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.