New Mexico Revisited

I talked with Paul Ahlstrom of vSpring Capital yesterday. His firm has offices in Los Alamos and Albuquerque, so I asked him about the New Mexico VC scene.

“With over $4 billion a year in R&D investment going into this region, you can’t ignore New Mexico,” he says.

“I thought, ‘how could you pour several billion dollars a year into the area and not get any significant exits?’” Ahlstrom says. So he and his wife moved to Los Alamos, N.M. and spent a year there. “I was probably the dumbest guy in the town, the only one without a PhD,” Ahlstrom says.

Ahlstrom found two things. First, the area didn’t have the same entrepreneurial drive. “There wasn’t a strong interest in commercialization. The labs weren’t being measured on the number of patents they filed.”

Second, the area didn’t have a strong, informal network of trusted investors and businessmen. “You need to connect that with early-stage capital and you have to have them there for a significant period of time to get things off the ground,” Ahlstrom says.

These two factors make the state a fertile ground for early stage investors. Ahlstrom attributes some of his firm’s success—its first fund, a vintage 2000 vehicle, returned 15.4 percent—to pursuing investments in New Mexico and Utah and avoiding the hype cycles of Silicon Valley.

“We’ve been looking for these brave new world technologies coming out of New Mexico and funded four so far, it’s earlier stage but the technologies are very different from what you might find in California.”

Ahlstrom points to VeraLight, a diabetes tester that uses fluorescence spectroscopy to figure out if a patient is developing diabetes. The technology, which is non-invasive, can be more accurate than drawing blood.

Getting a startup going in New Mexico just requires heavier lifting, Ahlstrom says.