blog souq business plan
DESCRIPTION
An old business plan I worked on few years ago.TRANSCRIPT
April 13, 2009
MIT Arab Business Plan Competition Dear MIT Team, It is our pleasure to be part of the MIT business plan competition. Our award has been the finalized business plan; which will form the basis of running our business. We look forward to learn from the invaluable feedback that each of the experienced and knowledgeable judges is willing to give to help improve and strengthen both our business plan and business model. We would like to thank you for the invaluable workshop that enhanced our business philosophy in lovely Beirut. We would like express our special thanks to Mr. Ken Morse for his inspirational words that helped nurture our entrepreneurial behavior. Best Regards, Blog SouQ Team
Adey Salamin, Ahmad Takatkah, Ammar Ibrahim
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BLOG SOUQ
BUSINESS PLAN
April, 2009
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Executive Table of Contents
A. EXECUTIVE SUMMARY .................................................................................................. 5
B. THE COMPANY, STRATEGY, MANAGEMENT, AND ORGANIZATION .................. 8
C. THE MARKET AND COMPETITORS ............................................................................ 17
D. THE PRODUCT OR SERVICE ........................................................................................ 28
E. MARKETING AND SALES .............................................................................................. 38
F. FINANCIAL INFORMATION .......................................................................................... 42
G. APPENDICES .................................................................................................................... 58
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Detailed Table of Contents
A. EXECUTIVE SUMMARY .................................................................................................. 5
B. THE COMPANY, STRATEGY, MANAGEMENT, AND ORGANIZATION .................. 8
B.1. Business Mission ........................................................................................................... 8
The Concept ...................................................................................................................... 8
The Problem ...................................................................................................................... 8
The Solution ...................................................................................................................... 9
Mission Statement ............................................................................................................. 9
Objectives ........................................................................................................................ 10
Keys to Success ............................................................................................................... 10
Growth Plans ................................................................................................................... 10
B.2. Management Team ...................................................................................................... 11
Founders (Adey Salamin, Ahmad Takatkah, Ammar Ibrahim) ...................................... 11
Other Key People ............................................................................................................ 13
Advisory Board of Directors ........................................................................................... 13
B.3. Ownership and Management Structure ....................................................................... 14
Ownership Structure ........................................................................................................ 14
Organizational Structure .................................................................................................. 15
B.4. Other Resources ........................................................................................................... 16
Human Resources Requirements ..................................................................................... 16
HR Development Strategy ............................................................................................... 16
C. THE MARKET AND COMPETITORS ............................................................................ 17
C.1. Market .......................................................................................................................... 17
Market Introduction ......................................................................................................... 17
Market Analysis .............................................................................................................. 17
Market Potential .............................................................................................................. 20
Target Market .................................................................................................................. 21
C.2. Competition ................................................................................................................. 22
Competitors ..................................................................................................................... 22
Competitive Advantage ................................................................................................... 23
Barriers to Entry and Future Competition ....................................................................... 24
SWOT Analysis ............................................................................................................... 24
C.3. Need for Market Research ........................................................................................... 27
D. THE PRODUCT OR SERVICE ........................................................................................ 28
D.1. Products and Services Description .............................................................................. 28
Type of Tradable Shares .................................................................................................. 28
Blog Auditing Solution ................................................................................................... 28
Online Trading Platform ................................................................................................. 29
Listing Process ................................................................................................................ 29
Trading Process ............................................................................................................... 29
Customer Service ............................................................................................................ 30
Business Model ............................................................................................................... 30
D.2. Product Development .................................................................................................. 32
Technology Used ............................................................................................................. 32
Strategic Partnership ........................................................................................................ 32
Technical Overview ........................................................................................................ 32
User Requirements .......................................................................................................... 33
Development Methodology ............................................................................................. 33
D.3. Identifying Costs / Manufacturing and Operations ..................................................... 35
Pre-Startup Cost .............................................................................................................. 35
Operating Cost ................................................................................................................. 35
D.4. Risks and Regulations ................................................................................................. 36
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Team Risk ........................................................................................................................ 36
Regulations Risk .............................................................................................................. 36
Execution Risk ................................................................................................................ 36
Technology Risk .............................................................................................................. 37
Capitalization Risk .......................................................................................................... 37
E. MARKETING AND SALES .............................................................................................. 38
E.1. Marketing Plan ............................................................................................................. 38
Company Message .......................................................................................................... 38
Strategic Position and Brand Building ............................................................................ 38
Marketing Strategy, 4Ps .................................................................................................. 38
Marketing Methods and Advertising ............................................................................... 39
Community Involvement and Social Responsibility ....................................................... 40
E.2. Sales Strategy ............................................................................................................... 41
F. FINANCIAL INFORMATION .......................................................................................... 42
F.1. Time Frame (Implementation Schedule) ..................................................................... 42
Goals and Milestones ...................................................................................................... 42
Startup Summary ............................................................................................................. 42
Financial Plan Summary ................................................................................................. 43
F.2. Forecast Assumptions .................................................................................................. 44
Basic Assumptions .......................................................................................................... 44
Five Years Revenue Forecast Assumptions .................................................................... 45
F.3. Financial Statements (Five Years) ............................................................................... 46
Financial Assumptions .................................................................................................... 46
Projected Profit and Loss (Income) Statement ................................................................ 47
Projected Balance Sheet .................................................................................................. 49
Projected Cash Flow Statement ....................................................................................... 50
Projected Revenues ......................................................................................................... 51
Projected Payroll Expenses ............................................................................................. 52
Projected Expenses .......................................................................................................... 53
Breakeven Analysis ......................................................................................................... 54
Sensitivity Analysis ......................................................................................................... 55
F.4. Funding: Capital and Debt ........................................................................................... 56
Funding Strategy: Capital vs. Debt ................................................................................. 56
Stages of Funding Required and Use of Proceeds .......................................................... 56
Exit Strategy .................................................................................................................... 57
G. APPENDICES .................................................................................................................... 58
G.1. Detailed Financial Model ............................................................................................ 58
G.2. Founders CVs .............................................................................................................. 58
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A. EXECUTIVE SUMMARY
Business Mission
Blog SouQ is an innovative startup established with the mission to empower people to develop the Blogsphere ecosystem by participating in sustaining, developing and promoting blogs. Blog SouQ is establishing a platform to accelerate the process of monetization of original content created by individuals. As an initial proof of concept the platform is focused on semi professional / professional bloggers allowing them to solve their traditional problems of raising capital for development and unlocking value from their efforts. Blog owners can raise capital and improve their blogs’ performance and revenues. Investors (whether financial, enthusiasts or corporate), get an opportunity to capture the benefits of this new exciting market. Blog SouQ will provide a safe, secure and friendly service that bloggers and investors can trust.
Management Team
Blog SouQ is being established by an ambitious and committed team with a vision and the desire to stand behind the company in a world full of competition and a continuous moving landscape of technology. Our team includes three professionals with a proven track record yet we seek and accept coaching to overcome recognized weaknesses. Team record includes senior positions with an investment advisory, founders to a management and IT consultancy, founders of three IT startups, mentors for Queen Rania Center for Entrepreneurship, CTO of the largest Middle East digital content providers among many other accomplishments. Ownership Structure
Founders of Blog SouQ are: Adey Salamin, Ahmad Takatkah and Ammar Ibrahim, each owning 25% of equity. 10% of Blog SouQ’s shares will be held as an incentive scheme for the potential CEO, while the remaining 15% will be held as an option pool for senior level employees.
Market
Blog SouQ is targeting a 25 billion dollar market of 200 million blogs and 346 million blog readers worldwide. It is estimated that there are 7.4 million active blogs worldwide of which 50% (3.4m) have advertising. According to Technorati, it is also estimated that the number of new blogs are doubling every six months. Across the span of 5 to 7 years we plan to target a market share of 10% of the active blogs with advertisements (370,000 blogs).
Competition
Currently we have two potential indirect competitors: Tipjoy.com and BlogShares.com. Tipjoy allows users to donate money to blogs while BlogShares is a fantasy exchange that rates blogs based on number of outgoing and incoming links.
Products and Services
We will create a similar structure to a stock exchange allowing bloggers to raise capital without the hassle of public-company regulatory oversight. Our two main products are a trading platform and a blog auditing solution. The trading platform will be very much similar to traditional stock trading platforms with modifications to match our new blog-ad-shares concept. Our blog auditing solution will be built in partnership with Woopra, a web analytics provider, and enhanced to investigate blogs contents regarding quality and quantity among
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other criteria. The auditing platform will provide live reports including industry and sector average performance measures and benchmarks to help investors evaluate blogs.
Business Model
We will charge a 5% transaction fee for listing and trading blog shares while charging $10 for an annual subscription to an unlimited number of detailed blog audit and analytics reports ($5 will be for Blog SouQ and $5 will be for our strategic partner Woopra). Marketing and Sales
Our marketing efforts will mainly focus on blog readers, the buyers and potential investors. Blog owners will be targeted by our direct sales operations. Our initial strategy is to focus on indirect advertising methods in the startup phase while moving to direct channels after receiving the seed investment. We will promote Blog SouQ via a multi-channel targeted marketing campaign that includes network marketing, word of mouth, PR portals, business reviews and social media marketing. This will enable us to start with minimal advertising expenses prior to the seed investment. Sales transactions will be conducted directly on our online trading platform. In communicating our message with blog owners, we will emphasize our value proposition of simplifying access to public investments and leveraging blog reader loyalty. Financials and Assumptions
Blog owners will be allowed to sell up to 50% of their blog ownership and we have assumed that the average blogger will only offer 25% ownership in their blog. To be conservative we will also assume no growth in the number of blogs and only 20% of our target market is successful in raising funds. We have also assumed that only 0.5% of the total blog readers market (estimated at 346 million) would be interested in gaining access to our blog audit reports within the total five year projected period. It is projected that year one will have zero revenues while our focus will be on finalizing the platform development for Blog SouQ coupled with the integration with our strategic web analytics partner. Given an average blog revenue of $7K per year we have assumed a TTM multiple of 3 for valuing the blogs prior to listing on Blog SouQ. We have also assumed that during the span of the investment and for re-trading the shares, the average valuation of the Blog and hence the transaction value will not change. To be conservative, we have assumed that only 20% of the listed blogs on Blog SouQ will have their blog shares re-traded and only twice in their life span. Given the conservative assumptions, in year one the company will have no revenues and in year five it is projected to reach $17.9 million. Assuming zero debt, we expect to achieve a net income margin of 68% in year two and grow it to 266% in year five. The company is projected to breakeven in year two of operations and at a hypothetical discount rate (WACC) of 20%, our Net Present Value is estimated at $10.8 million with an expected Internal Rate of Return in excess of 300%. A detailed financial model has been prepared in a separate addendum named Blog SouQ Financial Projections
Startup Summary and Funding Request
Our vision is to start small and grow rapidly within the next five years. To jumpstart the business, reduce time to market, lower startup cost, and get advantage of the offered business
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support services, the company will launch its operations from iPark, the Jordanian technology incubator. To bootstrap starting the company we need to raise initial funds of $60,000. We are planning to operate in a lean mode, participate in local and international business plan competitions, and target freelance consultation projects. The initial funds will be used to develop our alpha version, file for the business method patent, pay for the incubator’s rent and pay our basic salaries for the next 6 months. In parallel we will seek to promote our alpha version among friends and family members that own blogs with advertising. They will be our first batch of clients and focus group to test the basics of our product and business model. Next, we will be seeking a seed VC investment of $500,000 to cover our startup operating expenses of hiring the basic technical team to develop a beta version of Blog SouQ to launch. We expect to breakeven at the end of the second year. During the 3rd year, we will expand our team and start sales and marketing campaigns depending on our own revenues. An experienced CEO and CFO will be hired in addition to an online sales and marketing team and customer services team. As our user base grows so will our technical requirements which will be higher and will require a more sophisticated IT hosting environment.
Exit Strategy
For us, the founders, Blog SouQ is built to last. However, early investors can exit at later investment rounds, and late investors can exit either via an IPO, which is expected within 7 to 8 years of operations, or a potential acquisition.
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B. THE COMPANY, STRATEGY, MANAGEMENT, AND ORGANIZATION
B.1. Business Mission
The Concept
Blog SouQ presents an innovative stock market concept for blogs. It enables blog owners to raise capital to improve their blogs’ performance and increase revenues by selling blog-shares to the public without the complications of traditional stock markets. Investors can buy and trade blog-shares in a safe, secure and friendly online environment. Building on the traditional stock market concept, Blog SouQ is solving huge problems when it comes to issuing, selling, and trading blog-shares. Blogs are not limited liability or public shareholding companies; most of them are not even registered companies at all. So how can blogs be traded publicly without being registered entities? How can you control and monitor a blog’s performance? How do you protect shareholders’ rights? For how long will shareholders/investors hold their shares before profiting from them? How would a price go up/down? What are the rules and regulations for such a stock market? The combination of our team experience in web development, business solutions and finance created answers to all above mentioned questions. We are introducing a comprehensive web solution backed with solid business and legal processes that enable people to trade blog-shares and protects everyone’s rights.
The Problem
Blog Owners Perspective
Blog owners need to raise capital in order to invest in:
– Hiring technical support – Hiring editors – Improving blog features – Buying or developing new web applications – Running online marketing campaigns for the blog – Renovate the blog design – Travel and attend overseas events to cover its activities – Start a new blog
Given the need to raise capital, the challenge becomes in how to raise it. Many blogs are small in size hence requiring a small amount of investment. Furthermore, in most cases blogs are not owned by companies but by individuals.
Some of the challenges in raising capital:
– How do I meet blog investors? – How do I value my blog? – I need a small investment, who will facilitate it? – How do I protect my blog ownership? – Are there any legal issues?
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Investors Perspective
There are three core types of investors that we are going to target. The first type is the financial investors looking for new short term financial products and new investment opportunities. The second type is the enthusiast investor: people who are interested in investing because they are loyal readers for those blogs and would like to have some bloggers to continue their task. The third investor could be a company that wants to promote its brand through that blog. From the investors’ perspective, blogs are not actually limited liability or public shareholding companies; they are not even registered companies.
So the challenges become:
– How do you find Blogs that need the investment? – How do you introduce and match blog owners with blog investors? – How do you facilitate the investment in the blog? – How do you protect the investors’ shares? – How can investors exit their investment? – How can you monitor and audit a blog’s performance? – How do you determine the value of the blog?
The Solution
For blog owners: they can secure investments or raise capital by issuing and trading shares via Blog SouQ without the need to register as a public shareholding company, without the need for board of directors, external auditing, or any of the complicated regulatory requirements and long process of the actual stock market but providing a similar environment. For Investors: Blog SouQ has provided a new financial product for the financial investors, a way for the enthusiast to give money to the blog owner as long as the owner continues to blog, a better way for the brand owners to sustain marketing their brands of specific blogs by owning part of it. The detailed trading process is provided in the products and services section of this plan, in summary, Blog SouQ will:
– Provide a platform for blog owners to meet blog investors – Minimize legal process for both the investors and blog owners – Act as an escrow agent – Act as an external auditor for blogs – Perform blog valuations – Provide the means for investment while protecting both the investors and the blog
owners
Mission Statement
Our mission is to foster to empower people to develop the Blogsphere ecosystem by
participating in sustaining, developing and promoting their favorite blogs..
We enable blog readers to invest in and promote blogs which they love, we enable blog owners to improve their blogs’ performance and to achieve rewarding financial status by simplifying access to public investments, and we create new investment opportunities for financial investors.
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Objectives
Long - Term Objectives
– Provide a trading platform for matching investors and blog owners; – Engage and encourage bloggers to independently grow via attraction of necessary
investment; – Ensure sustainability of blogs via an independent funding model from loyal
readers of these blogs as investors
Short - Term Objectives
– Build-up an independent blog trading platform; – Promote Blog SouQ to key blog platforms and blog owners; – Partner with a blog analytics platform to add our customized auditing and
valuation functions.
– Reach out to blog readers.
Keys to Success
Blog SouQ keys to success are: – Experienced and highly committed team – Developing a solid trading platform – Meeting all development dates in a timely fashion – Solid marketing execution – Establishing trust between Blog SouQ and both investors and blog owners – A strong market entry – Controlling costs – Attain independence from any blogs platforms and owners – Attracting loyal blog readers to invest in their favorite blogs and encouraging
them to promote blogs in which they invest in. – Flexibility to enrich the management team with a senior CEO for equity
Growth Plans
Although Blog SouQ is initially targeting only blogs for this new stock market concept, we plan to apply the same concept to any startup website. All startup blogs and websites could be part of our stock market before going public in the traditional stock markets. We have avoided startup websites at this stage because of their countless business models and revenue streams that could not be controlled in one online auditing solution. Websites may also have direct physical cash transactions with their customers that could not be tracked online with our current proposed system. While for blogs, it is simple and straightforward, most of the blogs depend mainly on affiliate advertising services to generate revenues, which could be tracked and audited online without the need to have a physical external auditor. In our future growth plan, we will be developing a new trading process that targets a specific group of startup websites to include them in our stock market.
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B.2. Management Team
Founders (Adey Salamin, Ahmad Takatkah, Ammar Ibrahim)
The management Team is to be governed by an advisory board of directors and will have the following team members (CVs provided in the appendix):
Adey Salamin
Overview:
Founder and Partner at Singularity Advisors: An advisory firm founded in January 2007to focus on opportunities across the MENA – India corridor. Having started his career as an IT professional and subsequently an entrepreneur, he has moved on to become an investment professional in recent years. Adey has enjoyed an international career having held senior management positions in the US and Jordan. Adey has also been involved in setting up technology commercialization strategies and innovation clusters in Jordan and has worked with and advised numerous IT startup companies in the MENA region. Track Record:
Prior to founding Singularity Advisors, Adey founded and managed Strategment Consulting, a strategic management and IT consulting firm based in Jordan then acquired by Singularity Advisors. Previously, Adey was an Associate Vice President in the Strategic Management Group at Merrill Lynch Investment Managers in New Jersey and New York. Adey’s track record over the past 8 years includes involvement in the development of the Jordan Innovation Cluster, Technology Commercialization and transfer initiative, Mafraq & Irbid Special Economic Zones, founder of CST Capital (MENA, India), founder of Singularity Ventures (India Seed Fund). He has held senior positions with Merrill Lynch (NY, NJ - USA), International Computer Systems Ltd (London), Computer & Communications Systems (Amman), founder of Strategment Consulting (Amman). Adey has also been involved in numerous consulting projects in Jordan, UAE, KSA and Libya. Adey has worked and lived in Jordan, UAE, Libya, Canada and USA. He is a recognized figure among entrepreneurs and IT developers and well-reputed investment professional in Jordan, bringing a wealth of experience to the investment sector having come from a technology background with an international business-rich exposure. Exposure:
Current primary area of focus includes 1) Capital Syndication, 2) Market Entry / Cross Border M&A and 3) Corporate & Financial Restructuring As a Consultant, Adey advised numerous entrepreneurs and startups in Jordan (tech outsourcing), India (financial tech startup), Pakistan (web startups) and UAE on the topics of business planning, business development, deal sourcing, and market entry strategies. Education:
Adey holds a Finance and Accounting Certificate from the Wharton School of Business of the University of Pennsylvania and a Bachelor of Computer Science and Engineering, cum laude honors, from the University of Pennsylvania with minors in Economics and Math.
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Ahmad Takatkah
Overview:
Ahmad Takatkah has over five years experience in business development consulting and training for Technology Startups focusing on: entrepreneurship capacity building and mentorship, business planning, angel and venture capital investment process and term sheets negotiations. Track Record:
Before starting Fruits Ventures, a consulting firm for technology startups, Mr. Takatkah worked as a Program Manager at the Arab Science and Technology Foundation (ASTF) working on the “Startups Development” program to help technology entrepreneurs to start their own business, get incubated, access to capital investment, link with potential partners, and reach out to clients in the market. Prior to joining ASTF, Mr. Takatkah worked as a freelance business development consultant for multiple companies, organizations and venture capital firms between Amman and Dubai such as Riyada Ventures, Portuguese Trade Center, Access New Markets, RecruitGulf.com, Epygi Technologies, Fexco, and others to help them access the Middle East market and to organize local business events. Previously, He worked as a Marketing Manager for “Empretec”, the United Nations’ entrepreneurship capacity building program under the UNCTAD division. As an entrepreneur, Mr. Takatkah have founded and managed an online business company for which he successfully raised angel investment. The company lasted for one year only before the partners decided to shut it down. The business model was hard to sell and we didn’t manage to raise a second round of funding. Exposure:
Mr. Takatkah is a recognized trainer for “Queen Rania Center for Entrepreneurship” and the “Jordanian Engineers Association” in the fields of business planning, VC funding process, raising angel and venture capital investment and introducing term sheets for technology startups. He had successfully mentored three of the winning plans in the QRCE business plan competition for three consecutive years. Education:
Mr. Takatkah holds an MBA with distinction from the New York Institute of Technology, and a B.Sc. degree with distinction in Electronics Engineering from Princess Sumaya University for Technology. Ammar Ibrahim
Overview: Founder and Partner at Indemaj Technology: Web development and consultancy start up. CTO at Al Bawaba Middle East. Track Record:
Nearly a decade of experience in developing state of the art web applications. Founded Indemaj Technology in late 2006 and serves as a CTO for the largest digital content provider in the Middle East, Al Bawaba. Worked as a web technology consultant for many
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organizations, which include: Amman Stock Exchange, Securities Depository Center (SDC) of Jordan, Ministry of Water and MenaITech an Optimiza company. Exposure:
Advocate of Open Source technology. Frequent speaker and panelist. Participated in dozens of events all over the globe. Interviewed by Linux Journal (http://linuxjournal.com/article/8504) Worked as a technical reviewer for "Linux System Administration" Published by O'Reilly, March 2007.
Education:
A graduate of Jubilee school/King Hussein Foundation for gifted students. Bachelor of Computer Science/Information Technology from Jordan University
Other Key People
Blog SouQ business requires a high level international experience in financial investments as well as online business management. Although we can manage to develop Bog SouQ’s beta version and startup the company, down the road, we believe that we will need a professional CEO with international previous experience to enrich the company by his/her understanding of how things work on a global level. After developing the beta version, Blog SouQ will also need to hire an experienced: Chief Financial Officer. Our plan includes incentives for key management team members with equity shares in the company as described in the ownership structure below.
Advisory Board of Directors
Blog SouQ team appreciates the advice of senior international level professionals. We will be asking for mentorship, guidance and advice from specific domain experts who are needed for the success of Blog SouQ. We define the responsibilities of the board as:
– Sets objectives, goals and strategic direction for management – Supervises the management of Blog SouQ – Ensures management succession
We will be targeting well known overseas advisors to leverage their global knowledge and best practices. Periodic conference meetings will be conducted. Detailed description of needed advisory domain experts is provided in the organizational structure section below.
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B.3. Ownership and Management Structure
Ownership Structure
Initially we plan to register Blog SouQ as a limited liability company (LLC) in Amman, Jordan. All business, management, and development functions will be performed from there. As we grow, we plan to register another company in a tax free zone such as the Cayman Islands, Delaware or British Virgin Island. Founders of Blog SouQ are: Adey Salamin, Ahmad Takatkah and Ammar Ibrahim, each owns 25% of equity. 10% of Blog SouQ’s shares will be held as an incentive scheme for the potential CEO, while the remaining 15% will be held as an option pool for senior level employees.
Adey, 25%
Ahmad, 25%Ammar, 25%
CEO, 10%
Other Key People, 15%
Ownership Structure
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Organizational Structure
The following is the envisioned long term organizational structure:
a. Advisory Board of Directors
The advisory board of directors will include 5 experts as follows: 1. Financial Auditing Expert 2. Senior Financial Market Analyst 3. Management Expert 4. Technical Expert 5. Laws and Regulations Expert
b. Key Management
1. Chief Executive Officer (To be appointed at the 3rd year of operations) 2. Chief Business Marketing, Ahmad Takatkah 3. Chief Operations Officer, Adey Salamin (for the first two years will also be
responsible for the tasks of the CFO) 4. Chief Technology Officer, Ammar Ibrahim 5. Chief Financial Officer, (To be appointed at the 3nd year of operations)
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B.4. Other Resources
Human Resources Requirements
As shown in the table below, Blog SouQ will need the following resources and they will be hired at the shown years of operation:
Positions Year
1
Year
2
Year
3
Year
4
Year
5
Senior Developers (3 people): 1. With data mining background 2. With financial applications background 3. With high scalable web applications background
√ √ √
√ √ √
√ √ √
√ √ √
√ √ √
System Administrator (1 person) √ √ √ √ √ User Interface Designer (1 person) √ √ √ √ √ Quality Assurance (1 person) √ √ √ Accountant (1 person) √ √ √ √ Online Sales and Marketing Officers (3 people) √ √√√ √√√ √√√ Customer Service Officers (3 people) √√√ √√√ √√√ Admin Assistant (1 person) √ √ √ √
HR Development Strategy
Creativity, innovation and risk taking are our motives. Thus, we will focus on hiring passionate resources that think out of the box to create higher value. Continuous learning is one of our values. Our staff shall be attending at least two business/technical/personal development training workshops every year. We also plan to encourage learning from each other to build the spirit of team work. Being a client-oriented company is not only a marketing issue. In our team selection process, we take into consideration the persons' ability to accept feedback and show more effort in satisfying our clients. On the long run, an ownership structure for employees will be introduced to create the feeling of "working on my own business" for all employees. In addition to social and medical insurance, a trip will be organized every six months to a local area, and a relaxation session will be organized every month.
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C. THE MARKET AND COMPETITORS
C.1. Market
Market Introduction
Our market is the Blogsphere, which is the collective community of all blogs. A blog (a contraction of the term "Web log") is a web site, usually maintained by an individual with regular entries of commentary, descriptions of events, or other material such as graphics or video, in which readers can also post their own comments. But as the Blogosphere grows in size and influence, the lines between what is a blog and what is a mainstream media site become less clear. Larger blogs are taking on more characteristics of mainstream sites and mainstream sites are incorporating styles and formats from the Blogosphere. Whether or not a brand has launched a social media strategy, more likely than not, it’s already present in the Blogosphere. Four in five bloggers post brand or product reviews, with 37% posting them frequently. 90% of bloggers say they post about the brands, music, movies and books that they love (or hate). Company information or gossip and everyday retail experiences are fodder for the majority of bloggers. Companies are already reaching out to bloggers. One-third of bloggers have been approached to become brand advocates. There have been a number of studies aimed at understanding the size of the Blogosphere yielding widely disparate estimates of both the number of blogs and blog readership. All studies agree, however, that blogs are a global phenomenon that has hit the mainstream. The Blogosphere continues to evolve - with micro-blogging, long blogging, and video blogging. The numbers vary but agree that blogs are here to stay; the following are some snapshots about blogs from different media:
– comScore MediaMetrix (August 2008) – Blogs: 77.7 million unique visitors in the US – Facebook: 41.0 million | MySpace 75.1 million – Total internet audience 188.9 million
– eMarketer (May 2008) – 94.1 million US blog readers in 2007 (50% of Internet users) – 22.6 million US bloggers in 2007 (12%)
– Universal McCann (March 2008) – 184 million WW have started a blog | 26.4 US – 346 million WW read blogs | 60.3 US – 77% of active Internet users read blogs
Market Analysis
We have based our market analysis on the 2008 “State of the Blogosphere Report” presented by Technorati.com which conducted a survey from a random sample from more than 1.2 million bloggers who have registered with Technorati. (For more information, please see
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Technorati.com methodology.) The following are the results which form the basis for our financial and market analysis. Bloggers are not a homogenous group: personal, professional, and corporate bloggers all have differing goals and cover an average of five topics within each blog. They are often described as savvy and sophisticated. On average, bloggers use five different techniques to drive traffic to their blogs. They’re using an average of seven publishing tools on their blog and four distinct metrics for measuring success. According to Technorati.com, bloggers are more affluent and educated than the general population with 70% having college degrees and four in ten have an annual household income of more than $75K. Global Snapshot of Bloggers: (Source: Technorati.com)
Demographics U.S. Bloggers
(N=550) European Bloggers
(N=350) Asian Bloggers
(N=173)
Male 57% 73% 73%
Age: 18-34 years old 42% 48% 73%
Age: 35+ 58% 52% 27%
Single 26% 31% 57%
Employed full-time 56% 53% 45%
Household income >$75,000 51% 34% 9%
College graduate 74% 67% 69%
Average blogging tenure (m) 35 33 30
% Blogs with advertising 52% 50% 60%
Average Unique Visitors (m) 18,000 24,000 26,000
Segment Snapshot of Bloggers: (Source: Technorati.com)
Demographics Personal
(N=1015) Corporate
(N=156) Professional
(N=590)
With
Advertising
(N=695)
No
Advertising
(N=595)
Male 64% 70% 72% 66% 66%
Age: 18-34 years old 52% 45% 48% 53% 45%
Age: 35+ 48% 55% 52% 47% 55%
Single 36% 24% 31% 34% 34%
Employed full-time 52% 51% 55% 49% 56%
Household income>$75k 37% 49% 42% 40% 37%
College graduate 70% 74% 74% 69% 72%
Avg. blogging tenure (m) 35 35 38 35 33
% Blogs with Advertising 53% 64% 59% 100% 0%
Avg. Unique Visitors (m) 12,000 39,000 44,000 46,000 4,000
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According to Technorati.com 2008 survey, almost half of the blogging happens in the US while the rest of the world also has a significant share of the pie:
48%
27%
13%
7%
3%2%
Blogging Geographic Distribution
North America
Europe
Asia
South America
Australia
ROW
Source: Technorati.com
Almost all bloggers manage their blogs themselves, while one in ten of professional and corporate bloggers pay staff to contribute to their blogs. This keeps the costs of maintaining the blogs at a minimum:
78%
9%
13%
Blog Management
Manage alone
Paid staff
Unpaid help
Source: Technorati.com
Both personal and professional topics are equally popular. Forty percent of bloggers consider their blogging topics outside of these categories. “Other” blog topics include: 2008 US elections, alternative energy, art, beauty, blogging, comics, communication, cooking/food, crafts, design, environment, internet/Web 2.0, Jamaica, and media/journalism. Three-quarters of bloggers cover three or more topics. The average number of topics blogged about is five. There were some global differences. Music is more popular and politics is less popular in Asia, while personal, lifestyle, and religious topics are less popular in Europe.
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Market Potential
Blogs are now money makers. According to technorati.com, regular blogs generate mean annual revenues of $7,000. Blogs with 100,000 or more unique visitors per month generate $75K+ in annual revenue, while a successful blog might hit an average of $ 20,000+ per month such as TechCrunch.com. The majority of bloggers have advertising on their blogs. Investments include hosting, marketing, staff, and paid contributors. Among those with advertising, the mean annual investment in their blog is $1,800, but it’s paying off. Bloggers are sophisticated in using self serve tools for search, display, and affiliate advertising, and are increasingly turning to ad and blog networks. Many bloggers without advertising may consider it when their blogs grow – the inability to set up advertising will not be a factor. Bloggers invest significant time in creating and updating their blogs, as well as driving traffic and retaining their audiences. One in four bloggers spends ten hours or more blogging each week. So if we consider the blog as a “Revenue Generating Unit”, now more than ever, blog owners can raise capital by issuing and trading shares like any other company. Average Blogs Investments: (Source: Technorati.com):
US$ Dollars invested in blog over past year
How many dollars have you
invested in your blog over
the past year? MEAN
MEDIAN
MAXIMUM
ALL $1,020 $50 $200,000
U.S. bloggers 635 80 75,000
Europe bloggers 2,140 15 200,000
Asia bloggers 940 30 70,000
Corporate bloggers 3,790 200 200,000
Bloggers with advertising 1,800 100 200,000
Bloggers without advertising 100 0 5,000
Average Blogs Revenues: (Source: Technorati.com):
Annual revenue from blog (US$)
What is your annual estimated
revenue from advertising on your blog? MEAN MEDIAN MAXIMUM
U.S. bloggers $5,060 $200 $350,000
European bloggers 9,040 200 324,000
Asian bloggers 7,440 120 250,000
Blogs are an increasingly attractive platform for advertisers. The majority of bloggers we surveyed have advertising on their blogs. Marketers realize that bloggers are creating high quality content and attracting growing, loyal audiences.
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Bloggers with advertising are even more sophisticated in terms of their use of tools, advertising platforms and even events to build reader loyalty. They also invest more resources (both time and money) in their blogs. Active bloggers receive CPMs for advertising on their site on par with large online media publishers (although the median is considerably lower). On the other hand, some targeted blogs are enjoying double-digit CPMs.
CPM US$ (cost per thousand impressions)
What is the average CPM that you
receive for advertising on your site? MEAN
MEDIAN MAXIMUM
U.S. bloggers $4.20 $1.20 $30
European bloggers 3.31 0.55 50
Asian bloggers 6.21 1.3 55
(Source: Technorati.com) More blogs are raising venture capital. In 2008, VentureBeat (a blog) reported raising $320,000 from aVC investment. In 2007, several blogs raised considerable VC investments: Sugar Inc. ($10 million), GigaOm ($1 million), Xconomy, Blogher ($3.5 million) and The Huffington Post ($10 million). That’s at least $25 million in 2007 invested in popular blogs and blog networks that are registered as official companies.
Target Market
Blog SouQ is targeting “Active World Wide Blogs with Advertising Revenues”. We are targeting low-revenue blogs that are not registered as companies yet and whom owners are keen to receive relatively small amounts of investments in order to grow their blogs and increase their revenues to be more attractive to VC investors. To calculate the market size in dollar value (Source: Technorati.com):
– 184 million blogs world wide – 133 million blogs indexed at Technorati.com – 7.5 million active blogs – Over 50% are with advertising revenues – Average annual blog revenue is $7,000
This means that our target market includes only 3.75 million (50% times 7.5 million)active blogs with advertising revenues, each with average annual revenue of $7,000 which yields in $26.25 billion as the annual dollar value of our target market. On the other hand, according to Universal McCann (March 2008) worldwide blog readers are estimated to be 346 million readers. Blog SouQ is targeting to attract a 10% share of the active blogs market with advertising in the first 5 to 7 years, and 0.5% of blog readers market. Detailed forecast are provided in the financial section of this business plan.
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C.2. Competition
Competitors
TipJoy.com
TipJoy.com competition to Blog SouQ could be summarized by its ability to enable blog owners to raise money from their readers in the form of “Tips”, and to enable readers to support blogs that they love by giving them some donations as tips. TipJoy applies the idea of a “tip jar” on blogs and other content sites to help bring in a few extra dollars for bloggers. Their donations and payouts are made through PayPal, and there are a number of plugins for various blogging platforms to make the process easier. TipJoy is designed to make it even easier to get people to click that tip button. Readers are not required to create an account or have a PayPal account to leave a tip, so there is little friction to them getting started. If they want to leave a tip they just click the button and type in their email address. If you leave a tip as a new user, you start to build up an account debit, although no one comes after you if you choose to skip out on the bill. You can eventually pay that off via PayPal which gets 2% of the tip, and TipJoy keeps 3% of the tip. You can also start to ask for tips on your own site, and anything people leave for you offsets what you’ve given to others. The TipJoy site shows popular sites that have received a lot of tips, and you can also send any URL or email a tip directly as well. As a tipper, you can choose the amount you’d like to tip by default (starting at ten cents). Then, every time you click the tip button on a participating site, that amount is added to your bill. If you want to cash out of your tips you can choose to either receive an Amazon gift card or donate the amount to charity. For now, you can’t receive cash since the company wants to avoid becoming a regulated money transfer service. In the FAQs they suggest they’ll be adding this functionality eventually. TipJoy was part of Y Combinator's winter 2008 funding cycle, and in September 2008, it has closed a $1 million Series A funding round. The round was led by New York-based seed stage investor Betaworks and also included the Accelerator Group, David Shen Ventures, and private investors Chris Sacca, Taavet Hinrikus, and Ron Bouganim.
BlogShares.com
Blogshares.com competition to Blog SouQ could be summarized by its ability to enable blog readers and financial investors to make money out of their favorite blogs, and to enable bloggers to involve blog readers to help promote their blogs. Blogshares.com is a fantasy stock market where blogs are the companies. Players invest fictional dollars in a wide spectrum of blogs. Blogs are valued by both incoming and outgoing links, and can add value to other blogs by linking to them. Prices increase or decrease based on trading and the underlying value of the blog. Although real blogs are
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listed, but no actual ownership of blogs are transferred. BlogShares.com is purely a fictional marketplace for entertainment purposes only.
Players can basically play for free with transactions limits that prevent them from conducting high number of shares selling and buying. Premium membership is available to remove transaction limits and give access to some powerful tools to help players level up in their scores. Memberships available:
$2.95 per month $7.95 for 3 months and our most popular purchase $15.00 for a full year
However, people can make real money out of this by selling B$ trillions (Blogshares fictional dollars) for real-world dollars on eBay and via direct sale. Blgoshares.com fans have created hundreds of blogs to discuss prices, market trends, stocks analysis, and to educate new players how to get started and how to make money. BlogShares was written in early 2003 by Seyed Razavi in his free time. The overall objective of BlogShares was the exploration of an emerging social network while providing an addictive and fun environment for bloggers to join and help add to the worth of the social network. Another one of the purposes of this site was to prove the Power Law theory. Part of this theory is based on the fact that 20% of the population holds 80% of the wealth. This can also be attributed to weblogs, 20% of the blogs contain 80% of all incoming links. BlogShares hits a home run with this theory. BlogShares was taken over by its current owner, Jay Campbell. Blogshares.com now has 40K active users, over 17K blogs have been claimed by their owners and 7.3 million blogs tracked.
Competitive Advantage
Blog SouQ’s sustainable differential competitive advantages give us an edge over the above mentioned rivals and it presents a greater value for blog owners, blog readers and investors. Blog SouQ was created in a way that makes it difficult for competitors to neutralize those advantages. To clearly identify our competitive advantages, we went through abstract thinking sessions. We were able to identify the real value of what we are presenting to the market. This could be summarized in the following:
– Enabling blog readers to financially participate in the development of the blog sphere. – Enabling the public to invest in popular blogs in very early stages before they become
registered public companies to maximize return on investment. – Enabling blog readers to make money out of their favorite blogs by trading blog
shares and/or by getting part of their annual revenues.
On the other hand,
– Enabling blog owners to raise funds/investment from their readers and from other financial investors without being registered entities.
– Enabling blog owners to involve their blog readers to help promote their blogs.
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– Enabling blog owners create and retain loyal readers by giving readers the opportunity to own the blog and partner with its original owners.
Blog SouQ actually solves the basic problem: How to issue and trade real shares of blogs without being registered companies? We have provided an innovative totally new model of stocks and a secured process to trade those stocks. Our core competency that differentiates us from our competitors is the ability to help blog owners raise real (unlike Blgoshares.com) and considerable amount of capital (unlike TipJoy.com) from the public to improve the blogs performance and to increase their revenues.
Barriers to Entry and Future Competition
After consulting with local patent consultants, we found out that this idea could be filed as a business method patent. If filed in the USA, our new stock type and new process will be protected from copiers. Although people will still get around it by changing some features or steps in the whole process and copy the concept, but we think this patent will at least strengthen our position in front of VCs. We still don’t have enough financial resources to hire an IP lawyer and file a patent. Until then, we plan to file a provisional patent (which is valid for only one year) directly after securing basic required capital targeted by participating in business plan competitions and local grant programs. Blog SouQ is also backed with a huge technical barrier to entry. To develop our aimed solutions, top technical experts are needed. We started negotiating with a technical partner that has an existing web analytic system (Woopra: that generates live detailed statistics about the visitors to a website) to reduce our time to market and be the market leader in blog public investment market that we are looking to create. Directly after filing the provisional patent and after developing our beta version, we will start massive proactive direct sales campaigns by contacting potential bloggers via emails and VoIP calls to promote using our services of raising public capital. We will ask listed blog owners to place our button (with logo) on their blogs. The purpose is to quickly build our brand and get the maximum market share to make it harder for new comers to get large shares in this market.
SWOT Analysis
Strengths
Innovation –
Blog SouQ has an innovative trading model and a new equity stock type that was created specially for blog stocks and solves the blog owners’ basic problems.
Strategic Partnership – Blog SouQ has started developing a partnership agreement with Woopra, a web analytics service provider to build on their experience to create our web auditing and valuation solution. This will reduce our
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time to market and will leverage Woopra’s team experience in web analytics.
Ease of Use – Our trading platform will look and feel the same way investors are used to in traditional online stock market. There are no sophisticated special functions and activities to be learned.
Access – Our system can be used from anywhere in the world without downloading any software. Any browser on any system can be used to tap into the full potential of Blog SouQ.
Cost Effective Marketing – As detailed later in this plan, our creative marketing strategy will enable us to promote Blog SouQ with minimal advertizing expenses.
Committed and Experienced Team – We are a highly committed professional team with diverse business and technical expertise to start Blog SouQ.
Weaknesses
Lack of International Level Leadership –
Blog SouQ’s team is experienced enough to start it, but none of us could take it to grow and compete globally, that’s why we are planning to give equity to attract an international CEO with related experience.
Time to Market –
Although we are partnering with Woopra, we will still need relatively long time to develop our beta version (one year).
Opportunities
Clearly Defined Target Market –
We have clearly defined market characteristics and managed to segment the market by narrowing it to identify our niche target market.
Increasing Number of New Blogs –
According to Technorati.com, number of new blogs is doubled every 6 months. We are looking into an exponentially growing market.
Bloggers Pain –
Experienced bloggers face huge challenges to convince venture capital investors to invest in their officially registered blogs as companies, so what about new unregistered blogs?
Tap into new relevant markets –
Blog SouQ’s innovative platform is not exclusive to blogs. We plan to tap into similar markets once our business model picks up. This can prove to be a huge opportunity in the long run for Blog SouQ.
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The Global Financial Crisis – In lieu of the current economic crisis, investors are looking for new financial investment opportunities.
Threats
Competition –
Currently there are two main non direct competitors. One of them is very similar to our concept and with long experience in this field but as a fantasy game. So it could convert to trade blog shares for real money.
Regulations and Legal Issues –
There are different public investment regulations in different countries that we might have to comply with.
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C.3. Need for Market Research
Our idea is new and still not tested in the market, so we need an extensive market research targeting potential clients (bloggers and investors) to collect feedback from a focus group. This would result in solidifying our existing process, business model and marketing plan. During the development of Blog SouQ, and after filing a provisional business method patent, we will start discussions on popular blogs about the idea, and collect and analyze all comments and feedback from blog owners and readers. We will also work on collecting feedback from financial investors who use online trading platforms. After developing the beta version, we will offer a number of blog owners incentives to list their blogs by waving our commissions. We will also incentivize a number of investors to buy shares by guaranteeing their capital investment in specific blogs if the prices go down. Our purpose from this is to create a real world test group to collect practical feedback from people who are using Blog SouQ with their own money. Continuous development is one of our core values. Although initially we will not include a budget for R&D, after developing the beta version, our core developers will be dedicated to work full time on next versions of Blog SouQ.
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D. THE PRODUCT OR SERVICE
D.1. Products and Services Description
Building on our knowledge and experience, and after consulting with domain experts from regional and international stock markets, we have developed solid trading processes for which we are developing two main web technologies: Blog Auditing Solution, and Online Trading Platform. The detailed process and the two web applications along with our planned customer services strategy and the business model are described in the following sections.
Type of Tradable Shares
We are introducing new type of shares because of the special nature of blogs and their business models. Although our new share represents equity in the blog, it’s treated as a “Revenue Share”, not as a “Net Profit Share”. i.e., dividends will be distributed directly from advertising revenues not from blog’s net profits. Why? Simply, because in the case of blogs, which are not registered companies, only advertising revenues are auditable and can be tracked by our web auditing solution. Cost of developing and operating the blog cannot be audited online, they will need official financial statements and traditional financial auditing, which will be a nightmare for us because blogs are not legal entities or companies, and a nightmare for personal bloggers who might not even know anything about financial management and accounting. Bloggers will be allowed to sell up to 50% of reveuve shares in their blogs. We have come with this percentage based on the fact that average blogs cost 25% of their revenues (Source: Technorati.com). Thus, for bloggers to cover their cost and get at least 100% return on their investment, they cannot sell more than 50% of their blogs. This way we can guarantee that bloggers will still have stake in their blogs and will keep working on enhancing the blogs performance. When blog owners decide to exit the market and convert their blogs into officially registered companies to receive VC investment, all shares in the market should be bought and considered part of the investment.
Blog Auditing Solution
Our blog auditing solution is a critical building block in our business model. Public traded companies always need external auditing firms to gain investors trust. Since all blog revenues will come directly from online advertising, online sales and online subscriptions, our auditing solution will investigate all web tools that can give accurate estimates about money generated by a specific blog, or money that could be generated by this blog. Our solution, which will be developed in partnership with a web analytics provider: Woopra (detailed later in this plan), will investigate: Web Stats, Web Traffic, Members, Search Engines Optimization, RSS Feeds, links to the blog, its click through rate, number of ad clicks, number of sales leads directed by this blog, and number of sales transactions directed and/or conducted via this blog.
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In addition, the auditing solution will investigate the blog’s content regarding its quality and quantity. For quality, it will evaluate its content by comparing it with the most searchable keywords on the net regarding specific sectors such as: politics, science and technology, fashion, music, etc…. For quantity, it will simply measure how often the blog is updated with quality new posts and comments. Blog SouQ will provide live instantaneous performance and auditing reports about all listed blogs. We will generate industry/sector average performance measures for people to benchmark with when they want to evaluate any new blog.
Online Trading Platform
This solution will be very much similar to any online stocks trading platform, except for some modifications needed to match our new blog-ad-shares concept. This solution could be developed utilizing already existing open source systems to save time and effort. Trading will be conducted on the blogs’ stock charts and live performance and auditing reports will be easily accessible from those charts.
Listing Process
For any blog to be listed on Blog SouQ, it has to meet our criteria of “Accredited Blogs”. Accredited blogs are blogs that:
- Use one of the automated advertising networks such as: Google Adsense Commission Junction, LinkShare, Shareasale, ClickBank, etc….
- Have at least 500 unique visitors per day - Have been active (at least weekly new posts) for at least one year
IPO process starts by either bloggers, or Blog SouQ team. Bloggers who already know about our stock market can approach us online. Our team will act proactively by scanning blogs on the net looking for potential blogs to be listed, contacting them to introduce the concept and incentivizing them to list their blogs. Next, blogs will be tested against our above mentioned criteria. Then bloggers will be asked to send us the username and password of the blog’s domain name, in order to transfer the domain name to our hosting partner. Passwords will be changed so that only Blog SouQ will have full control over the blog as a third party to protect all shareholders’ rights. After that, blogs will be audited and valuated by our web auditing system. The output report will give summaries and analysis of the blog history for the last year of operation regarding technical and business aspects. It will also suggest the IPO price per share. If bloggers agree on the IPO price, and indicate how many shares (up to 50% equity) they would like to list, the report will be published to all public investors, and the blog will be listed on our online exchange for investors to view.
Trading Process
When blog shares are listed, investors (users) can buy and sell those shares online. They can search for specific blogs, or browse blogs by sector, by annual revenues, or by keywords. Investors can choose a blog and view its share price chart. They will be able to trade on the
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chart and conduct all required functions from there such as: viewing the blog’s auditing report, bid for a sell/buy price, place a limit-up/limit-down constraints, etc… Prices of blog shares will go up and down depending on the blog’s performance and its ability to generate more revenues or based on investor interest and bids. Basic (free) live performance reports about all listed blogs using our web-auditing system (described above) will be published to all users, while detailed reports (paid) with analysis will be only accessible to subscribed users. All blogs advertising revenues will be directed to a specific bank account created and controlled only by Blog SouQ. Bloggers will get 50% of the collected revenues on monthly basis. The other 50% will be saved in the blog’s account until the end of the fiscal year. At the end of the year, revenue dividends will be distributed to all shareholders of the other 50% including bloggers (if they kept a share for themselves in the other 50%). Investors can keep their shares until the end of the fiscal year to get their dividends, and they can sell (trade) their shares to other investors. For the IPO shares, prices will be fixed and investors can buy on “first come first served” basis. While for the shares trading after the IPO, investors will trade in a free market where prices will depend on demand and supply and on blogs’ performance.
Customer Service
After developing and testing our beta version, and after reaching considerable number of transactions per day, we will establish Blog SouQ’s customer service department. Our customer services will be mainly a 24/7 live chat support. We will be facilitating online monetary transactions. So to avoid any serious problems, and customer bad experience, all customer inquiries should be answered immediately to satisfy and even exceed our users’ expectations.
Business Model
Our business model is simple and straightforward. We will charge the seller 5% sales commission on any sales transaction. Blog owners will not be charged any setup or listing fees, and investors will not be charged any access fees to trade blog-shares. No subscription fees will be charged to view the basic blog reports and charts. However, we will charge investors an optional annual subscription fee of $10 to be able to access our detailed live blogs audit and performance reports for any blog listed. ($5 will be given to our Web Auditing partner Woopra, while $5 will be retained by Blog SouQ). The blog owner will not be charged any IPO or listing fees, but will be charged a sales commission of 5% when a sale is conducted on our platform. Investors will not be charged any commissions when buying blog shares. However, they will be charged the 5% sales commission when they sell their shares to other investors. Our business model also includes advertising services on the trading platform and on the blog reports pages. We will not be dependent on advertising revenues in the startup phase. To focus on our basic business model, and on customer service, we will use third party affiliate advertising networks. The following is the General Blog SouQ Process Flow:
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Stock MarketFor non-IPO: Free Market Environment(Supply and Demand)Rev. up, Demand up, Price upRev. down, Demand down, Price down
Stock MarketFor IPO: Fixed Share PriceFirst com first served
Sales and Marketing
Direct Sales Online Marketing
Staff Contact Bloggers
Bloggers Contact Blog SouQ
Blog Initial Test
Blog AuditingReport
Investors Contact Blog SouQ
Blog IPO Valuation and IPO
Price
Suggestions to Get Ready
Investors Subscribe on Blog
SouQ
Blogger Specifies No. of Shares to be Listed (up to 50%)
Blog will be Listed on Blog SouQ
Investors View IPO Blogs & their
Reports
Investors Buy Shares
Money Transferred to
Blogger
Investors View Quarter Blog
Reports
Blog Domain Name and Ad Revenues Transferred to
Blog SouQ
50% of Ad Revenues will be Transferred Monthly to
Blogger
The other 50% will be kept with Blog SouQ till the end of the Fiscal Year, then will
be distributed to Shareholders
Sell?
Get Revenue Dividends at the End of the Year
Offer Shares in the Market
ReadyNot Ready
NoYes
Other Investors Buy and Sell
Shares
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D.2. Product Development
Technology Used
Blog SouQ will intensively use open source technology unless a proprietary solution proves to be a better choice. Blog SouQ’s CTO has around a decade under his belt building and managing software development using open source technology. He’s a frequent instructor and speaker in open source events around the world. Open source has proven to be a very important factor in saving IT costs. The examples of Google, Facebook and Yahoo are almost entirely reliant on open source technology. The main technology stack to be used is LAMP. LAMP covers most of technology that will be used for Blog SouQ, and it stands for the following:
– Linux: an open source operating system. – Apache: The world’s most widespread web server. – MySQL: An open source database engine powering the most scalable websites in
the world – PHP: A general purpose programming language, designed for web development.
Facebook and Yahoo use PHP for their web development.
Strategic Partnership
We are negotiating a strategic partnership with Woopra (woopra.com). Woopra is a real-time web analytics system and quite comprehensive. We see that Woopra can help greatly in developing certain components/modules that can save a lot of time, and save our development resources for other tasks. The main goal of the partnership is to have Woopra expand on their traffic analytics report and generate a custom report that will serve as our blog audit report to be published when a blog signs up on Blog SouQ, and create live audit and performance reports for Blog SouQ investors.
Technical Overview
Blog Souq software components: Trading Engine
A high performance distributed trading engine that allows trading stocks in real time. The only interface to this system is through the web portal. Blog SouQ Backend Portal
This backend will be accessed by Blog SouQ’s team to manage information on the portal, manage bloggers, manage investors, and access internal reports and any other portal management future. Blog SouQ Portal
This will be the destination where bloggers and investors go to accomplish their goals. All development will be designed from ground up for internationalization capabilities so that
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when the business development unit decides to introduce the service in a new language, it’ll be merely a task of translating the interface rather than a rewrite or a huge change in the software. The portal is divided into the following sections: Sign Up: Bloggers and investors sign up. If a blogger decides to sign up, the portal takes the blogger through a series of steps to explain the IPO process and Blog SouQ’s regulations. Listed Blogs: This section will show all listed blogs. The investor can choose to view basic (free) or in-depth (paid) live information about any blog including our audit report. All relevant historical and trading information can be found as well. Payment Module: An online payment system that integrates with payment gateways to allow investors to transfer payments to Blog SouQ. Payment methods may include credit cards, PayPal or wire transfer. Trading Area: From this section, the investor can buy/sell shares. Corporate Information: Information about Blog SouQ, the team, investment opportunities, financial reports …etc Support: Support area with FAQs, knowledge base, guides, and possibility to contact support team for any other enquiry. Blogger Area: Blog owners will have an area to manage the settings and trading information of their blogs. This also allows owners to communicate with investors. It’ll also include any alerts, or up to date news regarding blogs. Investor Area: This will be similar to the “portfolio” section of traditional trading platforms. Investors can see their portfolio and other relevant information in this section. A detailed report of revenues and revenue earned for investors will be shown in this area as well.
User Requirements
Any user with basic computer skills can fully use Blog SouQ as either a blogger or investor. The online system is accessible using any browser on any computer.
Development Methodology
Development will follow an iterative incremental process called SCRUM for managing our software development activities. Scrum is a "process skeleton," which contains sets of practices and predefined roles.
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SCRUM has the following attributes: – Scrum is an agile process to manage and control development work. – Scrum is a wrapper for existing engineering practices. – Scrum is a team-based approach to iteratively, incrementally develop systems
and products when requirements are rapidly changing. Blog Souq needs to identify and implement features very quickly in order to serve the exponentially growing blogsphere.
– Scrum is a process that controls the chaos of conflicting interests and needs. – Scrum is a way to improve communications and maximize co-operation. – Scrum is a way to detect and cause the removal of anything that gets in the
way of developing and delivering products. Efficient and focused development means the success or failure of Blog SouQ. Using SCRUM ensures that we are focused and any obstacles are acted upon instantly and resolved.
– Scrum is a way to maximize productivity. – Scrum is a way for everyone to feel good about their job, their contributions,
and that they have done the very best they possibly could. Employees’ satisfaction is top priority to Blog SouQ’s management team. We need to make sure everyone is happy and they are well appreciated and trusted.
From the previous attributes, we can see that SCRUM is very suitable for Blog SouQ’s dynamic small team. It also copes very well with requirement changes and the nature of Blog SouQ web development. In a nutshell, SCRUM is all about delivering a high quality running product every 30 days increment. This works very well with the web trend of release early, release often. Bloq SouQ intends to release new development changes every one month.
The SCRUM process (source: controlchaos.com)
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D.3. Identifying Costs / Manufacturing and Operations
Pre-Startup Cost
As explained below in the startup summary, our startup cost will be basically covering Blog SouQ expenses for 6 months before we hire any employees. Founders will be working full time on it. This will include the following items:
Item Cost
Founders Salaries (2,000 per each x 3 x 6 months) $36,000 Incubator office rent (including fully furnished offices, internet and utilities) $1,200 Patent filing and legal consultation fees $20,000 Others $2,800
Total $60,000
Operating Cost
The detailed operating costs over the next five years are provided in the financial section. Following is the summary:
Positions Year1 Year2 Year3 Year4 Year5
Payroll Totals 203,490 283,815 549,007 603,907 664,298 Capital Totals 0 0 0 0 0 Expenses Total 21,751 74,051 166,551 305,551 462,551
Total ($) 225,241 357,866 715,557 909,458 1,126,849
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D.4. Risks and Regulations
Team Risk
Being a small startup company, employees might not feel job security. Staff members might find a better job offer and simply leave us any time. To overcome this problem, we plan to introduce an ownership structure for our employees, and we already included an option pool of shares above in the company’s ownership structure section. In addition, while developing our application, we will insist on having a content management system that allows any team member to catch up with previous efforts and continue on the planned schedule. This way we will not have serious problems with essential team members leaving the company any time.
Regulations Risk
One of our biggest challenges is complying with several different public investment regulations in different countries. Especially in Jordan, where there are previous public investment companies that were shut down by the government because of continuously changing regulations. To mitigate this risk, we are consulting with an international lawyer to recommend the best country to register Blog SouQ. However, we can always operate from Jordan as a registered regional office of the mother company to take advantage of the low salaries and high quality of technical professionals. Another legal issue is related to the tax authorities. Although blogs are individual non-official business, but some countries require financial records of all income resources of citizens even if conducted online. So we will be archiving all financial transactions on our systems and provide annual reports to individuals and/or government authorities.
Execution Risk
To reduce time to market, to avoid reinventing the wheel, and to avoid any serious executing risk, our developers will not start building the solution from scratch. As detailed above, we have partnered with a blogs analytics company that has been operating in the market for 3 years. They have already developed, tested and promoted their web analytic application. We are negotiating with them a partnership agreement in which they add more components to their system that are required for Blog SouQ’s operations regarding financial auditing of blogs for a share of revenues. Then we will integrate the new release into Blog SouQ. Our technology partner will get a percentage from our auditing reports revenues. Online trading platforms are not a new concept hence will depend on existing open source components that could be customized to suit Blog SouQ’s business functions. In other words, our developers will be working on integration and customization more than developing totally new web technologies from scratch. This will ensure simplifying and accelerating our execution plan.
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Technology Risk
We are aware of the need to run an IT infrastructure audit and web applications audit on periodic basis to ensure that our technology infrastructure is perfectly maintained and up to date. Blog SouQ platforms will be developed using the latest web and software technologies with top level experts hired to work on it. Our internal HR strategy will offer developers ongoing training to be familiar with any new technologies that emerge in the market and could contribute to the development of Blog SouQ platforms to keep us ahead of any new entry competitor.
Capitalization Risk
Delay in raising required investment will not affect our commitment and persistence to pursue our dream. However, this delay will affect our time to market and our ability to acquire needed resources to develop a high quality application. To mitigate this risk, and in parallel with pursuing seed VC investment, we are targeting required funds from grant programs and business plan competitions.
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E. MARKETING AND SALES
E.1. Marketing Plan
Company Message
All our marketing efforts will be targeting blog readers, the buyers and potential investors. Blog owners will be targeted by our direct sales operation because they are the sellers, the ones who will pay our commission. Building on Blog SouQ’s mission, we will emphasize the concept of empowering people to develop the Blogsphere ecosystem in our marketing message. As a blog reader, Blog SouQ will help you to participate in sustaining, developing and promoting your favorite blogs. It will also enable you to invest in and promote those blogs.
Strategic Position and Brand Building
Our suggested slogan is: “Invest in blogs that you love”. This slogan will encourage both: blog readers to invest in their beloved blogs and it will encourage blog owners to promote Blog SouQ indirectly by asking their readers to invest in their blogs. We have developed a free branding tool to ensure that Blog SouQ will be known for investment in blogs within a very short period of time. In our direct sales communication via email and VoIP calls, we will encourage them to add a specially designed button with Blog SouQ logo on it in their blog pages saying: “Love this blog? Invest in it”.
Marketing Strategy, 4Ps
Product: (Solution)
We believe that a product is all about solving a problem. For blog owners, Blog SouQ simplifies the process of accessing public investments. Blog SouQ offers new investment opportunities to the public. Investors can buy and trade blog-shares in a safe, secure and friendly online environment. Our legally safe trading process can guarantee protecting everyone’s rights. Our secured payment tools will create trust in conducting business deals. Our interactive, friendly and easy to use interface will allow any user with little financial and technology literature to use and benefit from our services Place: (Accessibility)
Our market and all related services will be fully conducted online. Thus, it could be accessed from anywhere any time, even from mobile phones. There are no special technical requirements that can’t be easily attained, and no desktop installation will be required. In addition, blog readers will find links to our market in their favorite blogs that directs them to those specific blogs charts. They will also have the ability to receive price alarms based on their choice on their mobile phones or their emails.
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Price: (Value)
Our value proposition for the sellers and blog owners is our ability to create an environment for them to sell and for investors to buy, and our ability to match between them in a secured legal environment. In developing our pricing strategy, we took into consideration the need for establishing a win-win scenario to retain our customers. No registration or setup fees. We charge a transaction based commission of 5% that is due only if the sale is conducted. So the price will depend on the amount of offered shares to sell. Promotion: (Information)
For blog owners to list their blogs, and for blog readers and investors to invest, they should get enough information to make a decision to get involved in this market. Our strategy is to depend on utilizing social media marketing by engaging with online communities to generate exposure, opportunity and sales. This would generate exposure for Blog SouQ, followed by increasing traffic and building new business partnerships. We will create online social groups, fan pages and channels on facebook, linkedin, youtube and twitter. We will also invite bloggers and forums to start discussions and create a buzz about Blog SouQ.
Marketing Methods and Advertising
Our strategy will focus on free indirect advertising methods in the startup phase. The main promotional task is to promote Blog SouQ via a multi-channel targeted marketing campaign. That includes network marketing, word of mouth, PR portals, business reviews and social media marketing. This will enable us to start with minimal advertising expenses. Blog readers are blogs’ first potential investors. Even if they are not able to invest in their favorite blogs, they will be promoting those blogs to financial investors who invest regularly in traditional financial markets to invest and help in improving their favorite blogs. Thus, we will focus on enabling investors and blog reader to promote blogs in which they have invested, and indirectly promote Blog SouQ. We will create fan pages and groups on facebook, linkedin, twitter, youtube, etc… to enable people to create a buzz about it by inviting each other. We will also provide investors with a button that could be placed on their profiles, personal and professional websites to be able to promote blogs in their portfolios. We will encourage bloggers to start discussions about it and get their readers feedback on the idea of listing their blogs on Blog SouQ. Blog owners will also be able to convert their readers into investors through a specially designed button that could be place on the blog saying: “Love this blog? Invest in it!” On the other hand, by having an identifiable market with available lists and related memberships, we believe we can exceed the news reporting standards and lure readers to visit our news portal (blog reports) on a daily basis. Committed authors and freelancers will result in a loyal readership base. On the long run, we will allow developers to add their own applications that can serve our clients to Blog SouQ. The idea is taken from Facebook applications that allow any entrepreneur/developer to attach their own applications to the members' profiles and generate
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advertising revenues by placing ads from our partner affiliate advertising networks. This will create more interest in our platform and will incentivize developers to promote their own applications thus promote Blog SouQ indirectly.
Community Involvement and Social Responsibility
Our social responsibility efforts will be directed to charity and non-profit blogs to help them raise donations. We believe that for our social responsibility strategy to be sustainable and consistent it has to be aligned to our mission and business model.
– To be aligned with our mission to empower people to develop the Blogsphere ecosystem we will enable the public to be involved in supporting charity and non-profit blogs of their choice.
– To be aligned to our business model, we will allow investors to add non-profit blogs, which could be chosen from a list on Blog SouQ, to their portfolios, so that whenever a profit is made, an optional instant popup window will appear and ask the happy investor to donate a percentage of the achieved profits or a fixed amount of money to non-profit blogs attached to their portfolios.
This will also encourage non-profit bloggers to promote Blog SouQ on their blogs. We will provide them with especially designed button to be placed on their blogs saying: “Support our cause, donate via Blog SouQ”
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E.2. Sales Strategy
Sales transactions will be conducted directly on our online trading platform. Our business model is based on charging sellers of blog-shares (initially blog owners, and then shares re-sellers) a 5% sales commission. In communicating our message with blog owners, we will emphasize on our value proposition of simplifying their access to public investments, and leveraging their blog readers’ loyalty. Blog SouQ enables blog owners to raise capital from the public to improve their blogs’ performance and increase revenues in order to achieve rewarding financial status. Blog investors could be those blog loyal readers, who would love to help in improving and promoting those blogs. Our direct sales operations will be targeting blog owners to incentivize them to list their blogs in order to create our market for investors to come and invest. We will adopt a proactive approach. Our sales team will be scanning and analyzing several blogs on daily basis, and then contacting potential blog owners to invite them to raise capital by listing shares of their blogs on our exchange. Blog SouQ is a client oriented company. Therefore, we have put ourselves in the blogs owners position, and we have taken into consideration sales and marketing issues while designing the business model. We don’t charge any fees to list and issue blog shares. We only charge blog owners whenever shares are actually sold.
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F. FINANCIAL INFORMATION
F.1. Time Frame (Implementation Schedule)
Goals and Milestones
Goals Timeline Milestone
Participate in local and international business plan competitions.
Pre-Startup Preparing our business plan
Get into the incubator Pre-Startup We have submitted our business plan to the incubator, and we have been accepted. Now we are waiting until June to get an office.
Apply to the Jordan Innovation Center (JIC) grant
Pre-Startup We have to be incubated to be eligible for the grant.
File the patent and start alpha version development at the incubator (only founders)
Pre-Startup Secure our basic fund: grants, business plan competitions, and freelance projects (bootstrapping)
Target seed VC investment Pre-Startup Finalizing and testing alpha version
Start beta version development Month1 - Year1 (Startup Stage)
Hiring the required team, finalizing and testing beta version
Achieve the breakeven point Month1 - Year2 (Startup Stage)
Launch the beta version and test it in the market and start selling
Start our official sale and marketing Month1 – Year3 (Startup Stage)
Hiring the rest of the required team
Target growth VC investment Month1 – Year4 (Startup Stage)
Achieving our revenue targets
Startup Summary
Blog SouQ is to start small and grow rapidly within the next five years. Currently, Blog SouQ is in the conceptual phase. During the pre-startup phase, our team will keep working in current jobs to finalize the concept development and finalize the business model. To jumpstart the business, reduce time to market, lower startup cost, and get advantage of the offered business support services, the company is to launch its operations from iPark, the Jordanian technology incubator. When we take an office at the incubator, we will be able to apply for its grants program. iPark will provide us with fully furnished offices including PCs, internet and utilities. We can stay at iPark a period of up to 5 years, and we can get up to 3 offices and accommodate up to 6 people per office. We are to operate on a lean mode and participate in local and international business plan competitions and target freelance business and technical consultation projects to bootstrap starting the company and raise the initial funds to start developing our alpha version. Offered grants, business plan competitions and freelance consulting projects should pay our salaries and pay the incubator’s rent for at least 6 months and cover the patent filing and legal consultation cost as well. So we will quit our jobs as soon as we get the initial funds (grant or competition awards) and work full time on developing the Alpha version for Blog SouQ.
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After developing the alpha version, we will be seeking seed VC investment. This should cover our operating expenses of hiring the basic technical team to develop a beta version of the website and test it in the market. We expect that during the second year the company will start getting revenues. Breakeven is expected at the end of the 2nd year. During the 3rd year, we will expand our team and start sales and marketing campaigns depending on our own revenues. An experienced CEO and CFO will be hired, in addition to an online sales and marketing team and customer services team. At this stage technical requirements will be much higher and more dedicated servers will be needed. During the third and the fourth years, our initial sales targets will be hunted, and during the fifth year, a growth business plan will be prepared to target a growth VC investment.
Financial Plan Summary
• 500,000 USD will be required the first two years to get the company up and running. • The company is projected to breakeven in year 2 of operations. • In year one the company will have no revenues and in year 5 it is projected to reach
$17.9 million. • In year one payroll is expected to be $ 203.5 K and projected to grow with the
number of resources added to $ 664.3 K • Given our objective of taking offices in iPark, the Jordanian incubator, we will not
have an capital expenditures and hence no depreciation. • Operational expenses are projected to be $22K for the first year and will grow to
$463K by year five. • To be conservative, we assumed a tax rate of 15%. Though we expect as we grow to
register the company in a tax free zone in order to increase our bottom line. • At a hypothetical discount rate (WACC) of 20%, our Net Present Value is estimated
at $10.8 million with an expected Internal Rate of Return of 335%. • All financial statements are projections. • The currency used is US Dollars. • A detailed financial model has been prepared in a separate addendum named Blog
SouQ Financial Projections.
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F.2. Forecast Assumptions
Basic Assumptions
Blog owners Sale Ratio (up to) 50%
Listing Fees 0
Blog Auditing Report $ 5.00 $10 Per request, $5 to Blog SouQ and $5 to Woopra / partner
Trade commission per transaction 5%
Advertising Revenue 0 To be conservative, we are assuming zero advertising revenues
Target Market
Number of worldwide Blogs 184,000,000 Number of Active Blogs 7,400,000 Number of Active Blogs with Advertising 3,700,000 5 year target market share 10% 5 year target number of Blogs 370,000
Average Blog Investment Figures
Average Blog Annual Costs $1,800 Average Blog Annual Revenues $7,000
Average Blog Valuation
Average TTM Revenues Multiple 3 Can be as low as 1 or as high as 6 Average Blog Listing Valuation $21,000
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Five Years Revenue Forecast Assumptions
Initial Listing
Successful Subscriptions Rate 20% of all listed blogs (target blogs) will be able to find an investor
Successful Subscriptions 74,000 total number of blogs that can find investors willing to buy their shares
Average Blog Offering 25% Percentage ownership of the blog being offered to investors
Average Blog Offering Value $ 5,250 Total Transactions Value $ 388,500,000
Blog SouQ Listing commissions $ 19,425,000 Transaction value x 5%
Unsuccessful subscription rate 80% of all listed blogs (target blogs) will not be able to find an investor
Unsuccessful subscriptions 296,000 total number of blogs that could not find an investor
Blog SouQ Listing Fees 0
Trading Blog Shares
Re Tradable Blog Shares 20% of all listed Blog Shares will be traded again
Number of Re-trades 2 number of times the shares will be traded again
Re Tradable Transactions Value $ 155,400,000 To be conservative we assume no change in listing price or valuation of blog on average
Blog SouQ Re Tradable commissions $ 7,770,000 Re-tradable value x 5%
Blog Audit Reports
Total worldwide Blog Readers 346,000,000 % of Blog Readers interested to invest 0.50% out of blog readers are interested to be
blog investors or want to access the blog audit reports
Blog SouQ - Audit Reports requested 1,730,000
Blog SouQ - Audit Reports Revenues $ 8,650,000 $10 for annual access to all reports $5 to Blog Souq $5 to Woopra - strategic partner
Total $ 35,845,000
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F.3. Financial Statements (Five Years)
Financial Assumptions
The following is our main financial assumptions covering the business plan. The detailed financial model is in a separate sheet (please refer to Blog SouQ Financial Projections excel
sheet). The main note to point is that we will have zero depreciation given zero capital expenditure for the next five years as we will be located at the iPark incubator. The rent charge in the incubator includes using the offices, furniture, PCs, equipments, telephones, internet, water and electricity). Starting / Paid Up Capital 500,000 $ USD
Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5
Accounts Receivable as % of Revenue 20% 20% 20% 20% 20%
Accounts Payable as % of Total Operating Expenses 10% 10% 10% 10% 10%
Statutory Reserves as % of Net Income 10% 10% 10% 10% 10%
Depreciation Rates Rate Years
None - given zero capital expenditures in the first 5 years 0% -
Tax Rate 15%
Weighted Average Cost of Capital (discount rate) 20% hypothetical
Payroll Assumptions
Yearly Salary Growth Rate 10%
Social Security Tax & Healthcare Rate 19%
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Projected Profit and Loss (Income) Statement
• It is projected that year one will have zero revenues and the major focus will be on
finalizing the platform development for Blog SouQ coupled with integration with our strategic web analytics partner Woopra.
• We plan to start an aggressive sales plan starting the beginning of year three. • Initially we plan to take no debt. • We expect to achieve a Net Income margin of 68% in year 2 and grow it to 266% in
year 5. • We project our IRR to be more than 300%
(in $) Year 1 Year 2 Year 3 Year 4 Year 5
Revenues - 1,792,250 5,376,750 10,753,500 17,922,500
General & Admin Expenses (225,241) (307,866) (610,557) (699,458) (811,849)
Salaries & Wages (171,000) (238,500) (461,350) (507,485) (558,234)
Health Insurance & Social Security (32,490) (45,315) (87,657) (96,422) (106,064)
Incubator Office Rent & utilities (3,051) (3,051) (3,051) (3,051) (3,051)
Company registration, license, renewal (3,000) (500) (500) (500) (500)
Legal Fees (2,000) (2,000) (2,000) (2,000) (2,000)
Web Hosting (Dedicated Servers) & Domain Name (1,200) (6,000) (18,000) (30,000) (60,000)
Prints - Promotion (1,000) (1,000) (5,000) (10,000) (15,000)
Office Supplies (500) (500) (1,000) (1,000) (1,000)
Training (5,000) (5,000) (10,000) (15,000) (20,000) Traveling & Accommodation (5,000) (5,000) (20,000) (30,000) (40,000)
Miscellaneous (1,000) (1,000) (2,000) (4,000) (6,000)
Selling & Distribution Expenses - (50,000) (105,000) (210,000) (315,000)
Conferences - - (5,000) (10,000) (15,000)
Advertising Expenses (e- marketing, etc..) - (50,000) (100,000) (200,000) (300,000)
Earnings Before Interest, Taxes,
Depreciation & Amortisation (225,241) 1,434,384 4,661,193 9,844,042 16,795,651
Margin 80% 87% 183% 312%
Depreciation Expense - - - - -
Earnings Before Interest & Taxes (225,241) 1,434,384 4,661,193 9,844,042 16,795,651
Margin 80% 87% 183% 312%
Interest Expense - - - - -
Tax Expense - (215,158) (699,179) (1,476,606) (2,519,348)
Net Income (225,241) 1,219,227 3,962,014 8,367,436 14,276,304
Margin 68% 74% 156% 266%
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Year 1 Year 2 Year 3 Year 4 Year 5
Operating Cash Flow (500,000) 874,039 3,280,883 7,311,476 12,864,243
Weighted Average Cost of Capital
(discount rate) 20%
Net Present Value
10,784,796
Internal Rate of Return 335%
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Projected Balance Sheet
(in $) Opening Year 1 Year 2 Year 3 Year 4 Year 5
Current Assets
Cash 500,000
297,283
1,171,322
4,452,205
11,763,681
24,627,924
Accounts Receivable - - 358,450
1,075,350
2,150,700
3,584,500
Inventory - - - - - -
Total Current Assets
500,000
297,283
1,529,772
5,527,555
13,914,381
28,212,424
Non-Current Assets
Fixed Assets - At Cost - - - - - -
Accumulated Depreciation - - - - - -
Fixed Assets, Net - - - - - -
Other Non-Current Assets - - - - - -
Total Non-Current Assets - - - - - -
Total Assets
500,000
297,283
1,529,772
5,527,555
13,914,381
28,212,424
Current Liabilities
Bank Overdrafts - - - - - -
Accounts Payable - 22,524
35,787
71,556
90,946
112,685
Other Current Liabilities - - - - - -
Total Current Liabilities -
22,524
35,787
71,556
90,946
112,685
Non-Current Liabilities
Long-Term Debt -
Total Non-Current Liabilities - - - - - -
New Financing (Debt or
Equity) - - - - - -
Shareholders' Equity
Paid Up Capital 500,000
500,000
500,000
500,000
500,000
500,000
Reserves - - - - - -
Retained Earnings - (225,241)
993,986
4,955,999
13,323,435
27,599,739
Total Shareholders' Equity
500,000
274,759
1,493,986
5,455,999
13,823,435
28,099,739
Total Liabilities &
Shareholders' Equity
500,000
297,283
1,529,772
5,527,555
13,914,381
28,212,424
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Projected Cash Flow Statement
(in $) Year 1 Year 2 Year 3 Year 4 Year 5
Operating Activities
Net Income (225,241)
1,219,227
3,962,014
8,367,436
14,276,304
Depreciation Expense - - - - -
Change in Accounts Receivable - (358,450)
(716,900)
(1,075,350)
(1,433,800)
Change in Inventory - - - - -
Change in Accounts Payable 22,524
13,263
35,769
19,390
21,739
Cash Flow from Operating Activities
(202,717)
874,039
3,280,883
7,311,476
12,864,243
Investing Activities
Purchase of Fixed Assets - - - - -
Cash Flow from Investing Activities - - - - -
Financing Activities
Net Debt / Equity
Repayment of Debt
Cash Flow from Financing Activities - - - - -
Beginning Cash Balance 500,000
297,283
1,171,322
4,452,205
11,763,681
Net Cash Flow (202,717)
874,039
3,280,883
7,311,476
12,864,243
Ending Cash Balance
297,283
1,171,322
4,452,205
11,763,681
24,627,924
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Projected Revenues
• Our projections have been based on certain data assumptions we have taken from
leading market research reports – mainly Technorati. • Revenue projections are based on the assumptions listed previously in section F2 and
under the “Five Years Revenues Forecast Assumptions”. • We have assumed that Blog Owners can only sell up to 50% of their blog ownership.
To be conservative we assumed that the average blogger will only give 25% ownership in their blog.
• We have assumed a target potential market of 10% of active blogs with advertising that might be interested and then assumed that only 20% of them will actually find an investor for the total five year projected period.
• We have assumed that only 0.5% of the total blog readers market would be interested in gaining access to our blog audit reports within the total five year projected period.
• To be conservative, we have assumed that we will charge $10 for an annual subscription to unlimited number of blog audit reports. Of the $10, $5 will be for Blog SouQ and $5 will be for our strategic partner Woopra.
• We have assumed a transaction commission of 5%. • Given an average blog revenue of $7K per year we have assumed a TTM multiple of
3 for valuing the blogs prior to listing on Blog SouQ. • We have also assumed that during the span of the investment and for re-trading the
shares, the average valuation of the Blog and hence the transaction value will not change.
• To be conservative, we have assumed that only 20% of the listed blogs on Blog SouQ will have their blog shares re-traded and only twice in their life span.
Year 1 Year 2 Year 3 Year 4 Year 5
Percentage of successful subscriptions per year 0% 5% 15% 30% 50%
Revenues $ - $ 1,792,250 $ 5,376,750 $ 10,753,500 $ 17,922,500
Growth Rate 200% 100% 67%
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Projected Payroll Expenses
• We have assumed that the founders will stick to a low salary in order to keep the burn
rate as low as possible. Once the company achieves the breakeven point and becomes profitable with high growth rates we might go back and revisit the numbers.
• We have assumed that all development will happen in Jordan and the median salary rates have been taken.
• Social Security and Health insurance have been taken into account based on Jordanian company averages.
(in $) Hire
Year
Yearly
Salary
Year
1
Year
2
Year
3
Year
4
Year
5
CEO 3 100,000 0 0 100,000 110,000 121,000
COO 1 24,000 24,000 26,400 29,040 31,944 35,138
CMO 1 24,000 24,000 26,400 29,040 31,944 35,138
CTO 1 24,000 24,000 26,400 29,040 31,944 35,138
CFO 3 60,000 0 0 60,000 66,000 72,600
Senior Developer - Data Mining Background 1 18,000 18,000 19,800 21,780 23,958 26,354
Senior Developer - Financial Applications Background 1 18,000 18,000 19,800 21,780 23,958 26,354
Senior Developer - Scalable web App Dev Background 1 18,000 18,000 19,800 21,780 23,958 26,354
System Administrator 1 18,000 18,000 19,800 21,780 23,958 26,354
User Interface Designer 1 18,000 18,000 19,800 21,780 23,958 26,354
Quality Assurance 3 18,000 0 0 18,000 19,800 21,780
Accountant 2 12,000 0 12,000 13,200 14,520 15,972
Sales & Marketing Manager 2 14,400 0 14,400 15,840 17,424 19,166
Sales Officer 1 9,000 9,000 9,900 10,890 11,979 13,177
Marketing Officer 2 9,000 0 9,000 9,900 10,890 11,979
Customer Service Manager 3 12,000 0 0 12,000 13,200 14,520
Customer Service Officer 1 2 9,000 0 9,000 9,900 10,890 11,979
Customer Service Officer 2 3 9,000 0 0 9,000 9,900 10,890
Admin Assistant 2 6,000 0 6,000 6,600 7,260 7,986
Total Payroll
171,000
238,500
461,350
507,485
558,234
Total Payroll including Social
Security Tax & Healthcare
203,490
283,815
549,007
603,907
664,298
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Projected Expenses
• Our operational expenses are projected to be relatively low considering being part of
the Jordanian incubator iPark. Rent is symbolic and includes all utilities and hardware we will need for the first couple of years.
• Our major expense driver will be for sales & marketing starting the second year.
(in $) Year
1
Year
2
Year
3
Year
4
Year
5
Incubator Office Rent & utilities 3,051 3,051 3,051 3,051 3,051 Company registration, license, renewal 3,000 500 500 500 500 Legal Fees 2,000 2,000 2,000 2,000 2,000
Web Hosting (Dedicated Servers) & Domain 1,200 6,000 18,000 30,000 60,000 Prints - Promotion 1,000 1,000 5,000 10,000 15,000 Office Supplies 500 500 1,000 1,000 1,000 Training 5,000 5,000 10,000 15,000 20,000 Traveling & Accommodation 5,000 5,000 20,000 30,000 40,000 Miscellaneous 1,000 1,000 2,000 4,000 6,000 Conferences 0 0 5,000 10,000 15,000 Advertising Expenses (e-marketing, etc..) 0 50,000 100,000 200,000 300,000
Total Expenses 21,751 74,051 166,551 305,551 462,551
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Breakeven Analysis
• Total cost consists of Payroll, Capital Expenditure, and Monthly Expenses. • The main source of revenue will be through listing, trading and blog audit reports
subscriptions. • No revenue is expected to be generated the first 6 months to a year after start up. • Based on the projections in the attached financial projections – we are expected to
breakeven by end of year two.
Time Total Cost Total Revenue Income
Year 1 225,241 0 (225,241) Year 2 357,866 1,792,250 1,434,384 Year 3 715,557 5,376,750 4,661,193 Year 4 909,458 10,753,500 9,844,042 Year 5 1,126,849 17,922,500 16,795,651
(2,000,000)
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
20,000,000
1 2 3 4 5
Amount ($)
Years 1 to 5
Cost vs. Revenue Projections
Cost
Revenue
Prof it
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Sensitivity Analysis
• A simple sensitivity analysis has been performed on the five year projected aggregate
gross profits. • As seen below, we have taken into account achieving only 25% up to 200% of targeted
revenues in our financials. While for Expenses (payroll and operational) we took into account the range from saving costs by 50% and increasing costs by up to 250% for the five year period.
• In all scenarios studied we see that Blog SouQ would still achieve a gross profit, yet for the worst case scenario it will not break even. On the other hand, in the best case scenario we can more than double our gross profit for the projected aggregate five year period.
5 Year Summaries Simple Profit Sensitivity Analysis
Revenues for 5 years $ 35,845,000 Cost for 5 years $ 3,334,971
Profits for 5 years $ 32,510,029
Revenues from Target for 5 years
25% 60% 80% 100% 140% 200%
Expenses
50% $ 7,293,765 $ 19,839,515 $ 27,008,515 $ 34,177,515 $ 48,515,515 $ 70,022,515 60% $ 6,960,268 $ 19,506,018 $ 26,675,018 $ 33,844,018 $ 48,182,018 $ 69,689,018 70% $ 6,626,770 $ 19,172,520 $ 26,341,520 $ 33,510,520 $ 47,848,520 $ 69,355,520 80% $ 6,293,273 $ 18,839,023 $ 26,008,023 $ 33,177,023 $ 47,515,023 $ 69,022,023 90% $ 5,959,776 $ 18,505,526 $ 25,674,526 $ 32,843,526 $ 47,181,526 $ 68,688,526 100% $ 5,626,279 $ 18,172,029 $ 25,341,029 $ 32,510,029 $ 46,848,029 $ 68,355,029 110% $ 5,292,782 $ 17,838,532 $ 25,007,532 $ 32,176,532 $ 46,514,532 $ 68,021,532 120% $ 4,959,285 $ 17,505,035 $ 24,674,035 $ 31,843,035 $ 46,181,035 $ 67,688,035 140% $ 4,292,291 $ 16,838,041 $ 24,007,041 $ 31,176,041 $ 45,514,041 $ 67,021,041 200% $ 2,291,308 $ 14,837,058 $ 22,006,058 $ 29,175,058 $ 43,513,058 $ 65,020,058 250% $ 623,823 $ 13,169,573 $ 20,338,573 $ 27,507,573 $ 41,845,573 $ 63,352,573
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F.4. Funding: Capital and Debt
Funding Strategy: Capital vs. Debt
We believe that the best way to fund our startup is by raising capital. We will avoid debt not only because it creates more liabilities and risks especially in the startup stage, but also because we are not seeking only “Money” to start our business. We will be looking for a venture capital investment firm with domain experts in our business. We understand that even VC investment comes with a high price (equity), but it also comes with invaluable added value of management support and business linkages.
Stages of Funding Required and Use of Proceeds
Pre-Startup: $60,000 – to cover at least 6 months before starting up
This stage will be funded by local grant programs, participating in business plan competitions, and by working on freelance consultation projects (bootstrapping). As detailed in the startup summary above, at this stage, an office at iPark incubator will be rented, founders will quit their jobs and work full time on developing Blog SouQ alpha version, and a business method patent will be filed. Proceeds of this stage will be used to cover founders’ expenses and salaries, pay for the incubator rent, and pay for legal consultation and patent filing fees.
Seed VC investment: $500,000 – to cover the first 2 years of startup stage
This stage will be funded by “Series A” investment round. Negotiable amount of redeemable preferred stocks will be exchanged for $500,000. At this stage shares will be fully diluted and dividends will not be distributed. To encourage investors to invest in this stage, we will negotiate offering them call/put warrants to give them the right to buy/sell stocks from/to the company at a pre-set price at a future date within a certain time period. We will also encourage them by vesting our own shares over the two years. Proceeds of this stage will be used to hire our basic development team to develop Blog SouQ beta version, and start selling our services online. Proceeds will cover the company’s expenses for two years assuming no revenues will be obtained. The investment is not all needed from day one. The investor will be required to commit the investment yet we will only call the amounts in tranches. The first being $250K to sustain the team for at least 1 year after which the product will be launched. After that we will call the money in tranches of $50K until we reach operational breakeven. Growth VC investment
This stage will be funded by “Series B” investment round, and anti-diluted preferred stocks will be offered to VC investors. At this stage, the beta version will be finalized and tested in the market for its ability to generate revenues. Proceeds of this stage will be used to expand our team and develop new services that could create new revenue streams to lengthen the growth period in Blog SouQ’s life cycle before reaching maturity stage. An example would be expanding the service to startup websites, widgets, etc…
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This plan is prepared for the pre-startup stage and the first five startup years of operations. Another plan for expansion and growth will be prepared during the fifth year of operations to target growth VC investment.
Exit Strategy
For us, the founders, Blog SouQ is built to last. However, early investors can exit at next investment rounds, and late investors can exit via IPO which is expected within 7 to 8 years of operations or a potential acquisition.
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G. APPENDICES
G.1. Detailed Financial Model
A detailed financial model has been prepared in a separate addendum named “BlogSouQ - Financial Projections.xls”.
G.2. Founders CVs
The detailed CVs of the three founders: Adey Salamin, Ahmad Takatkah and Ammar Ibrahim are in a separate addendum named “BlogSouQ - Founders CVs.pdf”