[BioSpherical]

Hi,

I have an idea for a 'private equity'/venture capital group which invests in online businesses. I'm looking to create a fund worth $15,000, which will be invested in new online businesses and existing ones. In some cases we may buy the whole business and improve it, before selling it on again for a profit. In other cases, we may buy a stake in an online business, but let the owner continue to run it.

I'm looking for 9 other people to become part of the group, and each person would need to invest $1500. So in total there will be 10 people who've each invested the same amount ($1500) and the total fund will be $15,000.

Each member will have a 10% stake in the group, which will include a 10% voting bloc in any proposed investments in businesses, and 10% of all profits the group makes (see below for more on this). Plus you'll be able to sell your stake if you like, either to an existing member of the fund or an outside buyer. Or, if the other members agree, we'll use money from the fund to buy your stake and we'll each get an extra 1% equity in the group.

This is how I propose the group works:
We will operate a bit like a private equity fund. We'll invest in online businesses or buy them outright. We'll then take our share of the profits that business makes, and aim to resell the business (or our stake in it) on again for a profit. 25% of the profit made from the resale will go back into the fund, the remaining 75% will be shared equally among the investors.
For example: We buy a website for $4000. 3 months later we've made it more profitable, and sell it on for $6000. That leaves a profit of $2000. 25% of that, plus the original cost of buying the business, goes back into the fund. In this case it would be $4000 + $500. We're left with $1500, and this is shared equally among the investors (so we'd take $150 each).

This works well because we all profit personally from the sale of a business, plus the fund gets bigger each time we do make a profit. And if we decided to close the fund, we'd all get 10% of what it was worth at that point. If it had grown to be worth $20,000, and we closed it, we'd each get $2000. This is in addition to the profit we've already taken home from past sales!

At the moment this is just an idea, but if it attracts interest and there are enough people interested, I would love to push ahead with it.

So, if you have $1500 and would like to pool it together with others to create a much larger investment fund, and you'd like to become part of an exciting new group, let me know!

[David Rocci]

Have you ever heard of Y Combinator? http://ycombinator.com/w2008.html

It's a very similar concept and I think it's a great idea. It's unfortunate but I think you will be hard pressed to find your 9 other partners on this forum. I wish I could say otherwise.

You may also want to consider that some people may want to join as a passive investment and not partake in the voting, evaluation or improvement of the businesses you will be "rehabbing". You may also want to interview potential members so the members of the group not only bring money but specific talent.

For example, if you brought on a web hosting guy, a seo guy, an advertising guy, a design person, etc.. You can each compliment the skills of the other. This will help you "rehab" the business more quickly with people you already trust and respect.

Good luck!

-dr

[transburgh]

Techstars is the same idea as yCombinator and what you are describing.

[BioSpherical]

Originally Posted by David Rocci

Have you ever heard of Y Combinator? http://ycombinator.com/w2008.html

It's a very similar concept and I think it's a great idea. It's unfortunate but I think you will be hard pressed to find your 9 other partners on this forum. I wish I could say otherwise.

You may also want to consider that some people may want to join as a passive investment and not partake in the voting, evaluation or improvement of the businesses you will be "rehabbing". You may also want to interview potential members so the members of the group not only bring money but specific talent.

For example, if you brought on a web hosting guy, a seo guy, an advertising guy, a design person, etc.. You can each compliment the skills of the other. This will help you "rehab" the business more quickly with people you already trust and respect.

Good luck!

-dr

Great advice. In fact, a few of the points you've mentioned there have already been considered - so far I have a total of 4 people likely to invest, with at least 3 others interested. If I get, say, 6 willing investors, the fund may still go ahead but just be smaller. We will also consider taking on passive investors who would have non-voting shares in the group.
Thanks for the points and advice, its appreciated.