<small venture fund and initial size.>
If I do this I will do it right, have a web site, etc. The initial size probably needs to be 50k plus or I end up with higher expenses for reporting, regs, etc. I may also have to do a blue sky filing in each investor's state. That's not worth it for one 25k investor. If the interest level were high enough to generate a good size fund (over 10 million US) maybe 25K initial size would work. The perfect manageable fund would be 25 investors totaling $3-5 million.
I'm doing this primarily for US investors. Even I have difficulty getting involved in opportunities like private placements. The three PPs I have managed to do (NGT @15, AAS @ .40, and WTC @ .65, all with warrants) have had stunning returns. But what I'm POed about are the ones I TRIED TO DO but couldn't because of US blue sky laws, C$97,000 minimum "sophisticated investor" thresholds for US investors, etc. If you try and do one through a Canadian broker they can't take your money. You have to go up there and open up bogus addresses and all kinds of nonsense. To Uncle Sam I say, I'm a big boy, let me invest when and where I want.
Another problem I've observed for US investors are logistics. I had a friend who spent three hours picking my brain about PM stock investing. Then he went to his discount broker (not the one I recommended) and had extreme difficulty executing Cdn trades. When he reported back on his progress he had done exactly the opposite of what I advised: he had bought a portfolio of US listed names including a couple I feel are pretty good shorts now. I think American investors buying the US listed names only are going to have troubles as those stocks are frothy.
The other advantage is pooling. Someone with 50k can't quite diversify enough on their own. They certainly can't get a private placement. Often executing trades in the thinner Canadian exchanges is a science. I think I've mastered the art of stinky bidding, but you need to pay close attention. There is strength in numbers.
Since this bull market is so new I don't think too many people have crossed their t's on this. American investors trying to exploit the Canadian juniors market is a huge unserved market. Step one is to test the market here for this where people know me, or can go back a check my track record on SI in real time. Since I'm detecting some interest I'll check back in about six weeks with my progress on this, and give anybody interested more particulars. Advise is welcome.
Here is a very good read on using "real option theory" for exploration and development plays by John Kaiser. This is close to how I operate:
diamondplay.com |
