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Sun Mountain Capital fills important role in the state’s VC environment

Brian Birk and Sally Corning

“For a state with fewer than three million people, there’s an extraordinary amount of entrepreneurial activity that exists here,” says Sally Corning about New Mexico. Corning, a partner, and Brian Birk, the managing partner of Sun Mountain Capital spoke to us recently at their Santa Fe office.

Both Birk and Corning bring impressive resumes to Sun Mountain, a venture capital firm headquartered in New Mexico. Each has years of experience in private equity, and the evaluation of investment opportunities. Birk co-funded Sun Mountain and has over 20 years of experience as a private equity investor and as an entrepreneur, founding and managing start-up companies. Corning has worked in investment banking at several Wall Street firms including Morgan Stanley and Credit Suisse First Boston, and led the evaluation of numerous companies and fund sponsors.

Although both could be working elsewhere, they’ve chosen to make Santa Fe their home. They are actually among the minority, as most advisors to the State Investment Council are based out of state.

n New Mexico, Sun Mountain wears two hats: One is as an advisor to the New Mexico Private Equity Investment program (NM PEIP), where it evaluates venture capital funds on behalf of the NM PEIP. Sun Mountain is also a direct a co-investor in New Mexico-based companies.

New Mexico Private Equity Investment Program

NM PEIP invests monies from the State’s Severance Tax Permanent Fund in private equity funds which then invest in New Mexico companies. The program was enacted by Governor Johnson in 1993 as he and others realized that although there were a lot of technologies and companies that had their start in New Mexico, they often moved to California, Texas, Colorado or other states because there was no local capital base to support them.

Governors Richardson and Martinez have continued the program, recognizing that to bring growth to the state, it needs a more diversified economy and a way to leverage the research and resources that already exist in the state’s national laboratories and universities.

The NM PEIP program is continuing to help nurture companies in the state and support them with capital. Results from a 2010 survey of companies helped by NM PEIP funding showed that almost 95% of the companies participating would have either moved from New Mexico or been located elsewhere if not for the NM PEIP funding they received.

“Several other states have adopted similar state investment programs due to the success that has been seen in New Mexico,” says Birk. Corning adds that the NM PEIP is an important program to the business ecosystem in New Mexico, without which successful companies such as nanoMR, Lumidigm, and Aspen Avionics would not have gotten off the ground.

A bridge between NM capital and other states’ VC firms

On the co-investment side, Sun Mountain has been instrumental in helping bring capital to the state through larger investment rounds for growing companies. This is where their out-of-state experience and networks have been vital.

Sun Mountain Capital fills an intermediate role that is complementary to the other funds in the state that may only be able to provide seed and startup funding. Since New Mexico is still lacking larger private equity general partnerships Sun Mountain has reached out to out-of-state funds that may have no experience or knowledge of New Mexico companies, helping local companies get larger rounds of financing as they become successful and their funding needs expand beyond the intermediate stage.

Leveraging their relationships and credibility with firms in other parts of the country, Sun Mountain acts as a bridge between New Mexico investment and out-of-state capital. Birk, Corning and other Sun Mountain partners know the funds outside New Mexico from their advisory work, so they’re already familiar with which sectors particular firms invest in and when an investment opportunity will be a good fit. For funds with no track record of investing in New Mexico, the connection with Sun Mountain is very important.

It’s not just reaching out to their network, but also being able to tell them that the New Mexico companies they’re recommending are ones that Sun Mountain believes in and has invested in. “We can say we’ve made an investment in this already, and we think you ought to look into this company,” Corning says. “This brings credibility.”

Some New Mexico VC success stories

The NM PEIP program is instrumental in the growth of New Mexico companies, but as they grow, they often need to tap capital outside of New Mexico to succeed.

When nanoMR required a large VC round, Sun Mountain was able to reach out to their network and help raise a $13 million investment round led by two funds out of Boston. This was the first time those Boston firms had invested in a New Mexico company.

“Aspen Avionics also received funding from the largest investor group out of Silicon Valley, the Granite Group, as a result of their familiarity with us,” Birk says.

Corning says, “We really got in on the ground floor of co-investments like nanoMR, back when they needed $1 million or less, and now those companies are raising $20 or $30 million at a time. It’s very gratifying to see that kind of growth in companies we helped fund at their start.”

Both partners agree that while it’s important that they have chosen Santa Fe as a place to live, it’s bringing their experience and networks from larger cities to New Mexico that has brought the biggest impact in outside dollars moving into the state.