A new venture firm, focused on tapping into the Southwest's startup potential, recently launched in El Paso with plans to deploy seed investments into dozens of regional startup companies.
Alejandro Muñoz Mendieta and Andy Vargas-Hernandez, two El Paso natives, officially launched No Border Ventures in mid-October. The VC, which the pair said had been in the works for several months, wants to tap into what Muñoz Mendieta and Vargas-Hernandez see as untapped potential throughout the Southwest — and parts of the Mountain West — region.
For instance, Muñoz Mendieta told Albuquerque Business First that about 11% of the founders of "unicorns" — companies that hit valuations at or above $1 billion — graduated from schools in the Southwest. In addition, he said a vast majority of venture capital currently flows to companies on the East and West Coasts, but many of those companies are first built "inland."
Moreover, very little venture capital has historically flowed to Latino-owned businesses, and Muñoz Mendieta added that Hispanic managers manage less than 2% of venture assets.
"That just tells you there's a massive opportunity," he said. "For us, launching No Border Ventures is about fostering that talent, finding the hidden gems and supporting and creating the entrepreneurial ecosystem — and generating economic impact in the regions where we operate and where we invest."
No Border Ventures is targeting a minimum of $10 million for its first fund. It wants to deploy capital in that inaugural fund into about 20 companies across states including Texas, New Mexico, Arizona, Nevada, Colorado and Utah, as well as parts of Latin America, with an average check size of around $250,000; Muñoz Mendieta and Vargas-Hernandez expect the fund's first investments to come in the first quarter of 2024.
They've already seen traction on both the investor and startup side since launching No Border Ventures (NBV). Muñoz Mendieta said he and Vargas-Hernandez have received close to 100 emails from startups and have begun building out a potential co-investor network of over 1,000 people.
One of the ways Muñoz Mendieta and Vargas-Hernandez hope to differentiate NBV from other VCs is by offering more flexibility as investors. They don't expect to lead investment rounds, for example, but can contribute additional money to founders' "cap tables" and offer operational support, Muñoz Mendieta said.
He also plans to teach entrepreneurship-focused classes at the University of Texas at El Paso in the spring semester to assist in developing the Southwest entrepreneurial ecosystem.
For Vargas-Hernandez, who currently lives in San Francisco, some of the core tenets NBV will look for in deciding which startups to invest in include the strength of the particular startup's team and its resourcefulness. Finding resilient founders, he said, is a big part of that.
"We're not necessarily looking for the founder to have all the answers," Vargas-Hernandez said. "But, can the founder be resourceful enough to navigate the company to profitability?"
Market placement is another big part of NBV's investment criteria. While the fund doesn't have specific verticals it's targeting, Vargas-Hernandez said the size of the markets startups are operating within, as well as how those startups can meet the needs of those markets, are important considerations when it comes to ensuring a worthwhile return for the fund's investors.
Although venture market conditions have been tight in recent months, Muñoz Mendieta and Vargas-Hernandez don't see major concerns when it comes to finding investors or startups that are raising money. In fact, they see the opposite — as Muñoz Mendieta put it, "Typically, good ideas are born in these types of markets. That's where you find those gems and those resilient founders."
"Something that's resonated with me a lot is that when you look at history, these times are the best times to invest. This is what excites us," Vargas-Hernandez added. "We see that a lot of innovative founders will go out to raise capital in 2024. We believe that 2024 will be an amazing year to be deploying capital."
