Sample Business Plan cyberpuppy

CyberPuppy Software Business Plan “This is the beginning of the age where the former disparate worlds of the poet and the engineer will merge.” — Lee S. Isgur, Volpe, Welty & Co. May, 1996 Confidential Information The information contained within is confidential. Disclosures of this information to third parties without our express written consent is forbidden. Contact: Neill Kramer, 415-326-2449 CONFIDENTIAL Property of CyberPuppy Software Page 1 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax Executive Summary Charter: To create products and services for wired kids. In the same way that Netscape has gained dominance over Microsoft in one specific category, CyberPuppy can supersede the current crop of major educational software publishers by setting a new standard in a new medium––children's client software for the Internet. How can this be done? Traditional software publishers have grown large and profitable based on the old paradigm of software merchandising--placing product in a box for the retail shelves. They also operate as large companies, with slow product development cycles and managerial hierarchies that often get in the way of innovative software design. By creating compelling Internet-based software that solves some of the problems children currently face on the Net, such as, "How can I find and communicate with other kids like myself?" and by easing the concerns of parents in terms of safe communications, CyberPuppy can dominate its market segment on the Net. We believe that it makes good business sense to make products exclusively for wired kids, using the Internet as a quick and easy delivery mechanism to a worldwide audience. Knowing our customers and building a global community are the keys. Every email address that we accumulate is like money in the bank, if we continue to enhance our products and maintain loyal customers. Delivering innovative software on the Internet, for children and parents, is a task that CyberPuppy can achieve. The strategy is to create a kid-safe, Internet-based product that looks and feels like a kid's product and is a "shell" for future add-on products. Parents can configure the product so that they can leave their children alone and not worry about unacceptable people or places invading the screen. Once a threshold of online users has been reached, a CD-ROM version of the product will be made available. We named our company CyberPuppy in 1992, well before "cyber" was used in common parlance. Our characters, including CyberPuppy, HyperKitty, Smorgy Borg and others, will be used in every product and/or service we create, in order to build product and brand loyalty and to distinguish ourselves from the competition. The on-line market is almost exclusively a medium for adults, although demand for appropriate tools and content for children is clearly very strong. CONFIDENTIAL Property of CyberPuppy Software Page 2 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax There are numerous dedicated web sites geared to the 1.1 million children currently using the Internet, and only one dedicated email product available for young users (KidMail Connection from ConnectSoft--a product that depends on the child knowing specific email addresses). Currently there are no Internet-based clients that are designed from the ground up for children, although there are online gaming services that offer games for kids. A compelling business opportunity exists for a break-through online product that is safe and imaginatively executed, as none of the major educational software companies have stepped to the plate (including Broderbund, Davidson, Microsoft, Disney, or Nickelodeon). The combined international market size for wired children, teachers, and parents is not known, but can be estimated at over five million. The potential is enormous, as the growth rate for Internet customers continues at unprecedented rates (roughly 800% growth for 1996). Market segmentation on the Internet has not occurred in any recognizable form, since essentially all products released to the market are designed for adults. Within the next twelve months, however, we are sure to see a number of creative efforts. A beginning in this area is the Internet protection products such as SurfWatch, an extremely successful product at the retail level and in the school market. While competition for web-based tools is fierce, dedicated Internet products for kids is presently an untapped market. AOL has announced a Software Greenhouse--a program designed to help small developers, with other major commercial providers following suit. Competitive differentiation will be easy at first, but the explosion of companies focusing on the Net is not to be taken lightly. Our products must be cool, innovative, and compelling for our target audience. And product delivery must be swift and in tune with the demands of our customers. Once released, our product must evolve quickly and continue to capture users at a rapid rate. As a free product, we must assume that other companies will also offer their products for free, and so our main advantage is to get there first and to continually innovate. Remaining agile and attracting talented personnel, combined with excellent marketing and public relations, will sustain us in the race to capture the wired kids of tomorrow. CyberPuppy Software, creators of the CODIE award-winning children’s software program Kid’s Studio™, is seeking partners for its revolutionary online exploration and communication system for children. CyberPuppy's new product, a children’s internet client, will offer much more CONFIDENTIAL Property of CyberPuppy Software Page 3 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax than targeting content for a kids web site. Our client, designed by a team of development and instructional design experts with a proven track record, will provide a compelling graphical environment, access to Internet resources which are often difficult to locate, as well as original content. CyberPuppy is currently partners interested in reaching households (and schools) with personal computers and children between the ages of seven and twelve years old. We are seeking $2 million for a fifty per cent equity position in the Company. CONFIDENTIAL Property of CyberPuppy Software Page 4 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax 1.0 The Company 1.1 Mission Statement The mission of CyberPuppy Software is to be the industry leader in children’s client software for the Internet. 1.2 Corporate History CyberPuppy Software, Inc. was incorporated in Rochester, New York on November 3, 1992 by Neill Kramer, Christopher Haupt, and Darin Krauss, who combined their talents in education, computer programming and computer graphics in order to develop software products for the most rapidly growing market in the industry, the edutainment market. On July 12, 1993 an Affiliate Partner Agreement was signed between CyberPuppy Software and Maxis, a leading publisher of “edutainment” software. On October 15,1993, CyberPuppy released its first product, Kid’s Studio™, a multimedia creativity tool for kids ages eight to twelve. Kid’s Studio is an all-in-one multimedia application that offers children sophisticated tools for creating their own presentations. At the time of its release, Kid’s Studio broke new ground in a number of different areas. It was the first children’s product to have: • a clip art browser (Treasure Chest) • Photo CD access • an object-oriented page architecture for multiple images and/or text objects • unlimited number of sounds and images allowed per page • full-screen QuickTime movies In short, it was the only integrated multimedia authoring tool for children in the marketplace. In March 1994, Kid’s Studio won the distinguished CODIE award for Best School Productivity/Creativity Program from the Software Publishers Association. On May 25, 1994, Kid’s Studio was sold to Storm Technology. Storm also hired the four key people from CyberPuppy and moved them to California. In November of 1994, two key members of CyberPuppy, Neill and Chris, left Storm to resume operations in California. In April of 1995, Storm decided that children’s software was not a viable market. In exchange for one final payment due in 1997, CyberPuppy received all rights back to Kid’s Studio. CONFIDENTIAL Property of CyberPuppy Software Page 5 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax In April ‘95, within thirty days of receiving the rights back to Kid’s Studio, Cyber-Puppy already had a verbal offer from Hearst New Media to purchase the product. The deal evolved into a licensing agreement with CyberPuppy offering limited rights to a upgraded version of Kid’s Studio called “Imaginator!” Imaginator! is published for KidSoft by Hearst New Media. About the People: Neill Kramer, President M.S. Instructional Design, University of Oregon From 1979-1986, Neill developed video and slide-tape productions, interactive exhibits, and public programs for museums around the country. Between 1989-1993 he taught courses about the interface between science and technology at the Rochester Institute of Technology and SUNY Empire State College. In 1989, Neill successfully implemented his first entrepreneurial product, The New York Times Calendar for 1990, published by Harcourt Brace Jovanovich, Inc. He founded CyberPuppy Software in 1992. Christopher F. Haupt, Chief Technical Officer M.S. Computer Science, Rochester Institute of Technology Christopher's responsibilities include oversite of current product development and planning for future communication and graphics technologies. He is the chief architect of CyberPuppy's communication infrastructure. Prior to CyberPuppy, he lead the engineering teams for the Codie award-winning Kid's Studio Macintosh and Windows product lines. Prior to joining the CyberPuppy team, Christopher was an Instructor for the Rochester Institute of Technology, teaching computer graphics in the undergraduate and graduate computer science programs. He was project lead and chief architect of several campus distributed information systems. He provided software and hardware consulting to the academic community on MacOS, VAX/VMS, Unix, and various Supercomputing environments. He has published several software development papers including the first experimental protocol for AppleEvent to TCP/IP gateways. Between 19861988 Christopher developed real-time process control software for continuous flow systems for E.I. Dupont of Wilmington, Delaware. He co-authored the EMS computer language used by Dupont to formulate film emulsions. CONFIDENTIAL Property of CyberPuppy Software Page 6 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax 2.0 Rationale for Product Development 2.1 It’s the Net, stupid! With a six month shelf life for most multimedia CD-ROM titles, the risks of development can outweigh the potential rewards. According to Tay Vaughan, a recognized authority and pioneer in multimedia and author of Multimedia, Making It Work (published by McGraw-Hill), “In this marketplace, small developers are quickly overwhelmed by the immutable laws of physics and economics: with one or two titles to sell, gaining a piece of this diminishing real estate is the work of Sisyphus. But you should know that the big guys, too, suffer these same laws: publishers seem to have half the shelf space of two years ago, yet offers twice as many titles in its product line.” 2.2 Growth of On-line Services and the Internet Developing multimedia software products for the Internet differs fundamentally from title development, in that there’s a frictionless distance between the publisher and the consumer—there’s no packaging, no middlemen, and no borders between countries. In essence, on-line commerce is an interconnected web of on-going transactions, with tremendous opportunities for growth. A survey from Matrix Information and Directory Services (MIDS) and Texas Internet Consulting breaks on-line usage down into three components: Core Internet Consumer Internet Matrix Internet. 7.8 million users 17.5 million users 28.0 million users Core Internet accounts users made up mostly of university and government domains. Consumer Internet includes the core users and then adds additional users accessing from consumer net access providers like Netcom and ClarkNet. Consumer Internet does include some big commercial online services like America Online and Compuserve. Finally, the Matrix Internet takes the first two categories and adds additional users who have access to Internet email, but not Internet services. CONFIDENTIAL Property of CyberPuppy Software Page 7 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax 2.3 Why CyberPuppy? A successful on-line service entails: SOFTWARE–a compelling interface and ease of use: CyberPuppy's principals combine the best in technical and user interface expertise. In addition to proven success in the children's multimedia market, Cyberpuppy's President, Neill Kramer, has a masters degree in instructional design, and Chief Technical Officer, Christopher F. Haupt, has significant programming and graphics development experience, including teaching experience in computer graphics at Rochester Institute of Technology. COMMUNICATION’S TECHNOLOGY–connections to the Internet: Writing protocols for the connection to the Internet is time-consuming and difficult. Even software developers that have successfully developed children's software for CD-ROM do not necessarily have the skills to write communication protocols. Christopher F. Haupt of CyberPuppy has published several Macintosh development papers including the first experimental protocol for AppleEvent to TCP/IP gateways. He is currently integrating advanced communication tools into a simple to use user interface for wired kids. MARKETING AND DISTRIBUTION: CyberPuppy's plan is to market and distribute our Internet client for kids, PigMail™, on the Net, and then once online momentum for the product is established, move into standard retail and OEM channels. 2.4 Pigs in Cyberspace? While the growth of the Internet is staggering, much of the content is still crude. CyberPuppy’s product, PigMail, will set a new standard for ease of use and on-line communications for children, parents and teachers. At its simplest, PigMail is an environment for interactivity, connectedness, exploration, and knowledge enhancement. What differentiates PigMail from any other on-line product is that the user can actually see where other users are in the world through carefully rendered global maps. In addition, the user can communicate to others either through email or through live chatting, as well as publish various forms of information (e.g., personal—a photo or sound byte, or school related—a field trip) to other PigMailians. CONFIDENTIAL Property of CyberPuppy Software Page 8 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax 2.5 The Publisher PigMail offers a publishing partner a quality Internet client written from the ground up for wired kids, that is both entertaining to kids and incorporates access to information (educational content from the Internet in the form of pre-screened Web pages). Although a downloadable product, PigMail can be published as a retail CDROM, with large graphic files transferred from the CD and the communications data coming through the user’s modem. Updates to the user interface, additional educational and informational sites and original content can be distributed through an update subscription. Some additions to the interface and connections to additional Web sites can be added at any point through online downloads. However, users will appreciate significant additions, particularly of video files to be transferred via CD-ROM, versus paying for long on-line connection times to down-load these files. In addition to the proceeds from software sales, updates and on-line transactions, the publishing partner will have a vehicle for delivering its own original content on-line as well as the opportunity to cross-sell, and possibly demonstrate, other products to pre-qualified, computer-savvy households. Additional "corporate sponsors" can be sought to pay to have their own site in PigMail. America On-line recently announced their intention to sell “show rooms” within AOL to other companies as well as connections to Web pages for hundreds of thousands of dollars a piece. CONFIDENTIAL Property of CyberPuppy Software Page 9 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax 3.0 Product Description 3.1 PigMail – A Revolutionary Communications Environment for Children Our first product for wired kids is an immersive environment for Internet communication, based on a geographical metaphor. The reasoning is simple-in cyberspace there's no sense of concrete places, no anchor to the world. For kids, the Internet is too abstract. If a kid wants to discover who is in Australia, they can use our product to navigate there in a few mouse clicks. The product has four levels or "views." At the top level there's a global view of every user of the product and their geographical location, regardless of whether there are hundreds of thousands or millions of users. At the next level down, the regional level, users can see a space that is the equivalent of roughly one-third of the United States at one time. At this view cities are visible, with different city icons representing different density levels. At the next level is a view of several buildings based on themes: a sports stadium, an art studio, a library, a park, etc. The final level is a view of the inside of a single building, whether it be the arcade or the art studio, with people represented by little avatar-like creatures. A handy feature of the product is a magnifying lens that allows the user to view a portion of the world at a deeper level, while remaining at a higher level. Phases of the Product: Phase I of PigMail is a Mac & Windows release on the client side, and a Unix server running the user database via a web site. The client will have: • an immersive and compelling graphical environment based on a geographical metaphor • robust parent-protection capabilities • a search engine • email • customizable avatars Phase II includes what we call "projects," and graphical chat capabilities. In addition, features are added to further distinguish user identities so that users can have a choice, for example, of a refrigerator to place their own "magnets" or a bulletin board for push-pin notes and/or images. In this way users can share their personal artwork, favorite foods, etc. in a graphical format. • Projects: Projects are collaborative events that are based on themes and make use of pre-made, email-like forms. An example would be a migration CONFIDENTIAL Property of CyberPuppy Software Page 10 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax project. Users would fill out a form whenever they spotted the animal that was the subject of the project (e.g., butterfly migration). The results of the projects can be visualized on the map. • Chat spaces: Examples of moderated chat spaces are: pets––a veterinarian moderates a chat space and users can ask questions and/or submit photos of their pets; stories––someone submits a theme for a story and users submit ideas for a single page. The story moderator chooses which pages he or she wants and then each user submits their individual page. The result is published when the moderator deems the story finished. Each page has a user link so that the audience members can ask a user about their particular page; travel––a user moderates a travel adventure that he or she had (choices for real versus fantasy vacations are made available). Other ideas for chat spaces are food, movies, TV, music, cultural exchanges, lifestyles, etc. Private chat spaces are also made available. Phase III includes virtual spaces, both moderated and private. Virtual spaces can be pre-constructed, although users can either modify existing spaces or build their own spaces. The virtual spaces are an outgrowth of the buildings, so that those that like to visit the sports stadium can now find out who is in the locker rooms, or the indoor tennis court. Objects in the spaces can have characteristics, so that users can create tables, chairs, etc. and attach behaviors to those objects. By creating virtual spaces the user can further express their own identity beyond simple graphic, text, and sound files. Feature enhancements throughout any phase of the product shall be driven by the notion of creating expressiveness between users, while at the same time maintaining the safety features of the product. Goals: 1. Make our products fun to use, but useful as well. 2. Have 100K users within 6 months after release of the product. 3. Have a retail version of our product by Spring '97. 4. PigMail recognized as the leading children's Internet tool by Xmas ‘97. CONFIDENTIAL Property of CyberPuppy Software Page 1 1 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax 4.0 The Market 4.1 The Market “The opportunity in online is to capture the new share of the market, not what’s out there now,” according to Don Tydeman of NetGuide Magazine. In 1994, four million households used online services, over seven million in 1995, and this number is predicted to rise to seventeen million by 1998 (Source: Jupiter Communications). Thirty-nine million people work at home in the United States, with a median age of 38, and the number of home workers is growing at a five percent annual rate (Source: Link Resources). Are they online? Find a list of households with multiple phone lines. According to the Father of the Internet, Vint Cerf, who currently works for MCI and is responsible for building their global information infrastructure, his estimates are 300 million users by the end of the decade. A new Interactive Digital Software Association (IDSA) study, conducted in conjunction with Coopers & Lybrand L.L.P., reveals the following highlights about the interactive entertainment/edutainment software industry: Highlights of the study include the following: -- The industry will be responsible for generating approximately $7.7 billion in sales throughout the economy in 1996, including an estimated $4.4 billion in retail sales (according to IDC/Link) and $3.3 billion in indirect sales. -- The interactive entertainment/edutainment industry directly employs over 90,000 people, many of whom are highly-skilled professionals. Indirectly it creates tens of thousands of additional jobs in related fields. Moreover, employment in the industry is growing at a rate of 26 percent annually. -- Supporting the country's technological leadership, the industry overall spent nearly $2.3 billion on research and development in 1995. The industry's ratio of R&D to equity was more than twice that of the average Fortune 500 company. -- In the last two years, surveyed companies increased their export sales by 28 percent. "Clearly, the interactive entertainment/edutainment software industry is one of the most dynamic and growing industries in America today," stated Warren Martin, co-chairperson of Coopers & Lybrand's national software CONFIDENTIAL Property of CyberPuppy Software Page 12 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax network. 4.2 Boys, Girls, Parents & Teachers Boys spend 4.3 hours per week playing computer games, and girls spend 3.9 hours per week playing computer games. Children buy or receive 5.4 programs annually. The typical PC household spends over $500 on software annually. Owners of educational software have, typically, seven programs and use them 6.1 hours per week. According to the Wall Street Journal, “Spending on kids has grown about 20% a year over the past decade even as household income has stagnated. Parents have turned over more of their income to their kids in part because of guilt over dwindling family time and perhaps growing pessimism about the kids’ futures.” "I'D RATHER HAVE A PC" A Consumer Electronics Manufacturers Association survey of teens and adults in households that own both PCs and video game machines shows that 54% of the teens polled spend more time with the PC. And if forced to choose between the two, 88% said they'd rather have the PC. About a quarter of the parents would allow their children "some influence" in selecting a computer. (Investor's Business Daily 23 Apr ‘96) In addition to increased consumer spending on the part of parents, an Educational Leadership magazine survey last year showed that the average teacher spends $454 annually of his or her own money on classroom supplies. 4.3 Reaching the Market The Internet Besides announcing PigMail to existing on-line users, a number of opportunities exist to partner with companies that target children. Family Planet Starwave, a Paul Allen company, has a number of compelling destinations on the Net. Family Planet is perhaps the leading web site for savvy parents that want to learn and educate their children. David Grady, an industry veteran and publisher of Family Planet has expressed an interest in licensing PigMail. Maxis Maxis’ software toys for kids division is eager to license PigMail as a penpal club for their customers. Both Family Planet and Maxis are awaiting the CONFIDENTIAL Property of CyberPuppy Software Page 13 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax release of a Windows version of PigMail. PBS Online PBS Online has also expressed an interest in licensing the product. Packard-Bell Packard-Bell is launching a front-end to the Internet that will be bundled on over 1.5 million computers over the next six months. They have expressed an interested in bundling PigMail on every computer. 4.4 The Competition KidMail Connection ConnectSoft 11130 NE 33rd Place Suite 250 Bellevue, WA 98004 (206) 827-6467 ConnectSoft of Bellevue, Washington has an email product for children, KidMail Connection. It is a simple front-end for email. Compuserve WOW Compuserve has a proprietary system for families that want to connect to the Net, and offers different graphical front-ends for kids and/or parents, with controls for protecting access to the Net for kids. Internet in a Box for Kids A division of Compuserve, Spry offers an all-in-one package for getting kids on the Net. Basically they offer a browser and parental controls. Other Products Worlds Inc. A spin-off company from title developer Knowledge Adventure, Worlds Inc. offers a 3-D environment for anyone with Internet access. Avatars populate the 3-D spaces. Another service, Alpha Worlds, lets users create their own real estate spaces. The site is used primarily by adults. Worlds Away A product of Fujitsu, Worlds Away is currently offered through Compuserve and will soon be appearing on the web. It’s a two-dimensional space with rooms and avatars. Users can express themselves by using various “emotions,” whereby the avatars change shape. The site is used primarily by adults. CONFIDENTIAL Property of CyberPuppy Software Page 14 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax The Palace The Palace is a Time Warner product. It offers a free client with a smiley face avatar, or for $20 you can customize your own avatar. It’s a two-dimensional space with rooms that are hyperlinked to each other. The site is used primarily by adults. V-Chat The Microsoft Network has been running V-Chat since late 1995. It’s a 3-D avatar based system and the site is used primarily by adults. Interactive Gaming XBand Network Catapult Entertainment makes the XBand Video Game Modem and Network for the Sega Genesis. The modem provides for multiplayer gaming and email (email can go across the Internet). The modem costs $70 and a monthly subscription to the service is $7.95. The subscription service offers a list of players to contact and also offers an email gateway. ImagiNation Network (INN) Has a subscriber base of around 50,000 people and is currently porting their proprietary system to the web. They are also revamping the product and will be supporting avatars in three-dimensional spaces. Total Entertainment Network (TEN) A subscription-based, online gaming environment now in Beta. Will include SimCity online. CONFIDENTIAL Property of CyberPuppy Software Page 15 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax 5.0 The PigMail Business Model 5.1 Another Internet product that’s Free?! Not quite. In order to insure the success of a people-centered product, there must be a minimum number of users that will drive the online activity. We predict that a minimum of 100,000 will be necessary for the product's success. The best way to achieve this ambitious goal is to offer a version of the product that is free. We believe that within the first six months of the product’s release we will have achieved our goal of 100,000 users. Our revenue model is based on the following: While the free product offers all of the functionality of the fee-based version, the product limits the user to five email addresses. If the user wants to communicate with more than five people he or she would either purchase the fully-enabled version or continually delete and add people from his or her email list. Full version: -Plug-in for $19.95. -Parental controls. -Expected average monthly revenue of $145,000 through 1997. (based on 250,000 users by 12/97 - 35% purchase full version) -Expected average monthly revenue of $350,000 through 1998. (based on 600,000 users by 12/98 - 35% purchase full version) Advertising: -A targeted market of wired kids. -Info-rich families and high-end demographics. -Twelve advertisers per month at $2,500 each. -Expected average monthly revenue of $30,000 through 1997. -Expected average monthly revenue of $60,000 through 1998. Retail CD-ROM: -Affiliate label model with CyberPuppy as developer. -Publisher takes the risk, CyberPuppy receives 12% of revenue. -Sales to begin in Spring '97 with unit sales of 3,000 per month. -Expected revenue of $12,000 per month through 1997. -Expected revenue of $30,000 per month through 1998. School Market: CONFIDENTIAL Property of CyberPuppy Software Page 16 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax -Rapidly growing market. -What the kids see at school they want at home. -Site licenses are extremely profitable. -Expected revenue of $7,500 per month through 1997. -Expected revenue of $30,000 per month through 1998. Online Shopping - 1998: -Expected to normalize by Xmas 1997. -Shoppers will spend an average of $2 a year using our product. -User base of 250,000 by the end of '97. -Expected average monthly revenue of $40,000 starting in 1998. Total income per month during 1997: $194,500 a $2.33 million business Total income per month during 1998: $510,000 a $6.12 million business 5.2 Who is the customer? Primary: The online consumer household—worldwide. According to Don Tydeman of NetGuide Magazine, the online consumer household is “communications intensive, better informed than most, and using multiple sources of news... tomorrow we will see more male/female parity of users, more non-techie users, and more entertainment/lifestyle oriented content.” Secondary: Middle school students—worldwide. CONFIDENTIAL Property of CyberPuppy Software Page 17 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax 6.0 Summary 6.1 Why a communications product designed specifically for children? Children have had penpals ever since writing utensils became mass produced. They are born communicators and have an appetite for learning that far exceeds adult capabilities. Children see computers as natural components of their environment, the way today’s adults accepted mechanical objects, such as bicycles, as natural to their childhood environment. PigMail combines superior graphics with the latest Internet protocols to provide state of the art connectivity. The same team that created the awardwinning Kid’s Studio will break new ground with children’s communication software. 6.2 Benefits to the Investor The next generation of software publishers will succeed by initially leveraging the online channel,and then moving to retail. The company that can create the branded, net-based excitement of a Yahoo with consumer GUI (graphical user interfaces) on the order of a Broderbund will win a coveted place on the Net. Yahoo + Broderbund = $2 billion valuation CONFIDENTIAL Property of CyberPuppy Software Page 18 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax Appendix A PigMail Product Specifics: Goals: 1) Global metaphor provides easy access to online users and geographicallyoriented Internet sites. 2) Kids to kids. 3) Editorialize the Net. 4) Publishing capability/Projects/Games/Virtual Spaces. Interface issues: People to People/Geography One of the main features of PigMail is the ability to get a sense of the people that are currently online (in addition to the places/information being used); that is, to suggest a community of people from different geographical locales, interests, etc. Top Level of Map: The main interface to PigMail is the map/geographical browser. When the user initially enters the environment, the server at first sends high-level information to the client detailing the general numbers of active users/sites in the vicinity of the user's entry point. This information is displayed as a series of glowing dots on the surface of the globe. The lights vary in color, depending on the activity at a particular location...a legend will offer users a clear understanding of population densities throughout the planet. As the amount of information is huge, the client builds up its picture through gradual expansion of its knowledge of an area. At first, the area within a certain radius of the entry is updated, then during idle moments, this information radius expands to eventually encompass the entire planetary surface. If the user should begin to browse the map with the magnifier or otherwise scroll the currently visible location, the client will send an urgent update to the server to begin filling in its picture from that new place (assuming that it doesn't already have the information for that place.) Map Updating Details: Information during the first coverage pass is at its most simple, with more in-depth information sent with each subsequent update. The first update may only include the general counts of the users/places at each locale, the second may begin to send actual people/place IDs, types, etc., and so on. This information is cached at the client for the duration of the session. Information on the map can become outdated over time. Users log in and out of the system frequently. The client updates itself on a heartbeat-like pulse CONFIDENTIAL Property of CyberPuppy Software Page 19 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax of around twice a minute (adjustable based on performance characteristics of the line, machine, server load). The communication that occurs at heartbeat time can both update the status of current information at the client (bringing news of users that have appeared and disappeared between beats), as well as bringing new information which can refine the current local/global image. These beats can alternate in type depending on the needs of the client (e.g., tell me about a new area, tell me about people/places in an existing area, etc.). These beats can occur even when the map is not visible, during idle moments in other activities, for instance. Due to the low pulse rate, there are windows of opportunity for people to slip away. If the user tries to get information on a person that recently went offline, they will be able to see that person's profile, but will be notified that they are currently not online. If the user attempts to engage in an interactive activity with the off-line person, they will be given a notice that she is unavailable. The user will be able to optionally cancel the activity, continue with other people they may have also chosen, or leave a message for the offline person if the activity was a one-on-one situation. Working With the Map: The user will be able to "fly" over the map, looking at the glowing lights below. At some point, the user will want to start exploring the contents of those lights. The magnifying tool allows closer examination of the lighted areas. Within its bounds, the user can see an iconic representation of the people and places below. The map surface becomes a more detailed, close-up view of the general area over which the magnifier rests. The magnifier has a number of function shortcut controls arranged around its perimeter. In the middle of the magnifier window is a cross-hair, which can be used for pinpointing the subject of any invoked function. The user can move the magnifier around by dragging its thick frame within the map window. An optional identifying tag can be displayed in the form of hot-help as the cross-hairs move over objects...this appears as a short string of info that updates on the magnifier frame. For simplicity, the magnifier should have a minimum of controls, each with a standard icon used elsewhere in the product. Filters/Search Engine: A significant problem facing on-line users is the huge overload of information. The PigMail product provides relief from this headache with its configurable filter technology as a supplement to its specially edited info-base. CONFIDENTIAL Property of CyberPuppy Software Page 20 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax Filters provide a means by which the user can qualify what information they want to find. The filters operate on a number of different levels. In their simplest form, the user can change the view that appears on the Map interface to display only items which match specific criteria. When a user selects one of these top level filters, the lights on the map and the icons visible in the magnifier change to reflect the location and quantity of information present for the selected category only. If the user wishes to further qualify her search, she can use the Find Filter to specify an ad-hoc query. These queries can operate on the active category, or on all data. A Find Filter searches descriptions of people (which can include the person's name, hobbies, etc.). These ad-hoc filters could be saved for future use (perhaps as the user's preferred way of examining data.) Filters could also provide alternate viewing options for the current information on the map or within the magnifier. This may take the form of alphabetized lists of the content found by the active filter. The user can pick from the list and the given person’s location will be centered on the map. Activities There are two main activities for users of PigMail, interacting with other people and interacting with information. The Geographical Locator is used to initiate either activity. (There are shortcuts , however, such as using previously located places or people stored in your address book/rolodex to address a message or hotlink to a web site.) It is possible to consider the Geographical Locator a form of either activity, as you can find people/places and view their id cards/resumes. Person to Person Interaction: Interaction with other people is done through two primary tools: email and multimedia chatting. Both tools are near full page windows which replace the map, each having a specialized interface created to simplify person to person interaction. Both can address people selected from the map, or from the rolodex. The email interface supports the Internet MIME specification. This means that users can associate pictures, sounds, and other binary data with their message. PigMail will be able to show these attachments as a collection of objects stored in an area below the textual portion of the message. Future implementations can display this content in place. These attachments can be viewed if the user has the proper players installed. Pictures and sounds will be supported in the first release. Other content could include movies, comCONFIDENTIAL Property of CyberPuppy Software Page 21 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax pressed images, documents from other PC applications, etc.. By using the MIME standard, PigMail users can exchange messages with any other Internet user with a MIME-aware mailer. Messages can be saved to disk as PigMail mail files (which can subsequently be opened by PigMail), as HTML pages, or as their individual components. To address a PigMail email message, the PigMail user selects a name or names from her rolodex of stored user-names or dragged from the map and placed on the mail icon. Either place can be summoned if not currently visible. Advanced users can directly type email addresses if known. Goals: Should be able to send to other PigMail users. Should be able to include multimedia content. Should be able to send mail to other Internet users. Should be able to receive mail from outside of PigMail (other Internet users). Should be able to have all members of an account group receive mail individually. [Should be able to use other mailers, e.g. Eudora, to get mail] Issues: POP/SMTP performance drops at around 10K users. Chat: The enhanced chat function is unique to PigMail in that it supports multimedia extensions in the first release. Chat sessions are started when the user selects other users from her rolodex or off the map. When she begins the chat, an invitation goes out to the selected individuals. If a user agrees to the chat, she is teleported to the originator's chat space. The originating user begins the chat with a summary of who chose to join the conversation. Chat sessions begun in this way are private, and are under the control of the originator. When the original chat user quits, the chat session is closed down, unless a current participant agrees to become the controlling member (also known as the moderator). In this way, the torch can be passed, and a chat session can continue indefinitely. During the course of a private session, new members can join by asking permission from the current moderator. The moderator can set the session so as to not allow add-on members, to automatically add new members, or to selectively add members. People can find private chats by looking in the different club spaces at the list of current private talks happening in that space. When the private session is created, the originator has the option of entitling the private space to help others locate the chat. CONFIDENTIAL Property of CyberPuppy Software Page 22 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax Public chat spaces reside within club rooms. These chat sessions exist at all times and are usually unmoderated. People can join and leave at their leisure. Control of public chat sessions can be given to accounts by the system administrators. A user begins or joins a chat and can immediately see who else is participating by looking at the avatar list associated with the discussion. This scrolling area contains the names of the participants, and optionally, their stamp-size avatar. The user types her contribution to the conversation and when ready sends the comment. The sentence is posted to the other chat members with an associated icon/picture of the sender. Authors can further enhance their expressiveness by dragging “PigLatin” pictures and icons off of a nearby palette and dropping them onto the sentence they are composing. These icons represent a variety of emotions and ideas, and can help express a concept in a nearly universal way. Later versions of the chat function could send sound-bites, user supplied pictures, and other data-types supported by PigMail. In addition avatar expressions can be incorporated, in addition to PigLatin. Parental Controls: A parent mode dialog, protected by password, allows the optional restriction of a number of operational parameters: - Hours online can be limited by setting monthly, weekly, and daily limits. - Approval of penpals and other email/chat friends can be set up using "personality" filters. - Web access. Parents can turn off the links that can link to the web. - Review kid's online activity. PigMail can optionally log page/site paths for review. Proposed Budget - Phase I (6 months of operations): There are essentially three components to Phase I of PigMail: a networking component that can handle the "live" aspects of the product, specifically the dynamic user database and email; a graphical component that provides the immersive environment; and the database function on the client side that supports an internal database, a searching feature, and updates to the server. Dynamic Scenario (6 months of operations): Windows: Senior Engineer $55,000 Junior Engineer $45,000 CONFIDENTIAL Property of CyberPuppy Software Page 23 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax Mac: Senior Engineer Unix (four months): Senior Engineer Project Lead (Chris): CEO (Neill): Graphics: Webmaster: Equipment: Misc: Rent & Utilities: Extras: Interface Consultant: Marketing Consultant: Public Relations: Total $55,000 $35,000 $40,000 $40,000 $27,000 $15,000 $50,000 $15,000 $18,000 $15,000 $25,000 $25,000 $460,000 Note: This scenario takes into account working with an agency for hiring the engineers, since we could get people to start right away. If we're looking for long-term employees, then we can save 20% from the above fees but will need 1-2 months to find the right people. CONFIDENTIAL Property of CyberPuppy Software Page 24 CONFIDENTIAL 2248 Park Boulevard Palo Alto CA 94306 (415) 326-2449 (415) 326-6301 fax