• Home
• About Us
  • Board of Directors
  • Team
  • Advisory Board
  • Fund Investors
  • Non-profit Contributors
  • Community Partners
  • Legal Documents
• Learn and Engage
  • Fund Investors
  • Non-profit Contributors
  • Get Involved
  • Donate
  • About Our Industry
  • Community Partners
  • Industry Links
• Investment Fund
  • Target Company Characteristics
  • Portfolio Structure
  • Approval Process
  • Reporting Requirements
  • Investment Portfolio
  • Is Your Business Eligible?
• Business Services
  • Success Stories
• News
  • Press Releases
  • Newsletter Archive
• Contact Us
  • Directions to Our Office
  • Join Our Team

Investment Fund : Investment Policy :

Investment Policy

Summary

New Mexico Community Capital's (NMCC) for-profit management company subsidiary, New Mexico Community Capital Management, LLC (NMCC, LLC) will construct a balanced portfolio of investments in order to provide capital and expertise to companies operating in the state of New Mexico. The goal of these investments will be to contribute to sustainable economic development in the state for the benefit of local communities while generating an acceptable risk-adjusted financial return to investors.

NMCC, LLC is the General Partner of NMCC's first fund, New Mexico Community Capital Fund 1, L.P. (the Fund). The Fund will employ a disciplined approach in an effort to achieve both social and financial returns. The criteria by which investment decisions will be made are outlined in this document. (Please refer to the separate Investment Application and Approval Process document for further information about application procedures.)

Investment Approval Process

Transaction application and evaluation processes will be standardized, rigorous and transparent. The applicant will be required to provide adequate information at each review stage to enable NMCC, LLC's Managers to make responsible decisions about the merits of the investment.

NMCC's Investment Committee will review all transactions deemed worthy of consideration by the Managing Director, the individual who directs the operations of NMCC, LLC. The Investment Committee will consist of at least three individuals with significant private equity investment experience as well as operating experience. The Investment Committee has the ability to prevent the Managing Director from recommending an investment.

Investments that have been recommended by the Managing Director and that have not been denied by the Investment Committee must be approved by the unanimous vote of the Managers of NMCC, LLC, which consists of the Managing Director, NMCC's CEO and a representative appointed by NMCC's Board of Directors.

General Investment Criteria

Investment decisions will be made based on the following criteria:

The Company must be a business with its principal office and a majority of its full-time employees located in New Mexico. In the case of a Limited Partnership, New Mexico must be the principal place of business and 80% of its assets must be located in New Mexico.

Specific Investment Criteria

1. Minimum Requirements*
   Target portfolio companies must meet the following criteria:
2. 1. Employ at least 5 employees
   2. Have been in operation for at least two years
   3. Have sales of not less than $500,000 for the previous twelve months
   4. Have a pattern of sustained revenue growth
   5. Have been cash flow positive for at least one year
   6. Be managed by people that have demonstrated operating expertise and a material investment in the business
   7. Be committed to providing a superior workplace environment
   8. Have adopted elements of independent governance or be willing to adopt independent governance mechanisms, including the ability for NMCC Management to control at least one board seat.
   9. 1. In cases where NMCC Management is co-investing with another lead investor, this requirement may be waived if the lead investor has a direct governance role.
      2. * Investments in companies that do not meet all of the preceding criteria will be made only under unique circumstances and such investments will represent no more than 20%of the portfolio. These investments will involve a more substantial evaluation process and the Managing Director must demonstrate to the Investment Committee and NMCC LLC Managers that such an investment is merited.
3. Social Requirements
   Applicants must meet at least two of the following criteria:
4. 1. The Fund's investment will increase applicant’s permanent, full-time employment
   2. The applicant's product or service:
   3. 1. Makes a positive impact or reduces negative impacts on the environment
      2. Increases the health and/or safety of the community
      3. Increases in the level of locally produced products available in the community
   4. The business will improve the wealth of the community

Industry Considerations

1. Target Industries Include:
2. 1. Light Manufacturing
   2. Consumer Products
   3. Energy & Environmental Improvement
   4. Food Processing/Organic Foods
   5. Consumer and Business Services
3. Industries that will not be targeted Include:
4. 1. Real estate focused deals
   2. Single location retail businesses
5. Prohibited Industries Include:
6. 1. Gambling operations
   2. Liquor Stores
   3. FCC Regulated entities
   4. Race Tracks
   5. Companies which are primarily financial service organizations

Fund Diversification & Portfolio Structure

• The Fund will not invest more than 15% of its capital in any single portfolio company.
• The average investment will range from $ 250,000 to $ 500,000.
• Many investments will involve the reservation of follow-on capital ranging between 50% and 100% of the initial investment amount.
• Approximately 10 to 14 investments will be made by the Fund.
• The Fund anticipates investing (and reserving) approximately 30% of committed capital in each of the 1st two years after the initial close of the Fund.
• No less than 40% of the Fund will be invested in companies outside the Albuquerque, Los Alamos, and Santa Fe metropolitan areas.
• An emphasis will be placed on providing capital to benefit low and moderate income and disadvantaged communities.
• It is likely that a substantial portion of the investments will be made with other funds or investors who have transactional and/or operational expertise.
• Exit strategies for each investment will be clearly defined.

Deal Structures

The Fund will underwrite each transaction individually and will consider an array of equity and equity-linked structures tailored to fit the characteristics of each transaction. These structures include:

• Purchase of preferred stock
• Purchase of common stock
• Issuance of promissory note convertible to preferred stock
• Debt with warrants

Reporting & Governance

NMCC intends to be an active investor and will maintain an ongoing governance role in all investee companies in which it is the lead investor. Furthermore, it intends to invest considerable resources in helping portfolio companies execute their business plans. It is anticipated that monthly reports will be required from each investee in addition to comprehensive reports required on a quarterly basis. (See separate Portfolio Company Reporting Requirements.)

Exit Strategy

No investment will be made without adoption of a transaction-specific liquidity plan. To the extent possible, NMCC will include an exit mechanism at the front end of the transaction. We expect that we will recover value in our investment through the internal recapitalization of our investee companies in most cases. Ways that this objective could be accomplished include:

• Repurchase of our interest by the entity from which we acquired it
• Purchase of our interest by an expanded pool of employee owners
• Purchase through an ESOP vehicle
• Merger with another company may be a viable exit mechanism in some cases