SmartAB™ Wisdom #3: Add IQ To Your Subscription Model
Last month, I introduced a truly innovative and ground-breaking service – SmartAB™. And I declared right from the outset, that Canada Green ESCO (CGE) designed SmartAB™ to turn advisory costs into… profit centers.
And at the times when all the major stock indices are in a free-fall and crater before our very eyes - my repeated advice: “Imitation works best in karaoke bars, not in business. To escape the competition, businesses need to constantly reinvent” – adds the urgency long lost…
I said: “firstly, we eliminated the need for costly retainers and replaced them with a low-cost monthly subscription fee - to access the ultimate SmartAB™ advice. Secondly, all your SmartAB™ subscription payments will be accumulated over time as… credits. For details, please see: SmartAB™ - Redefining Entrepreneurship.
I also mentioned that all the subscription fees will be counted as a cumulative credit. Better yet, in addition to the ongoing Business Development Advice, SmartAB™ subscribers will be able to CONVERT their credits into the shares of CGE’s organically launched startups - if and when the subscribers decide to do so...
CGE is planning to launch several startups in the future and SmartAB™ subscribers will be entitled to get the shares in such startups - at NO ADDITIONAL COST. Moreover, after each CONVERSION, the accumulated credits will be reset to zero, making room for the new subscription credits to be counted.
In principle, the conversion of subscription fees into shares is similar to the SAFE concepts introduced by Y Combinator (Simple Agreement for Future Equity) in late 2013. You can find many more details on the Y Combinator’s website, but essentially, it was “a simple and fast way to get that first money into the company, and the concept was that holders of SAFEs were merely early investors in that future priced round”.
Nobody ever tried to introduce the “SAFE For Subscriptions” business model – until SmartAB™ was born. And the most frequent question about SmartAB™ I am getting today is as follows: does it only work for the startups?
My answer? NOT AT ALL… It can work equally well for much larger PUBLIC companies, too. All they need is a bit of imagination. So, perhaps it’s time to invoke the famous quote by Albert Einstein:
“Imagination is more important than knowledge. For knowledge is limited, whereas imagination embraces the entire world, stimulating progress, giving birth to evolution"
And this is exactly what I was trying to recommend to Andrew Lloyd Weber (ALW) in my post: REINVENTING Andrew Lloyd Weber – A True Story. Initially, I received the following canned response and the rebuff:
“Dear Oleg, thank you very much for getting in touch. As you can imagine, it is not always possible for Lord Lloyd Webber to read every message that is sent in, but we are so pleased that you enjoyed watching Andrew's shows on YouTube. You can buy or rent them via the links below…”
Well, I never give up easily, so I continued my efforts to reach out and explain the benefits of my advice - until I received the typical “Stiff Upper Lip” response from David Dobson, Business Development Director at AWL’s “The Really Useful Group Ltd”. He said:
Thanks for getting in touch. This is not one for us I am afraid. We have very clear objectives for our business and your idea is not a fit. We wish you luck with it. All the best, David”.
My answer to all such snubs and putdowns is as follows:
“When companies don’t know how SmartAB™ can help – it’s REGRETTABLE. Knowing but not following good advice - is UNFORGIVABLE”
And How About Netflix?
According to CNBC:
“Shares of Netflix closed down more than 35% Wednesday, Apr 22, 2022 - after the streamer reported earnings Tuesday evening that showed it lost subscribers for the first time in more than 10 years. The results and weak outlook led to a wave of downgrades from Wall Street on fears over the company’s long-term growth potential.
The drop caused Netflix to shave more than $50 billion off its market cap. It is now the worst-performing stock of 2022 in the S&P 500, down 62.5% year-to-date”.
Like it or not, Netflix is now trading at ~$180 per share, a far cry from its 52-week peak of $700. It translates into a 1-year loss of 64%. Ouch!
So, would the SmartAB™ subscription strategy work for companies like Netflix or ALW? Of course, it would… Just what exactly prevents Netflix - "The Mother Of All Subscriptions" - from offering its subscribers equity in some of its… future productions?
Wouldn’t accumulating subscription credits that could be converted into SAFE equities become a significant LOYALTY REWARD for Netflix subscribers? And wouldn’t such an approach help Netflix to differentiate its subscription from subscriptions of others?
Well, if Netflix disregards my SmartAB™ advice, it can consider the following 2 strategies:
· Lower Subscription Costs – to lure more subscribers from competing streaming services
· Raise Subscription Costs – and create an “artificial” rise in the Revenues Per Subscriber ratio. It’s a pure math exercise: increase the nominator, decrease the denominator – what’s not to like?
Well, lowering the subscription cost may bring a prolonged price war with all the other streamers. The airline industry tried it for years – and the CEOs of such companies can show you a lot of scars on their backs. Hence, I like to say:
“Intense Competition drives profits into the ground. And before you know it, you might be already digging”
And as far as engineering an “artificial”, or “fake” increase of the Revenues Per Subscriber goes? Well, don’t get me even started. Just how different would it be from share buybacks?
I’ve said it many times: it’s time to reverse the biggest mistake of the past and to make share buybacks illegal! Otherwise, we keep allowing the manipulative promoters to send a “fake” message of a “greatly improved” measure of profitability. It’s the same denominator “shtick” I previously described with respect to the Revenues Per Subscriber ratio…
Before 1982, share buybacks were considered illegal and treated as market manipulation by SEC. There is enough evidence 40 years later that tinkering with SEC rules didn’t work.
If corporate profits are to be reinvested in developing new products, building factories, or opening new stores – they can’t be used to buy your own shares, instead. Otherwise, we will be stuck with dwindling employment and diminished capacity to innovate.
Growth is all about identifying new opportunities, managing new initiatives, and waiting for the investments in innovation and R&D to pay off. In stark contrast, the gains offered by share buybacks s are nothing but a short-term benefit to hedge funds and corporate executives. This, of course, is at the cost of long-term prosperity and viability of a going concern.
When companies are increasingly becoming the biggest buyers of their equities, instead of retail, or institutional investors – you may officially declare: “Houston, we have a problem”…
According to INSEAD, share buybacks are corporate suicide. So, will my graphical association with a French guillotine and its proverbial swooshing sound, drive the message across?
Of course, some of the investment funds such as Warren Buffett’s Berkshire Hathaway, do not produce any products or encounter R&D expenses. So, they might consider share buybacks – resulting in less punitive consequences.
But even then, IMHO, the illusion of improved share prices is highly controversial. Hence, I was extremely pleased to see the following recent reports about Berkshire Hathaway:
“The company slowed its share buybacks but ramped up its stock purchases in the first quarter, slashing its cash reserves. The famed investor's company spent about $3.2 billion on buybacks in the period, compared to upwards of $6 billion in each of the previous five quarters, marking its lowest outlay since the first quarter of 2020”.
Does VPM Need To Offer Subscribers Its Shares?
I am asking the above question for a reason. Some Crowdsourcing sites such as Kickstarter and Indiegogo explicitly forbid offering shares during their fundraisings. So, for example, as I recently reported in my previous SmartAB™ posts, VRilock Psioninc Metaverse (VPM) is offering its supporters the ability to convert the credits they earn into… digital merchandising.
Moreover, the subscribers have a clear choice to monetize their credits through merchandising, or to wait indefinitely - until acquiring a stake in VPM becomes a compelling option. It’s all pretty hypothetical at this point…
In contrast to Crowdsourcing, the Equity Crowdfunding sites don’t have Kickstarter’s restrictions. However, if the company is less than 120 days old and doesn’t have yet any CPA reviewed or Audited Financial Statements, the funds it can raise during the first Equity Crowdfunding year are limited to $107K.
According to the information provided by Wefunder about Regulation Crowdfunding:
· The law requires that you disclose certain financial information in order to raise under Reg CF. The specific financial reporting requirements depend on two factors: incorporation date and raise size
· If you were incorporated <120 days ago and raising:
o Less than $107K: You will need a cover sheet, balance sheet and footnotes for the period spanning your incorporation date up to the current date
o More than $107K: You will need a cover sheet, balance sheet, and footnotes, and a CPA Review Statement
o More than $1.07M: You will need a cover sheet, balance sheet, and footnotes, and an Independent Auditor's Report. See more details at Wefunder
So, will VPM’s innovative Value Proposition appeal to its supporters/investors? Time will tell. Perhaps, some supporters will get as excited as Victor Kiam? In his 1979 Remington shaver commercial, he said: “I liked the shaver so much, I bought the company”
For More Information
Please see my additional posts on Linkedin, Twitter, Medium, and CGE’s website.
You can also find additional info in my book on amazon: “AI Boogeyman – Dispelling Fake News About Job Losses”, and on our YouTube Studio channel… Thank you.
I’m In The Business Of Joining Advisory Boards…
· Until now, bringing exceptional business development advisors wasn’t easy. In most cases, it was simply too expensive. And equity-only compensations - were not attractive enough to draw in the rainmakers
· Welcome to SmartAB™ – a radically innovative Advisory Board service offered as a low-cost monthly SUBSCRIPTION
· Since BODs serve investors, Advisory Boards (ABs) are CEOs’ best friends™. Nobody else turns your SmartAB™ subscription costs into profit centers. We pioneered such a strategy. And now, we relentlessly assist companies around the world to adopt it - one AB at a time…
· Enroll in SmartAB™ at Substack. When companies and their BODs don’t know how SmartAB™ can help – it’s REGRETTABLE. Knowing but not following good advice - is UNFORGIVABLE
SmartAB™ - An Innovative Advisory Board Service Offered As A Low-Cost Monthly Subscription
Disclaimer: The opinions are my own. If you require professional guidance about taxation, accounting, or legal issues – please contact qualified lawyers and certified accountants. Thank you.