Looking for investors - Online 'private equity' group - 9 others needed!

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!

 

one problem: who would do the work to build the companies that are bought?

 

Well, we'd either hire someone to manage the site (part of the money in the fund would be set aside for that), or one of the members in the group could do it. For example, if the member who found the site and proposed we bought it wanted to manage it, they would be allowed to.

 

hmm, then that person would feel obligated to earn more, or people will be pissed if he is doing a bad job. Just make sure the people you get for the group have a good eye for potential websites so money and time is not wasted.

 

They would only manage the website if they wanted to. And its likely if they want to run the site, they see its potential, and so would work hard at it.
Also, if some of the members thought they weren't doing a good job, they could propose to either take over the site themselves or hire someone to do it, and it would go to a vote.
The group will be run democratically, and it can work if the members help it to.

 

This is really sketchy, what is to prevent you or one of the other 9 from taking the money and disappearing?

 

Honesty of members, some kind of contract - I'm thinking investors in the group will be businesspeople investing in a business opportunity, not just some scammer looking to run away with the money!
Although I haven't yet decided how the money would be kept, I'm thinking it would be best in a PayPal account. A new one could be created for the venture, or an existing one could be used (such as mine). I'll happily provide proof that I'm not going to run away with the money, and am serious about this. For a start I'm director of a UK-based company, and have been involved in online businesses for around 3 years now.

 

There is many large companies out there that started like this. In fact most of the large domain holding companies with mega portfolios are a bunch of people who've done just this. I'd be interested in learning more.

 

Glad to know someone can see the potential in this! I'll PM you...

 

Before committing to anything, could I have your background (including company information) and what types of sites you are intending to buy. I've got cash, profitable sites and a wealth of experience (coding, design & development) so I might bring some unique tools to the table.

Again, I'm just checking to see if there is any water in the pool before considering jumping. I guess a detailed PM is in order.

 

the moment you said the money would be kept in a paypal account you lost me. are you aware of paypal limiting accounts for no reason and taking the money for themselves? go to paypalsucks.com.

 

Sounds interesting. PLease PM me with more details.

Josh

 

I've already suggested the usage of everyone being an equal "director" and not a single chairman. Each person would have the exact same access and equity in the company. This should in theory also be LTD and shares properly done up if it were to be done. As for funds holding. If you are a large group doing legitimate business and not doing fraud paypal will not take your funds.
It should be explained to them via a certified business letter what the company is and it's objectives immediately so they're aware.

 

Why not create an LLC with all parties being equal holders. The LLC protects all parties personal assets, but allows the company to move forward as a single entity. Allowing you to have a single paypal account. Once that account was formed all parties could have the same login info. Although, I think your biggest issue would be who does what, but I guess if everything went to vote then their shouldn't be too many issues (except ties since there are ten people. Maybe you want to make it 9 or 11.

Good luck at any rate.

 

Yeah I think LLC and LTD are the US and Canadian versions of virtually the same thing. I'd go for 11 members. smart idea. An LLC / LTD would also allow for public share offerings.

 

you would be surprised about paypal. last i heard there was a pending class action suit against them. I would advise paypal being used a means to exchange money, but never to hold money there.

 

to do this right, create an LLC and open a free business checking account in a local bank. all partner names appear on the account name. link that to paypal if you must

 

True but worldwide people would have no real access to the account if partners were no in the US ? ..

 

not sure about this. use one of the internet banks?

 

Ok the problem here is we are all from different parts of the world. I'm from the UK, and it seems there are others from the US and Canada.
In the US LLC's are the generally the entities new businesses set up as. In the UK its Ltd companies and I assume in Canada its also Ltd companies, according to your comments ?

Well, another idea would be to set up an offshore entity. I have looked into this before for other purposes, and it can be done quite easily by online offshore incorporation companies. The problem is cost - its likely to cost $1000-$3000 (US $) to set up an offshore company. But the cost of doing that could come out of the fund if members agree, and it would probably be a good idea in the long run.
Your comments welcome.