State Investment Council invests $100M in high-tech venture fund

Copyright © 2022 Albuquerque Journal

A lot more high-tech innovation from New Mexico’s national labs and research universities could soon head to market, thanks to a $100 million State Investment Council commitment to the newly formed national venture firm America’s Frontier Fund.

The council unanimously approved the new investment Tuesday morning, making it the largest SIC commitment ever to a single venture fund under the SIC’s private equity program, which pumps money from New Mexico’s Severance Tax Permanent Fund into venture firms that invest in local startups.

The SIC is the first institutional entity nationwide to commit money to America’s Frontier Fund, or AFF, which formed this year to pool both public and private funding sources that it will then invest in next-generation, “transformative” innovation that AFF calls “frontier technologies.” That includes microelectronics, artificial intelligence, advanced manufacturing, quantum sciences, advanced communications, new energy and synthetic biology.

The AFF team – made up of nationally renowned venture investors, scientists, technologists and policy leaders – will scope out emerging technology at top-tier research centers to pull breakthrough innovation out of the labs and into the marketplace through newly formed companies, AFF CEO Gilman Louie told the SIC on Tuesday morning.

To do that, the firm will build a new “venture studio” in Albuquerque, plus satellite studios across the state, putting boots on the ground at all of the state’s major research institutions to find promising technology, launch startups to further develop and market those discoveries, and then grow the companies through direct investment and business support services.

In fact, the Albuquerque-based venture studio will serve as a national headquarters for a chain of new AFF venture studios to be built around the country, allowing AFF to unite top-quality national and local-level talent and expertise in a virtual Silicon Valley based out of New Mexico, Louie said.

“(Our vision) is to transform New Mexico into a global leader for frontier technology innovation, making New Mexico the center of a vibrant network of venture studios across the U.S.,” Louie told the council. “… We believe New Mexico should be a global leader in frontier tech because New Mexico is at the center of many of America’s new scientific research discoveries.”

AFF will directly build companies in New Mexico and keep them headquartered here, Louie added.

“New Mexico brings world class research and development talent and engineers, multiple national and government labs with cutting-edge research, best-in-class state and local government programs, and untapped potential for commercialization,” Louie said.

SIC member Harold Lavender, who heads the council investment committee that recommends new private equity commitments to the full council, said AFF stood out as a prime opportunity for New Mexico, given the top, national-level leaders directly involved in the initiative, plus the potential financial might the firm will bring to the table.

“It’s headed by luminaries and investors with real experience and track records of success,” Lavender told the Journal. “Each one of them has pretty amazing backgrounds. That was a real selling point.”

Louie is the former CEO of the Central Intelligence Agency investment firm In-Q-Tel. He currently heads the venture firm Alsop Louie Partners. And he’s chaired the Federation of American Scientists for the past 15 years, while also previously serving as a commissioner on both the Congressional Commission on R&D for the U.S. intelligence community, and on the National Security Committee on Artificial Intelligence.

Ex-Google CEO Eric Schmidt, PayPal co-founder Peter Thiel, and former IBM CEO Samuel Palmisano are all backing the AFF. So are former U.S. Defense Secretary Ashton Carter, former U.S. National Security Adviser H.R. McMaster, and other top executives from federal agencies.

The AFF leaders are united around a foundational mission of re-building global U.S. leadership in critical technology development needed for the emerging 21st-century industries that will drive social, economic and political progress in the coming decades. To do that, the AFF initiative is working to build long-lasting public-private partnerships that bring together the talent, expertise and capital to unleash U.S. innovation in the country’s heartland, according to AFF leaders.

AFF’s first fund is targeting an initial $500 million raise, and the SIC is now the first institutional entity to commit to it. AFF expects a first close on that fund in second-quarter 2023, with about two-thirds of it coming from public investors and the rest from private equity.

Over time, the firm expects to raise a lot more capital, but the SIC commitment has already cemented a prime spot in the AFF initiative that could bring substantial benefits to the state, Lavender said.

“I believe it’s entirely possible that several viable, investible and potentially very successful companies can emerge from this initiative every year,” Lavender told the Journal. “Those are companies that will employ New Mexicans and that will stay here in the state.”

It’s a great group to partner with, said SIC spokesman Charles Wollmann.

“It’s a group that’s been there, done that, and recognizes New Mexico as a diamond in the rough,” Wollmann told the Journal. “There’s never any guarantees of success, but this group has a lot of talent and a great strategy to move forward.”