Episode 6: Disruption in the Desert with Michelle Miller of HD3
In our sixth episode, Michelle Miller, Founder of the High Desert Discovery District (HD3), joins Natasha Allen for a wide-ranging discussion about New Mexico’s under-the-radar startup scene, her work with innovative AgTech company Innate Immunity, and how to bridge the financing gap for entrepreneurs pioneering technologies with long development cycles.
Transcript
The below episode transcript has been edited for clarity
Natasha Allen
Good morning or afternoon everyone. My name is Natasha Allen and today I have the pleasure of meeting with Michelle Miller. Michelle is the Co-Founder, CEO, and President of HD3. HD3 is also known as the High Desert Discovery District – the first startup accelerator in New Mexico.
The purpose of the accelerator is to commercialize and bring to market high-value science and technology discoveries and innovations. Michelle has over 25 years of experience in commercializing scientific discoveries, technology innovation, product development, regulatory management, and full team management. Michelle, super excited to talk to you today. How are you doing?
Michelle Miller
I’m good. How are you today?
Natasha Allen
Wonderful. To start off, can you tell us a bit about your journey as an entrepreneur and executive – and what Innate Immunity is?
Michelle Miller
I started New Mexico’s first startup accelerator that we call HD3 in 2010. The reason I started it was that New Mexico didn’t have an accelerator. We had a lot of other organizations that were working to try to take off the bench, so to speak, innovative assets that could be the basis for startup activity but had had really little to no success in that. And there are many complex reasons why that was.
At the time as you know, there were various accelerators getting started, prominent ones throughout the U.S. – Y Combinator, Techstars, and others. I began studying that and realized that that might be a solution or at least a partial solution to New Mexico’s problem of being able to create wealth-producing startups from the core innovation hubs that we have here in New Mexico, so we did that.
I did it in collaboration with the Department of Energy and Los Alamos National Laboratory, the State of New Mexico, and a handful of investors. We launched in 2010 and through the next 10 years or so succeeded in vetting 1,000 plus discoveries, ideas, and concepts – young companies and existing startups. Our goal was to see if we could bring the network that we had created, which has now grown into about 1,500 global advisors, investors, entrepreneurs, and innovators, and their knowledge to the New Mexico incubator, and see if we couldn’t do better at startup formation. Not just forming them, but actually driving them to market. So that’s what we did.
We had a cohort of about 25 companies over that period of time, moving them along the commercialization pathway towards a few exits – with many still pending and on the way in the future.
Innate Immunity, in particular, was in the last cohort. It started out as a biotechnology company focused on plant and crop disease – particularly crop disease impacting the very dire situation of U.S. citrus – and also grape disease, apple disease, and others that we’ve since included. But for this particular last company, I act as the CEO and we have been trying to commercialize a therapeutic peptide that shows very broad clearance activity in a wide variety of different plants. We have also since discovered its applicability in animal and human health, as well as potentially industrial health. So, this is an exciting one. We’re still in the thick of it, but agriculture was the original application that we focused on.
Natasha Allen
Great. You have some good insights. So let me get back to New Mexico and your stronghold in the region. What are some of the technologies that you’ve seen that have been commercialized by startups? Are there unique technologies that are coming out of New Mexico?
Michelle Miller
As probably everybody knows, New Mexico was the home of the Manhattan Project during World War II – and as a result of that, Los Alamos National Lab Laboratory became an epicenter of innovation over the years. And it’s got a sister – its own independent lab called Sandia Labs in Albuquerque. Those are two federally funded, Department of Energy and National Security Administration federal laboratories that produce a lot of innovation from not just energy but really material sciences, cyber[security], infrastructure technology, biotechnology, and more including AI. Sandia is an engineering lab for the most part, whereas Los Alamos is very early-stage technology. Sandia takes that and then moves it into the engineering phase.
Quick stats – New Mexico per capita has the largest percentage of PhDs in the country – with the largest federal percentage of R&D spent in any state. And yet we’re always at the bottom of the poverty scale. And that was the intellectual pursuit that I was looking at when I started HD3 – asking why we have all this innovation and wealth, assets and innovation, but we’re still poor.
Natasha Allen
Did you ever get to the bottom of why? Why there’s that disconnect?
Michelle Miller
If we have hours and weeks to discuss; it’s a very complicated thing. Part of it is culture. Part of it is just the geographical expanse of New Mexico. It’s a very big state, I think it’s the 6th largest land mass state. Yet there’s a very small population, and because we have such a low population it’s hard for firms to scale and grow here, because you have to recruit a lot of people. And they aren’t just walking around. So that’s part of it.
But it is complicated. Our educational system isn’t great, even though it’s a beautiful, beautiful state. And while there’s a lot of beauty and a lot of great pieces to New Mexico, there are definite challenges that prevent it from just becoming another Silicon Valley. As people tell me, it’s just more complicated than that.
Natasha Allen
Exactly. And then skipping around; I’m interested in Innate Immunity and their innovations. I’d love to highlight the issues with citrus – I don’t think anyone, or most people I know, recognized how pervasive it was.
Michelle Miller
There was a cover I have in my pitch decks from Scientific American. I think it was in 2014 and the cover was “The end of orange juice.” It’s a very stunning cover because, like you say, so many people don’t understand the peril that the global citrus industry is facing.
There is a gram-negative disease called citrus greening that is spread in the citrus groves by a cichlid (small bug) that takes this causative agent around from tree to tree. Every single citrus tree in Florida is infected by it today, and it is spreading across the country. It’s in Texas and it has popped up in California – but they have been so far successful at eradicating it.
But it’s a devastating disease, and it has no cure to date. And it is also present around the world in the citrus growing regions – from Brazil to China to Mexico. It’s everywhere they grow citrus. HLB is what it’s called for short at present. And there have been hundreds of millions, if not a billion or so, dollars put into R&D to solve this – because everybody wants their orange juice and their oranges.
But so far it has eluded us and there’s a lot of complicated scientific reasons for that. It’s a very complex disease to solve. Our peptide therapeutic, which we call 28P, is active against this bacteria and we know it kills it. We have run field trials with prominent industrial partners to try to solve the problem.
In terms of people’s orange juice, the reason why most don’t understand that it’s a threat is that the orange juice industry has been able to maneuver and work through pricing adjustments. HLB doesn’t necessarily completely eradicate the juice of the orange, or of the orange itself – it makes the whole outside very mottled, ugly, and deformed. So, you can still juice that kind of fruit and make it work to some degree.
You cannot do that with fresh fruit. People buy pretty fresh fruit. They don’t buy ugly fresh fruit, so that is the threat that is posed by not having a solution to this as it marches along the U.S. towards California – which is a fresh fruit state, a fresh food industry state.
So, we’re still working on it is what I can tell you and your audience. It’s a complicated disease. We hope, and we believe, that our peptide is going to be part of the solution to it. And that’s what keeps us going every day – that and many other crop diseases that we believe our peptide therapeutic can also address.
Natasha Allen
That’s amazing. And thank you for sharing that. Like I said, I don’t think a lot of people know that this is an actual concern and issue. In terms of startups you’ve worked with, have there been any others that have had a significant impact, or resulted in any noteworthy exits that you’d want to talk about?
Michelle Miller
We’ve had a few singles and doubles as I call them. We still waiting on our big grand slam exits on the horizon.
The ones that have not exited yet but will soon are medical devices that have been licensed away. We also have had some industrial product applications such as improvements to paving roads and asphalt that goes into making roads. We’ve had exits in the consumer categories of CBD and spirits. But the big, big ones that are on the horizon have to do with biotechnology.
We have a lot of innovation in vaccine development and novel ways of producing pharmaceuticals and vaccines, as well as in energy, oil, and gas.
Because a lot of the technology is very long-term, it takes many, many years to develop. These are deeply disruptive technologies that, disrupting whole industries – giant industries from oil and gas to pharmaceuticals – where you don’t just turn on a dime. Our technology tends to take a very long time. Therefore, by nature, our exits take a very long time. We don’t develop many overnight apps in New Mexico that can be exited in six months or so. Sometimes I really wish we did, but unfortunately, ours take the long view of it.
Natasha Allen
That’s a good way to parlay into the project that you’re part of that should be coming into effect sometime this year. The Arches Financing Collaborative – where you’re helping to bridge the gap between funding and a viable product or something to sell. Can you just talk a bit about that project?
Michelle Miller
New Mexico’s ecosystem has decent financing for good deals. I always say that if you have a good deal, you can find funding. Whether that is in New Mexico or elsewhere. That holds true barring you know, the ups and downs of the economy and financing at any given time. But what we have noticed over the years is that our early-stage investors, which tend to be angel groups or high net worth angels, some family offices, friends and family – are on the far end of the spectrum of startup formation. Our [startups] proceed towards commercialization in this very long-time span of trying to get a product to market, which can take up to a decade.
In many cases the angels, of course, tap out. They can only put in so much, and companies still aren’t close to revenue. They aren’t even off to production yet. In many cases if they can’t acquire grants or other non-dilutive forms of funding or strategic partners – then a lot of times venture firms will fill that gap.
And I’m not anti-venture, but I do think there’s a time and a place for it. Because New Mexico’s development timeline tends to be so long, in many cases, it’s our opinion that venture comes in prematurely into that gap. And you know, if you’re still some years away from a product, venture comes in with the way venture does things. With their deal structure founders easily get very, very diluted, very, very early on – and they still have a long time to go before they can get to product and revenues.
What we’re working on is called the Arches Financing Collaborative. It is part of HD3, and we’re working with social impact partners, foundations, and family offices – noteworthy institutions that have a social impact mission – to bring forward mission-oriented money that can act as a guarantor to those firms that you know are on their way but need more time. It’s an intriguing model. We’ve been having conversations with prominent social impact partners to try to see if we can’t find more clever, creative ways to finance these very important young companies that should keep their equity intact for the founders. Because it’s good for the company to do that for as long as possible. That’s the niche we’re trying to fill.
Natasha Allen
That’s amazing. I feel like your whole purpose of doing HD3 was to try to help New Mexico and provide access to very successful startups just needing a little more time. So, in terms of socialization and large scale system developments, how do you approach driving change? Because you have been, it sounds like, on the forefront of this for quite some time.
Michelle Miller
When I did start HD3, I knew it would be a long road and I never expected to get to the end. There is all the success we were all hoping for, but social change is very hard – especially in a place that is extremely poor in resources. We have a lot of deficits. That all impedes what you might call wealth creation that could help lift and instigate stronger community development, stronger economic development for everybody here.
We have these amazing assets that we are getting better at forming into wealth-creation that can become engines of prosperity for everyone in a community. And so that is happening but it isn’t happening that fast. You keep hearing this idea of impact investing. When I first heard about it, I didn’t really know what it was – I mean, other than what you think it is. But as I began to research it, it made a lot of sense for what HD3 is about – which really is trying to bring about change in New Mexico economically. And it seemed like there is a better way to manage that mission that many organizations have – earning profit as well as creating positive change in their communities.
We’re trying to navigate into that world a bit more and find out where the nexus is between straight up startup wealth creation and the social impact of whatever it is that that startup is trying to solve the problem for.
Let’s just keep with citrus and agriculture. The citrus effort you could call a big problem that needs a solution. We all want that to continue on, and so we’re working to see what social impact partners might help this particular company keep going so that that problem can be solved – so that we don’t run out of money and just throw up our hands and be done with it.
If we can bring forward social impact partners that are aligned with that mission, and to solving that particular problem, then that is the idea behind the Arches Financing Collaborative. Bring forth relevant social impact partners that also care about, you know, keeping orange juice available for our children and our grandchildren. And keeping that company alive so that we can solve that problem. That kind of thinking can be applied to cancer, Alzheimer’s, the climate, and many other social problems we believe that can be married up with a wealth-creating assets as well as the social impact asset base.
Natasha Allen
So, a couple more questions. How do you mentor and support young teams? Entrepreneurs that are just starting out – what advice do you typically give them on their journey?
Michelle Miller
We like to find them first. Back in 2010, when we started HD3, Shark Tank wasn’t even on, or it was just happening about that time. I like to claim, of course, that we were first at it, but we called ours Discovery Day, and we’ve probably held 70 or 80 discovery days over the past decade.
That’s where we would invite innovators, entrepreneurs, scientists, and engineers who have something to come and present to our network of advisors, investors, mentors, and experts to see what they have, and to see if there was something there that HD3 could wrap around.
Like I said, we now have some 1,500 folks that are called an HD3 advisor. They’re all over the place, all over the U.S., as well as in Europe, South America, Israel, and Asia. Each has been brought to our attention through some other person. It’s classic networking, and they’ve gotten involved with something, or they have a particular subject matter expertise that they can bring to help us commercialize that discovery.
So we bring creators in and hear their ideas, and sometimes it’s great. Sometimes its not so much. But we like to hear what they have and give them our advice. And if it’s something that we really do believe in, we can help them raise capital and fill out their team and management – get them on the track to becoming not just a startup, but a successful startup.
When we started we were in New Mexico only. We are now scaling past New Mexico. I’m always open, and I do get pitched quite a bit on different ideas, even today. Right now we’re focused on the exits of the first cohorts. We’re not formally taking new ideas up the flagpole, but anybody can always reach out to me anytime. And I know a lot of people and can be of help to get that innovator pointed in the right direction and you know, be a sounding board for sure.
Natasha Allen
That’s amazing. Thank you for that, because I’m sure – for better or for worse – a lot of people will take you up on that. My final question for you is how do you envision the future of the startup and innovation scene in New Mexico? Are there any specific initiatives or developments that you’re particularly excited about?
Michelle Miller
Well, I get asked this question quite a bit – “How come we can’t figure this out,” and “Why is it so slow and why does it take so long?” and “Where is our Google in the backyard?” sort of thing. It’s hard work to create a viable, let alone profitable, “something” from scratch. From nothing to something is brutal to be quite frank.
You never really hear much about being in the trenches of how hard it is to create something. We only hear about the so-called overnight successes of Elon Musk, Apple, and all of those legendary figures. But in the real world, where there are many innovators toiling every day, it is very difficult.
I’m in the trenches as a founder, co-founder, and alongside all of our cofounders and founders. But you know, I also understand what that’s like. People that have never done it don’t entirely understand how difficult it is, what the toll is, and how very few actually succeed.
I’m hopeful that the simpleness of it is that you just grind it out. You just keep going, and you find a way to survive. And if you have something that the market wants, and to solve the problem that is truly needed, I believe you will succeed.
The hard part is that it’s just hard. It isn’t that complicated, other than accepting that it is hard. And if you have the solution, you’ll get there – but you need a lot of help. It’s like a village. You do need a lot of help around you to keep going. And what HD3 does at the end of the day is bring forward those helpers, those connectors – those people that can keep it going and keep it alive so that you can bring everything to, hopefully what is a solution to the marketplace. That’s what we hope for.
Natasha Allen
Thank you so much, Michelle. This was so insightful. I learned a lot about what’s happening in New Mexico and also more about what you’re doing with HD3, and how it’s having such a humongous impact – both in New Mexico, and beyond. Until next time.
Foley & Lardner’s Innovative Technology Insights podcast focuses on the wide-ranging innovations shaping today’s business, regulatory, and scientific landscape. With guest speakers who work in a diverse set of fields, from artificial intelligence to genomics, our discussions examine not only on the legal implications of these changes but also on the impact they will have on our daily lives.
