JUNE 17, 2011 Abe$El$Sayed$Betty$Morin$Nancy$Sagar$Greg$Walters$Nathan$Wilson$$

$

FINAL PRESENTATION UCLA$Executive$MBA$Program$Strategic$Management$Research$$

[client name withheld]

“I thought about doing this in 1996 but couldn’t figure it out.”

2

Core Model: Services 3

BUSINESS'MODEL'

Equity'

Cash'

Discounted'Cash'+'Equity'

?'

MERGER VISION 4

BUSINESS'MODEL'

VC'referrals'

“Invest”'combined'services'in''web/mobile'startups*'

'for'cash'+'equity''

*$25B'app$revenue,$2015$

$

Strategy (Capital,$turnarounds)$

3$FTEs$

Software (Mobile/web)$$25$US$FTEs$

Project Objective

Develop an “optimized business model”

5

'''

This model is not viable. “ ”

Customers$$ 10$

Web/mobile$startups$ 91$

Attorneys$ 8$Angels$ 11$Venture$capitalists$ 33$

Competitors$ 7$

Startup$experts$ 5$

Entertainment$cash$cows$ 7$

Entertainment$experts$ 5$

177'PRIMARY'RESEARCH'SUBJECTS'

VCs not a source of dealflow 6

EXAMPLE:''VC'RESEARCH'RESULTS'

0$

2$

4$

6$

8$

10$

12$Never' Infrequently' Frequently'

Resp

onse

s$

0$

1$

2$

3$

4$

5$

6$

7$

Ratin

g$on

$1U7$scale$

How$frequently$do$you$refer$portfolio$companies$to$ENGINEERING'or'STRATEGY'SERVICES?'

Is$it$valuable$to$use$the$$SAME'FIRM'FOR'BOTH?'

Source:$Primary$research.$n=17$

Few economies of scope 7

EXAMPLE:''CUSTOMER'RESEARCH'FINDINGS'

3.1%$of$revenue$Customers'

Startups:''same'story'

8

PROJECT'PIVOT'

Raise$a$fund$ New$model$(offshore$or$incubator)$

Bolster$service$business$$to$generate$$

MORE CASH to$invest$

Options

x x

Overarching$strategy,$marketing,$operations,$structure$

0$

1$

2$

3$

4$

5$

6$

7$

0$ 1$ 2$ 3$ 4$ 5$ 6$ 7$

Strategy

'

Elite'engineering'

9 Web/Mobile Startup Segments

SEGMENTATION'/'CLUSTER'ANALYSIS'

Strategy seekers $ Nontech

Money hungry Fledglings

Confident

10 “CASH COWS”

TARGETING'CONCLUSION:'CASH'COWS'

2009$ 2010$CPG$ *$Entertainment$*$Retail$ Technology$Auto$ *$Media$*$

Entertainment$ Retail$Financial$Services$ CPG$

TOP VERTICALS IN MOBILE APP SPENDING*

*$11.6 B 'Projected$2012$US$spending$

Source:$$State$of$the$Apps$Industry$2010$and$2009$Surveys;$DIGIDAY,$Stifel$Nicolaus,$Millennial$Media.$$$

11

FIRST'CASH'COW'TARGET'

High Demand •  #1$app$spending$•  #1$user$category$$•  New$entertainment$

formats$&$distribution$$•  Multiple$business$units$$

Insufficient Supply •  Engineering$shortage$•  No$dominant$player$•  Small$vendors$=$“hit$or$

miss”$

“Entertainment'on'mobile'has'not'even'scratched'the'surface'of'what'is'possible.”'

$

Peter$Guber,$Chairman$&$CEO,$Mandalay$Entertainment$

Entertainment & Media

Why choose ---? 12

PERCEPTUAL'MAP'OF'COMPETITION''

0$

1$

2$

3$

4$

5$

6$

7$

8$

9$

10$

0$ 1$ 2$ 3$ 4$ 5$ 6$ 7$ 8$ 9$ 10$

Spec

ializ

ed'Exp

ertis

e'

Flexibility'

In[house''teams'

Product'firms'

Elite'software'development'

Offshore'

Small'shops'

Selection'Criteria'

FLEXIBILITY'

SPECIALIZED'EXPERTISE'

REFERENCES'

Upcoming'Sponsorships'

September'2011!

Sales Strategy – Cash Cows 13

CUSTOMER'ACQUISITION'

'VP'Business'Development''Has$sold$to$entertainment$digital$media$groups$(e.g.$Razorfish).$Hire$now.$!

'Marketing'to'build'brand'Event$sponsorships,$expanded$web$presence,$promotional$budget,$speaking$engagements$(Rob).$$

Acquisition Quotas

2011' 2012' 2013' 2014' 2015'

Major$marketing$investments$(#)$ 3$ 8$ 9$ 9$ 9$

Marketing$budget$($)$ $$97$k$$ $$281$k$$ $$327$k$$ $$379$k$$ $$411$k$$$

FullUtime$BD$executives$ 1$ 1$ 2' 2' 2'

14

CUSTOMER'ACQUISITION'SCHEDULE'

Single$Projects$ 2$ 5$ 1$ 1$ 3$

NEW'CASH'COWS'PER'EXEC' 0' 3' 2.5' 2' 3'

Cash$only,$50%+$gross$margins$

0$

3$5$

4$6$

2$

5$ 1$1$

3$

2011$ 2012$ 2013$ 2014$ 2015$

Number$of$new$individual$projects$ Number$of$new$cash$cows$

$0.86'$2.00'

$2.67'

$4.50'

$5.99'

$0.0$

$1.0$

$2.0$

$3.0$

$4.0$

$5.0$

$6.0$

$7.0$(M)'

15

Cash Cow + Single Project Revenue CUSTOMER'ACQUISITION'>'REVENUE'PROJECTION'

Reference$only$–$not$used$in$projections.$$Source:$$Forrester$Research,$Feb.$2011$

US$Mobile$Application$Development$Services$Market$Projected$TAM$&$YOY$growth$

$'400M' $'1.6B' $'2.7B' $'4.1B' $'5.6B'

300%! 300%! 69%! 52%! 37%!

Reference!only!–!not!used!in!our!revenue!projection.!!Source:!!Forrester!Research,!Feb.!2011!

16

5 Year Revenue Projection (Consolidated)

$0.0$

$1.0$

$2.0$

$3.0$

$4.0$

$5.0$

$6.0$

$7.0$

$8.0$

$9.0$

$10.0$

2011' 2012' 2013' 2014' 2015'

!!!!$4.0!M!! !$5.3!M!! !$6.0!M!! !$7.9!M!! !$9.5M!

Total

17

Ops Improvement Plan

CAVEAT:''FIX'OPERATIONS'FIRST'

PROJECT'MANAGEMENT' 4.3'

Delivery$on$expectations$ 5.0'

Likelihood$of$future$work$ 5.3'

Scoping'•  Tech$team$not$always$

involved$•  Difficulty$evaluating$resource$

requirements$•  No$formal$change$processes$$•  EarlyUstage$projects$are$

ambiguous$$

Overwork'•  Too$many$concurrent$projects$•  Junior$engineers$not$trained$in$

project$management$•  Team$can$be$difficult$to$reach$

(7!point!scale)!

18 Operations Solutions

ADD'CRITICAL'SOFTWARE'RESOURCES'

President'CEO'

Directors'(3)'

VP'Strategy'(2)'

GM/'Strategy'M'China'

China!So3ware'Engineers'

Domes:c!So3ware'Engineers'

Admin'

Dir.,'Corp.''Developmt'

Project'Admin'

Managing!Director,!So3ware'

BD!#2!!(Scenario'1,'2013)'

Project!Managers!!(1'per'3'projects)'

Director,'Finance'VP,!Biz!

Dev'

17$ 17$20$

25$31$

36$1$

3$

3$

4$

5$

0$

5$

10$

15$

20$

25$

30$

35$

40$

45$

2010' 2011' 2012' 2013' 2014' 2015'

$1.8'

$1.8'$2.1'

$2.4' $2.5'

$1.6'

$2.1'$2.4'

$3.4'

$3.9'

EOY Software Headcount 19

SOFTWARE'EXPENSES'(SCENARIO'1'IN'BUSINESS'PLAN)'

SG&A'

Engineering$Mgt,$Biz$Dev,$Exec.$Mgt,$Finance,$HR,$Admin$

Project$Managers,$$US$Engineers$

COGS'

20 Net income available for investment

CONSOLIDATED'P&L'(SCENARIO'1'IN'BUSINESS'PLAN)'

$0.08' $0.46' $0.55' $1.02' $1.65'

$0.0$

$1.0$

$2.0$

$3.0$

$4.0$

$5.0$

$6.0$

$7.0$

$8.0$

$9.0$

$10.0$

2011' 2012' 2013' 2014' 2015'

Millions

$

2%$ 9%$ 9%$ 13%$ 17%$

COGS'

NET'INCOME'

SG&A'

$0.08'$0.46' $0.55'

$1.02'$1.65'

21 Investment Division

FINAL'RECOMMENDATION:'CREATE'INVESTMENT'DISCIPLINE'

$1.  Source*$/$evaluate$/$manage$deals$2.  Screen$deals$as$if$they$are$cash$$3.  Reimburse$software$/$strategy$

groups$for$services$

Investments

Advisory!Board!(3M5'experts)'

*$Fledglings$+$Internal$ideas$

Generate$&$evaluate$deals$for$equity$

A Framework to Realize the Vision

Recommendation Impact

CONCLUSION:''THE'OPTIMIZED'MODEL'

IMPROVE OPERATIONS by$hiring$a$managing$director$&$project$managers$

TARGET CASH COWS(entertainment$first)$with$BD$and$marketing$investments$

CREATE INVESTMENT DIVISION with$advisory$board$to$help$source$&$manage$deals$$

•  Better$investment$decisions$•  Greater'emphasis'on'larger'

equity'stakes'that'can'lead'to'larger'exits'

•  Protect$company$by$diversifying$from$A$

•  Faster$revenue$and$net$income$growth$to$fund$investments$

•  Stronger$referrals$&$ability$to$land$new$business$

•  Greater$profit$margins$

Q&A Thank you!