By Charles Payne
Founder & CEO
Wall Street Strategies
Host: Making Money with Charles Payne
On November 12, 1955 the popular television show The Honeymooners aired an episode called “Better Living through Television” where the latest get-rich scheme where Ralph Kramden comes across an all-in-one gadget that has an assortment of featured that could make all kitchen utensils obsolete. His marketing plan foresaw the Home Shopping Network and infomercials but also underscored a key issue with (potentially) great products that lack the right management to make it a success.
During the commercial Ralph froze from the pressure being on live television but things went a lot further downhill from there as the Chef of the Future failed to prove the device worked. The one scene that sticks out for anyone that ever watched the program featured the line: “can it core an apple?" The product and commercial were a bust but if it wasn’t Ralph and Ed Norton had a warehouse filled with the product ready to fill orders.
Fast forward to the second most successful money raised in the history of crowdfunding and at least the bumbling duo from The Honeymooners were smart enough to meet demand- if it materialized. Last year the Coolest Cooler took off like a rocket.
Setting crowdfunding efforts and becoming a pop culture icon during the process the Coolest Cooler is known to most US households even if very few actually have the product. No, it cannot core an apple but it does just about everything else.
Did I mention this thing is cool. But a not-so-cool thing has happened since 62,000 folks chipped in to power a raise of $13 million (originally the backers were looking for $50,000 from 250 backers).
Open to the Public
- There are several different types of crowdfunding which is only the logical extension of that ill-fated television ad on the Honeymooners.
- Reward-based- funding receive a tangible item(s) or service in return
- Lender-based funding – funders repaid over time
- Donation-based funding- essentially charity-giving
- Equity-based funding – funders receive a stake in the company
Backers of the Coolest Cooler expected a discounted cooler in return- before at summer now many wonder if they’ll receive it before next summer. Management has blamed a motor factory strike yet kept a commitment to deliver a limited supply to Amazon Launch customers at $500.00. Thus far the best backers have gotten are apologizes (at least 50,000 emails personally replied to) and new delivery dates.
This is an important lesson for all to understand as we enter a new phase in the Jobs Act that has made it a lot easier for companies to raise money from the general public.
Jumpstart our Business Start-up Act (JOBS)
The first step of Title I allowed for select disclosure for emerging growth companies – those with less than $1.0 billion in revenue during any fiscal year. Title II saw exemptions from certain broker-dealer rules.
Beginning on October 30, 2015 Title III of the Jobs Act kicked in which means non-accredited investors get a bite at making investments that may have been deemed too risky or placed under greater scrutiny before. The Act was designed to remove hurdles for companies and potential investors looking to get quicker funding. Some rules for equity crowdfunding include ise of funding portals that are restricted from acting like broker-dealers:
Cannot offer investment advice
Compensate others for solicitation
Hold or manage investor funds or securities
Generate leads or compensate promoters
Some equity crowdfunding offerings can go through broker-dealers but not portals. Here’s the reason this is going to be huge- a piece of the action. Some industry experts anticipate equity crowdfunding to raise more the $40 billion achieved in traditional venture capital in 2014
Companies can raise $1,000,000 over a 52-week period and non-accredited investors can invest based on the following.
Income $100,000 can invest $2,000 or 5% of income- whichever is greater
Income above $100,000 can invest 10% if income or 10% of net worth
This is going to be an amazing market with mindboggling success stories over the next few years. Many people are going to hear of them down the road and wish they got involved. There will also be losers and tales of caution, too. My suggestion to would-be investors is to build a portfolio of such investments that represent 10% of your total investing dollars.
The hard part will be separating hype from the ability to deliver. With that in mind there are two questions you should always ask.
Can it core and apple?
Can you deliver the product on time?
Buckle up its going to be a real cool ride.
Wall Street Strategies, Inc.
CEO and Principal Analyst
Charles V. Payne is the Chief Executive Officer and Principal Analyst of Wall Street Strategies, Inc. (WSSI), which he founded in 1991. With less than $10,000.00 in start up capital and working from his apartment, he launched WSSI to provide a unique brand of stock market advice. Through this service, subscribers (money managers and individual investors) began to reap sizeable profits and the firm developed a national reputation as provider of timely and effective equity analysis. Today, WSSI provides information to over 120,000 registered subscribers, in more than 60 countries as well as several of the largest bank/brokerage firms. Charles oversees a team of stock analysts that cover specific industry groups, in addition to monitoring the entire market and individual sectors on his own.
Charles' passion for the stock market began when he was 14 years old. He told his mother then that one day, he would work on Wall Street.
Charles got his start in the industry in research at EF Hutton in 1985. After two years, he switched gears and accepted a position with boutique brokerage firm, Greentree Securities. It was there that he first saw a niche for independent and timely equity advice, which led to the creation of Wall Street Strategies. Due to the success of his guidance and stock selections, Charles has become well sought after by many highly respected finance-oriented radio, web and television programs. He is widely recognized in the media as a leader among the analyst community, and is routinely contacted for his market opinions by several prestigious news organizations.
On June 2, 2014, Fox Business Network launched Charles’ new show “Making Money with Charles Payne” which is featured daily at 6pm EST. He is a member and occasional host of “Varney & Co” and in addition, he is a guest-host on several shows including “Cavuto on Business” and “Your World”.
Over the years, opinions and articles on Charles Payne have been featured in prestigious news organizations such as Reuters, the Wall Street Journal, and the New York Times. He has been the keynote speaker at numerous investment conferences, grass roots events and educational gatherings worldwide.
Charles is author of “Act Fast, Be Smart and Get Rich” debuted in April 2007.
Charles was awarded the Congress of Racial Equality (CORE) Man of the Year Award in 2009.
Charles attended Minot State College and Central Texas College during his time in the Air Force and Majored in Criminal Justice.
Hobbies include drawing and painting along with reading non-fiction books.
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