Council Adds $15 Million On Top of Capital Fund<\/p>\n
Gamblers call it “doubling down” — doubling your bet on the same card.<\/p>\n
State officials may be doing just that.<\/p>\n
The State Investment Council today is expected to approve a plan to invest $15 million directly into a start-up that wants to take over the Philips Semiconductor plant in Albuquerque. In return, the state will become a part-owner.<\/p>\n
The “doubling down” comes from the fact the state also has invested $15 million in a venture capital fund that is one of the private investors in the start-up project, called Mesa Semiconductor.<\/p>\n
In the July 10 announcement of the state’s plans to invest in Mesa, economic development officials said the Anila Fund of Palo Alto, Calif., and other private investors also would put $15 million into the project.<\/p>\n
State officials didn’t mention that the state already had committed to a $15 million investment in Anila. That decision was made in March.<\/p>\n
As a result, the state is enabling a $30 million stake in the new venture.<\/p>\n
“We may make (an investment) directly and one via a fund,” said deputy state investment officer Deborah Gallegos. “There’s not a problem in doing that.”<\/p>\n
Mesa Semiconductor is being formed as a management buyout of the Philips plant, which is scheduled to close by the end of the year. The buyout is expected to save 300 tech jobs.<\/p>\n
The Journal could not confirm whether the Anila Fund was using its $15 million in state money to fund its investment in Mesa Semiconductor.<\/p>\n
Moses Joseph, general manager for Anila, could not be reached for comment.<\/p>\n
A second contact at Anila, New Mexico native Mike Pogue, said he only had a “loose affiliation” with the fund. He said he could not say where Anila was getting its $15 million for the Mesa investment.<\/p>\n
“The idea that the state is taking on the role of a venture capitalist and is trying to find companies and fund them, that’s highly unusual,” said Mark Heesen, president of the National Venture Capital Association in Arlington, Va.<\/p>\n
There are only about 850 venture capital firms in the country because it’s “long and difficult work,” he explained.<\/p>\n
It is also unusual for venture capitalists to invest in a management buyout of a company, he said.<\/p>\n
The good news for companies in New Mexico, Heesen said, is the state appears to be very liberal in its investment decisions.<\/p>\n
State officials said they are recommending funding for three of the 30 companies seriously studied for investment.<\/p>\n
That’s “a high hit rate,” Heesen said.<\/p>\n
“If I were an entrepreneur, I would think I had a pretty good shot (in New Mexico),” Heesen said.<\/p>\n
Funded own deal<\/p>\n
The Mesa deal came through the Economic Development Department, said Greg Kulka, director of private equity investments for the State Investment Council.<\/p>\n
The department was helping Philips management find a way to achieve a buyout of the Albuquerque plant.<\/p>\n
“As we looked at the situation, we thought there was potential there,” Kulka said.<\/p>\n
The Anila Fund was already involved with the management team at the time, he said.<\/p>\n
“We ultimately funded our own deal and negotiated with Philips directly,” Kulka said.<\/p>\n
When the state invests in a venture capital fund, it does not control how the money is invested. The only state requirements are:<\/p>\n
* The fund has a representative in New Mexico.<\/p>\n
* The fund must arrange for the same amount of money to be invested in New Mexico companies.<\/p>\n
The Legislature gave new authority this year to the State Investment Council to invest directly in private companies, as well as through venture capital funds.<\/p>\n
The State Investment Council staff is recommending $29 million be given this month to three start-ups.<\/p>\n
In addition to the $15 million for Mesa, $10 million may go to jet maker Eclipse Aviation in Albuquerque and $4 million to Minneapolis-based tech firm PowerWAN.<\/p>\n
The Anila Fund was instrumental in persuading the state to invest in PowerWAN, which hopes to open a manufacturing operation in New Mexico that will employ 15 people.<\/p>\n
“Anila came to us and said they would be willing to move this company to New Mexico if we would co-invest,” Kulka said. “We looked at their due diligence and performed our own. We concluded there was great potential for return.”<\/p>\n","protected":false},"excerpt":{"rendered":"
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