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KernelSlanders
May 27, 2013

Rogue operating systems on occasion spread lies and rumors about me.

Coming from the tech/startup world I have a pretty good understanding how to get a business off the ground (a successful exit is a different matter) in that space.

If I think I have a better way to do online marketing attribution or alerting on abnormal server performance, there's a clear path to turn that into a company. It involves writing the initial version of the software, filling for an LLC where you trade a little bit of cash and the IP for your founder's shares. Depending on the exact nature of the business raise somewhere in the ballpark of $200k from a friends and family or angel round to pay for AWS fees and maybe an employee (who also gets a bunch of equity) or some marketing. Then go try to sell your SaaS offering to potential clients.

If I have a better way of picking stocks or valuing options and want to launch a hedge fund (or other buy side firm), what's the equivalent story look like? What's the bare minimum for pre-funding organizational expenses? By funding I mean raising AUM. I think I need to raise both investment funds and equity in the "firm" itself. How are those split? Presumably the firm's assets and the portfolio are segregated, but I really have no idea. Am I thinking about this correctly at all?

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Pryor on Fire
May 14, 2013


Are you an accredited investor yet?

KernelSlanders
May 27, 2013

Rogue operating systems on occasion spread lies and rumors about me.

Pryor on Fire posted:

Are you an accredited investor yet?

Yes

ohgodwhat
Aug 6, 2005



Are you doing prop trading or a hedge fund?

let it mellow
Jun 1, 2000



Dinosaur Gum

I'm pretty sure the answer is bitcoin

KernelSlanders
May 27, 2013

Rogue operating systems on occasion spread lies and rumors about me.

ohgodwhat posted:

Are you doing prop trading or a hedge fund?

Let's go with hedge fund. I assume the answer for prop trading is, "just start trading your portfolio," but if not I'm be curious how it differs.

baquerd
Jul 2, 2007
I'M A FUCKING IDIOT



http://www.investopedia.com/article...-hedge-fund.asp

jaymm
Dec 30, 2006


I mean bare minimum start up costs for a legit (read institutional investors will look at you) fund are around $500,000. Most of this is legal cost related as getting the fund structure in place, filing the right forms, and getting a fair LPA in place is not cheap.

You will want to engage several service providers including an admin (10 bps of AUM expense), auditor ($$75,000 minimum depending on investment complexity), legal counsel, etc.

To start marketing, you need an audited track record. Institutional investors will want to see a few years of successfully managing capital. Your $200,000 in family money is meaningless. When I worked at a start up hedge fund, the founders were in for over $5mm in capital and that only got them off the ground with ~$150mm in contributions, this is considered a highly successful launch mind you,

Saxon
Jan 21, 2006
NEEDS MORE CRIT

FWIW, I have a friend in NYC with a very small fund (a bit over $5m AUM). He said that he still needed to raise more capital (I think he said another $5m) before he could really work with larger institutions. He went out on his own after having 1 year of IB experience and something like 3-4 years of experience working at a hedge fund.

Fozzy The Bear
Sep 27, 2009

My reaction after reading this
------>


KernelSlanders posted:

If I have a better way of picking stocks or valuing options

If this is true, why do you need outside investors? Just raise the money yourself from you amazing stock picking skills.

Elephanthead
Sep 11, 2008


College Slice

Fozzy The Bear posted:

If this is true, why do you need outside investors? Just raise the money yourself from you amazing stock picking skills.

The better way is him earning a fee, not actually picking things that have better returns.

baquerd
Jul 2, 2007
I'M A FUCKING IDIOT



Elephanthead posted:

The better way is him earning a fee, not actually picking things that have better returns.

In the sense that it lets him de-risk by risking other people's money, sure!

ohgodwhat
Aug 6, 2005



KYOON GRIFFEY JR
Apr 12, 2010



Fozzy The Bear posted:

If this is true, why do you need outside investors? Just raise the money yourself from you amazing stock picking skills.

leverage baby

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EAT FASTER!!!!!!
Sep 21, 2002

Legendary.



This seems like a really promising thread, keep us posted.

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