would have been almost inconceivable, even as recently as 4 years ago, Tom remarks. He remembers coming back to New Mexico in 1997 to open an office for a Houston-based VC, Murphree Venture Partners, when there were only a couple of VC offices in the state.
The State Investment Council (SIC) and Small Business Investment Corporation (SBIC) are also credited by the Verge partners with helping form the venture industry in New Mexico. The SIC has been a significant player in almost every venture fund that has opened an office in New Mexico. Focusing on investing in underserved areas of equity and alternative lenders, the New Mexico Small Business Investment Corporation (NM SBIC) was Verge's first institutional investor.
The start of the New Mexico Venture Capital Association (NMVCA) in 2004 was also an event that signaled the maturing of the VC environment, and Verge partner Tom Stephenson was on the original board.
Verge Partners Part of New Mexico VC History
Dave has seen a number of milestones in the growth of New Mexico VC, including the creation of Technology Ventures Corporation (TVC), which was a part of Lockheed Martin's winning proposal to manage Sandia in 1993. TVC was started to facilitate the formation of companies based on technology out of the labs.
This marked a sea change in the environment Dave had seen from the 60s to the 80s when he first was involved in tech transfer. He laughs remembering that it was a big breakthrough when he stopped being the only private sector guy at meetings.
Tom gives Verge partners Ray and Dave credit for building some of the infrastructure that made New Mexico venture capital possible, such as helping to develop programs for tech transfer out of the national labs in the mid-80's, being active in angel investing, and forming professional groups like the New Mexico Entrepreneur Association.
"Verge is a homegrown story," Dave says, "a small band of brothers that wouldn't give up."
For more information on Verge and its portfolio companies visit their website at www.vergefund.com.