In fact I have lost 100% of every “small company investment” and of every startup regardless of whether listed or not
Quite. The only money I’ve invested that has really worked has been real estate – not to invest, but to live in, at least some of the time. Everything else has at best been ho-hum, at worst… bad.
I put quite a lot into my brother’s startup (biotech). The idea was, and still is, excellent. But then “professional management” came in and totally messed everything up. The shares still exist, but are worth less than 1% of what they cost. They would still have some value as a tax write-off, except that the company is so messed up that I can’t even get them to figure out how to sell the shares.
In IT startups, about which I know rather more than I wish I did, it goes exactly as Peter says. If you’re an “early investor” it’s pretty much guaranteed that you will get washed out when the VCs come in, if not on the first round then the second. You have got to get lucky in several different ways at once to make serious money that way.
Cubcrafters are having a public offering to raise funds. $400 minimum investment and I only skim read the rest of the sales waffle.
Ah, that’s where I’ve been going wrong all these years
Peter wrote:
the only way to make money with “small companies” (…) Put it another way, act on inside information regarding some wonderful new invention about to be patented. That’s in theory illegal,
No, it is illegal only with listed companies.
IME, the only way to make money with “small companies” (basically, startups, and pretty well the whole of the AIM market) is to get in on the ground floor i.e. get in when they start up. Put it another way, act on inside information regarding some wonderful new invention about to be patented. That’s in theory illegal, but is completely normal with startups. You invest something substantial but an amount you can afford to lose, so say 5k gets you 1% of the company. Then, if this “500k company” gets bought by Geoff Bezos for 10BN, you can buy yourself a TBM 
In reality this usually doesn’t happen and you lose 100% of your money, because the original 500k raised from investors gets spent mostly on putting the founder’s kids through private schooling, and when the money is mostly gone, he does another round of financing in which this amazing company is valued at 5M, so your 1% becomes 0.1%. A year later it becomes 0.01%. I once owned about 0.01% of a company which “Microsoft were about to buy for 1BN” but of course they didn’t, and I lost 100% of my 15k.
In fact I have lost 100% of every “small company investment” and of every startup regardless of whether listed or not
And these are supposed to be companies which are “properly managed” and have “proper accounting practices”. In GA, forget it. The whole business runs on a shoestring and is mostly right on the edge of collapsing. You only need to look at the extreme reluctance of GA companies to participate on social media (except to push out free advertising) – they don’t want their business to be openly discussed.
Can you invest, financially, in GA? For e.g. manufacturers, smaller scale than Textron, but lower risk than electric quadcopter startups.
I have shares in Latécoere, a fuselage and wiring subcontractor for Airbus, Boeing and Dassault. They were an aeroplane manufacturer in their own right in the 1920s and 30s (mailplanes, flying boats), and the Lignes aeriennes Latécoere became Aéropostale and then Air France. The name conjures a lost romantic era of independence and adventure, Saint Exupéry braving the Sahara or Guillaumet the Cordillera.
My Gazprom shares are currently frozen
Typically maintenance organisations provide training aircraft to clubs on a dry lease. Am aware of one ‘mom and pop’ that has a fleet of twenty plus PA28s (mainly Warriors) which average 300 hours a year. The value of the fleet has increased by over 100% (probably closer to 200%), and my estimate of annual free cash flow being generated is around £200k, while providing the backbone to the maintenance organisation. There is a fair amount of operational risk, so I don’t think this is a business for a passive investor, and arguably a maintenance organisation is best placed to manage the operational risk. I can’t see how a financial administrator will add value, or protect from the operational risk.
I think the old truism “How do you get a small fortune in aviation? Start out with a large one” applies to all of these things.
you’d still be hard-pressed to buy and fit a new engine for £10,000.
You bet! My overhaul (not new engine) cost me about $35K – $25K for the overhaul itself, and $10K to remove and reinstall the engine (badly – but that’s another story). Admittedly that’s an IO540, but even for a 360-sized engine hard to see how the total could be much less than $20K. And that’s if everything goes well, no unexpected damage etc.
To me, that one statement drives the BS meter right off scale
so the other numbers don’t really matter
And all you need is a surprise or two on the maintenance front (which is a high probability event given the use the plane must be put to to get the annual hours; we are not talking about all-dual stuff like IR training) and the whole thing breaks down.
Sure leasebacks are popular in flight training. I was offered this in 2002/2003 when my TB20 was new. Fortunately I realised the BS factor early on and pulled the plane out. I also learnt that the people who run schools are very good at spotting “vulnerable aircraft owners” who are ripe for this kind of thing. It can work, and I have seen it work, in cases where the plane is worth almost nothing to start with and owner doesn’t care if it ends up being worth even less afterwards.
Also most of the training business – in Europe, anyway – operates on minimal maintenance. May be legal, yeah, right, not in cases I saw in my PPL, but things tend to be left until they break.
When aircraft prices start to fall (which they are bound to, given today’s silly levels) then you are going to lose big-time.
