Thanks Joe for your detailed response. I was kind of expecting more of a bussines plan from a backer's POV, but since nobody else beside you replied, I will share my idea.
So let's say, I have a little extra capital and I want to get a 10-20% or even better return and I get the idea of doing it by backing a few traders instead of putting it into funds. So let's say I am looking for 4-10 traders ( too few and there is no diversity and the risk is too much, too many, too much trouble) and on average I would back them up to max. 20 cars on average. Copying the TST intraday margin model, the quick math tells me that about half million bucks would do the job (10 traders x 20 cars x 2000$ average margin) Now you see just how little money can back how many traders.
Anyway, as I said in the request post, I want it simple and easy, I don't want to write code, hire lawyers, or spend money on advertisement,etc.
So what do I do? I post on the 3-4 big traders' website that I am looking for traders to back. For the interested, I tell them, go to C2, start a system and send me an email when you think that you achieved something to look at.
See how simple? PR was free, I am using a cheap and 3rd party simulator (so they won't accuse me of profiting from their trials) but what is best I am not even giving out numbers and percentages. All I would say is that I would like to see longer performances (not 10 days), the more consistent the trading with smaller DD will catch my money for backing. I mean I could come up with some approximate numbers what I am shooting for but the point is that I am flexible, and I wouldn't turn down a guy for missing the profit target by $20, like TST did. Also, I would want at least a month's performance but of course the longer the better.
One extra thing I would ask them to keep a trading diary, because I would scrutinize individual trades, and they have to be able to explain why they took this trade or that.
Profit share would be negotiated based on performance and individually. A better performance gets a better share. I would say I as a backer would want to keep at least 50% after all I am taking all the risk. So profit share would be somewhere between 30-50%, let's get realistic.
Now I think IB has an account type where I can put a bigger capital in and let more traders trade it, so I would use that one. As I see it, my overhead is pretty much zero, and C2 costs only $20 per month for the would be traders.
Once they go live, I would have a few rules, but I would try to keep them to the minimal. I would probably willing to lose up to 5K per trader... How many cars a trader could start with would depend on their C2 performance.
Maybe I am a simpleton, but I don't see why we need to over complicate life when it is not necessary...
This business plan is open for criticism, my main point here is that if a firm/backer is looking for talented traders, the idea can be done on the cheap and can be very simple...
