[Smidge.Com] - A virtual, actively managed, multi-asset digital currency fund

[creativex]

Hi Smidge. I too would appreciate it if you'd address some of the questions asked above...particularly given our email exchange.

Cheers.

Hi creativex,

Can I ask you to please be more specific? I'd be happy to answer anything that is unclear.

Ty. Let's start with this:

When burnside first asked you what your profession was you said accountant and it has been recently changed to account manager so.. Ok that still does not answer any trades you have had in the past that would warrant you being a sound investor,

Great you dont day trade but what trades have you made in the past that would be worth mentioning

...and forgive me if this has been asked and answered elsewhere. I admit I've not yet read enough regarding your interesting startup.

[Smidge]

Hi Smidge. I too would appreciate it if you'd address some of the questions asked above...particularly given our email exchange.

Cheers.

Hi creativex,

Can I ask you to please be more specific? I'd be happy to answer anything that is unclear.

Ty. Let's start with this:

When burnside first asked you what your profession was you said accountant and it has been recently changed to account manager so.. Ok that still does not answer any trades you have had in the past that would warrant you being a sound investor,

Great you dont day trade but what trades have you made in the past that would be worth mentioning

...and forgive me if this has been asked and answered elsewhere. I admit I've not yet read enough regarding your interesting startup.

Hi creativex,

What I've invested in before:
https://bitcointalk.org/index.php?topic=259772.msg2771971#msg2771971
https://bitcointalk.org/index.php?topic=259772.msg2788731#msg2788731

What I'm investing in now:
https://docs.google.com/spreadsheet/ccc?key=0AgLGW6ARhmFLdDVyLUFPYjBHX0FIWWxXTy1Bc09uaVE&usp=sharing

If I'm an Accountant... pardon, Account Manager:
https://bitcointalk.org/index.php?topic=259772.msg2803102#msg2803102

And yes, I will forgive you. But only to make it clear once and for all and only because it's you

[Korbman]

I've stumbled across this thread before, but I hadn't made a concerted effort to dig into the content.
It seems my recent postings breaking down and analyzing other up-and-coming funds has garnered a bit of attention, both on and off the forums. Why? I don’t know. I've always assumed I was just asking basic questions, and I don’t consider myself an expert by any means. Regardless of this, it seems quite a few people have found my postings to be helpful.

Smidge contacted me directly to ask if I’d take a look at his business plan and to provide honest feedback. What you’ll read below is the result.

And before anyone asks (as I’m sure someone would), no, I did not receive compensation (of any kind) for my efforts, nor do I plan on receiving anything in the future. The questions and comments written below were done on my own accord and represent my opinions.

I've noticed that Smidge mostly points everyone to look at his business plan and website for answers to various questions. As such, this post will be a breakdown of the plan (aside from basic definitions of phrases on his website, everything just points back to the plan anyway).

Another note on this, I’m focusing my questions just on the business plan for the moment. Questions I've asked may have already been answered or hinted to with the thread, and for that I apologize.

By now I’m sure most of you have seen this disclaimer, so I might as well keep with the trend. Yes, this will be an extensive post and I apologize. As a forewarning, my responses may sound rude and/or condescending, but I assure you I don’t mean them that way. I imagine it as if you and I are sitting at a table and I’m asking these questions with more of an upbeat attitude.
Generally speaking, the willingness of the OP to thoroughly answer any and all questions can be indicative of the effort they’re willing to put into their business.

Business Plan
v0.7b, updated Jul 21st, 2013 by Smidge (www.smidge.com/data/files/smidge.com.business.plan.pdf)

I suppose we’ll start off here. Typical mix-up since they’re similar, but this isn't a business plan, this is a prospectus.

A business plan lays out the goals of the company and how you want to (reasonably) attain them, as well as disclosing the company management structure and the company financials (income/balance/cash flow statements).

A prospectus, on the other hand, is typically used in securities offerings. It provides detailed information about the security that will be offered, tying in details about the company’s current business, financial statements, etc.

Purpose

[unneeded marketing jargon]

The purpose of Smidge.Com (“the fund”) is to allow investors to participate, in an overly proportional manner, in a diverse number of assets that exist in the crypto currency space, managed by experienced investors.

Can you describe how your operation is able to invest in an “overly proportional” manner? The phrasing in this situation is a bit unusual…but that may just be discrepancies in language, leading to confusion.

‘Experienced’. I’ve seen that word (and/or its synonyms) pop up a number of times during my reading, yet I haven’t seen any indication of past performance (either here or on your website). In your post history, you've made mention of investing in ASICMiner and some domain names, but not much else than that.

The fund holds assets in Bitcoin (BTC), Litecoin (LTC) and, to some extent, alternative crypto currencies (Altcoins). The fund may be supplemented by other assets, like hardware (not planned at launch). The Fund's portfolio will be public to show proof of ownership of underlying assets.

Are you considering building out a plan for adding mining hardware in the near future? If so, what hardware would you have in mind?

Smidge.Com aims to become the largest BTC investment fund by market capitalization, building trust for investors, start-ups looking for capital and the digital currency community as a whole.

That’s an extremely lofty goal for someone relatively new to the forums and without any provable Bitcoin trading experience prior to starting the fund. I’m not saying it isn't possible; what I am saying is to focus on building a solid foundation for your company first, growth comes later.

Strategy

The fund will primarily invest in BTC, LTC and, to a certain extent, Altcoin, assets. This is done in order to maximize returns and issue those as dividends to investors on a regular basis.

So, your business strategy is to “invest in securities and make a return”. That is not a strategy, that is a purpose; that’s what your company is supposed to do.

The strategy is being executed by applying the expertise of the management team in the fund’s day-to-day operations. Additional activities that are difficult or not at all possible for the small scale investor will include:

-   Participating in bulk offers (auctions) of discounted shares
-   Approaching and participating in start-up operations pre-IPO (as venture capitalist and advisor)
-   Approaching individual shareholders for large, uncomplicated buyouts of private shares at a discount (avoiding auctions)
-   Expand influence in the assets by becoming major shareholders, occupying board seats and other positions with greater influence
-   Investing in direct shares, avoiding fees completely
-   Becoming a trusted entity and a contact point for advice- and capital-seeking start-ups in the crypto currency world

Phew, you are dreaming quite large right now. This list doesn't seem to correlate to any particular strategy since these are just [super] long term goals. I get the feeling you’re planning as if you’re going to get BTC1,000 tomorrow and you’re trying to figure out how to invest it.

Unfortunately for you, I've been in this exact position before. I know that rush when entering the Bitcoin markets; where constraints are loosened and you feel as if you can create anything from the ground and up; to be a part of something still in its infancy and the urge to help it grow.

But I’m here to help provide a reality check. You’re not going to get the funding you’re looking for, and to get even a tenth of that amount would require a substantial amount of time and effort. As you read this (and continue through the other points), my hope is you’ll understand why.

The combination of the fund’s efforts is expected to lead to an asset valuation that, in mid and long term, significantly outperforms the market.

How do you outperform a securities market that has no statistical/averaging data and has only been around for about a year and half? A line must be drawn in order for you to “outperform” it, so where/what is that line?

If you’re referring to the Bitcoin currency market, how do you plan on beating a performance of 1000% (over the past 12 months, and only taking into account last year’s price and today’s price, not the $265 high)?

The fund will initially be launched as “Smidge.Com A”, A hereby classifying the first tranche. Other tranches of the fund might be launched by the management team in the future, classified as “Smidge.Com B”, “Smidge.Com C” etc. with different areas of operation, strategies, assets and/or splitting of shares. Shareholders of the previous tranches will be offered discounted shares in advance. The management team will disclose the processes after successful IPO of “Smidge.Com A” and after new tranches are deemed necessary.

“Might” be launched, or will be launched? I can see the purpose of various tranches over time, but that’s not something to focus on.

And speaking of these tranches…

Structure

The fund is a virtual identity held by investors of Smidge.Com, a company in the course of incorporation [1]. at the time of release of this document.

The shareholders of the fund “Smidge.Com A” will hold 765,000.00 shares, while Smidge.Com shareholders will hold 135,000.00 shares. Each of the funds’ shares always equals to 1/900,000 [2] of the total profits and voting power of the summed value from both the fund and Smidge.Com.

[1] – How far through the incorporation process are you, and what is your official company name?

[2] – Based on what I've read so far (and what I’ll get into more thoroughly below), each tranche (A, B, C, etc) will have 900,000 shares with it?
Speaking to just the 900,000 in “A”, you've determined that you’ll hold 15% (135,000) of it because…why?

Tying into this part is:

Raising Expansion Capital & IPO

After accepting pre-IPO investments from individual investors (private offering) for a limited time [1], the fund will be offering shares of stock to the general public through an IPO on one or several virtual security exchanges, as soon as negotiations are concluded [2]. Any listing fees will be paid by the company Smidge.Com, not the fund’s cash reserve or assets.

Details of the “Smidge.Com A” private offering:

-   Number of shares available: 315,000.00
-   Pre-IPO share price: 0.02 BTC [3]
-   Shares can be acquired in packages consisting of 250 shares (5.00 BTC per package)

[1] – Ah, the deadly sin of any up and coming business: making sure the purchases are “limited time” offerings. It’s a fantastic way to look like a Ponzi, or other ill-intentioned scheme, regardless of your intentions. I know the purpose of a private offering in normal fiat markets, but here in Bitcoin they typically don’t bode well. The “Get in Now” attitude has a negative stigma around here.

[2] – What Exchanges are you looking to host on? I've seen mention of BTCT, but are there others? The problem with not being listed on an Exchange is liquidity. Transferable shares are great if people actually want to buy into your asset, but that takes a substantial established company to make happen (like ASICMiner).

[3] – Good god man, you’re valuating your Smidge “A” shares at BTC18,000 for the 900,000 total shares? Not only that, you've granted yourself BTC2,700 of the total (equaling 135,000 shares) for no other reason than “management”?

To that end, why 315,000 shares? What happened to the remaining 450,000?

You’re sights are set WAY too high (hence why I said “you’re not going to get the funding you’re looking for” above). On top of that, you don’t have anything to back up the valuation.

In order to participate, please visit the page “SMIDGE.COM A DIRECT SHARES” on www.smidge.com . You can then use the contact form or contact username “Smidge” on bitcointalk.org.

Shares can be transferred owner-to-owner at any time by involving the fund’s management team. For more information, please visit the page “SMIDGE.COM A DIRECT SHARES” on www.smidge.com or PM username “Smidge” on bitcointalk.org.

You seem to be repeating yourself here…

Other than that, for what reason should investors purchase private shares? As a third party, this is incredibly sketchy. You’re asking for us to send money to a privately generated address with the promise of getting some virtual transferable shares (and all completely off an exchange). So if tomorrow you decide to up and leave, that’s it; the coins are gone.

Am I one of the few that sees a problem with this?

Management team and personal commitment

Management team currently consists of Smidge as CEO, through whom most of the communication will be done. There are two shareholders of Smidge.Com [1] consulting him in operations and finance, who have access to documents assuring the continuity of the fund in case Smidge catches a cold, gets hit by a bus etc.

Smidge’s ID, E-Mail and phone number have been verified with Mt.Gox [2].

The management team/consultants personally know each other since several years and have worked and invested together on multiple occasions. They are obliged to each other and Smidge.Com through a legal binding contract. [3]

[1] – Any chance of divulging this information, or will they just be silent partners that we’ll never know? If the latter, then what’s the point of revealing this information at all?

[2] – So what? Mt. Gox has absolutely nothing to do with your business. The object here should be to verify your identity with any Exchange operators you’re looking to be hosted on. And if you’re looking for more transparency, then verify with your Investors as well. It makes it easier than doing a WhoIs on your website and tracking names through any social media accounts.

[3] – Similar to my statement on Sandstorm, both this and #1 are just “words on paper” with nothing to back up your claims. If you’re looking for transparency (which we’ll touch on momentarily), then information on partners and contracts involved is almost necessary.

The management team transferred an initial investment of 24.6349 BTC [1] into the fund on July 21st, 2013. These assets, as well as any profits generated through them, will be part of the fund at its announcement date (July 21st, 2013). More physical and virtual assets (BTC, LTC, Altcoins, mining equipment…) are planned to be brought into the fund or it’s tranches at a later time as donation [2], for additional value without dilution of existing shares.

[1] – Just so I have this straight, you and your team have committed nearly BTC25 to your company, yet you've granted yourself a BTC2,700 holding out of your proposed market cap of BTC18,000 with no existing revenue streams? As some internet users would say, “lolwut?”.

[2] – I’m not sure how this makes any sense. You’re going to conjure assets from somewhere, and then just give them to your fund as a “donation”?
In short, don’t do this. Keep your company holdings and financials separate from your own, because if the time comes to cash out, there will be nothing but trouble as you go “oh, I let my company use my shares and my mining equipment, so I’ll take them back now”.

Transparency

The fund seeks maximum transparency by

-   fully disclosing all assets held in the fund regularly
-   disclosing all dividends accrued and paid
-   disclosing all management fees
-   operating a website at www.smidge.com for public information

This is a start, but certainly not enough.
We know nothing about you and your history, and before April 2013 you didn't exist. There’s more to transparency than disclosing what you invest in. There’s the matter of management biographies, company financial statements, risk management strategies, and the like.

Underlying assets of the fund

The management team will buy and sell previously mentioned asset classes in the best interest of the fund in its day-to-day operations in order to maximize returns. Shareholders can bring forward motions to add or remove assets to or from the fund at any time.

As if you wouldn’t act in the best interest of the fund? I’m not sure why this sort of phrasing is needed. If I’m putting money with an investment management company, I automatically presume I’m investing in people who have the fund in their best interests.

Dividends

Dividends will be paid from earnings accrued from the underlying assets of the fund. Additional dividends might be paid from earnings out of trading activities. A portion of earnings might be reinvested into assets.

Dividends will be paid weekly, usually every Sunday. Additional dividends might be paid at any time if deemed necessary.

Why pay weekly if you’re intention is to be a long term investment vehicle? I'm really just curious if there's any reasoning behind it, as compared to bi-weekly, monthly, etc.

Risk to shareholders

The fund's market cap and NAV rely on the value of the underlying assets and the share price decided upon by the market. If the underlying asset value decreases, the entire fund's market cap and NAV will also decrease. Additional risks to assets include the price of BTC, losses related to trading activities as well as other risks. The fund does not hedge against all of these risks. Each shareholder must understand these risks before investing.

So much for a long term investment…
Are there any strategies you've currently implemented to hedge against at least some risks? If so, what sort of risk management is at work? It's a hard question to answer, but let’s see if you can describe anything other than Sandstorm’s “Simple risk management” phrasing.

Legal aspects

The fund is a virtual identity. As with all digital currency funds and securities, everything is virtual, which to the best of our knowledge is perfectly legal. Please do your homework and read this document thoroughly before investing.

This notion is rapidly changing. Here in the States, I have a feeling the SEC will begin to move against existing virtual securities and adjust the federal regulations accordingly. Germany (and other EU countries) will undoubtedly feel pressure from the US on these matters. As Bitcoin grows, there’s no reason to think regulatory committees won’t start pushing. 

When the time comes, what will you do in the face of regulation? What laws and regulations do you think could apply to your company, and do you feel you can aptly adapt them?

Fund Closure

Management reserves the right to close this fund for any reason giving 30 days’ notice. All assets in the fund, will be liquidated on the respective markets. Distribution to shareholders will be done according to a public, defined timeline and action plan.

Why would the fund ever be closed down? And isn't the object of having multiple partners to limit the chance of this happening?

In any case, I presume by all assets this includes currency holdings (including any company fiat), stocks, bonds, and physical hardware (mining equipment if any)?

--------------------------

Alright! I suppose that’s all I can manage for now, though I do look forward to the responses. To the other posters in this thread, some of you may recognize your questions reworded as to cite examples from the business plan. This wasn't an accident as I noticed Smidge wasn't answering a few questions all that thoroughly. Maybe I’ll somehow be an exception given I was asked to respond?


To: Smidge – Here’s the honest reality check.
You are not experienced in Bitcoin securities trading (based on the information you've provided us).
You are looking for a massive company valuation based on essentially nothing.
You are not trusted (it’s earned over time, not just given out).
You are a new forum member and you are new to Bitcoin overall (so far as I've been able to determine).

Combined together, you’re nearly in the same situation as the Sandstorm security, which seems to be your primary competition (though I’m sure there’s more, and anyone please feel free to enlighten me on this).

That said, why should investors put any money with you over Sandstorm? After all, Sandstorm is at least being actively traded on an exchange (which makes purchases and sales vastly easier overall, even if the IPO was terrible), and its owner currently holds 40% of the total asset. By reading the business plans for each company, the distinction should be obvious, but unfortunately this isn’t something I can say is true.

In the end, no one is perfect and I don't expect them to be. For many people, this is quite a learning experience when starting out (I know it was for me). Let's see if we can work through this!

[joesmoe2012]

I've stumbled across this thread before, but I hadn't made a concerted effort to dig into the content.
It seems my recent postings breaking down and analyzing other up-and-coming funds has garnered a bit of attention, both on and off the forums. Why? I don’t know. I've always assumed I was just asking basic questions, and I don’t consider myself an expert by any means. Regardless of this, it seems quite a few people have found my postings to be helpful.

Smidge contacted me directly to ask if I’d take a look at his business plan and to provide honest feedback. What you’ll read below is the result.

And before anyone asks (as I’m sure someone would), no, I did not receive compensation (of any kind) for my efforts, nor do I plan on receiving anything in the future. The questions and comments written below were done on my own accord and represent my opinions.

I've noticed that Smidge mostly points everyone to look at his business plan and website for answers to various questions. As such, this post will be a breakdown of the plan (aside from basic definitions of phrases on his website, everything just points back to the plan anyway).

Another note on this, I’m focusing my questions just on the business plan for the moment. Questions I've asked may have already been answered or hinted to with the thread, and for that I apologize.

By now I’m sure most of you have seen this disclaimer, so I might as well keep with the trend. Yes, this will be an extensive post and I apologize. As a forewarning, my responses may sound rude and/or condescending, but I assure you I don’t mean them that way. I imagine it as if you and I are sitting at a table and I’m asking these questions with more of an upbeat attitude.
Generally speaking, the willingness of the OP to thoroughly answer any and all questions can be indicative of the effort they’re willing to put into their business.

Business Plan
v0.7b, updated Jul 21st, 2013 by Smidge (www.smidge.com/data/files/smidge.com.business.plan.pdf)

I suppose we’ll start off here. Typical mix-up since they’re similar, but this isn't a business plan, this is a prospectus.

A business plan lays out the goals of the company and how you want to (reasonably) attain them, as well as disclosing the company management structure and the company financials (income/balance/cash flow statements).

A prospectus, on the other hand, is typically used in securities offerings. It provides detailed information about the security that will be offered, tying in details about the company’s current business, financial statements, etc.

Purpose

[unneeded marketing jargon]

The purpose of Smidge.Com (“the fund”) is to allow investors to participate, in an overly proportional manner, in a diverse number of assets that exist in the crypto currency space, managed by experienced investors.

Can you describe how your operation is able to invest in an “overly proportional” manner? The phrasing in this situation is a bit unusual…but that may just be discrepancies in language, leading to confusion.

‘Experienced’. I’ve seen that word (and/or its synonyms) pop up a number of times during my reading, yet I haven’t seen any indication of past performance (either here or on your website). In your post history, you've made mention of investing in ASICMiner and some domain names, but not much else than that.

The fund holds assets in Bitcoin (BTC), Litecoin (LTC) and, to some extent, alternative crypto currencies (Altcoins). The fund may be supplemented by other assets, like hardware (not planned at launch). The Fund's portfolio will be public to show proof of ownership of underlying assets.

Are you considering building out a plan for adding mining hardware in the near future? If so, what hardware would you have in mind?

Smidge.Com aims to become the largest BTC investment fund by market capitalization, building trust for investors, start-ups looking for capital and the digital currency community as a whole.

That’s an extremely lofty goal for someone relatively new to the forums and without any provable Bitcoin trading experience prior to starting the fund. I’m not saying it isn't possible; what I am saying is to focus on building a solid foundation for your company first, growth comes later.

Strategy

The fund will primarily invest in BTC, LTC and, to a certain extent, Altcoin, assets. This is done in order to maximize returns and issue those as dividends to investors on a regular basis.

So, your business strategy is to “invest in securities and make a return”. That is not a strategy, that is a purpose; that’s what your company is supposed to do.

The strategy is being executed by applying the expertise of the management team in the fund’s day-to-day operations. Additional activities that are difficult or not at all possible for the small scale investor will include:

-   Participating in bulk offers (auctions) of discounted shares
-   Approaching and participating in start-up operations pre-IPO (as venture capitalist and advisor)
-   Approaching individual shareholders for large, uncomplicated buyouts of private shares at a discount (avoiding auctions)
-   Expand influence in the assets by becoming major shareholders, occupying board seats and other positions with greater influence
-   Investing in direct shares, avoiding fees completely
-   Becoming a trusted entity and a contact point for advice- and capital-seeking start-ups in the crypto currency world

Phew, you are dreaming quite large right now. This list doesn't seem to correlate to any particular strategy since these are just [super] long term goals. I get the feeling you’re planning as if you’re going to get BTC1,000 tomorrow and you’re trying to figure out how to invest it.

Unfortunately for you, I've been in this exact position before. I know that rush when entering the Bitcoin markets; where constraints are loosened and you feel as if you can create anything from the ground and up; to be a part of something still in its infancy and the urge to help it grow.

But I’m here to help provide a reality check. You’re not going to get the funding you’re looking for, and to get even a tenth of that amount would require a substantial amount of time and effort. As you read this (and continue through the other points), my hope is you’ll understand why.

The combination of the fund’s efforts is expected to lead to an asset valuation that, in mid and long term, significantly outperforms the market.

How do you outperform a securities market that has no statistical/averaging data and has only been around for about a year and half? A line must be drawn in order for you to “outperform” it, so where/what is that line?

If you’re referring to the Bitcoin currency market, how do you plan on beating a performance of 1000% (over the past 12 months, and only taking into account last year’s price and today’s price, not the $265 high)?

The fund will initially be launched as “Smidge.Com A”, A hereby classifying the first tranche. Other tranches of the fund might be launched by the management team in the future, classified as “Smidge.Com B”, “Smidge.Com C” etc. with different areas of operation, strategies, assets and/or splitting of shares. Shareholders of the previous tranches will be offered discounted shares in advance. The management team will disclose the processes after successful IPO of “Smidge.Com A” and after new tranches are deemed necessary.

“Might” be launched, or will be launched? I can see the purpose of various tranches over time, but that’s not something to focus on.

And speaking of these tranches…

Structure

The fund is a virtual identity held by investors of Smidge.Com, a company in the course of incorporation [1]. at the time of release of this document.

The shareholders of the fund “Smidge.Com A” will hold 765,000.00 shares, while Smidge.Com shareholders will hold 135,000.00 shares. Each of the funds’ shares always equals to 1/900,000 [2] of the total profits and voting power of the summed value from both the fund and Smidge.Com.

[1] – How far through the incorporation process are you, and what is your official company name?

[2] – Based on what I've read so far (and what I’ll get into more thoroughly below), each tranche (A, B, C, etc) will have 900,000 shares with it?
Speaking to just the 900,000 in “A”, you've determined that you’ll hold 15% (135,000) of it because…why?

Tying into this part is:

Raising Expansion Capital & IPO

After accepting pre-IPO investments from individual investors (private offering) for a limited time [1], the fund will be offering shares of stock to the general public through an IPO on one or several virtual security exchanges, as soon as negotiations are concluded [2]. Any listing fees will be paid by the company Smidge.Com, not the fund’s cash reserve or assets.

Details of the “Smidge.Com A” private offering:

-   Number of shares available: 315,000.00
-   Pre-IPO share price: 0.02 BTC [3]
-   Shares can be acquired in packages consisting of 250 shares (5.00 BTC per package)

[1] – Ah, the deadly sin of any up and coming business: making sure the purchases are “limited time” offerings. It’s a fantastic way to look like a Ponzi, or other ill-intentioned scheme, regardless of your intentions. I know the purpose of a private offering in normal fiat markets, but here in Bitcoin they typically don’t bode well. The “Get in Now” attitude has a negative stigma around here.

[2] – What Exchanges are you looking to host on? I've seen mention of BTCT, but are there others? The problem with not being listed on an Exchange is liquidity. Transferable shares are great if people actually want to buy into your asset, but that takes a substantial established company to make happen (like ASICMiner).

[3] – Good god man, you’re valuating your Smidge “A” shares at BTC18,000 for the 900,000 total shares? Not only that, you've granted yourself BTC2,700 of the total (equaling 135,000 shares) for no other reason than “management”?

To that end, why 315,000 shares? What happened to the remaining 450,000?

You’re sights are set WAY too high (hence why I said “you’re not going to get the funding you’re looking for” above). On top of that, you don’t have anything to back up the valuation.

In order to participate, please visit the page “SMIDGE.COM A DIRECT SHARES” on www.smidge.com . You can then use the contact form or contact username “Smidge” on bitcointalk.org.

Shares can be transferred owner-to-owner at any time by involving the fund’s management team. For more information, please visit the page “SMIDGE.COM A DIRECT SHARES” on www.smidge.com or PM username “Smidge” on bitcointalk.org.

You seem to be repeating yourself here…

Other than that, for what reason should investors purchase private shares? As a third party, this is incredibly sketchy. You’re asking for us to send money to a privately generated address with the promise of getting some virtual transferable shares (and all completely off an exchange). So if tomorrow you decide to up and leave, that’s it; the coins are gone.

Am I one of the few that sees a problem with this?

Management team and personal commitment

Management team currently consists of Smidge as CEO, through whom most of the communication will be done. There are two shareholders of Smidge.Com [1] consulting him in operations and finance, who have access to documents assuring the continuity of the fund in case Smidge catches a cold, gets hit by a bus etc.

Smidge’s ID, E-Mail and phone number have been verified with Mt.Gox [2].

The management team/consultants personally know each other since several years and have worked and invested together on multiple occasions. They are obliged to each other and Smidge.Com through a legal binding contract. [3]

[1] – Any chance of divulging this information, or will they just be silent partners that we’ll never know? If the latter, then what’s the point of revealing this information at all?

[2] – So what? Mt. Gox has absolutely nothing to do with your business. The object here should be to verify your identity with any Exchange operators you’re looking to be hosted on. And if you’re looking for more transparency, then verify with your Investors as well. It makes it easier than doing a WhoIs on your website and tracking names through any social media accounts.

[3] – Similar to my statement on Sandstorm, both this and #1 are just “words on paper” with nothing to back up your claims. If you’re looking for transparency (which we’ll touch on momentarily), then information on partners and contracts involved is almost necessary.

The management team transferred an initial investment of 24.6349 BTC [1] into the fund on July 21st, 2013. These assets, as well as any profits generated through them, will be part of the fund at its announcement date (July 21st, 2013). More physical and virtual assets (BTC, LTC, Altcoins, mining equipment…) are planned to be brought into the fund or it’s tranches at a later time as donation [2], for additional value without dilution of existing shares.

[1] – Just so I have this straight, you and your team have committed nearly BTC25 to your company, yet you've granted yourself a BTC2,700 holding out of your proposed market cap of BTC18,000 with no existing revenue streams? As some internet users would say, “lolwut?”.

[2] – I’m not sure how this makes any sense. You’re going to conjure assets from somewhere, and then just give them to your fund as a “donation”?
In short, don’t do this. Keep your company holdings and financials separate from your own, because if the time comes to cash out, there will be nothing but trouble as you go “oh, I let my company use my shares and my mining equipment, so I’ll take them back now”.

Transparency

The fund seeks maximum transparency by

-   fully disclosing all assets held in the fund regularly
-   disclosing all dividends accrued and paid
-   disclosing all management fees
-   operating a website at www.smidge.com for public information

This is a start, but certainly not enough.
We know nothing about you and your history, and before April 2013 you didn't exist. There’s more to transparency than disclosing what you invest in. There’s the matter of management biographies, company financial statements, risk management strategies, and the like.

Underlying assets of the fund

The management team will buy and sell previously mentioned asset classes in the best interest of the fund in its day-to-day operations in order to maximize returns. Shareholders can bring forward motions to add or remove assets to or from the fund at any time.

As if you wouldn’t act in the best interest of the fund? I’m not sure why this sort of phrasing is needed. If I’m putting money with an investment management company, I automatically presume I’m investing in people who have the fund in their best interests.

Dividends

Dividends will be paid from earnings accrued from the underlying assets of the fund. Additional dividends might be paid from earnings out of trading activities. A portion of earnings might be reinvested into assets.

Dividends will be paid weekly, usually every Sunday. Additional dividends might be paid at any time if deemed necessary.

Why pay weekly if you’re intention is to be a long term investment vehicle? I'm really just curious if there's any reasoning behind it, as compared to bi-weekly, monthly, etc.

Risk to shareholders

The fund's market cap and NAV rely on the value of the underlying assets and the share price decided upon by the market. If the underlying asset value decreases, the entire fund's market cap and NAV will also decrease. Additional risks to assets include the price of BTC, losses related to trading activities as well as other risks. The fund does not hedge against all of these risks. Each shareholder must understand these risks before investing.

So much for a long term investment…
Are there any strategies you've currently implemented to hedge against at least some risks? If so, what sort of risk management is at work? It's a hard question to answer, but let’s see if you can describe anything other than Sandstorm’s “Simple risk management” phrasing.

Legal aspects

The fund is a virtual identity. As with all digital currency funds and securities, everything is virtual, which to the best of our knowledge is perfectly legal. Please do your homework and read this document thoroughly before investing.

This notion is rapidly changing. Here in the States, I have a feeling the SEC will begin to move against existing virtual securities and adjust the federal regulations accordingly. Germany (and other EU countries) will undoubtedly feel pressure from the US on these matters. As Bitcoin grows, there’s no reason to think regulatory committees won’t start pushing. 

When the time comes, what will you do in the face of regulation? What laws and regulations do you think could apply to your company, and do you feel you can aptly adapt them?

Fund Closure

Management reserves the right to close this fund for any reason giving 30 days’ notice. All assets in the fund, will be liquidated on the respective markets. Distribution to shareholders will be done according to a public, defined timeline and action plan.

Why would the fund ever be closed down? And isn't the object of having multiple partners to limit the chance of this happening?

In any case, I presume by all assets this includes currency holdings (including any company fiat), stocks, bonds, and physical hardware (mining equipment if any)?

--------------------------

Alright! I suppose that’s all I can manage for now, though I do look forward to the responses. To the other posters in this thread, some of you may recognize your questions reworded as to cite examples from the business plan. This wasn't an accident as I noticed Smidge wasn't answering a few questions all that thoroughly. Maybe I’ll somehow be an exception given I was asked to respond?


To: Smidge – Here’s the honest reality check.
You are not experienced in Bitcoin securities trading (based on the information you've provided us).
You are looking for a massive company valuation based on essentially nothing.
You are not trusted (it’s earned over time, not just given out).
You are a new forum member and you are new to Bitcoin overall (so far as I've been able to determine).

Combined together, you’re nearly in the same situation as the Sandstorm security, which seems to be your primary competition (though I’m sure there’s more, and anyone please feel free to enlighten me on this).

That said, why should investors put any money with you over Sandstorm? After all, Sandstorm is at least being actively traded on an exchange (which makes purchases and sales vastly easier overall, even if the IPO was terrible), and its owner currently holds 40% of the total asset. By reading the business plans for each company, the distinction should be obvious, but unfortunately this isn’t something I can say is true.

In the end, no one is perfect and I don't expect them to be. For many people, this is quite a learning experience when starting out (I know it was for me). Let's see if we can work through this!

Thanks for the honest review.

[freedomno1]

It seems my recent postings breaking down and analyzing other up-and-coming funds has garnered a bit of attention, both on and off the forums. Why? I don’t know. I've always assumed I was just asking basic questions, and I don’t consider myself an expert by any means. Regardless of this, it seems quite a few people have found my postings to be helpful.

Your efficient at asking the right questions and making a good effort while pointing out the key-points Korbman.
18RATTT was a redirect to you since I attempted it but was not satisfied with my effort if you got asked by them for a second opinion
I appreciate the good analysis and i'm sure others beside me have noticed the depth of your analyzing to get to the root of the questions.
Freedom

[Smidge]

Hi Korbman,

I hereby want to make an announcement for a new fund by posting the business plan.

Feel free to shoot holes in it as you desire by just replying, but please make sure you read the business plan thoroughly and check out the FAQ on the website www.smidge.com first! ...

To be quite honest with you, your following analysis is what I was looking for when I wrote this.

I've stumbled across this thread before, but I hadn't made a concerted effort to dig into the content.
It seems my recent postings breaking down and analyzing other up-and-coming funds has garnered a bit of attention, both on and off the forums. Why? I don’t know. I've always assumed I was just asking basic questions, and I don’t consider myself an expert by any means. Regardless of this, it seems quite a few people have found my postings to be helpful.

This is why I contacted you. I need reviewers who have been in the game long enough to see a bunch of these ventures come and go, read through this thing word by word and ask basic questions, so that I can improve the venture and myself.

Smidge contacted me directly to ask if I’d take a look at his business plan and to provide honest feedback. What you’ll read below is the result.

And before anyone asks (as I’m sure someone would), no, I did not receive compensation (of any kind) for my efforts, nor do I plan on receiving anything in the future. The questions and comments written below were done on my own accord and represent my opinions.

He speaketh the truth.

I've noticed that Smidge mostly points everyone to look at his business plan and website for answers to various questions. As such, this post will be a breakdown of the plan (aside from basic definitions of phrases on his website, everything just points back to the plan anyway).

Another note on this, I’m focusing my questions just on the business plan for the moment. Questions I've asked may have already been answered or hinted to with the thread, and for that I apologize.

The BP is meant to be the central documentation of what we do. This is why I posted an exact copy of it in my announcement.

By now I’m sure most of you have seen this disclaimer, so I might as well keep with the trend. Yes, this will be an extensive post and I apologize. As a forewarning, my responses may sound rude and/or condescending, but I assure you I don’t mean them that way. I imagine it as if you and I are sitting at a table and I’m asking these questions with more of an upbeat attitude.
Generally speaking, the willingness of the OP to thoroughly answer any and all questions can be indicative of the effort they’re willing to put into their business.

That is what I was asking for, so thank you again.

Business Plan
v0.7b, updated Jul 21st, 2013 by Smidge (www.smidge.com/data/files/smidge.com.business.plan.pdf)

I suppose we’ll start off here. Typical mix-up since they’re similar, but this isn't a business plan, this is a prospectus.

A business plan lays out the goals of the company and how you want to (reasonably) attain them, as well as disclosing the company management structure and the company financials (income/balance/cash flow statements).

A prospectus, on the other hand, is typically used in securities offerings. It provides detailed information about the security that will be offered, tying in details about the company’s current business, financial statements, etc.

They are similar. I still call it BP because ours is currently somewhere inbetween and aims to be a full BP when finished (v1.0). A lot of the detailed data has to be gathered along the first steps that we are currently making.

Purpose

[unneeded marketing jargon]

The purpose of Smidge.Com (“the fund”) is to allow investors to participate, in an overly proportional manner, in a diverse number of assets that exist in the crypto currency space, managed by experienced investors.

Can you describe how your operation is able to invest in an “overly proportional” manner? The phrasing in this situation is a bit unusual…but that may just be discrepancies in language, leading to confusion.

The operation is not investing in an overly proportional manner, please look at the wording carefully. It means our shareholders are participating in an overly proportional manner in the market.

Here is an example: If you'd combine the 20 biggest BTC/LTC securities by market cap and form an index (let's call it BTC-X, which is essentially "the market"), then the performance of BTC-X represents the total performance (or price, depending on setup) of the individual securities that it contains. What we try to do as fund managers is beat "the market" through our expertise in managing the fund's day to day operations and let our shareholders participate. This is what I call "overly proportional" manner, it essentially means beating the market. That is how the benchmarking is done with funds on the financial markets. US fund managers are benchmarked against the DOW, Germans against the DAX etc. Unfortunately, most of them fail (see my previous post about this), which is verifyable. I believe we really need an index like that, it's not more than the combined performance of the x biggest stocks by market cap.

Now if someone starts that index mentioned above, please give me some credit I think it would be the single most important number besides BTC/USD, you can create sub-indices i.e. for mining, plus you can issue put/call options on them etc. But this is not on topic anymore, sorry.

‘Experienced’. I’ve seen that word (and/or its synonyms) pop up a number of times during my reading, yet I haven’t seen any indication of past performance (either here or on your website). In your post history, you've made mention of investing in ASICMiner and some domain names, but not much else than that.

I posted this before, but let me sum it up.

I am actively engaged in investing in virtual currency stocks since April 2013. The first security was bought on 2013-05-24 (verifyable on btct.co). There were a total of 18 BTC invested from my own capital. Please note also that I did not start with the whole 18 BTC that I invested, but gradually fed in further BTC (the last 5 on July 10th). On July 21st (launch of Smidge.Com), I was at 24.7212 BTC that I transferred entirely to the fund (see balance sheet "Week 30"). During last week until Sunday, July 28th, I grew this sum 26.30% (see balance sheet "Week 31").

- Have you run a fund of any kind before?  Is it somewhere documented that we can check out?
Not a public fund, but as I mentioned before, I have been successfully investing in stocks since 2006 for myself and a family fund. It was pretty turbulent at times from 2008 on, as you can imagine. If you have the time, you can check my tweets for hints on what I've invested. I am considered by friends, family and coworkers as an expert in macroeconomics. This passion is also how I got drawn into the current environment

Sources:
https://bitcointalk.org/index.php?topic=259772.msg2771971#msg2771971
https://bitcointalk.org/index.php?topic=259772.msg2788731#msg2788731
https://docs.google.com/spreadsheet/ccc?key=0AgLGW6ARhmFLdDVyLUFPYjBHX0FIWWxXTy1Bc09uaVE&usp=sharing

The fund holds assets in Bitcoin (BTC), Litecoin (LTC) and, to some extent, alternative crypto currencies (Altcoins). The fund may be supplemented by other assets, like hardware (not planned at launch). The Fund's portfolio will be public to show proof of ownership of underlying assets.

Are you considering building out a plan for adding mining hardware in the near future? If so, what hardware would you have in mind?

Not at the moment and yes, the topic is very vaguely described. If a plan for this is ever made, we would launch a new security to distinguish this operation very clearly from the current fund, to not mix things up.

Smidge.Com aims to become the largest BTC investment fund by market capitalization, building trust for investors, start-ups looking for capital and the digital currency community as a whole.

That’s an extremely lofty goal for someone relatively new to the forums and without any provable Bitcoin trading experience prior to starting the fund. I’m not saying it isn't possible; what I am saying is to focus on building a solid foundation for your company first, growth comes later.

That is the goal for the fund's size. It's ambitious, but as you mentioned, not impossible. And I am aware that it might take a long time.

Strategy

The fund will primarily invest in BTC, LTC and, to a certain extent, Altcoin, assets. This is done in order to maximize returns and issue those as dividends to investors on a regular basis.

So, your business strategy is to “invest in securities and make a return”. That is not a strategy, that is a purpose; that’s what your company is supposed to do.

You are correct. The fund's purpose is to generate returns, by applying strategies (listed below). I need to change the wording on that.

The strategy is being executed by applying the expertise of the management team in the fund’s day-to-day operations. Additional activities that are difficult or not at all possible for the small scale investor will include:

-   Participating in bulk offers (auctions) of discounted shares
-   Approaching and participating in start-up operations pre-IPO (as venture capitalist and advisor)
-   Approaching individual shareholders for large, uncomplicated buyouts of private shares at a discount (avoiding auctions)
-   Expand influence in the assets by becoming major shareholders, occupying board seats and other positions with greater influence
-   Investing in direct shares, avoiding fees completely
-   Becoming a trusted entity and a contact point for advice- and capital-seeking start-ups in the crypto currency world

Phew, you are dreaming quite large right now. This list doesn't seem to correlate to any particular strategy since these are just [super] long term goals. I get the feeling you’re planning as if you’re going to get BTC1,000 tomorrow and you’re trying to figure out how to invest it.

Unfortunately for you, I've been in this exact position before. I know that rush when entering the Bitcoin markets; where constraints are loosened and you feel as if you can create anything from the ground and up; to be a part of something still in its infancy and the urge to help it grow.

But I’m here to help provide a reality check. You’re not going to get the funding you’re looking for, and to get even a tenth of that amount would require a substantial amount of time and effort. As you read this (and continue through the other points), my hope is you’ll understand why.

"The strategy is being executed by applying the expertise of the management team in the fund’s day-to-day operations.", which means buying and selling securities. This is the basic strategy of every fund and I won't go into details on that. You can see what we buy and sell in the balance sheet every week. What I listed above are certain additional activities, of which we can perform more the bigger the fund gets. Regarding our current progress that we are making in several areas, I am very confident that we can reach all of our goals. Plus, there are no hard time limits set, yet.

The combination of the fund’s efforts is expected to lead to an asset valuation that, in mid and long term, significantly outperforms the market.

How do you outperform a securities market that has no statistical/averaging data and has only been around for about a year and half? A line must be drawn in order for you to “outperform” it, so where/what is that line?

If you’re referring to the Bitcoin currency market, how do you plan on beating a performance of 1000% (over the past 12 months, and only taking into account last year’s price and today’s price, not the $265 high)?

The fund will initially be launched as “Smidge.Com A”, A hereby classifying the first tranche. Other tranches of the fund might be launched by the management team in the future, classified as “Smidge.Com B”, “Smidge.Com C” etc. with different areas of operation, strategies, assets and/or splitting of shares. Shareholders of the previous tranches will be offered discounted shares in advance. The management team will disclose the processes after successful IPO of “Smidge.Com A” and after new tranches are deemed necessary.

“Might” be launched, or will be launched? I can see the purpose of various tranches over time, but that’s not something to focus on.

"Might be" is exactly what this should mean. We don't know if other securities will be issued under this umbrella, let alone what their focus will be (Mining, etc.). We have laid the groundwork now though, so that we can create new ones without trouble.

And speaking of these tranches…

Structure

The fund is a virtual identity held by investors of Smidge.Com, a company in the course of incorporation [1]. at the time of release of this document.

The shareholders of the fund “Smidge.Com A” will hold 765,000.00 shares, while Smidge.Com shareholders will hold 135,000.00 shares. Each of the funds’ shares always equals to 1/900,000 [2] of the total profits and voting power of the summed value from both the fund and Smidge.Com.

[1] – How far through the incorporation process are you, and what is your official company name?

There is going to be news on this soon, we are currently still working on the details. The status is still the same as stated in the BP.

[2] – Based on what I've read so far (and what I’ll get into more thoroughly below), each tranche (A, B, C, etc) will have 900,000 shares with it?
Speaking to just the 900,000 in “A”, you've determined that you’ll hold 15% (135,000) of it because…why?

900,000 in "A". As mentioned before, no other details on further tranches are available because none are planned. The details on the 135,000 Smidge.Com shares and issuing of them are currently being worked out, more on that will follow soon.

Tying into this part is:

Raising Expansion Capital & IPO

After accepting pre-IPO investments from individual investors (private offering) for a limited time [1], the fund will be offering shares of stock to the general public through an IPO on one or several virtual security exchanges, as soon as negotiations are concluded [2]. Any listing fees will be paid by the company Smidge.Com, not the fund’s cash reserve or assets.

Details of the “Smidge.Com A” private offering:

-   Number of shares available: 315,000.00
-   Pre-IPO share price: 0.02 BTC [3]
-   Shares can be acquired in packages consisting of 250 shares (5.00 BTC per package)

[1] – Ah, the deadly sin of any up and coming business: making sure the purchases are “limited time” offerings. It’s a fantastic way to look like a Ponzi, or other ill-intentioned scheme, regardless of your intentions. I know the purpose of a private offering in normal fiat markets, but here in Bitcoin they typically don’t bode well. The “Get in Now” attitude has a negative stigma around here.

It is not my fault that in Bitcoin, they don't bode well. It is also not an indication that our offering is one of the schemes listed, although it makes it more likely regarding the environment we are in. It's an honest, professionally operated pre-IPO offering for discounted shares that we planned carefully, not rushing an IPO or any further steps.

[2] – What Exchanges are you looking to host on? I've seen mention of BTCT, but are there others? The problem with not being listed on an Exchange is liquidity. Transferable shares are great if people actually want to buy into your asset, but that takes a substantial established company to make happen (like ASICMiner).

We are still in pre-IPO stage and plan to remain there for a few weeks. We are currently discussing with several exchanges, planning to IPO on several exchanges.

[3] – Good god man, you’re valuating your Smidge “A” shares at BTC18,000 for the 900,000 total shares? Not only that, you've granted yourself BTC2,700 of the total (equaling 135,000 shares) for no other reason than “management”?

To that end, why 315,000 shares? What happened to the remaining 450,000?

You’re sights are set WAY too high (hence why I said “you’re not going to get the funding you’re looking for” above). On top of that, you don’t have anything to back up the valuation.

315,000 (35%) are offered pre-IPO (can be transferred to any exchange we IPO on), the details for the rest are currently being worked out.

In order to participate, please visit the page “SMIDGE.COM A DIRECT SHARES” on www.smidge.com . You can then use the contact form or contact username “Smidge” on bitcointalk.org.

Shares can be transferred owner-to-owner at any time by involving the fund’s management team. For more information, please visit the page “SMIDGE.COM A DIRECT SHARES” on www.smidge.com or PM username “Smidge” on bitcointalk.org.

You seem to be repeating yourself here…

Other than that, for what reason should investors purchase private shares? As a third party, this is incredibly sketchy. You’re asking for us to send money to a privately generated address with the promise of getting some virtual transferable shares (and all completely off an exchange). So if tomorrow you decide to up and leave, that’s it; the coins are gone.

Am I one of the few that sees a problem with this?

You are referring to a general problem in the environment that we are all operating in. I agree that having an exchange inbetween is much less risky for the shareholder, and that is exactly what our next step is. But rushing an IPO is the worst thing you can do to your shareholder's trust, as you have seen in numerous examples before. This is what we are trying to avoid and during this process of preparing a rock solid IPO, we are putting a lot of manual work into providing investors with discounted shares, at the same time increasing the capital we can work with. The amount of shares we will be able to sell with this is extremely small, and we know that. Also, this is not meant to replace an exchange's services or some "cut out the middleman" strategy. We know very well that an exchange provides an invaluable service and we are going to embrace this quite soon.

Management team and personal commitment

Management team currently consists of Smidge as CEO, through whom most of the communication will be done. There are two shareholders of Smidge.Com [1] consulting him in operations and finance, who have access to documents assuring the continuity of the fund in case Smidge catches a cold, gets hit by a bus etc.

Smidge’s ID, E-Mail and phone number have been verified with Mt.Gox [2].

The management team/consultants personally know each other since several years and have worked and invested together on multiple occasions. They are obliged to each other and Smidge.Com through a legal binding contract. [3]

[1] – Any chance of divulging this information, or will they just be silent partners that we’ll never know? If the latter, then what’s the point of revealing this information at all?

As stated, the consultants are two people close to me in real life who chose to be silent partners, as you put it. It's a finance and an operations expert who have access to information on running the fund in case anything happens to me, that I took a long time to collect and write down. The point of revealing this is to show that there is more behind this venture than one single guy, namely several real life partners bound by a contract that have access to redundant information.

[2] – So what? Mt. Gox has absolutely nothing to do with your business. The object here should be to verify your identity with any Exchange operators you’re looking to be hosted on. And if you’re looking for more transparency, then verify with your Investors as well. It makes it easier than doing a WhoIs on your website and tracking names through any social media accounts.

I will provide more verification soon. I am, in several aspects, also verified with WeExchange (pending), burnside and with John K, who I got involved with to resolve the Accountant/Account Manager issue posted before. There will be more information on verfication soon, when the founding of the company is official.

I did not want to hold back all answers for days, so that was the first batch. To be continued...

[Deprived]

I was also PMed and asked to review this.  I haven't as:

1.  I haven't had time,
2.  I regularly get asked to review securities, nearly all of which are either:
 a. Mining operations.
 b. Someone who bought ASICMINER shares, made a profit on it and want to run an investment fund.

Thankfully korbman has stepped in and pointed out the most obvious problems.

I'd like to expand on one of them - the taking of a large chunk of units by the issuer.  The largest problem with this is that if the fund doesn't sell out (and it won't) the management end up holding a disproportionately large portion of the fund.

If the issuer takes 135,000 units (shares) and only sells another 62,500 then he ends up owning two thirds of the funds - meaning all investors have immediately taken a 67% loss in their capital value.  And if he then closes teh fund he gets 2/3 of all investment for doing absolutely nothing.

Using shares as a means to take a management fee is horrible practice for the above as well as other reasons.  I run a fund myself - here's how I do it:

1.  The fund begain with assets I transferred in - as it happens it was just BTC, LTC and some ASICMINER shares (this was back when they were .1 each nearly a year ago).
2.  Initial shares were sold at a fixed price - I started with a number equal to the value of the assets i transferred in - so I basically bought them at the same price as anyone else (but was able to pay with securities I held - this was necessary to remove any conflict of interest if I continued managing my own investments in parallel).
3.  My management fee is a percentage of profits.  Not received dividends or any crap like that - but actual profits.  Meaning growth above the previous High-water mark.
4.  I take my fee in units at the current NAV/U.

That allows me to expand my holdings - and at a preferential price - but without EVER diminishing the NAV/U of the holdings of existing investors.  Immediately after people bought in, each unit of theirs was backed by assets roughly equal to the price they paid (slightly less due to transaction fees on the exchange).

If you have confidence in your ability to make a profit then a structure like that is both fair to investors AND offers you a chance to make a very decent management fee.  Not only do you get the headline rate - but by taking it in units at NAV/U you additionally gain from any premium the market places on them.

Of course if you don't make a profit you get absolutely zero.  And that's how it should be when you haven't demonstrated significant experience, aren't regulated or insured etc.

[Smidge]

I was also PMed and asked to review this.  I haven't as:

1.  I haven't had time,
2.  I regularly get asked to review securities, nearly all of which are either:
 a. Mining operations.
 b. Someone who bought ASICMINER shares, made a profit on it and want to run an investment fund.

Thankfully korbman has stepped in and pointed out the most obvious problems.

I'd like to expand on one of them - the taking of a large chunk of units by the issuer.  The largest problem with this is that if the fund doesn't sell out (and it won't) the management end up holding a disproportionately large portion of the fund.

If the issuer takes 135,000 units (shares) and only sells another 62,500 then he ends up owning two thirds of the funds - meaning all investors have immediately taken a 67% loss in their capital value.  And if he then closes teh fund he gets 2/3 of all investment for doing absolutely nothing.

Using shares as a means to take a management fee is horrible practice for the above as well as other reasons.  I run a fund myself - here's how I do it:

1.  The fund begain with assets I transferred in - as it happens it was just BTC, LTC and some ASICMINER shares (this was back when they were .1 each nearly a year ago).
2.  Initial shares were sold at a fixed price - I started with a number equal to the value of the assets i transferred in - so I basically bought them at the same price as anyone else (but was able to pay with securities I held - this was necessary to remove any conflict of interest if I continued managing my own investments in parallel).
3.  My management fee is a percentage of profits.  Not received dividends or any crap like that - but actual profits.  Meaning growth above the previous High-water mark.
4.  I take my fee in units at the current NAV/U.

That allows me to expand my holdings - and at a preferential price - but without EVER diminishing the NAV/U of the holdings of existing investors.  Immediately after people bought in, each unit of theirs was backed by assets roughly equal to the price they paid (slightly less due to transaction fees on the exchange).

If you have confidence in your ability to make a profit then a structure like that is both fair to investors AND offers you a chance to make a very decent management fee.  Not only do you get the headline rate - but by taking it in units at NAV/U you additionally gain from any premium the market places on them.

Of course if you don't make a profit you get absolutely zero.  And that's how it should be when you haven't demonstrated significant experience, aren't regulated or insured etc.

Hi Deprived,

Thanks a lot for taking the time to look at this, although very briefly. I understand the issue that you and Korbman raised, but please both consider that none of the 135.000 shares have been issued. The only thing that is being put out there is the pre-IPO shares. This is done intentionally, as we are working on the share structure and other details, also involving exchanges. There is no dilution of profits whatsoever, plus it is not possible to close the fund and take a majority share.

[John (John K.)]

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I confirm that I have received a single page (page 1) of an employment contract (with the job title listed as 'Key Account Manager B2B' addressed to Alex Metz. Please note that I am not a professional nor trained in verifying documents given, so I cannot guarantee that they're 100% authentic or came from the original owner.

Thank you,
John
30 July 2013
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PS: Quoted by request.

- What is your current day job?  How long have you worked there?

I work full-time as Key Account Manager in the B2B space since 2010.

[coco23]

Hi,
I haven't read your business plan nor I'm interested in investing, just wanted to comment on this:

I posted this before, but let me sum it up.

I am actively engaged in investing in virtual currency stocks since April 2013. The first security was bought on 2013-05-24 (verifyable on btct.co). There were a total of 18 BTC invested from my own capital. Please note also that I did not start with the whole 18 BTC that I invested, but gradually fed in further BTC (the last 5 on July 10th). On July 21st (launch of Smidge.Com), I was at 24.7212 BTC that I transferred entirely to the fund (see balance sheet "Week 30"). During last week until Sunday, July 28th, I grew this sum 26.30% (see balance sheet "Week 31").

So you were trading from end of May to end of July and you made 26.3%

Unfortunately coinflow.co seems to be down, so I can't access the long term charts, BUT:
In this period of time almost everything went up on Btct.co. The most traded securities like Asicminer (from ~2.5 to now over 4), Basic (should be >+500%) or Cognitive (more than doubled) all increased significantly.

I don't want to question that you might have experience from somewhere else, but I don't see the 26.3% in this time as a good achievement or as a proof of experience.

[Smidge]

Hi,
I haven't read your business plan nor I'm interested in investing, just wanted to comment on this:

I posted this before, but let me sum it up.

I am actively engaged in investing in virtual currency stocks since April 2013. The first security was bought on 2013-05-24 (verifyable on btct.co). There were a total of 18 BTC invested from my own capital. Please note also that I did not start with the whole 18 BTC that I invested, but gradually fed in further BTC (the last 5 on July 10th). On July 21st (launch of Smidge.Com), I was at 24.7212 BTC that I transferred entirely to the fund (see balance sheet "Week 30"). During last week until Sunday, July 28th, I grew this sum 26.30% (see balance sheet "Week 31").

So you were trading from end of May to end of July and you made 26.3%

Unfortunately coinflow.co seems to be down, so I can't access the long term charts, BUT:
In this period of time almost everything went up on Btct.co. The most traded securities like Asicminer (from ~2.5 to now over 4), Basic (should be >+500%) or Cognitive (more than doubled) all increased significantly.

I don't want to question that you might have experience from somewhere else, but I don't see the 26.3% in this time as a good achievement or as a proof of experience.

Hi coco23,

Can you please go through your numbers again? Because your conclusion and statement make no sense, which is because you didn't read what I posted (but quoted it).

[coco23]

Hi coco23,

Can you please go through your numbers again? Because your conclusion and statement make no sense, which is because you didn't read what I posted (but quoted it).

Sorry if I wasn't clear enough.
You posted the performance of your funds that far (the 26.3% in 2 months) as an indicator for your experience in the reply to Korbman above.

And I say that such a performance wasn't difficult to achieve given the bull market on Btct in the last months.

Hence your performance is no indicator for how good or experienced you are. Not to mention that a timeframe of 2 months is too short for such conclusions anyway.

Just wanted to point that out. There is no central index (like Dow Jones or similar) we could compare your performance with and many newbies might invest money just because of your past performance.

[Smidge]

You posted the performance of your funds that far (the 26.3% in 2 months) as an indicator for your experience in the reply to Korbman above.

... During last week until Sunday, July 28th, I grew this sum 26.30% ...

I grew the fund by 26.30% in one week (last week to be precise). Is this particular fact unclear to anyone else?

Edit: The performance since 2013-05-24 until last week is explained in the post above.

[coco23]

You posted the performance of your funds that far (the 26.3% in 2 months) as an indicator for your experience in the reply to Korbman above.

... During last week until Sunday, July 28th, I grew this sum 26.30% ...

I grew the fund by 26.30% in one week (last week to be precise). Is this particular fact unclear to anyone else?

Edit: The performance since 2013-05-24 until last week is explained in the post above.

Thanks for the clarification, I got confused with your numbers. Nvm, my bad.

So your experience (apart from real stocks markets) is basically 2 months investing on Btct. Then your funds was founded last week and I'd say you had an excellent week since then.

Still this is no proof of experience. All the best for you and your funds, but I'd definitely suggest for interested investors to follow this for a few weeks before investing.

[Smidge]

You posted the performance of your funds that far (the 26.3% in 2 months) as an indicator for your experience in the reply to Korbman above.

... During last week until Sunday, July 28th, I grew this sum 26.30% ...

I grew the fund by 26.30% in one week (last week to be precise). Is this particular fact unclear to anyone else?

Edit: The performance since 2013-05-24 until last week is explained in the post above.

Thanks for the clarification, I got confused with your numbers. Nvm, my bad.

So your experience (apart from real stocks markets) is basically 2 months investing on Btct. Then your funds was founded last week and I'd say you had an excellent week since then.

Still this is no proof of experience. All the best for you and your funds, but I'd definitely suggest for interested investors to follow this for a few weeks before investing.

Hi coco23,

No problem. Anyone investing in these kind of securities should do their own due diligence, if anyone wants a documented 12 months of performance, then I cannot deliver this and they definitely shouldn't invest. What I can deliver though is describing how my investment history looks like (digital currencies and previous investments) and delivering sophisticated weekly balance sheets that prove my expertise.

There are other ventures out there who promise hopes and dreams, then rush an IPO within a few days and fail. This is not my approach with Smidge.Com. My job is to deliver a green number for investors regularly and plan any next steps carefully as we go along.

[Smidge]

Part II:

The management team transferred an initial investment of 24.6349 BTC [1] into the fund on July 21st, 2013. These assets, as well as any profits generated through them, will be part of the fund at its announcement date (July 21st, 2013). More physical and virtual assets (BTC, LTC, Altcoins, mining equipment…) are planned to be brought into the fund or it’s tranches at a later time as donation [2], for additional value without dilution of existing shares.

[1] – Just so I have this straight, you and your team have committed nearly BTC25 to your company, yet you've granted yourself a BTC2,700 holding out of your proposed market cap of BTC18,000 with no existing revenue streams? As some internet users would say, “lolwut?”.

As stated, none of these shares have been issued. The only thing that is being put out there is the pre-IPO shares. This is done intentionally, as we are working on the share structure and other details, also involving exchanges. There is no dilution of profits whatsoever, plus it is not possible to close the fund and take a majority share.

[2] – I’m not sure how this makes any sense. You’re going to conjure assets from somewhere, and then just give them to your fund as a “donation”?
In short, don’t do this. Keep your company holdings and financials separate from your own, because if the time comes to cash out, there will be nothing but trouble as you go “oh, I let my company use my shares and my mining equipment, so I’ll take them back now”.

I transferred ALL my coins into the fund. I acquired about 5 BTC after that as my private coins that I use to buy stuff. This is to demonstrate that I am "All In" on this venture and have a personal commitment.

Transparency

The fund seeks maximum transparency by

-   fully disclosing all assets held in the fund regularly
-   disclosing all dividends accrued and paid
-   disclosing all management fees
-   operating a website at www.smidge.com for public information

This is a start, but certainly not enough.
We know nothing about you and your history, and before April 2013 you didn't exist. There’s more to transparency than disclosing what you invest in. There’s the matter of management biographies, company financial statements, risk management strategies, and the like.

I cannot change that. But I can tell everyone that my Key Performance Indicator is this balance sheet, which has developed very well:
https://docs.google.com/spreadsheet/ccc?key=0AgLGW6ARhmFLdDVyLUFPYjBHX0FIWWxXTy1Bc09uaVE&usp=sharing

Underlying assets of the fund

The management team will buy and sell previously mentioned asset classes in the best interest of the fund in its day-to-day operations in order to maximize returns. Shareholders can bring forward motions to add or remove assets to or from the fund at any time.

As if you wouldn’t act in the best interest of the fund? I’m not sure why this sort of phrasing is needed. If I’m putting money with an investment management company, I automatically presume I’m investing in people who have the fund in their best interests.

Just to make it crystal clear. Please remember that not everyone is an expert in this field and you need some basic explanations in between.

Dividends

Dividends will be paid from earnings accrued from the underlying assets of the fund. Additional dividends might be paid from earnings out of trading activities. A portion of earnings might be reinvested into assets.

Dividends will be paid weekly, usually every Sunday. Additional dividends might be paid at any time if deemed necessary.

Why pay weekly if you’re intention is to be a long term investment vehicle? I'm really just curious if there's any reasoning behind it, as compared to bi-weekly, monthly, etc.

It is important for many investors that regular returns come in, bi-weekly or monthly is just too slow for the environment we are operating in. I think every shareholder agrees that they want their returns asap.

Risk to shareholders

The fund's market cap and NAV rely on the value of the underlying assets and the share price decided upon by the market. If the underlying asset value decreases, the entire fund's market cap and NAV will also decrease. Additional risks to assets include the price of BTC, losses related to trading activities as well as other risks. The fund does not hedge against all of these risks. Each shareholder must understand these risks before investing.

So much for a long term investment…
Are there any strategies you've currently implemented to hedge against at least some risks? If so, what sort of risk management is at work? It's a hard question to answer, but let’s see if you can describe anything other than Sandstorm’s “Simple risk management” phrasing.

First of all, you cannot hedge against any risk and circumstance. If the market goes down, your NAV goes down, except you hedge 1:1 on every trade you make, which in turn minimizes your profits. A lot of the risk management lies in the trading strategies that are being applied, which are highly proprietary to every fund manager. Diversification and close observation of the market and it's securities is a key element aswell. By combining all this, you can manage a large size fund with not a risk-less, but with a healthy risk/reward ratio.

Legal aspects

The fund is a virtual identity. As with all digital currency funds and securities, everything is virtual, which to the best of our knowledge is perfectly legal. Please do your homework and read this document thoroughly before investing.

This notion is rapidly changing. Here in the States, I have a feeling the SEC will begin to move against existing virtual securities and adjust the federal regulations accordingly. Germany (and other EU countries) will undoubtedly feel pressure from the US on these matters. As Bitcoin grows, there’s no reason to think regulatory committees won’t start pushing.  

When the time comes, what will you do in the face of regulation? What laws and regulations do you think could apply to your company, and do you feel you can aptly adapt them?

We are currently in the process of incorporation. I know its an issue, more on that will be posted very soon.

Fund Closure

Management reserves the right to close this fund for any reason giving 30 days’ notice. All assets in the fund, will be liquidated on the respective markets. Distribution to shareholders will be done according to a public, defined timeline and action plan.

Why would the fund ever be closed down? And isn't the object of having multiple partners to limit the chance of this happening?

In any case, I presume by all assets this includes currency holdings (including any company fiat), stocks, bonds, and physical hardware (mining equipment if any)?

The closure statement is in there because it is expected, just like in any other BP/prospectus. People want to know what exactly happens with their investment in case of failure. "Assets" includes any asset that the fund holds, both physical and virtual.

--------------------------

Alright! I suppose that’s all I can manage for now, though I do look forward to the responses. To the other posters in this thread, some of you may recognize your questions reworded as to cite examples from the business plan. This wasn't an accident as I noticed Smidge wasn't answering a few questions all that thoroughly. Maybe I’ll somehow be an exception given I was asked to respond?


To: Smidge – Here’s the honest reality check.
You are not experienced in Bitcoin securities trading (based on the information you've provided us).

As stated before, everyone needs to do their own due diligence. My job is maximizing earnings for the shareholders with financial instruments, with which I have over 7 years of experience. Everyone can see the performance weekly in the balance sheets.

You are looking for a massive company valuation based on essentially nothing.

That is not entirely correct. We are looking for high investments in order to maximize effectiveness and do things that smaller funds cannot (listed above). The size is planned to gradually increase, nothing is being rushed.

You are not trusted (it’s earned over time, not just given out).

It's earned over time, as you stated. I am working on it and everyone must decide for themselves.

You are a new forum member and you are new to Bitcoin overall (so far as I've been able to determine).

I've been involved and lurking since quite some time (which I cannot prove), but registered since April (which I can prove) and trading since May with great results.

Combined together, you’re nearly in the same situation as the Sandstorm security, which seems to be your primary competition (though I’m sure there’s more, and anyone please feel free to enlighten me on this).

I don't see SDSTM as competition, just as any other fund. They are just serving the same market and I am open to any discussion and best practice sharing with them.

That said, why should investors put any money with you over Sandstorm? After all, Sandstorm is at least being actively traded on an exchange (which makes purchases and sales vastly easier overall, even if the IPO was terrible), and its owner currently holds 40% of the total asset. By reading the business plans for each company, the distinction should be obvious, but unfortunately this isn’t something I can say is true.

Of course they are listed, but I don't want to repeat what happened to them, that is why Smidge.Com will be very carefully preparing this.
... and you are complaining about Smidge.Com holding 15%?

In the end, no one is perfect and I don't expect them to be. For many people, this is quite a learning experience when starting out (I know it was for me). Let's see if we can work through this!

+1!
I hope we can soon agree that we were off to a good start (which we are!) and have developed in a professional way, preparing every next move carefully to maximize our own and our shareholder's success.

With that said, my Key Performance Indicator is and will always be this:
https://docs.google.com/spreadsheet/ccc?key=0AgLGW6ARhmFLdDVyLUFPYjBHX0FIWWxXTy1Bc09uaVE&usp=sharing

Edited for spelling and grammar.

[Smidge]

Over the last weeks, I have been engaged in countless conversations, getting a lot of input from the community. I wrote a few things down that should not be included in a weekly update or business plan. It should provide some insight into the thinking and with which mindset/philosophy we are currently operating:

Sorry for it being unstructured, it is just a brainstorm type of list:

• Purchasing shares of the fund is completely free of charge, meaning 100% of your investment "gets to work" immediately. You won't have to sit and wait to (eventually) break even for a few weeks before getting net ROI on your investment. As investors, we understand this dilemma and chose to eliminate it
• We will not increase the number of shares (diluting existing shares and affecting voting control), ever. we would rather launch a new security, as stated in the BP
• Owners of shares will always be free to bring forward motions to decide upon structure of the fund and it's holdings (Smidge.Com will not even own the majority of this type of shares, but rather a small portion, as stated in the BP)
• Owners of private shares can choose to have their shares transferred to them on any exchange that lists us in the future
• We are not rushing an IPO or any other measures, but are slowly building up the necessary structures in order for things to go smoothly
• We are not speculators, we are investors. we do not trade the assets frequently, sitting in front of the screen waiting for them to move a point or two
• The mission is to identify people, concepts and/or securities with potential in the long run. This may incur lower performance in the short term that we try to average out
• We don’t pour money into hot markets nor completely cash out of falling markets
• We do not invest in overheated assets at a late stage. Good news and rising stock prices should be the result of a security's owner applying a good long term strategy. We invest in those as early as possible
• We invest certain sums regularly, in rising and in falling securities. We know that trying to hit market tops and bottoms is speculation, not investing. We do not gamble with shareholder's assets
• We do not day trade shares of long term investments, which the majority of the fund consists of
• We are not promising guarateed amounts of dividends
• We display the key figures in the balance sheet after deducting the management fee, to give you a realistic impression of the numbers
• We stick with our game plan by keeping close contact to our investment's management and keep our cool when others are losing theirs
• We realize that our shareholders do not want a speculator, acting upon a fixed set of rules/algorithms or even worse, his or her daily mood. We realize that success is always a moving target, the mission is to adapt to new situations and navigate the fund based on a healthy risk/reward ratio
• The fund should not be regarded as an object of speculation, although the road may be bumpy during launch/IPO etc. The fund should be part of every portfolio as stability component, enabling more freedom for your other investments

[davos]

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I confirm that I have received a single page (page 1) of an employment contract (with the job title listed as 'Key Account Manager B2B' addressed to Alex Metz. Please note that I am not a professional nor trained in verifying documents given, so I cannot guarantee that they're 100% authentic or came from the original owner.

Thank you,
John
30 July 2013
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PS: Quoted by request.

- What is your current day job?  How long have you worked there?

I work full-time as Key Account Manager in the B2B space since 2010.

Seeing as you're not a CFA or at least have made no claim to being an otherwise qualified investment manager or securities analyst... I'm not entirely sure what this information is meant to elucidate. I'm not saying that fiat qualifications can or should be required to manage investments in cryptomarkets. If your profession is at all pertinent to this asset, I'd be curious to know how.

[xaviarlol]

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I confirm that I have received a single page (page 1) of an employment contract (with the job title listed as 'Key Account Manager B2B' addressed to Alex Metz. Please note that I am not a professional nor trained in verifying documents given, so I cannot guarantee that they're 100% authentic or came from the original owner.

Thank you,
John
30 July 2013
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PS: Quoted by request.

- What is your current day job?  How long have you worked there?

I work full-time as Key Account Manager in the B2B space since 2010.

Seeing as you're not a CFA or at least have made no claim to being an otherwise qualified investment manager or securities analyst... I'm not entirely sure what this information is meant to elucidate. I'm not saying that fiat qualifications can or should be required to manage investments in cryptomarkets. If your profession is at all pertinent to this asset, I'd be curious to know how.

+1

I don't see the relation between a "key account manager" and running an investment fund. From what I understand, an account manager simply manages relations with a customer/vendor. It has nothing to do with financials and investment, unless its a fund account manager, which smidge said it was not.

[Smidge]

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Hash: SHA1

I confirm that I have received a single page (page 1) of an employment contract (with the job title listed as 'Key Account Manager B2B' addressed to Alex Metz. Please note that I am not a professional nor trained in verifying documents given, so I cannot guarantee that they're 100% authentic or came from the original owner.

Thank you,
John
30 July 2013
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PS: Quoted by request.

- What is your current day job?  How long have you worked there?

I work full-time as Key Account Manager in the B2B space since 2010.

Seeing as you're not a CFA or at least have made no claim to being an otherwise qualified investment manager or securities analyst... I'm not entirely sure what this information is meant to elucidate. I'm not saying that fiat qualifications can or should be required to manage investments in cryptomarkets. If your profession is at all pertinent to this asset, I'd be curious to know how.

+1

I don't see the relation between a "key account manager" and running an investment fund. From what I understand, an account manager simply manages relations with a customer/vendor. It has nothing to do with financials and investment, unless its a fund account manager, which smidge said it was not.

The official confirmation from John K was not to prove that I have any official or certified competence to run an investment fund. It was simply to prove that I did not change my job description from Accountant into Account Manager, as previously claimed.