This article from today's Albuquerque Journal points out why, despite enormous potential, an investment in SGLB is high risk. Of course this time could be different but the author does an excellent job in describing the lack of both human and monetary resources available to startups in a very poor state like New Mexico:
SANTA FE, N.M. — Wired magazine published an article in 2000 that seemed to proclaim – finally! – the birth of the long-anticipated New Mexico version of Silicon Valley.
Titled “Greetings From Info Mesa,” the article described the world’s need for information processing tools capable of making sense of the oceans of data being produced by the pharmaceutical industry, financial markets, climate science, genomics and other industries.
“Today, those tools are pouring forth from an unexpected place: Santa Fe, New Mexico, home to a growing, computer-powered industry known as informatics, and the center of the data dump universe,” according to Wired. Most of the companies began with people or technology or both with roots at Los Alamos National Laboratory or the Santa Fe Institute.
The magazine quoted Stuart Kauffman, a founder of BiosGroup, as saying, “I’m told that Santa Fe feels like what Silicon Valley felt like 10 years ago.”
Unlike San Jose or Santa Clara or other Silicon Valley communities, Santa Fe is not blanketed with thousands of low-rise buildings housing thousands of high-tech companies employing hundreds of thousands of people. Thus, it is tempting to dismiss Info Mesa as another bust.
After a conversation last week with Info Mesa pioneer John Elling in his cluttered office off of Airport Road in the Santa Fe Business Incubator, I came away with a very different understanding of Info Mesa.
Info Mesa has been a rousing success in that some startups have done quite well, some of their founders have made some good money, and some entrepreneurs like Elling followed up their initial Info Mesa forays with a succession of businesses, some of which have done well.
However, Elling said, it was never in the cards that Info Mesa would spawn an explosion of jobs.
Elling was an analytical chemist at LANL before he became one of the founders of Bioreason, a company that searched through drug companies’ enormous databases to find molecules that could become the foundation of new pharmaceuticals. Bioreason was sold to a larger, out-of-state company, and Elling went on to found several other companies and invest in more.
Some Info Mesa ventures failed, of course. Phase-1 Molecular Toxicology, which was a very promising startup designed to identify potentially dangerous drug side effects, didn’t make it.
Several ventures were sold to or absorbed by out-of-state companies. The Prediction Co. still has a Santa Fe presence, but it is now part of a large investment management company. Daylight Chemical is now based in California, although it has a research operation in Santa Fe.
Some Info Mesa founding fathers, including Roger Jones, Anthony Nicholls, Spencer Farr and Dave Weininger, are still active in Santa Fe.
New, small companies are sprouting up every year, but New Mexico craves a homegrown Google, Facebook or Cisco Systems, a startup that becomes the multibillion-dollar, industry-dominating company that creates thousands of jobs and spins off dozens of new companies.
Elling explained why that has not happened.
Info Mesa was built on brilliant ideas and some software. The nice thing about a software startup is you need only enough money for “a couple of computers and a coffee maker” to implement and prove your idea, Elling said. That gets you intellectual property you can sell or license to a larger company. That almost always means making a deal with an out-of-state firm that may, but probably won’t, want an ongoing presence in New Mexico.
If you decide to build a company that sells software to end users, you are talking about a whole different level of investment, and a need for talent beyond great science and programming. You need salespeople, marketing, finance, technical support.
All of that takes time and money that the scientist-entrepreneur could be using to develop another new idea, another generation of technology, Elling said. You go from spending 90 percent of your time doing science to spending 90 percent of your time doing marketing. Few scientists want to do that, and fewer still are any good at it.
Even if a company takes that route, marketing, sales, manufacturing, finance, legal and customer service talent is in short supply in New Mexico but abundant in California. That’s no knock on New Mexico. It’s just a function of California’s much larger population and much longer experience.
If it takes $1 million to create and prove a great idea that can be sold to another company, it takes $10 million to turn that great idea into a software product that can be marketed to end users and $100 million to put in place the marketing and customer support that it takes to be a significant company, Elling said. Investors are not usually patient enough or wealthy enough or brave enough to put that kind of capital at risk.
The history of Info Mesa shows that it’s possible to build a successful tech company in New Mexico. But for a long time to come, success will take the form of dozens or hundreds of small businesses that will never employ more than few people each.
