Mark Meyerdirk and Joe Kessinger started the Alternative Investment Forum, LLC (AIF) in 2014 as an educational program to showcase high quality early stage companies for accredited investors. They have held four forums so far, connecting 16 companies with more than 300 high net worth investors.
Mark is a business consultant, attorney, entrepreneur and securities expert with more than 40 years of experience working with small and midsize companies worldwide. He is here today to share more about AIF and to give fund-seeking entrepreneurs insight into the mind of an investor:
What about the KC entrepreneurial ecosystem is attractive to you, and where can there still be improvements?
We know there are great early-stage companies looking for capital and great investors looking for good investment opportunities in Kansas City. KCSourcelink has been a good place to connect the dots with the Capital Match, and the Kauffman Foundation has also been a great resource for the entrepreneurial community. There are some excellent angel groups and a growing number of venture funds coming into the community.
We did a survey, with the help of KCSourcelink, of people who have attended our events. We learned from our survey that the investment community wants more knowledge regarding deals and deal flow and that they are concerned about buy-side due diligence.
What sorts of businesses have you showcased at the Alternative Investment Forums? What’s the thru line and what sort of companies are you uniquely suited to support?
We do not actually invest in the companies we identify, but showcase early-stage companies that are looking for capital investments of $1 to $5 million. These companies are generating revenue and have, or are positioned to, have earnings in the short term, and have excellent management teams. We are industry agnostic.
Joe Kessinger and I have both been involved in investing and raising capital for early-stage investment opportunities since the 1980s. I’m a securities attorney working with companies in the seed and series A investment space, and Joe is a CPA and commercial banker also working with companies that are in revenue and that have some EBITDA. [Do you need to brush up on your investment terms? Here you go.] We are both “deal junkies” and in our work we are introduced to many investment opportunities.
We created AIF because we experienced the situation faced by well-run early stage companies in Kansas City that could not secure investment capital because they were not big enough or did not fit in traditional buckets for venture capital, private equity or investment banks. We wanted to showcase these companies to private high net-worth accredited investors we know in Kansas City.
We started AIF in 2014 to create a forum to invite investors to see great companies. We operate the forum like a school where the investors go from classroom to classroom and the entrepreneurs pitch three times in succession to different investor classes. The investors get to see deals they are interested in and the entrepreneurs see a fresh class of new investors each time. It’s important to note that AIF is not a broker/dealer or investment advisor and that we earn no fees from any investments that are made by our forum participants.
How do you consider the risk involved in investing in startups? Why are you interested in early stage investments?
We are interested in early stage investments that are in revenue and earnings because the risks are less once the business has had some success and needs more capital to advance to the next level. The value to the investor is often times in the follow-on investment opportunities as the company continues to grow.
What uncommon characteristics do you see in the most successful entrepreneurs?
Successful entrepreneurs know their value proposition in their industry, and have a very healthy understanding of how the capital markets operate.
What three things are most important to you about an entrepreneur’s pitch? Will anything kill a pitch straightaway?
Realistic revenue projections and some evidence that supports the likelihood of future earnings and an exit.
A realistic valuation based on financial logic.
Who the management team is and why they are likely to succeed.
An unrealistic valuation typically is a deal killer. (Check out the Midwest Seed Financing Survey 2015 for more insight.)
What go-to advice do you give to entrepreneurs?
Be honest and have a realistic cash flow pro forma that shows you have a clear vision about what your business is going to do.