I-Bankers Direct, which recently opened an office at 1 Atlantic St., has launched a crowd-funding platform designed to transform the process of investing in private and public growth-stage companies.
The platform, www.ibankersdirect.com, allows individuals to invest as little as $5,000 directly in selected small-cap growth businesses, pairing accredited investors with emerging companies that have investment capital needs.
“It was clear to us that there are many high-net-worth individual investors in the marketplace who have both the ability and the desire to invest in small, dynamic companies,” said John Kallassy, I-Bankers president and co-founder. “What they lacked is access to a reliable source of deals. We also know from experience how challenging it can be for small, growing businesses to raise capital.”
I-Bankers works only with accredited investors.
To be considered accredited, according to Securities and Exchange Commission guidelines, investors must have $1 million in net worth (excluding their primary residence) or annual income of at least $200,000 or $300,000 if they and a partner file jointly with the Internal Revenue Service.
Kallassy understands the challenges of obtaining financial backing. For seven years, he was chief executive officer of Zargis Medical, a global medical device company, when it was a sold to 3M in 2011.
“I started and sold a few companies,” said Kallassy, who became a licensed investment banker in 2012 and sought to create a tool for new businesses to obtain funds without going the expensive — and time-consuming — route of an initial public stock offering. “That’s where we come in. We’re doing something different. We’re a registered broker-dealer. We only take investments from accredited investors, and we’re able to work with small businesses.”
It isn’t financially feasible for large investors to participate in smaller deals, Kallassy said, adding that he and his partner, CEO Michael McCrory, examine many young companies before placing them on their website for investor consideration.
“We don’t work with startups. We meet with management and learn about their company. We cut out the work that an accredited investor would do,” Kallassy said. “We have two companies in the portal, and we have seven or eight that are pending.”
With online access to offering documents, management conference calls, company slide decks, video presentations and other decision-making support, individual investors can evaluate and invest in promising business opportunities from any Internet-connected device, he said.
Using the SEC guidelines, there are 9 million accredited investors in the United States and many don’t know that they can participate in such an investment program, Kallassy said. Growth-stage companies with an interest in raising capital via the I-Bankers can also visit the website.
I-Bankers has assembled a team of investment professionals, software innovators and e-commerce experts to transform the capital-raising landscape for growth-stage businesses, said Kallassy, whose company also has offices in New York, Palo Alto, Calif., and Lugano, Switzerland.
“We’ve harnessed the power of the Internet — and leveraged the experience our team has gained helping companies access billions of dollars in capital over the past 18 years,” McCrory said a statement. “Our platform, recently capitalized with $1.5 million of institutional and private investment, provides accredited individual investors, angel investors, venture capitalists and private equity investors with 24/7 access to investments previously unavailable to them. It’s a win for everyone.”
If I-Bankers successfully raises funds for a company, it collects a “success fee” from the business.
It can be difficult for young, growth-stage companies to obtain funding from banks, said Russ Mason, president of the Greenwich-based Investment Management Institute, and I-Bankers appears to provide another option.
“It’s a very appealing concept. The entry-level strategy allows us to cast a wide net for investors. This is very good for wealthy families,” said Mason, whose organization provides seminars on wealthy family investing.
It is important, Mason said, that I-Bankers assembles a strong portfolio of companies with good potential because an investment gone sour could seriously reflect on the business.
“They have to get the platform marketed and put up new companies,” Mason said.
I-Bankers is taking the angel investing concept one step further with crowd sourcing, said Dr. Walter Dolde, associate professor of finance at the Stamford branch of the University of Connecticut. But unlike I-Bankers, which examines a business before putting it on I-Bankers’ website, angel investors do their own homework.
“I’d feel good as an investor if I-Bankers put their own money into it (businesses),” he said.
“We will invest in transactions we put in the portal,” Kallassy said.
I-Bankers is similar to a San Francisco-based business called CircleUp, which focuses on consumer businesses, said Ramsey Goodrich, a partner and managing director of Carter Morse & Mathias, an independent investment bank based in the Southport section of Fairfield, and chairman of the Connecticut branch of the Association for Corporate Growth.
“I think you’ll see more of this,” he said.
But Goodrich cautioned that many investors like the ability to do their own examination of a business. At this level of development, a company’s product may not be as important as its management, he said.
“You don’t get the same access to management and their thought process,” he said. “I want to make sure that management is capable of getting it done.”
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