An offer came out yesterday pushing the opportunity to buy up to a million MileagePlus miles in a single transaction, with no limit on the number of transactions other than that only two could be paid by credit card. The first 300 buyers could get elite status in the United MileagePlus program as well, and some buyers could get a free pair of Bose headphones, too. The catch – there always is one – is that the price of the points being sold by Wall & Main is 3 cents each. So, yeah, that’s more than some other ways which United makes available to buy points on the cheap, but it also isn’t the worst deal I’ve ever seen.
Let me be very clear: I think that for 99% of my regular readers buying these miles at these prices is a very, very bad idea. But I also know that there are a lot more people out there and many of them aren’t looking to spend the time others of us put in to this hobby/obsession. And they might be willing to regularly by premium cabin travel anyways. At that point the deal really isn’t horrible.
So, a bit about Wall & Main, the company behind this deal which has been quite poorly represented in some of the reports I read yesterday. They are not a venture capital company. They are not going to be acting as an incubator. They are not looking to invest in any other companies. What they are doing is attempting to build their business – primarily a crowd-funding broker – through crowd-funding. They want to prove that their version of the model can work in the real world. And, like most other crowd-funded companies they’re giving their supporters something in return for the investment. In this case, miles.
The company has an interesting take on the crowd-funding landscape. They see it as massive and able to support some additional players. But, because it is so massive they don’t see a need to take all comers on in their portfolio; in fact, they don’t want most projects. Their team will review applicants and, using their venture capital experience, choose those which they think are more viable as companies which can be funded through their portal. But they aren’t going to be funding any directly.
They also plan to provide many more services to their member companies than most similar efforts. While Wall & Main will not be a incubator (they typically provide many similar services to companies in their programs) they will make available things like HR & legal advice, mentoring and infrastructure resources. The difference between incubators and Wall & Main is that rather than taking a cut of the company like an Incubator would W&M will simply be selling those services to their participant companies. They’re paying either way; Wall & Main thinks that selling the services rather than owning a chunk of the company is a better business model and hopes some start-ups will agree.
If you are in it not just to buy the miles but to actually participate in the crowd-funding investment model buying in gets you access to some extra “features” within the Wall & Main operations. Founding Champions will have early access to the data on companies looking to get funding and priority on certain transactions which might become over-subscribed in the future, among other things.
What I cannot understand, having chatted with the executives and looked at other companies in similar positions, is why they are so focused on the miles. Yes, I get that as a society we’re obsessed with points and such. And that’s a great way to influence incremental or discretionary spend. But most successful crowd-funding projects reach their goals because they offer a compelling business case, not because they offer an awesome gift back to their supporters. During a Q&A session online yesterday even Randy Petersen – a guy who is all about miles in life – was somewhat perplexed by the focus being paid to the miles side of things rather than the business side. I think that the hard sell on the points’ value, trying to convince potential buyers that they’re getting more value in the immediate reward than they are spending, is a mistake from a business perspective. That’s simply not how most crowd-funded organizations succeed and it distracts from what their real goal is (or should be). It is also a bit strange that they haven’t published their target funding goals (they also didn’t give a number when asked about that in the online session); most companies have a target number for their fundraising efforts and in the crowd-sourcing world that number is usually public.
I’m not going to be subscribing. I know how to get miles for less and I have the time and means to do so if I want to. Plus I’m not really all that in to the crowd-funding space. But that doesn’t mean the Wall & Main business model is bogus or that the deal is horrible. It is certainly better than redeeming miles for gift cards.
Never miss another post: Sign up for email alerts and get only the content you want direct to your inbox.
What’s your impression of Randy’s quote … “These packages are a ‘must buy’ for any savvy traveler.”
For me, this level of puffery was so ridiculous that i couldn’t take the offer seriously
The use of the term “investment” in Wall&Main in Randy’s and Milepoint’s gushing praise of this deal was quite misleading as well. There is no investment- it’s a pure donation to a profit making company. The whole thing was well beneath what I’d come to expect from them.
@greek2me, exactly. Seth, the problem I’ve had with this whole thing is the use of the word investment. Gary used it in his blog, you use it here…for example, you say “And, like most other crowd-funded companies they’re giving their supporters something in return for the investment. In this case, miles.”
There is no investment here. This is not an investment opportunity. You’re not obtaining any equity in the firm; you’re not buying shares of anything. There’s no potential for your initial capital to increase in value. It’s a straight, dollars for points transaction.
Not all investments are equity transactions. And in the crowd-funding world none of them are.
In this case there are some other benefits also offered to people providing cash in the early stages and the value of those benefits is predicated on the company reaching their funding goals and actually launching. And those benefits may provide some increased value in the future. I don’t think it is a smart move for me and I don’t think it is a smart move for most people. But it also is not just a points purchase.
I think the company did a spectacularly bad job of positioning the offer and they went after the wrong audience in an effort to sell it. But that’s part of the fun of watching a crowd-funding campaign in action. Some of them are very entertaining, to say the least.
As for Randy’s quote, he’s both right and wrong. The 3cpm price point isn’t horrible. It isn’t the best you’ll get, not by a long shot, but if you want or need that many points and you don’t have the time to mess around it isn’t the worst way to get there. Buying direct from United is going to take a lot more time and energy. Getting there through CC churning will be even more ridiculous than that. How long would it take to get to 1mm points using Vanilla Reloads?? At the same time, however, very few people have an immediate need for 1mm points in a single transaction.
If you only see this as a mileage purchase and you think the price point is too high then move on. I know many people who would also balk at redeeming TATL in coach, something I did earlier this year and a trip on which I realized tremendous value. We all have different priorities in how we deal with our points and cash spending.
The spindoctors at work advertising a simple mile purchase….
I should add, I don’t think W&M is a scam, as some have argued. I agree, Seth, that they’ve somewhat poorly presented their business model through this pitch, by being so focused on the reward, and not on the redeeming factors to their business that would compel someone to give them money. That doesn’t make them illegitimate, however.
My big objection is just the way this has been spun as an “investment.”
Andrew said it all – no growth potential no investment. The angle is that it’s an investment only for the company itself, there is no investor other than those in the company. It should be just a pricier miles purchase. The headset is not even worth mentioning.
Sorry, posted my comment above without seeing your reply, Seth. I understand that not all investments are strict equity transactions (although I think by far the most common interpretation of the word, particularly when a wall street type company wants you to give them money, is putting your money into an asset with some expectation of capital appreciation). But I still think you’re using a loose definition of the word “investment.”
Sure, I suppose you can consider most anything to be an “investment” if you really want to. That $100 I gave to my alma matter last year? I guess you could call it an “investment” in the future of the school, or in some future student’s life. Or how about the $20 I gave (through crowd sourcing, no less!) towards putting up a billboard to get the basketball coach at my alma matter fired? I’m “invested” in seeing our basketball team improve, so could you call that $20 an “investment”? Okay, sure.
But neither of those things are truly investments, at least in my mind. I mean, go to Crowdtilt.com–their motto is “Group Fund Anything.” That’s exactly what’s going on here–you’re not investing in W&M, you’re funding them. I didn’t invest in the billboard, I helped fund it.
So again, I’m not saying W&M is not deserving of funds from someone who believes in what they’re doing. I’m sure there are folks out there who think what W&M plan to do with their money is fantastic, and they’ll be happy to fund W&M. But I don’t think it’s investing, and I think it gives the appearance of being disingenuous when an opportunity like this is pitched as an “investment.”
Just plane (intentional) dollars and cents: Bad Deal. And with award seats all but drying up, especially on United’s extended carrier group, a risky idea. For a million miles ($30,000) there ought to be some substantial discount and I’m not seeing it here. Have I over looked some important benefit? IMO, hold on to your wallet and run like hell.
Hi Seth,
With regard to legitimacy, one interesting thing I observed is that there address is not located any place on their website, unless I missed it, and I looked pretty hard. They only list their email address and an 855 area code phone number which is an area code not associated with any geographic location.
I wonder how a company, that is asking the public to give them thousands or tens of thousands of dollars, can be considered legitimate when they don’t even disclose their address.
What do you make of this?
That’s relatively low on the list of things I’d worry about. Their address is readily available on the domain name registration among other places. Searching for “wall and main” corporate address on the internet got me the correct answer pretty quickly.
Really? Randy was perplexed during the call about their focus on miles? That same Randy who provided the choice quotes and showed up for a video infomercial on their website? Puzzling. Is there a recording of that call somewhere?
Is that dude in the photo a real Wall and Main executive, or did they use a stock photo for that site and end up with one of Ken Lay of Enron fame?
http://en.wikipedia.org/wiki/Kenneth_Lay
It is a real guy; he was on the call yesterday, too.
There is video of the call. My understanding is that they are cutting it into bite-size pieces rather than a full hour-long bit to make it more digestible for viewers.
As for the confusion, perhaps that was a poor choice of words on my part. Several times Randy tried to steer the conversation towards the actual business model of the company and their long-term plans rather than just talking about miles. I did, too, as that is more interesting to me. They chose to keep the discussion more on the points. I think that was a bad choice but such is life.
Thanks for the clarifications and additions.
Who were they targeting with that call? Who were the participants?
I agree that if that call was meant to be their “launch event” of sorts, their focus should have been on their business model. Unless, well, the miles sale were their business model.
They will survive, if for no other reason that this.
They have realized that the best model for them to stay alive (if they get funded by miles) is to sell their services to the startups.
In the Alaska Gold Rush, most miners died bankrupt; the store keepers and general traders and saloons did quite well.
Same in the Internet boom, the Intels and Suns did ok
In the mortgage meltdown, the mortgage brokers did fine. The loss was taken by the common man.
For those interested in the business side of the W&M proposition, they finally posted about it: http://blog.wallandmain.com/?p=250.