A new partner with more than a decade of experience investing in New Mexico and the broader Southwest region has joined a Santa Fe-based venture firm as it raises a fourth, $75 million-plus fund.
Lee Rand, who's spent over 15 years as a partner with Santa Fe-based investment firm Sun Mountain Capital, joined Cottonwood Technology Fund, another venture firm based in Santa Fe, in April. He remains a partner with Sun Mountain Capital.
Launched by Dave Blivin in 2009 with active offices in Santa Fe and the Netherlands, Cottonwood Technology Fund has co-invested in several New Mexico-based startups with Sun Mountain Capital, including Albuquerque-based mPower Technology, Rio Rancho-based Green Theme Technologies and Albuquerque's BennuBio.
"It was a really nice way for us to continue that relationship, do new deals together while really aligning our interests," Rand said about joining Cottonwood. "I like what Dave [Blivin has] built and I like the focus of Cottonwood on deep tech, early stage. It's really where I've focused most of my activities as well."
Cottonwood's current portfolio includes other New Mexico companies like hydrogen corporation BayoTech, biothreat surveillance startup BioFlyte and photonics manufacturing firm Skorpios technologies, all headquartered in Albuquerque.
Most recently, the venture firm joined the $8.3 million Series A round raised by Albuquerque-based Circular Genomics in late January, alongside other investors like Albuquerque's Tramway Ventures and Tennessee-based Mountain Group Partners, which led the round.
It's "actively investing" in one more deal out of its third fund, too, Managing Partner Blivin said, and he added another additional deal could come out of that third fund. Cottonwood has made 12 investments out of its $80 million third fund to date, with a typical deal size of around $5 to $6 million.
Blivin said Cottonwood's fourth fund will be similar in size and focus. The firm recently started reaching out to existing investors, including family offices and corporate limited partners, to raise money for that fund and expects to make around 12 to 15 investments.
Cottonwood could look to add two to three additional corporate limited partners to the fourth fund, Blivin said.
Adding Rand to the firm as a new partner will help Cottonwood raise its fourth fund and manage the investments that come out of it, Blivin said. The firm expects to add more companies to its portfolio through the fourth fund.
Blivin also said he intends to "wind down" his involvement with Cottonwood.
"But I don't want me winding down my involvement to mean Cottonwood doesn't continue in the region," Blivin said. "I think we've been a unique and important resource in the region for hard tech, pre-seed companies."
Bringing on Rand to the firm, he said, helps ensure "Cottonwood has a path forward into the future."
Rand, who holds a master's in business administration from Harvard Business School and has experience with companies including Intel Corp. (NASDAQ: INTC) and Netboost Corp, which Intel acquired in 1999, said his background has been "very operational."
"As a VC, I've been very much of a lean-in, hands-on, value-added type of investor," he said. "Particularly at the early stages."
Those more early-stage investments in technology startups — think pre-seed, seed or Series A rounds — are what Rand said "could have the biggest impact and returns."
"The ability to get involved with these early stage tech founders and really help them build out the rest of the story and build a business and bring co-investors, that's really what Cottonwood does," Rand said. "It's a good fit for my skill set and it's the part I enjoy."
In terms of the broader venture capital environment, a slow start to 2024 hasn't been unique to New Mexico or the Southwest region, Blivin said. A first quarter 2024 venture report compiled by PitchBook Data Inc. and the National Venture Capital Association shows quarterly deal value in the U.S. dipped to the lowest levels since 2018 and deal count remained on a downward trend.
Pre-seed and seed stage deals saw an especially "significant drop," the 44-page report notes.
