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New Mexico to funnel more investments to in-state startups

ALBUQUERQUE – New Mexico will be investing more money in state-based businesses and startup companies as it attempts to spur development and diversify the economy.

The State Investment Council voted Tuesday to adopt recommendations that will target more financial commitments from the state’s private equity program to New Mexico and nationally based venture capital firms that are actively investing in the state.

The state program is funded by the severance tax permanent fund, a multibillion-dollar state trust that originates from taxes on oil and mineral extraction.

Gov. Michelle Lujan Grisham, the council’s chair, said by targeting investments in New Mexico’s own backyard, the state can achieve positive returns while creating jobs and new industries.

“Leveraging the significant intellectual and human capital that exists at our national labs, research universities and with entrepreneurs across our state helps to make smarter and more significant investments in New Mexico and accelerates the expansion of our state’s economy,” the first-year governor said in a statement.

The push to build up home-grown companies and funnel more capital toward firms that are investing in New Mexico has been ramping up. Over the past three years, the council added several funds to the state’s investment program.

A 2018 report found that each $1 invested by the program’s funds into a New Mexico-based business attracted about $6 of outside investment and that the companies were having a positive effect on the overall economy through purchases and payroll.

The arts-based entertainment company Meow Wolf is among the companies funded through the program over the years.

Another example is Descartes Labs. The Santa Fe-based startup uses its expertise in high-performance computing and satellite imagery to crunch data on a number of things, including wildfires and methane emissions from oil and natural gas installations around New Mexico.

Before now, the council limited investments in the equity program to 5% of the state’s $5.5 billion severance tax permanent fund, given its historically lower returns and higher risks.

Tuesday’s decision to increase that to 9% – the most allowed under state statute – came after months of analysis.

According to the council, long-term investment performance for the state’s private equity investment program has improved, returning 7.7% annually over the past five years.

The council also voted Tuesday to ask the Legislature to increase the statutory cap for the program to allow up to 11% of the severance tax permanent fund to be invested in-state.

The council since 1993 has invested $360 million indirectly into dozens of New Mexico companies. Over the next year, the council estimates the in-state commitments will range from $75 million to $125 million.