GLOBAL DEBT NETWORK
The NASDAQ marketplace for auto loan portfolios
October 2008 Investor Pitch
Executive Summary
Mission
To facilitate the a more liquid and transparent secondary market for consumer loans
Inability of many lenders to access leverage or volume prevents growth
Situation • • • • Over $1.5T in non-revolving consumer debt outstanding in the US alone This segment is under developed & cannot access secondary markets 20,000+ non-bank/fragmented local lenders serve these segments These lenders are typically small & are underserved by technology
Thousands of smaller lenders will finally be able to scale
GDN Solution
• • • • • • • • • Deliver as a hosted solution (SaaS) billed on a transaction basis Flexibly architected for easy use and rapid training & deployment Pursue beachhead market in independent auto finance then expand Aggregate data and deploy analytics to open secondary market ops Strong & experienced management team (6 FTE + 6 contractors) $60MM in all credit quality loans listed 65 Buyers and 55 Sellers Registered ~$1.25MM into the company to date 7 Partnerships including US Subsidiary of Wolters Kluwer
SaaS product released and customers using system
GDN Status
Auto Loan Originations
30,000+ dealers, credit unions, banks and finance companies originate auto loans
$500B financed yr & $900B outstanding new and used car auto loans
Auto dealers sell estimated $25B of seasoned* loans/ year Finance companies, banks & credit unions sell $75B yearly
Loan originators sell loans to
Mitigate Risk Access Capital
Loans are sold by:
Expensive brokers Internal sales teams
* Seasoned loans are loans with consumer pay history
Portfolio Buyers
Finance companies, banks, hedge funds and credit unions purchase seasoned loan portfolios-est. $100B/yr Buyers purchase auto loans
Existing
pay histories High yield Liquid collateral
Loans are acquired via
Internal
sales teams Expensive brokers
This $100B+ market is broken…
Addressable Market= $1B+ in broker fees and internal sales team costs for buyers and sellers Limited liquidity for loans (prime, near-prime, subprime) & the securitization market is non-existent for big and small players Portfolio acquisition and selling costs are high Expensive and time-consuming transaction process No transaction or document standardization
Sparse marketplace data
Marketplace translation is lacking Difficult to attract new investors
Global Debt Network is the NASDAQ marketplace for auto loan portfolios
Why dealers and financial institutions use us…
Instant access Cost savings Disintermediation
Transparency
Transaction efficiency
How is GDN unique?
First online marketplace
Central access point
End-to-end transaction system
Online due diligence Buyer and seller communication system
How we keep people coming back…
Portfolio filtering
Custom “recommended portfolios”
Action step drivers “Watch-list” portfolios Online due diligence
Buyer – seller translation (User Profiles)
Data
US Consumer Non-Mortgage Lending
$2.4T
100% 90% 80% 70%
$1.3T
Finance Co’s
~40% of non-mortgage consumer debt ($520B) is controlled by fragmented/local independent finance companies
Not yet evolved (low density)
• • • • • • Fragmented (~$21mm avg. balance owned) Regionally/locally focused Targeting lower tiers of credit Under served by technology providers Inefficient processes Sub optimized balance sheets
Billions Oustanding
60%
Revolving
Non-revolving
50% 40% 30% 20% 10% 0%
Banks & Credit Unions
Evolved (high density)
• • • • • Large scale (~$140mm avg. balance owned) Huge IT budgets (often 8% of revenue) Targeting higher tiers of credit Technologies exist in this segment Well tuned balance sheets
Non M ortgage Debt
Non-Revolving Debt
Secondary Market Maturity by Vertical
Though there are many “scale” lending markets they have evolved to varying degrees with respect to secondary market operations
High Density 53% Not Securitized 47% Securitized
100% 80% 60% 40% 20% 0% Student loans Mortgage Credit Card (outstanding) New Auto
Low Density 90% Not Securitized 10% Securitized
$258 $281 $246 $285
$85
$2,330
$949
Other Consumer finance (outstanding)
Used Auto
Equipment Loans & Leases
Mature secondary markets
Originated and securitized debt by Collateral (2007) Billions across all lending sources
Immature secondary markets
Used Car Finance Market is Complex & Fragmented
New cars sold: 17 million annual
11mm new car loans
Primary Market
Controlled by major players: 60% (High Density) High credit levels Financed: 60% of total (11mm) Captives: GMAC, Ford Credit, Toyota Financial Non- Captives: Bank of America, Wells Fargo, JPM Chase
Used cars sold: 44 million annual
19mm used car loans
Controlled by top 10 players: 20% (Low Density) Low credit levels Sourced through: 45k dealerships Financed: 45% (19mm) Lending sources: 4,000+
0% 20% 40% 60% 80% 100% Finance Source
M ajor Finance
Smaller Independent
Source: NAIDA, NADA
How we make money…
We make money on every completed transaction Future Revenue Sources
Transaction
data reporting New asset class entry International market expansion Line of credit lead gen model Partners referrals
Financial Projections
Year 1 Total Sales COGS Gross Rev Gross margin Operating Expenses EBITDA $ $ $ 696,660 $ Year 2 3,097,586 $ Year 3 13,244,438 2,699,229 10,545,208 80% 2,808,210 7,736,998
230,431 $ 465,298 $ 67% 2,062,969 $
737,489 $ 2,360,097 $ 76% 2,709,157 $
$ $
(1,597,670) $
(349,060) $
Membership Seller (Dealers and Fis) Buyers Total Transactions
*These projections
230 122 44
484 227 199
681 356 358
do not include the pursuit of the mortgage marketplace, but costs are allocated to development.
Competition
Current competition/status quo
Portfolio size focus
GDN Loan brokers Any size Small
Scalability
High Low
Access to Buyers
High Low
Fees
Low High
Value-Add
High Low
Online Brokers
Internal Sales
Large
Any size
Medium
Low
High
Low
High
Expensive
Medium
High
Potential Competition
Dealer management software systems/Industry insiders National banks
Start-up mortgage platforms Indirect lending platforms
Management Team
Scott Walchek- Co-Founder & Chairman
GP at Integrity Partners, a boutique VC specializing in technologies Former Baidu.com Chairman Co-founder and CEO of C2B Technologies (Sold to Inktomi in 1998)
Mike Sheridan- Co-Founder & President
Senior Associate- Amerivon/Growth Management Partners, a private equity firm Debt and Equity Derivatives Trader- Stafford Trading and TD Equity Options Former Board of Directors at DocStoc.com
Carl Dellar
Research Director, Intel Research (part of CTG) 2003-2006 VP Engineering, C2B Technologies (Sold to Inktomi in 1998) VP Engineering (founding team), BroadVision, Inc. PhD, Computer Science, University of Cambridge, England
Use of Funds & Capital Raising
Use of Funds
Capital Raising
Product development
Marketing programs Admin staffing hires
Current round: Series B
Seeking: $500K to $1MM
Past Investment
Series A : $500k June 2007 Convertible note: $750k April 2008
Milestones
Product Launch
Beta - May 19th, 2008 Official - June 24th, 2008
Market Traction
21 portfolios listed $60MM+ in loans listed ($39K to $26MM) 65 buyers/55 sellers 7 partnerships
Passtime: #1 GPS/starter interrupter devices CreditSmarts: 5th largest Indirect lender platform (1500 active dealers/85 lenders) VantageILM: Consumer loan portfolio management platform Peak5: Largest sole sub-prime auto loan servicer AppOne- Top 5 largest indirect loan origination and lending platform
New Market Rollout Plan
Strategy
Prioritize markets similar to auto Capitalize on housing opportunity Develop market presence Leverage exposure
Keys
Attract new investors Technical and customer service ramp Easy to port app to new assets classes
Thank you
Please feel free to call or email Mike Sheridan
Email:
mike@gdnauto.com Cell Phone: 310-866-5103 Office Phone: 310-928-7634