Potential financial challenges for New Mexico tech startups

By On Behalf of Giddens & Gatton Law, P.C. | December 22, 2017

Nykia Allen, the president of the New Mexico Technology Council, recently spoke optimistically about the technology sector in the state, citing a range of enterprises from tiny startups with ideas in infancy to larger tech companies with more solid financial underpinnings, according to KOB4. She continued, however, with a concern that the recent federal decision to remove the guaranty of net neutrality could slow the upward “momentum” of New Mexico tech businesses.

Allen noted that if “drastic changes” in Internet access are made, the tech “startup scene” could be negatively affected. The article also quotes U.S. Rep. Michelle Lujan Grisham, D-N.M., as saying that if Internet providers “unfairly discriminate against certain companies and consumers,” by allowing unequal access, the state economy would be hurt because “innovators and small companies depend on an open, free, and fair Internet.”

Other pressures on tech-company financial health

Tech.Co recently published a piece that considered the reasons technology companies of all sizes can end up filing for bankruptcy, even when they began with impressive success:

  • Insufficient revenue when initial investment dries up before enough revenue is generated to stabilize the business
  • Explosive growth that fuels investment in the business without sufficient revenue to pay for it
  • Unsuccessful mergers, acquisitions and ventures
  • Threatening competition without adequate response
  • Obsolescence of key products
  • Overvaluation that cannot be sustained

Legal remedies

Any New Mexico technology company facing financial challenges should speak with an experienced bankruptcy attorney about what legal remedies to consider. An alternative to bankruptcy may be the right answer. For example, loans and other debt may be renegotiated or refinanced to allow cash flow to improve and meet other business needs.

Business bankruptcy should also be explored. Each situation is different. Depending on the circumstances, liquidation bankruptcy in which business assets are sold to pay down debt, and winding down the enterprise, may be a strong consideration. If the business has a realistic chance at coming back, reorganization bankruptcy would allow the creation of a plan for paying down debt, some discharge and reestablishment of the business in a healthier financial state.

Posted in Bankruptcy