Sample Business Plan twest

Business Plan twest.com CONFIDENTIAL October 1, 1999 Version: 1.0 For questions and comments please contact: Lars Thomsen Email: Lars.Thomsen@mediaintegration.com Phone: +49-89-24 22 50-112 Ulrich Schmid Email: Ulrich.Schmid@mediaintegration.com Phone: +49-89-24 22 50-136 Address: Thomsen & Thomsen Mediaintegration GmbH Viktualienmarkt 5 80331 Munich GERMANY page 1 TABLE OF CONTENT 1 Executive summary 1.1 1.2 1.3 1.4 Vision Product / service concept Market entry strategy Goals 3 3 3 4 4 2 Business idea 2.1 2.2 2.3 2.4 Product Product portfolio of weblications Product features and benefits Next generation products 5 5 6 7 8 3 Marketing 3.1 3.2 3.3 3.4 3.5 Market Customer acquisition Sources of revenue Competition Conclusion 10 10 13 14 16 18 4 Implementation and management 4.1 Implementation schedule 4.2 Management team and company history 19 19 19 5 Projected Financials & Equity structure 5.1 Pro Forma Earnings statement (see Appendix 1) 5.2 Pro Forma Cash Flow Statement (see Appendix 1) 5.3 Equity and funding 21 21 21 22 6 Appendix Appendix Appendix Appendix Appendix Appendix 1: 2: 3: 4: 5: Projected Results & Cash flow Assumptions for financial projections twest™ technology Screenshot of twest ™ workbench Competitive environment 23 23 25 28 31 32 page 2 1 Executive summary 1.1 Vision Market: interactive web applications on demand twest.com’s mission is to establish a market for interactive web applications (‘weblications’) on demand for the small and medium enterprise and consumer markets and to become the authority for those applications. twest.com’s revolutionary technology enables private and business owners of web-pages to instantaneously introduce, alter and maintain dynamic and interactive features in their web-sites, any time and anywhere with only a web browser. 1.2 Product / service concept Product: transforms static webpage into interactive medium twest.com offers a set of dynamic tools that transform a static web-page, serving informative purposes only into a truly interactive medium to communicate, coordinate and transact with its visitors. Any owner of a static web-site can fully integrate our interactive modules with ease. Based on the database-driven twest™ technology platform (patent pending), these tools are customizable solutions for business and private use. The applications can be accessed on demand, for any desired period and include news editing systems, web shops, voting tools and many more. The benefits for the users are significant: • An easy-to-use but powerful user interface allows seamless integration and customization of twest™ tools with no IT knowledge required, • these tools can be instantly integrated into any existing web-page with only a few mouse-clicks, • no upfront investment in software is required, since twest.com will offer application services for a low rental fee. Revenues will be generated through subscription fees and advertising. Some products that are targeted to the mass market will be offered for free in order to generate subscriber volume. page 3 twest.com’s business model - weblications on demand Paying Subscribers Target Predominantly SME Highly functional business tools • Shop • News Administration • Eventboard • Discussion forum • [virtual intranet]* • [resource administration]* Free Subscribers All homepage owners Website-enhancing and fun modules • Online editing • Party Organizer • Quiz it • Tticker • [virtual garden]* • [football lottery]* Products/ service Revenue model Monthly fees for module packages Ad revenues through module co-branding Advertising on twest.com homepage and workbench - traffic from users to update and change subscriber modules * [planned modules] 1.3 Market entry strategy twest.com will acquire subscribers through three marketing and distribution channels: 1. Partnerships with companies with a large existing customer base of potential twest.com subscribers, such as portals hosting web-sites, value-added-resellers (VAR), Internet service providers (ISP), system integrators (SI) and web design agencies, 2. Direct Marketing activities 3. Strategic partners to develop brand awareness through co-branding of free twest™ tools and module sponsoring. Market entry: Germany 18-10-99 USA 15-11-99 Initially, we will focus our marketing and sales efforts on the US and German markets. twest.com will launch its products in Germany at the computer and internettechnology trade fair “Systems ‘99” in Munich on October 18, 1999 and in the U.S. on November 15, 1999 at Comdex in Las Vegas. 1.4 Goals Our goals are challenging, but straight forward: • to be the first mover in the evolving market for interactive web applications on demand, to create brand awareness and to sustain a market leadership position, • to maintain our technological advantage and to continue leading the technological trend, • to exit through an IPO or a strategic sale. Use of funding In order to pursue these goals, the twest.com management is seeking outside investment to finance: 1. Market entry activities in the US and Germany, 2. Continuous investments in technology and product development, 3. Organizational development and growth twest .com - Projected Revenues (in $ million) 175 157 150 125 100 $ million Revenues 93 75 50 25 0 0 -25 1999 2000 2001 2002 2003 2004 7 24 51 EBIT page 4 2 Business idea 1 Choose a solution for your website This autumn, twest.com will enter the market with a unique set of applications that allow anybody to: • instantaneously edit and enhance his or her homepage • with dynamic, database driven applications • through any common browser from anywhere • with just a few mouse-clicks. A static web-page that previously had only informative purpose can be transformed into an interactive medium to communicate, coordinate and transact with its visitors. These interactive modules will be fully integrated into users’ web-pages. Based on the twest™ technology platform, these tools are customizable applications on demand that can be rented for a desired period of time for a very low monthly subscription fee of $15. 2 Twest uploads your site and shows you where to put modules 2.1 Product 1 Product and Service concept - How does it work?? PROBLEM: your website lacks functionality • • • • • • edit text 1 communicate get interactive coordinate transact integrate powerful business tools twest.com offers your solution Edit and change module on workbench with guided user interface Ready: Go! • select from module catalogue 2 Your homepage is uploaded to 5 Click FINISH and the twest.com server and parsers automatically finds • editing points • module drop-in points • insert chosen modules 3 Change text and insert modules twestified website is transferred to your server or ISP 3 • Edit / alter text / insert links 4 • gear up your modules 6 Module runs on the twest.com server, while the output will appear on your website - individualize layout / design - enter / change module content Real-life example: VC wants to post time-triggered press release for deal announcement Deal closes on 1 Friday -> you should update your webpage with the latest press release to appear the following Monday Access internet: 2/3 www.twest.com has a news publishing module taking care of news 4 releases on your website Select: www.yourwebsite.com, the workbench shows you all possible spots to place the module Enter module, adjust layout / design, drop press release, enter publishing date (Monday: 8:00 AM) in Admin mode 5 Click FINISH, logout, catch your plane on Friday night and go on holiday While you sit on the beach, twest automatically publishes your latest success story on Monday 6 4 4 Change content / layout of module Time required for ‘twestification’ 2 min 3 min 30 sec 1 Detailed screenshot of twest.com workbench in Appendix 4 page 5 2.2 Product portfolio of weblications On October 18, 1999 we plan to have 16 modules available to users. This number will increase to about 30 by the end of 1999 and the projected rate of the further development will be more than 100 new modules each year. Modules available from 18 October 1999 on... Free for all: the online editor edit your homepage like a Word document: content, layout, format, design, alignment etc. on the twest.com workbench PAYING SUBSCRIBERS Shop-Popp set up a small shop in your web-site Basic function: online editing for free FREE SUBSCRIBERS Party Organizer Organize your party through your website Display changing sayings or proverbs to the visitors of your site Eventboard Publish and control a list of upcoming events with automatic publishing at specified dates. Update and publish news on your website through a simple input-routine. Automatic publishing on specified dates . Implement a newsletter service with subscription option for your visitors Fortune Cookie Newsmatic Quiz-it Install an online quiz on your site. Newsletterman Cursor Mania Modifies the cursor, so it draws a trail of user-selected graphics AddressRight Your online address book Tticker Add a banner with moving text to your site Counting time forward or backwards to a certain event Your Vote Integrate a voting booth on your website to find out about visitors opinions (incl. statistical analysis) Create a discussion forum on your site. Clockwork Millennium The Forum FAQ Super Get on top of your FAQ’s through structured publishing. Feedback function via email Interactive guest book. Control entries before being published – no spam on your site Get-the-Feedback My Guests page 6 2.3 Product features and benefits Easy and immediate integration directly into the owner’s web-page The easy-to-use concept of twestTM allows anybody to edit or seamlessly integrate specific functions into any Internet page with just a few mouseclicks. An intuitive guided tour helps the user through the different steps. The user’s web-pages always remain on the original server, even though the twestTM modules run in the background on twest.com servers. Visitors of a twestified web-site perceive the modules as seamlessly integrated. They will not be diverted via a link and it will appear that all information resides on the subscriber’s server (while there is traffic going on between the user’s server and twest.com). Very little IT knowledge required twestTM is designed to fully automatically execute all processes involving the implementation of twest.com’s weblications. This automated process requires absolutely no IT expertise other than basic knowledge of using a web browser (not even html or xml programming skills). Unique combination of features Customization Not only are users of twest.com able to alter single twest™ tools according to their particular task solution requirements, they are also able to change the visual design of the individual tools in order to be consistent with the overall design of the web-site. Database driven, interactive applications Unlike traditional static web-pages, twest™ tools are built on databases which can be easily updated, and are fully scalable. Low cost through rental model Unlike most other web-editing and programming tools, twestTM modules are either free or rented at reasonable monthly rates. No hardware and software requirements There is no software needed beyond a web browser. twest™ modules are hosted on twest.com servers, so that additional hardware is not required. Finally, the system is already adapted to the expected market shift towards ‘less intelligent’ access devices on the Internet (like web-pads, mobile phones, set-top boxes etc). page 7 2.4 Next generation products Beginning in 2000, we will extend the scope of twest.com’s activities. Besides increasing the portfolio of available twest™ modules, twest.com will integrate and interlink its tools to provide industry-specific, packaged solutions combined with external content. Finally, twest.com will offer an Applications Programming Interface (API) for allowing external applications to be “twestified” to grow into a fully integrated Applications Service Provider (ASP). Interconnectivity of twest TM modules Data exchange enhances effectiveness between modules As a first step we will start to significantly improve the effectiveness of some twest™ modules by allowing them to interact with each other. For example, when posting a new press release with the tool Newsmatic (news publishing system) the user will also be able to automatically generate an email to all addressees of the address book module in a specified category so that they receive an immediate electronic copy of the press release. Data exchange between different twest™ modules is a step towards providing packaged solutions. Packaged offers for industry-specific solutions With the interconnectivity of different twest™ modules and the system’s modular structure, twest.com will be able to offer complex packaged solutions to satisfy the needs of specific customer groups. For example, we will offer product bundles for booking, scheduling and news modules for e.g. a racquetball and fitness club. Integrating external content In addition, twest.com will provide external content via the twest™ system onto small business and private web-sites. Samples are: • • • • • Industry specific news from the web Stock quotes Whether reports Sports news Radio, etc. Twest.com will enable the user to integrate many business and communication functions in its own web-site. With this added functionality, twest™ will become a real, web-based alternative for tasks that currently can only be performed by very expensive enterprise resource planning (ERP) and intranet systems. page 8 Further modules in planning (available from Jan 2000 on) Further functionality & fun from January 2000 on Virtual Intranet applications: All modules will be able to offer restricted areas only to be accessed with proper passwords and Ids. PAYING SUBSCRIBERS Resource administration Ease the organization, planning and tracking of your staff on your homepage – with an integrated billing system to generate invoices FREE SUBSCRIBERS Virtual garden Like a tamagotchi, the virtual garden must be created and taken care of. Regular visits and ‘work’ in the garden will make it grow in size and beauty. Special events, like typhoons, to be alerted to you via email and mobile phones. Organize football lottery or other games with your friends / colleagues on your homepage. The module does all the coordination and calculation work for this occasion. Workflow applications Coordination of daily tasks, meetings and other appointments with a group calendar Bookmaker Application Programming interface (API) Twest API open to programming community from January 2000 on Starting in January 2000, twest.com will publish an API to the programming community (similar to 3Com’s Palm Pilot or Desktop.com) to invite external programmers to develop new or adapt existing applications that could run on the twest™ system. Twest.com will publish an SDK (Software Development Kit) providing instructions about the structure of the twest™ API and directions for how to program and integrate these modules in the twest™ environment. Since the API is only an interface to the twest™ core system, it will NOT reveal the proprietary core system itself. Modules programmed according to the API structure can then be ‘plugged’ on the twest™ platform like Lego bricks on a base. Even software based on Java applets can be run on the twest™ system (i.e. StarOffice Java) which makes twest™ an ASP platform for a large variety of existing software. twest.com will publish these applications based on a revenue sharing model with the programmers. Ultimately we plan to become a hub for web-ware solutions. Long term, twest.com will also develop tools for the seamless integration of scattered personal content currently existing on multiple locations on the net. These tools would display existing personal content, for example, address books on major sites, on the own home page. page 9 3 Marketing 3.1 Market What is the ASP market? ASP: remote rental of software and processing power Application Service Provision (ASP): traditionally, both individuals and companies have invested heavily in powerful hard- and software solutions installed on-site. ASP changes the existing model as software applications and processing power can be rented as a third party service, which is accessed remotely via network solutions, i.e. the Internet. Size and growth of the market The increasing use and technological performance of the Internet has multiplied the number of users with physical access to net-based ASP and thus the number of potential ASP customers. Annual growth of the ASP market: 100 to 400% According to Forrester Research, the total size of the worldwide application services market is roughly $0.5 billion in 1999. It will grow to reach $1.5 $2.0 billion in 2000, with the bulk of it in North America. According to a number of analysts, the market should continue to grow quickly beyond 2000, with annual growth rate expected to be between 100% and 400% over the next few years. Which part of the ASP market do we play in? Two major segments of the ASP market can be identified at the moment: • Outsourcing complex business solutions by companies like Corio Inc. / Peoplesoft, mySAP.com, etc. • On the other hand, there are many single-function applications in the Internet with a low degree of customization. Many of those applications are for free, but usually they reside within the “area” of large portals or communities. ASP MARKET: twest.com fills an existing gap: the „interactive application on demand“ market segment High Intershop mySAP.com Peoplesoft Corio Cytrix Usinternetworking Complexity of Implementation Razorfish red ant beseen visto lycos sitematic Yahoo Yahoo Shop Hot Office Hotmail tripod geocities „Interactive Applications on Demand “ Low Degree of Customization High page 10 twest.com’s services fill a gap in the current ASP market, combining high functionality, customization and easy implementation in the way not being offered by anyone else. twest.com’s target market Target: all website owners twest.com targets the small and medium-sized enterprise (SME) market, as well as individual web-site owners with its new product offering. SME market (<100 employees) The SME market represents a total of about 10.5 million businesses in the U.S. and Germany combined. Of those companies, 9% and 5% respectively had a web-site in the beginning of 1999. Less than half of these web-sites carry interactive features2. 1999 Total no. of companies SMEs: - SMEs as % of total companies - Total SMEs SME web-sites - % of SME - Number of SMEs with web sites USA3 7.3 m 98% 7.15 m 9% 0.64 m Germany 4 3.37 m 97% 3.27 m 5% 0.16 m Total 10.67 m 10.42 m 0.80 m Market potential for interactive websites - about 6.1 million SME 7% 19% 58% With (interactive) website = potential subscribers 100 80 60 Percent 40 20 Without website 0 1999* 2000** 2002*** # of companies with website (10.5 million SME) Source: 0.8 million 2.0 million 6.1 million * eStats 1999 ** Forrester 1999, interactive websites *** Gartner Group/Jupiter, engagement in electronic commerce 2 According to eStats, only 4.2% of US SME have web-sites with interactive features, whereas 30% of medium sized companies and 86.4% of large firms already operate interactive web-sites. 3 eStats 1999, Forrester 1999 4 Schober Business Directory; www.comcult.de 1999 page 11 The SME market for interactive web-site functionality is predicted to grow significantly as 1. more SMEs construct web-sites... 2. and more SMEs adopt interactive tools. Stimulating customer contact (i.e. interactivity) is the primary reason for 87% of SME executives5 questioned to invest into an Internet presence. For twest.com this transformation from static to interactive web-sites will add to the underlying growth of web-sites operated by SMEs. Estimated market size in 2002: $1.5 million Strong demand for interactive sites: Market potential: 6.1 million SME by 2002 Assuming that each of those SMEs with interactive web-sites is willing to spend $20 per month to have this functionality, then the annual market potential would be roughly $1.5 billion by the end of 2002. We believe SMEs will quickly adopt twest.com’s services once they are available because twest™ enables them to simply and quickly add needed interactivity to their web-sites, without any upfront software investment and with no additional investment in in-house technology resources. USA average6 $61,700 $12,500 $10,000 Cost advantage of twest.com Building an average web-site Building a small e-commerce site Support & maintenance / year twest.com’s monthly fees from $19,95 existing admin staff Individual market twest.com also plans to target individual users. There are about 45 million individual homepages in the United States and Germany today, very few of which are interactive. Number of private homepages in 1999 Direct domains - .com domains non-business - .de domains non-business total direct domains Sublevel homepages7 - Geocities - Xoom - Tripod - AOL - others8 total subdomains Total private homepages 4.1 m 0.2 m 4.3 m 20.0 m 9.2 m 5.0 m 1.8 m 5.0 m 41.0 m 45.3 m 5 6 7 ActiveMedia 1998 eStats 1999 company’s homepages, management interviews (www.geocities.com, www.tripod.com) 8 management estimate for all .edu and other provider’s subdomains etc www.xoom.com, page 12 The individual market for interactive web-site functionality will significantly for the same reasons as the SME market: 1. more individuals will construct web-sites and 2. more will adopt interactive tools. grow Like the SME market, modest assumptions indicate that the individual interactive web-site market will be a multi-billion dollar market within a few years. Assuming that the penetration of web-sites grows to 25% of the population within few years, but that only 20% of individual web-sites are interactive, the potential number of interactive sites could be as high as 18 million. If individuals with interactive sites are willing to spend $10 per month for that functionality, the potential market size will be $2.2 billion annually. We believe that individuals will adopt the twest™ product initially because it offers a range of free value-added services which allow them to experiment with and add functionality to their own web-sites. Over time, as individuals create ever more sophisticated personal web-sites and use their web-sites to manage their schedules, messaging and news needs (a trend that is already evident), they will begin to use the more sophisticated twest™ modules on a regular basis. Market size in 2002: $2.2 billion twest responds to a market need and is easy to operate 3.2 Customer acquisition Acquiring a sizable customer base within a few years at a reasonable cost per customer will be a significant challenge for twest.com. As for all young, webbased companies. twest.com plans to target a mix of direct and indirect channels to reach both SME and individual customers. Initially, we will emphasize indirect channels in order to generate critical mass for the business, with increasing emphasis on direct channels as the business becomes established. Customer SMEs Medium Strong Strong segment Individuals Strong N/A Medium Channel Indirect Direct ISPs VARs Partner marketing through ISP/Portal Relationships twest.com is already in discussions with several ISPs and portals in the United States and Germany. ISPs and portals such as Yahoo (geocities), Lycos (tripod), AOL, One-List.com or Intel are potentially suitable partners for twest.com because they are seeking additional services and functionality to offer their customers. Several of those companies have already shown specific interest in twest.com’s products either as homepage-enhancement tool for their users or as a step towards ASP solutions. Partnerships essential for quick market entry page 13 For twest.com, partnerships with ISPs and portals will be crucial. Since such companies have ready access to an established customer base, they can generate new twest.com customers cost-effectively and quickly. ISPs and portal partnerships will be a cost-effective way of acquiring individual customers and SMEs, particularly smaller ones with more limited product needs. While such partnerships could take many forms, we anticipate co-branding our offering with our partners and either wholesaling the product to them or sharing advertising costs and resulting revenues. VARs twest.com will target applications-oriented value-added resellers (VARs), such as multimedia agencies, IT consultants and network and systems integrators in order to reach potential SME customers. Those resellers will be able to leverage their own products with powerful twest™ modules or simply recommend the usage of twest.com modules to their clients. Reseller sales will either be compensated with an ongoing commission on monthly subscriber fees or in the form of barter deals: cross-bannering, banner for traffic, etc. Direct marketing In addition to partner marketing, twest.com will use a direct marketing subscriber acquisition strategy to recruit both individual and SME customers. The marketing mix will include: • • • • • PR: press articles in relevant trade / technology publications, as well as presence at key trade fairs and conferences Referral program: cash or product rewards to individual or SME web-site owners who have allowed banner links on their homepage and whose visitors sign up for the twest.com service, On-line advertising: banners with partners (as mentioned above) and with other high-traffic sites, Database marketing: primarily to existing customers once we have established user information about them (usage patterns, credit history, etc.) Off-line advertising: print ads in relevant trade/technology publications, 3.3 Sources of revenue Subscriber fees Revenue through rental fees Our main sources of revenue are subscribers’ monthly fees paid for using our services. The twest.com price model for paying subscribers is simple and clear: a 21 days free trial is offered, subsequently monthly fees will bee charged for a variety of application packages. page 14 There are several package categories for different subscriber needs. Each package contains the online editor and an increasing number of applications to choose from. • Basic: $ 19.95 / month for initially 5 modules. • Professional: $ 29.95 / month for initially 10 modules. • Premium: $ 49.95 / month for initially 25 modules plus support. In order to avoid deterioration of revenues per customer through competitive pricing, we will try to maintain the package prices constant and increase the content: • More modules per package • More integrated packages, specialized on user segments (i.e. restaurant package) • External package content (i.e. news from the Internet) The customer will get more and more value for the same money and twest.com can sell more of its products to existing subscribers without extra marketing. All packages will be equipped with largely sufficient memory space and data traffic capacities to fully exploit the modules’ possibilities. In the case that applications booked by users exceed those capacities, for example extremely high server capacity or data traffic usage, additional usage fees will be charged to customers. Advertising Advertising will be the second major source of revenue for twest.com. Global online advertising spending projected $10,0 $8,0m $8,0 Revenue through advertising $ billion $6,5m $6,0 $4,0 $3,8m $2,2m $2,0 $0,0 1999 Source: * eStats 1999 2000 2001 2002 twest.com homepage We are aiming to generate large traffic volume on the twest.com homepage and subpages. Due to the nature of twest™, each subscriber has to go through the twest homepage in order to alter / administer modules on his web-site. Constantly increasing module offers from twest.com, as well as specific package solutions (i.e. restaurant package) provide stickiness to the twest.com page. In addition to more traffic, twest.com is able to categorize its subscribers with a high degree of precision, as the backend of many transactions / interactive functions reside on the twest.com server. We will use this data to increase marketing effectivity. The advertising space will either be marketed by a third party (e.g. doubleclick.com) for advertising revenues, or through direct barter deals with potential partners (e.g. traffic for free module use..). page 15 twest.com free modules on private home pages Through the twest™ technology, we are able to provide advertising space on all twest™ modules that are offered for free to users of private homepages. This advertising space will be marketed in the following ways: • Co-branding of modules (e.g. party planner branded by Coca-Cola) • Module sponsoring (e.g. Reebok sponsors facility administration modules for their sports centers) 3.4 Competition Competitors divided into three categories Our competitive environment of online applications can be divided into three main categories: 1. Business solutions 2. Homepage building / communities 3. Personal communication Business solutions Potential competitors in the category of business solutions, like HotOffice TM Inc. or AgillionTM, offer communication and collaboration tools as well as Internet-based enterprise resource planning (ERP) software and services for small enterprises. Business solutions provider differ from twest.com The differences compared to twest.com are: • None of these applications can be integrated directly in the customer’s web-site but resides outside the client’s communication sphere, • Most of the solutions are standardized products which allow little freedom for customization, • The applications are offered at one price only, which is higher than the twest.com entry price of $19.95, • Unlike twest.com, these services target almost exclusively small and medium sized companies and don’t have the leverage of image through the mass market. Homepage building Companies like geocitiesTM, sitematicTM, beseen TM or homestead.com offer free web space mainly to private web-site owners. As a value added service they provide building tools for non-programmers to set up and implement a standard web-site. Homepage building providers differ from twest.com • • • • The focus of these companies lies on full service providing or the community business model. These site building tools serve as tool to attract more clients and therefore are limited in their functionality, The building tools have a much lower standard than twest™ and all they provide are features to set up static web-sites. Professional use of those sites might therefore be limited. For most applications and definitely for all dynamic tools, programming (html) knowledge is required. The customization of the web-site or the dynamic tools is restricted. page 16 Personal communication The third category of competitors deals with maintaining and sharing private as well as public information. Services such as calendar, address book, email, communities etc. are offered online. Key players in this segment are web portals like Yahoo TM and Netscape TM as well as specialized companies like VistoTM. • • • Many single applications can be found at different locations in the web the possibility to integrate these functions in one place is small, let alone in the customer’s web-site. These services are mainly targeted at private users and they are not really suitable for professional use. Most of the services are standard applications that are customizable only by content and not tailored to individual needs. How does twest.com differ from existing solutions? Competitors Twest.com • single solutions. • Applications reside outside the customer’s webpage; at the solutions provider’s web address • All of the services offer standardised applications allowing little customization • Applications require some programming skills or educated computer literacy and • Programming is based on standard cgi or Java Scripts. • Integrated solution • Immediately and seamlessly integrate all functions into customer’s own web-site • All applications can be tailored to individual needs • No programming skills or in-depth computer literacy required • Sophisticated database programming No one offers yet this integrated and unique combination of features => one stop shopping for interactive applications on demand A detailed overview of competing companies can be found in Appendix 5. page 17 Technological market entry barriers for potential competitors We believe we have a significant technological advantage since no comparable product is on the market yet. To date, we have invested more than 100 man-months in our proprietary (patent pending) technology. So far, most of the resources have gone into the development of the following components of twest™ : Major developments • • • programming complex html-page parsers to find the right edit points within the web-page for the instant editor and insert points for other twest™ applications (modules), standardizing module structures, setting up an easy to use and intuitive user interface (twest™ workbench). The twest™ system is not built on Java applets or cgi scripts like most competing products. It is highly sophisticated database-driven system. A detailed twest™ technology and system description is provided in Appendix 3. Property rights Filing for patents and trademark The company is currently in the process of filing for patent registration in the United States. The trademark twest™ is already filed in Germany, Europe and in the United States. 3.5 Conclusion In summary, our strategy is based on the following cornerstones: • • • The Application Service Providing market is exploding, twest.com is marketing to a large customer base of homepage owners, market entry barriers are being set up through: • superior technology and functionality • rapidly growing product portfolio • aggressive marketing and sales strategy to build brand awareness page 18 4 Implementation and management 4.1 Implementation schedule twest.com - implementation schedule until End of 1999 September ONLINE 18-Oct-99 US Market entry 15-Nov-99 31. Dec. 99 Technology & Development twest™ system: - completion and beta test of twest core system and initial 16 modules Hardware - installation of own server capacity up to 150.000 user twest™ system: - open market testing of twest™ system - fine tuning of billing software twest™ system: - completion of twest™ SDK - integrate first twest™ modules - integrate external content Hardware : - preparation of hardware outsourcing in EU and the US - managing of outsourced hardware Service: infrastructure +staff training, setup call center Intensive market research as base for future module development Marketing & Sales Negotiations with co-operation partners and strategic alliances to leverage our customer base PR campaign for market entry both in the US and in Europe online advertising GER Systems 99 trade fair online advertising US Comdex Fall 99 Pricing ALL MODULES FREE FOR INTRODUCTION (Version 0.99 for free trials, announcement of future prices) Legal & Corporate Incorporation Patent registration TEST Phase MARKET INTRODUCTION GERMANY MARKET INTRODUCTION US 4.2 Management team and company history Company history Thomsen & Thomsen Mediaintegration, Munich Twest.com was created out of Thomsen & Thomsen Mediaintegration GmbH (TTMI) in Munich, which was founded in May 1997 by Frank and Lars Thomsen. TTMI focuses on database-driven intra- and Internet solutions and quickly evolved into an Internet system integrator. In its first year, the company was already profitable, despite fast growth. page 19 Bring a successful product to the market TTMI develops and tailors solutions for some major German clients such as Siemens AG, Deutsche Telekom AG, as well as various SMEs. Focusing on the clients’ needs, standard products and procedures were developed, which became known as the OOW-Productline (owner operated web-site). OOW became the preferred web-site enhancement system for several German companies in 1998 without any marketing activities, and the demand quickly surpassed Thomsen & Thomsen’s capacity. Facing this heavy demand overhang, the idea of twest™ (OOW for the mass market) was born. While OOW needs to be installed and tailored to individual customers, twest™ is the fully automated equivalent for the broad public. Currently, in September 1999, 35 people are working in our four offices in Munich. The management Lars Thomsen, CEO Responsible for sales, marketing and corporate development Lars Thomsen is a graduate of information science and marketing at the University of Saarbrücken. He has several years of experience in management and marketing consulting in the service industry (marketing for utilities and telecommunication industry), having founded and co-owned two companies in Saarbrücken and Hamburg. He is well known as a charismatic and visionary speaker for marketing and future issues at conferences seminars. Lars responsibilities comprise sales, marketing and corporate development. Frank Thomsen, CTO Responsible for development, implementation and operations Before founding Thomsen & Thomsen, Frank Thomsen worked as selfemployed web designer and programmer for several large and medium sized corporate clients. He finished his studies in communication science at the LMU University in Munich in spring 1996. During his studies, he worked as a trainee in several advertising agencies and was employed as a part-time worker in Siemens Electromechanical Components for a year. In 1993, he wrote and produced his first musical, which went on stage in 1994. He is responsible for development, implementation and operations of twest™ . Ulrich Schmid, CFO Responsible for finance, international expansion, strategic alliances Ulrich Schmid is the Chief Financial Officer of twest.com. Previously, Ulrich Schmid served as the head of business development of a Boston based life science company. Prior to that he gained several years of experience in management consulting as well as privatization in Eastern Europe. Ulrich Schmid received a BS in Business Administration from Syracuse University and an MBA from Harvard Business School. He is responsible for finance, international expansion and strategic alliances. page 20 5 Projected Financials & Equity structure 5.1 Pro Forma Earnings statement (see Appendix 1) twest.com - Projected Results (in $ million) 200 157 150 100 51 50 93 Revenues $million 0 -50 0 7 24 EBIT COGS Expenses -100 -150 1999 2000 2001 2002 2003 2004 5.2 Pro Forma Cash Flow Statement (see Appendix 1) Currently, we estimate a cash flow gap of about $18 million Projected cash flows (after tax) 25 20 15,9 15 10 26,7 $million 5 1,7 0 -1,4 -5 -5,7 -10 1999 -9,1 2000 2001 2002 2003 2004 page 21 5.3 Equity and funding The existing development of twest.com has been financed through: 1. The company founders who have financed the initial phase of development and growth out of their existing media agency business. 2. In order to develop the specific twest™ applications, seed financing was provided to TTMI that comprises of $0.75 million equity funding by Wellington Finanz in April 1999 and a loan from the Kreditanstalt für Wiederaufbau (KfW) of $1.25 million in July 1999. Ownership structure The current ownership structure of the company is the following. • • • • Management & Founders / Family Founders’ parents Wellington Finanz (VC) Other investors 50% 20% 29% 1% Twest.com will establish a employee Stock option plan initially with 8% of twest.com’s equity prior to the next round of funding. Those 8% will fully dilute current owner’s shares, so that the ownership structure will be the following: • • • • Management & Managing Founders Founders’ parents Wellington Finanz (VC) Other investors 54,0% 18,4% 26,7% 0,9% page 22 6 Appendix 6.1 Appendix 1: Projected Results & Cash flow page 23 Basis for Businessplan 28-9-99 v1.1 P&L and Cash Flow printout Unit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 27 28 29 30 31 32 33 34 1999 2000 2001 2002 2003 2004 Number of clients Subscribers Free modules Total # # # 13.200 8.956 22.156 81.840 366.105 447.945 171.072 771.973 943.045 287.074 1.444.099 1.731.172 437.876 2.392.226 2.830.102 633.918 3.502.597 4.136.515 Profit and Loss account Revenues Net Subscriber revenues Advertising revenues Other income Total Revenues Cost of goods sold Programmer royalties Cost for Server farm Transaction fees Total COGS Gross Margin Expenses Product development Sales & Marketing General & admin Total expenses EBITDA '000 $ '000 $ '000 $ '000 $ 0 0 0 0 6.519 870 0 7.389 19.953 4.367 0 24.320 40.386 10.446 0 50.831 70.755 22.149 0 92.904 115.212 41.987 0 157.199 '000 $ '000 $ '000 $ '000 $ '000 $ 0 0 0 0 0 -130 -2.432 -196 -2.758 4.631 -440 -9.433 -599 -10.472 13.848 -1.139 -18.407 -1.212 -20.757 30.074 -2.516 -31.445 -2.123 -36.083 56.821 -5.017 -48.138 -3.456 -56.612 100.588 '000 $ '000 $ '000 $ '000 $ '000 $ -722 -1.292 -400 -2.414 -2.414 -2.899 -7.308 -3.541 -13.748 -9.117 -3.351 -9.877 -6.360 -19.588 -5.741 -3.990 -14.362 -10.032 -28.384 1.690 -4.494 -20.713 -14.911 -40.118 16.703 -5.080 -29.716 -21.236 -56.031 44.556 Cash flow EBITDA Capital Expenditure Operating cash flow Taxes Operating CF after Tax '000 $ '000 $ '000 $ '000 $ '000 $ -2.414 -64 -2.478 0 -2.478 -9.117 -129 -9.247 0 -9.247 -5.741 -153 -5.893 0 -5.893 1.690 -184 1.506 0 1.506 16.703 -219 16.484 -817 15.667 44.556 -263 44.294 -17.822 26.471 6.2 Appendix 2: Assumptions for financial projections • • All figures are net of inflation. All monetary values are denominated in US$ with an exchange rate of DM1.85 to the US$. page 25 Basis for Businessplan 28-9-99 v1.1 Assumptions printout - Revenues Unit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 1999 2000 2001 2002 2003 2004 NUMBER OF SUBSCRIBERS Paying subscribers Acquisition directly by twest.com Acquisition through resellers Total new customers / month Subscribers through referral programs Churn rate Free subscribers Direct acquisition in first 3 months Growth Referrals per new subscribers for how many months monthly growth rate Churn rate REVENUES Paying subscribers Subscription Revenue Average subscriber fee per Module Number of Modules ordered Net revenue / customer subscribers/month % of new customers subscribers/month calc % customers p.a. % customers p.a. 2.000 120% 2.400 4.400 10,0% 10,0% 2.600 120% 3.120 5.720 10,0% 10,0% 3.380 120% 4.056 7.436 10,0% 10,0% 4.394 120% 5.273 9.667 10,0% 10,0% 5.712 120% 6.855 12.567 10,0% 10,0% 7.426 120% 8.911 16.337 10,0% 10,0% subscribers/month time # per new subscriber/month months % annual rate 3.000 referral* Jan. - May 2000 1 2 6,0% referral* growth rate growth rate growth rate growth rate June -Dec 1 1 7,0% 6,0% 5,0% 4,0% 6,6% 7,3% 8,0% 8,8% 9,7% $ / month modules calc 0,00 5,00 0,00 3,00 5,00 15,00 2,70 6,00 16,20 2,43 7,20 17,50 2,19 8,64 18,90 1,97 10,37 20,41 Advertising revenue Twest.com homepage advertising (starting @ 75,000 subscribers) twest.com homepage Revenue per 1000 banner eyeballs $/1000 % of banner space sold % of total banners Advertising revenue per subscriber $/month twest.com workbench Revenue per 1000 Banner eyeballs $/1000 % of banner space sold % of total banners Advertising revenue per subscriber $/month Co-branding of modules(starting @ 50,000 free subscribers) Revenue per 1000 Banner eyeballs $ % of banner space sold % of total banners Advertising revenue per free subscriber $/month 15,00 50% 0,07 15,00 50% 0,05 15,75 60% 0,10 16,50 60% 0,07 16,54 70% 0,14 18,15 70% 0,10 17,36 70% 0,17 19,97 70% 0,13 18,23 70% 0,20 21,96 70% 0,16 19,14 70% 0,24 24,16 70% 0,20 7,00 10% 0,00 7,00 12% 0,00 7,00 13% 0,01 7,00 15% 0,01 7,00 17% 0,01 7,00 20% 0,02 Note: * referral - a new subscriber refers 1 (line 15) additional subscriber per month for 2 months (line 16) = in 1999, every new subscriber creates 2 referrals Basis for Businessplan 28-9-99 v1.1 Assumptions printout - Expenses Unit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 1999 2000 2001 2002 2003 2004 COST OF GOODS SOLD Subscription Revenues Reseller royalties Royalties for external module authors Transaction fees Monthly hardware costs (>150,000 user) Paying subscribers Free subscribers EXPENSES Marketing Expenses Paying subscribers Cost per newly acquired subscriber Cost per referral customer Free subscribers Monthly marketing spending Product development Twest core programming Module Programming New modules / month Average programming time Maintenance of new modules Average maintenance For how long total maintenance Editing of externally programmed modules Outsourcing Internal API Programming (external) Salary per programmer Internal External Modules(API programming) Other external programming Customer care cost per subscriber % of reseller revenues % of outsouced revenues % of subscriber revenue US$/subscriber US$/subscriber 40,0% 0,0% 3,0% 2,00 1,00 36,0% 15,0% 3,0% 2,00 1,00 32,4% 15,0% 3,0% 2,00 1,00 29,2% 15,0% 3,0% 2,00 1,00 26,2% 15,0% 3,0% 2,00 1,00 23,6% 15,0% 3,0% 2,00 1,00 $ $ '000$/month 190,00 50,00 50,00 209,00 50,00 50,00 229,90 50,00 0,00 252,89 50,00 0,00 278,18 50,00 0,00 306,00 50,00 0,00 days/month modules/month days/module days/module/month months days days/module 40,00 10,00 30,00 5,00 3,00 15,00 5,00 44,00 11,00 33,00 5,50 3,00 16,50 5,50 48,40 12,10 36,30 6,05 3,00 18,15 6,05 53,24 13,31 39,93 6,66 3,00 19,97 6,66 58,56 14,64 43,92 7,32 3,00 21,96 7,32 64,42 16,11 48,32 8,05 3,00 24,16 8,05 % % $/year $/year $/year $/subscriber 100,0% 0,0% 55,00 165,00 165,00 2,50 90,0% 10,0% 56,10 0,00 168,30 2,50 80,0% 20,0% 57,22 0,00 171,67 2,50 70,0% 30,0% 58,37 0,00 175,10 2,50 60,0% 40,0% 59,53 0,00 178,60 2,50 50,0% 50,0% 60,72 0,00 182,17 2,50 6.3 Appendix 3: twest™ technology twest™ is built using a range of technologies which are modern, standard and reliable. These technologies include : • • • TCP/IP and Internet for networking. Servers running the Linux operating system. Solid database management system ( www.solidtech.com). Solid is a widely used database system notable for its speed, scalability and distribution features. Use of Solid has allowed twest™ to create an innovative model of multiple shared and distributed databases. Apache web server (which is the most widely used web server on the Internet). Various Internet/programming technologies (HTML, Java, C, C++, php3) all of which are widely used in modern programming and Internet application systems. • • All of these tools have been chosen to enable us to build a system which is stable, flexible, fast and highly scalable. Although twest™ is built with standard tools and technologies, it uses them to build a powerful and innovative architecture which differs substantially from the technology used by our potential competitors. This design allows us to target customers and provide services that our competitors cannot. A further important feature of our architectural design is the creation of an open standard for module development (consisting of a well-documented Application Programmer Interface (API) and Software Development Kit (SDK) for module developers). This open standard will allow external developers to create new twest™ modules, without requiring twest.com to reveal the code and technology of the twest™ system itself. Combining the API and SDK with a system whereby we pay commissions to external developers provides important advantages: • Without having to employ a huge programming staff, twest.com will be able to simultaneously utilize the programming efforts of many developers to rapidly create a large number of new modules to supplement those we have already developed and will continue to develop. • External developers will be a source of fresh ideas and will be able to respond to market demands to create a range of innovative module applications of which twest.com would otherwise have been unaware. page 28 How does twest ™ work?: Adding modules to an existing web-site (twestification) ISP/Web Hosting server Customer's web pages 2 twest server Twest Web Site twest Database 3 5 4 1 Customer PC Web Browser When a site owner decides to use twest™ modules, the following steps occur: 1. The user visits the twest.com web-site, completes a license agreement, enters payment details, and then enters the URL of their web-site, as well as information about how the twest.com server can upload modified pages onto the customer’s ISP server (for example, an ftp username and password9). 2. Using the URL obtained in the previous step, the twest.com server will use a ‘web spider’ to collect the entire content (web-pages, image and sound files)10 of the site and copy it back to the twest™ system. A reference copy of the site will be permanently stored in the twest.com database. 3. The twest.com server will parse the structure of the existing web-pages to find suitable locations where twest™ modules can be inserted. 9 In case the customer does not have this information, the twest.com helpdesk will contact the ISP directly to obtain the details. Over time twest.com will establish relationships with ISPs so that twest.com will already have all the information available in many cases, and the customer may only need to identify his ISP. 10 A spider is capable of collecting all web-site content which is available to a browser. This includes html, client-side script JavaScript (or another language), graphics, and sound files. A spider cannot access any server-side programs or scripts, so that obviously these will not be copied back to the server. This implies a limitation on the customers using twest™ – twest™ won’t alter server-side scripting or server-side components. In most cases, this will not be a limitation to the user, since twest.com target customers’ web-sites currently lacking dynamic content. page 29 4. Using a web browser, the twest™ system provides customers with an easy-to-use Graphical User Interface (GUI) allowing them to navigate through the copy of their site, add modules to their pages and edit the existing text on the pages. For each module, the customer can set properties and options which affect the appearance (as displayed to visors to their site) and functions of the module. 5. Using the upload information obtained in step one, the twest.com server copies the modified web-site back to the ISP’s web server.11 11 Depending on modifications made to each page, some pages will be copied back to the ISP’s web server as static pages. Other pages will be dynamic and a pointer will be copied back to the ISP’s server redirecting browsers to the page on the twest.com server. However, the distinction between static and dynamic pages will be invisible to the site owner and the visitor. They perceive it as a fully dynamically operating web-site. page 30 6.4 Appendix 4: Screenshot of twest™ workbench Toolbar & Navigation Guided Tour TABS to select view mode - Site - Module content - Design - Module info - Help New Module Selected website, just as real Edit text with the online editor page 31 6.5 Appendix 5: Competitive environment BESEEN.COM What is Beseen? Beseen [http://www.beseen.com], a web-based service offered by categorybased web directory LookSmart, provides a suite of free tools that help web developers create and maintain their web-sites. Beseen vs. twest.com Different Business Model • Beseen is a free web-space provider for private users (similar to geocities) as well as a provider of web-space and domain name registration for professionals (full service provision). It offers tools for developers as value-added services. • Beseen’s service has a different target group (no business, merely web designers and Internet savvy users) Different Product Design • html code and hence IT knowledge is required for most professional tools • specific technology resources are required for maintaining web-sites • Beseen’s functions are not fully customizable • It is not a technology platform like twest.com • Beseen uses mostly third party tools Full Service Providing • Beseen has a broad product portfolio (web hosting, domain name registration, tools for developers, advertising, promotion, etc.) • Beseen offers an interesting advertising concept (also risky) Organization • Beseen has a strong partner and distribution base • They maintain international branches in USA, Australia and Europe • Beseen has a strong financial backup page 32 HOTOFFICE.COM What is Hotoffice? HotOffice™ is a web-based Intranet Service that connects colleagues, clients and vendors from anywhere. This monthly subscription service provides a hosted intranet at a fraction of the costs of setting up and maintaining a private system. HotOffice’s service includes sharing and retrieving documents, sending and receiving e-mail, updating a calendar and contact manager, hosting bulletin board discussions, holding online conferences, making travel arrangements etc. The vision is to create the ultimate all-in-one productivity, communications and collaboration tool for small business. HotOffice levels the playing field for small business with collaboration needs, multiple offices, mobile workers, telecommuters and virtual offices HotOffice vs. twest.com Different Business Model • HotOffice is a workflow application based on Internet technology for the internal use of small businesses. It is comparable to products like Lotus Notes or Ms Outlook, but much lighter and easier to handle without a heavy IT infrastructure. • The target group overlaps the target group of twest.com in some parts. However, twest.com aims at a much bigger target group with different needs. • The target group and hence distribution and partners are specialized on mobile computing for small companies. • The service can get quite expensive for more users. It is probably better to use standard software instead. Different Product Design • HotOffice is an all-in-one product which can be customized by content and not by modularization. • All features are offered for one price. • All the information resides outside the company’s communication sphere. • BUT: very easy to handle, no IT skills required, fast set-up (10 minutes) Organization • The company has strong partners and distribution channels • Hotoffice has good financial backup page 33 SITEMATIC.COM What is Sitematic? Sitematic is an automated web publishing system supposed to make technically powerful, elegantly designed web-sites available to virtually all companies. No technical knowledge is required. Sitematic includes all kinds of automated features one can add to a site with a mouse-click. The company focuses on a single service - automated web-site publishing services. Sitematic vs. twest.com Different Business Model • Sitematic’s core competence is full-service provision for small business (static web-site building, maintaining, promoting and registering). • Their target group concentrates on small companies with no IT knowledge • Sitematic is providing services that twest.com does not offer in the first run (except the online-shop) Different Product Design • Sitematic’s services include setting up, maintaining, promoting and registering a web-site and/or an online shop. • The products are pretty standard and not dynamic (except the online shop). The customization of the web-site is restricted. • The application is not suitable for professional web-site development • Sitematic’s service requires at least some computer skills to set up and implement a web-site • The implementation is lengthy (at least 45 minutes for a standard homepage and “one-product“ shop) • It is not possible to enhance a web-site with functions Organization • Sitematic is using different distribution channels that are very specialized • They acquired just $2 million venture capital (from a press release) page 34 HOMESTEAD.COM What is homestead.com? Homestead is a Java-based service that enables individuals or groups to collaboratively build and publish web-sites without programming or ftp. Homestead Technologies, Inc. is a provider of self-service web publishing using consumer webware — software that lives on the web. As a web-based publishing platform, homestead enables individuals, groups and small businesses to quickly create feature-rich sites that help them better communicate and collaborate with their real-world communities of family, friends and colleagues. Homestead vs. twest.com Different business model: • Homestead is a web building tool • The emphasis is not on SME market • Homestead’s goal is to be a „publishing platform for all consumers“ and not to be providing „interactive applications on demand“ to enhance web-sites. • Homestead does not offer sophisticated business tools • Homestead generates revenue from sponsorship, co-branding, licensing and content partnerships. They do not have subscribing fees for business tools. • twest.com serves as a publisher / hub for webware or onlineapplications. • twest.com is offering business tools for communication and organization purposes. We are evolving to a supplier for online-rental ERP applications. Different product design: • Homestead’s service is Java-based and as a result runs slower than twest™ • It is not possible to integrate function into an existing web-site • Download is necessary (30 to 60 minutes) to upload homestead website to another or one’s own ISP or to edit homestead web-sites offline. • Modules are not available without sponsoring • Layout / Design is restricted BUT: • easy integration of elements • more dynamic tools in planning • easy navigation • image upload • layer technology • interface for palm • URL registration page 35 VISTO What is Visto? Visto’s vision is to provide everyone with anywhere, anytime access to personal information via the web. The free membership includes fully integrated calendar, email, address book and file storage service, as well as content providing and community software. Visto vs. twest.com Different Business Model • The core competence of Visto is maintaining and sharing of private as well as public information. • Tools for this purpose include calendar, address book, e-mail, groups etc. • The target group of Visto is similar to twest.com’s target group, although this service is not for professional use in small companies (no domain name registration, no customization, not possible to integrate in corporate network, see product design below) Different Product Design • Visto is offering one product for all • Their service is a standard application which is just customizable by content • The integrated web-site is not customizable and very standard (BUT: good functionality for sharing information) • All information and action is within Visto’s communications sphere and hence not able to integrate in a corporate network or web-site Organization • Visto has strong partners and distribution channels • The company is backed by venture capital • BUT: The only source for revenue is advertising Innovation • It is possible to integrate telephone services within Visto (get e-mail via telephone etc.) • Information sharing within groups is straightforward and efficient • Visto is a good service for communities, clubs, etc. page 36