Survey dissects area investors’ challenges, interests with startup deals

A recent survey of high-net-worth investors in the Kansas City area has found that most could benefit from independent due diligence and improved communication with other investors.

The survey — conducted by KCSourceLink and the Alternative Investment Forum spoke with 80 area investors about their activities in early-stage investment. Mark Meyerdirk, founder of the Alternative Investment Forum, said that the aim of the survey was to gather data on high-net-worth individuals’ interests to help fill gaps in the investor community.

Meyerdirk said that the survey helps paint a clearer picture of what investors need to make more startup investments in Kansas City. He added that due diligence — or vetting of a deal’s potential success — was among the top barriers to investing.

“This survey suggests there’s an interest in early-stage investment,” he said. “We’ve identified what their concerns are, which primarily have to do with due diligence and not knowing what the opportunities may be. … It’s now incumbent upon us to create some next steps that will help that community become more organized and to offer a suite of information that can be made available to the community that they can use to help make them more comfortable in doing early-stage investing.”

Sixty-two percent of respondents said they were interested in startup investments, while 68 percent asked for more information on early-stage deals, according to the survey. Meyerdirk said that most of those that have already invested in startups — 57 percent — have injected between $50,000 and $1 million in early-stage firms.

The challenge with startup investing, Meyerdirk said, is that there are a plethora of available deals, but investors have either little relevant industry knowledge or limited time to evaluate each opportunity. Seventeen percent of those surveyed said they have no interested in early-stage investments while another 17 percent said they don’t have time for due diligence.

To help with that, Meyerdirk said that his organization is exploring the potential to create an independent firm to offer due diligence services.

“As the survey suggests, one of the major concerns an investor has is how to properly dig into a deal and when they don’t know the space, how can they tell if it’s a quality deal,” he said. “There’s a depth of capital that’s untapped. And if there was logical, reasonably safe approach to providing professional guidance to that community, they’d be more comfortable making investments in early-stage projects.”

Meyerdirk’s organization is hosting its fourth Alternative Investment Forum event on June 2 to welcome investors and private equity firms to learn about new investment opportunities. The event will host a panel with: OpenAir Equity Partners CEO Ron LeMay; KC Rise Fund managing partner Darcy Howe; iSelect Fund CEO Carter Williams; Copaken-Brooks principal Keith Copaken; Upstart Partners founder Keith Harrington; and Flyover Capital general partner Mike Peck.

For more information on the event, click here.