An acquaintance of mine is trying to sell me on an idea he says will make me a millionaire sooner. He wants to start a club which he plans to call “The Next Millionaire’s Club”. It will be a group of 100 aspiring Internet Millionaires who pool their money to build the equivalent of a cable network that streams news and other programming entirely via the Internet. His idea is to have a profit sharing agreement with 25K investment per 1% percent ownership and the investor’s profit-share is equal to his/her investment percentage. So if I were to invest $25,000 I would be entitled to 1% share of any profit, $50,000 = 2% share, $125,000 = 5% share and so on. Now, if the site were to make 1 billion dollars, if my calculations are correct, 1% of 1,000,000,000 is ten million dollars. However, if the site were to make 1 million dollars, I would lose $15,000; 5 million dollars and I would double my 25K investment… You can do the Math.

By all means $10 million sounds inviting, and his idea doesn’t sound exactly crazy. If he were able to bring in viewers in large numbers then he would be able to make a lot of money from advertising. He might even be able to restrict viewership of popular shows to subscribers thereby making more money. It’s definitely an idea with big profit potential; but I don’t have 25 thousand dollars to invest so, even if I were so inclined I couldn’t.

As far as knowing if 2.5 million dollars would be enough to do what he’s hoping to do, well, I have no information to go on for that. You’re looking at needing funds to build a sophisticated website with the capabilities for efficient video streaming. You’re looking at needing funds to produce the content that will be streamed via said website. You’re looking at needing funds for marketing and advertising to get the word out about the site and get people flocking to it. You’re looking at needing funds to pay miscellaneous salaries. Two million dollars just doesn’t go a long way any more–not that I’ve ever had two million dollars myself.

It might be that he needs more than 100 investors or else he needs more than a 25K investment per investor. Then again people have started what have become billion-dollar websites on significantly less that 2.5 million dollars. Certainly if I had 25K to take a chance with, I’d prefer to take a chance on something that could possibly turn the 25K into ten million dollars but 25K is well beyond my ability to invest even in my health.

I can appreciate that having 1000 investors invest $2500 or 10000 investors invest $250 would then stretch the profit dollars too far. In the case of 10000 investors for example divided into a billion dollars equally results in $100,000 per $250 invested. Certainly I wouldn’t complain about turning $250 into $100,000; but there would be no guarantee of turning a billion dollars in profit. To at least double your investment the venture would have to yield $5 million in profit; but what would be so great about trading $250 for $500? So his idea to open the club to only 100 investors actually makes sense.