1. How are revenues growing? Which clients are most important?

2. What is the biggest factor in cost of goods sold? Do you think that this is realistic? Why or why not?

3. Do any part of the financial statements seem unrealistic to you? Explain.

Case Gravyty: Understanding Your Market and Building Realistic Proformas Basis of Presentations This plan contains 18 months of projections. While we believe that the assumptions underlying the projections are reasonable, there can be no assurance that these results can be realized, the nature of the underlying assumption will stay the same, or that actual results will meet expectations. Top-Down vs. Bottom-Up Financials Gravyty believes that "bottom-up financial analysis is the best approach to business planning. This is in contrast to "top-down analysis, which states the percentage of a given total addressable market (TAM) an entrepreneur thinks can be captured. Bottom up financials allow us to think client-by-client, month-by-month about the strategies and personnel necessary to build the business. Nonprofits in the United States are required to file a Form 990 with the Internal Revenue Service (IRS) in order to maintain their status. Within the Form 990, is a National Taxonomy of Exempt Entities (NTEE) code, which is used by the IRS to classify these organizations into 24 different groups. Management has chosen to focus initially on those segments in the chart below for their bottom up approach based on size of the market, access to early adopters, and the initial perceived need based on the value proposition. Estimated Organizations 50% 40% 10% Based on Average Distributed Number of Organizations Filing Form 990 # of NPOs Small Medium Large Technology Spend Technology Spend Philanthropy, Voluntarism & Grantmaking Foundations 89,194 44,597 35,678 8,919 $ 10,207,628,942 $ 8,676,484,600.70 Education 40,033 32,026 8,007 $ 9,162,878,795 $ 7,788,446,976 Recreation & Sports 49,765 24,883 19,906 4,977 $ 5,695,255,895 $ 4,840,967,511 Community Improvement & Capacity Building 49,132 24,566 19,653 4,913 $ 5,622,813,476 $ 4,779,391,455 Human Services 46,843 23,422 18,737 4,684 $ 5,360,853,449 $ 4,556,725,432 Arts, Culture & Humanities 45,409 22,705 18,164 4,541 $ 5,196,742,187 $ 4,417,230,859 Religion-Related 30,554 15,277 12,222 3,055 $ 3,496,691,422 $ 2,972,187,709 Health Care 27,422 13,711 10,969 2,742 $ 3,138,255,946 $ 2,667,517,554 80,065 94 munity Improvement & Capacity Building an Services Arts, Culture & Humanities Religion-Related Health Care Housing & Shelter Public & Societal Benefit Mutual & Membership Benefit Employment 49,132 46,843 45,409 30,554 27,422 21,852 20,410 19,691 16,902 24,566 23,422 22,705 15,277 13,711 10,926 10,205 9,846 8,451 19,653 18,737 18,164 12,222 10,969 8,741 8,164 7,876 6,761 4,913 $ 4,684 $ 4,541 $ 3,055 $ 2,742 $ 2,185 $ 2,041 $ 1,969 $ 1,690 $ 5,622,813,476 $ 5,360,853,449 $ 5,196,742,187 $ 3,496,691,422 $ 3,138,255,946 $ 2,500,808,436 $ 2,335,781,630 $ 2,253,497,113 $ 1,934,315,586 $ 4,7 + 4,5 4,417,230,859 2,972,187,709 2,667,517,554 2,125,687,171 1,985,414,386 1,915,472,546 1,644,168,248 Customer Acquisition Given the high touch nature of the business, we chose to control early growth to maximize learning over revenue. Given our domain expertise, we had several existing connections to organizations who would be beta testers and potential early clients. However, we decided that we would only believe we were onto something when the first stranger bought for "full price. This means a customer would buy their services based on the merits of the value proposition and realization, rather than as a favor. When thinking about customer acquisition, we want to plan carefully around personnel numbers. Since our intention is to raise outside capital for the business, we tested for a breaking point. Could a customer success manager handle 25, 50, 75, or 100+ customers before quality or morale is impacted? We also believe that after an early investment in R&D, the business would scale based on an inside and outside sales team. High Level Assumptions Monthly Acquisition Growth Rate (20% Reduction) Churn Rate 20% Increase) Year 1 Year 2 Year 3 Year 4 20% 16% 13% 10% 1% 1% 1% 2% Annual & Semi-Annual Paying Customers Aquired by NPO Type Organizations Philanthropy, Voluntarism & Grantmaking Foundations Education Arts, Culture & Humanities Religion-Related Health Care Environment Science & Technology Medical Research Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Q3 +Q4 2017 1 2 3 4 5 6 8 10 12 15 18 21 25 29 34 40 98 1 2 5 10 12 15 18 21 25 29 34 40 98 1 2 3 4 5 10 12 15 18 21 25 29 34 40 98 1 2 3 4 5 6 8 10 12 15 18 21 25 29 34 40 98 1 2 4 5 6 8 10 12 14 17 20 24 28 33 81 1 2 3 4 5 6 8 10 12 14 17 20 24 28 69 1 2 3 4 5 6 8 10 12 15 18 21 25 29 34 40 98 1 2 3 4 5 6 8 10 12 15 18 21 25 29 34 40 98 2018 416 416 416 416 344 293 416 416 2019 1,341 1,341 1,341 1,341 1,109 944 1,341 1,341 1 3 6 10 Environment Science & Technology Medical Research Subtotal Customers Aquired Churn Net Customers 1 1 6 2 2 13 2 2 4 4 4 29 3 5 5 37 5 8 8 59 6 6 45 8 12 12 90 3 21 10 74 10 15 15 112 1 111 12 18 18 134 1 133 14 21 21 157 1 156 17 25 25 187 2 185 20 29 29 218 2 216 24 34 34 256 3 28 40 40 301 3 3 298 69 293 98 416 98 416 738 3,133 8 45 944 1,341 1,341 10,099 174 9,925 6 13 21 29 37 45 59 74 90 253 730 3,088 Headcount Requirements Headcount Needs Per X Organizations - Growth Team Type Sales Development Customer Success 1 Per 30 200 75 Annual & Semi-Annual Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Q3 Q4 2017 2018 2019 2 1 1 1 1 3 3 4 6 Head Count Needs Founding Team Management Team Initial Development Team Growth Team Sales New Hires Development New Hires Customer Success New Hires Hiring Total Headcount 2 1 5 1 1 1 F 7 1 1 1 2 8 1 1 9 1 11 F 24 15 3 3 2 9 6 23 40 27 102 78 15 12 41" 32 122 162 330 228 49 34 132 91 353 515 3 1 3 1 2 16 1 1 1 2 2 8 2 1 6 6 1 9 1 12 2 14 1 17 4 4 5 5 5 8 8 11 Headcount Based on our customer acquisition schedule and the headcount needs to support these customers, we put together an estimated cost schedule for salaries to bring into the Income Statement. Initially, these would be the main costs for the business, so it was important to keep them in check to extend runway of initial capital investments. Annual Salary Per Employee Type Management Salaries Salary Founder 1 Growth 10% $ $ 70,000 70,000 Founder 2 Annual Salary Per Employee Type 296 ment Salaries er 1 er 2 Salary $ 70,000 $ 70,000 Growth 10% + Engineering Salaries Developer Salary s 5 50,000 Growth 10% Operations Salary Customer Success Salary $ 65,000 Growth 3% Sales Salaries Sales Executive Salary $ 100,000 Growth 8% Headcount & Salaries Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 2019 Jun-17 Q3 Q4 2017 2018 Annual & Semi-Annual Head Count Needs Founding Team Founder 1 $ Founder 2 $ Subtotal s $ $ $ $ . $ $ $ $ $ $ $ $ $ 5,833 $ 5,833 $ 5,833 $ 5,833 $ 5,833 $ 5,833 5 5,833 $ 6,417 $ 6,417 $ 6,417 $ 6,417 $ 6,417 $ 6,417 S 38,500 $ 84,700 $ 93,170 $ 5,833 $ 5,833 $ 5,833 $ 5,833 S 5,833 $ 5,833 $ 5,833 S 6,417 $ 6,417 $ 6,417 $ 6,417 S 6,417 S 6,417 $ 38,500 $ 84,700 S 93,170 $11,667 $11,667 $11,667 $11,667 $11,667 $11,667 $11,667 $12,833 $12,833 $12,833 $ 12,833 $ 12,833 $ 12,833 $ 77,000 $ 169,400 $ 186,340 Engineering Initial Team $ Growth Team Subtotals 4,167 $ 4,167 $ 8,333 5 8,333 $ 8,333 $ 8,333 8,333 $ 8,333 $ 8,333 $ 8,333 $ 8,333 S 8,333 $ 9,167 S 9,167 $ 9,167 $ 9,167 S 9,167 $ 9,167 $ 55,000 $ $ $ $ 121,000 133,100 $.$ $ 4,167 $ 4,167 $ 4,167 $ 165,000 $907,500 $ 3,260,950 4,167 5 4,167 5 8,333 5 8,333 58,333 5 8,333 S 8,333 S 8,333 5 8,333 S 8,333 5 8,333 S 8,333 S 9,167 S 9,167 S 9,167 S 13,333 S 13,333 S 13,333 $ 220,000 $ 1,028,500 $ 3,394,050 Sales Sales Executive S Subtotal $ $ $ $ $ $ $ S $ $ $ $ 8,333 $ 8,333 $ 8,333 $ 16,667 $25,000 $25,000 $ 36,000 $ 45,000 $54,000 $ 63,000 $ 72,000 $ 81,000 $ 1,296,000 $11,897,280 $ 41,570,496 $ 8,333 $ 8,333 $ 8,333 $ 16,667 $ 25,000 $25,000 $36,000 $45,000 $54,000 $ 63,000 $ 72,000 $ 81,000 5 1,296,000 $11,897,280 $ 41,570,496 Operations Customer Success $ Subtotal $ S $ S $ S $ $ $ 5 $ S $ S $ S $ S $ $ 5,417 S 5,417 S 5,579 $11,158 511,158 $ 11,158 $ 16,738 S 16,738 $ 301,275 $ 2,827,299 $ 9,375,598 $ 5,417 S 5,417 $ 5.579 $11,158 $11,158 $ 11,158 $ 16,738 $ 16,738 $ 301,275 $ 2,827,299 $ 9,375,598 Total Salaries $ 4,167 $ 4,167 $ 8,333 5 8,333 $ 8,333 $20,000 $28,333 $28,333 $ 28,333 $ 36,667 $50,417 $50,417 $ 63,579 $78,158 $ 87,158 $ 100,325 $ 114,904 $123,904 $ 1,894,275 $ 15,922,479 $54,526,484 Cost Assumptions We model both variable and fixed costs for the business. These were often aggregate percentage numbers that were used to simplify some complexity within the financial model-so long as they could find rule-of-thumb numbers or reasonable comparables. We used a learning curve as a means to quantify efficiency. Through time, we believe we will get better and faster at various processes, which will bring down costs. We also believe that R&D as a percentage of Revenue will be on the lower end because most of the R&D costs will be tied up in Developer salaries. Similarly, we believe that SG&A percentages will be on the lower end of comparable companies due to initial 97 model both variable and fixed costs for the business. These were often aggregate percentage numbers that were used to si e complexity within the financial modelso long as they could find rule-of-thumb numbers or reasonable comparables. + We used a learning curve as a means to quantify efficiency. Through time, we believe we will get better and faster at various processes, which will bring down costs. We also believe that R&D as a percentage of Revenue will be on the lower end because most of the R&D costs will be tied up in Developer salaries. Similarly, we believe that SG&A percentages will be on the lower end of comparable companies due to initial sales/advertising efforts focused on the existing networks of the founding team and the word-of-mouth nature of product adoption within nonprofit sector. Cost Assumptions Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 - Annual & Semi-Annual Feb-17 Mar-17 Apr-17 May-17 Jun-17 Q3 +04 2017 2018 Jul 16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 2019 Select Variable costs Monthly % of Revenue) (excl Payroll) Payroll Tax & Benefits Hosting Storage, R&D Technology Operations Total Select Variable costs 15% % 15% 6% 2 23% 15% % 6N 2% 23% 15% 15% 6% 6% 2% 2% 23% 15% 6% 2% 23% 15% 6% 2% 23% 15% % 6% 2% 23% 15% 15% 6N 2% 2% 23% 23% 15% GX 2% 23% 15% 6% 2% 23% 15% 6% 2x 23% 15% 6X 6 2% 23% 15% 6% 2% 23% 15% G% 2% 23% 15% % 15% 6% 6% 2% 2% 23% 23% 15% 6% 2% 23% 15% 6% 2% 23% 15% 6% 2x 23% 23% 23N $ $ $ $ $500 $ 500 $ 500 $ 500 $500 $ 500 $ 500 $500 $500 $ 500 $500 $500 $500 $ 3,000 $ 48,000 $ 120,000 Flored Costs Monthly Office Cost Anual Franchise Tax Liability Insurance Accountant Fees Flared One-Time Setting Up Office Legal Fees for Corp $ $ 800 600 $ 800 $ 600 $ 800 $ 800 $ 600 $ 600 $ 5,000 $10,000 $ $ 2,000 $ 2,000 $ 5,000 $ 10,000 $20,000 $ Total Fixed costs $ 1,000 2.400 $ 2,000 $ $ $ - $ 5,500 $500 $500 $ 500 $500 $ 500 $1,900 $ 2.500 $500 $500 $500 $500 $ 3,000 $ 64,400 $ 151,400 Learning Curve Learning Curve Adjustment 100N 99% 97% 96% 94% 93% 91% 90% 89% 87% 86% 85% 83% 82% 81% 80% 79% 77% 71% 59% 49% Other Costs Monthly Income Taxes 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% Comparable Numbers Blackbaud Revenue Cost of Revenue 2014 564.42 273.44 2013 503.82 232.66 2012 447.42 202.46 2011 Growth 370.87 157.19 Blackbaud 2011 Growth 370.87 5% Revenue Cost of Revenue % of Revenue Gross Profit % of Revenue SG&A % of Revenue R&D % of Revenue Total Operating Expense % of Revenue 119 2014 564 42 273.44 48% 290.98 52% 165.64 29% 77.18 14% 519.05 92% 2012 447.42 202.46 45% 244.96 43% 158.35 2013 503.82 232.66 46% 271.16 48% 147.93 26% 65.64 12 452.27 80 157.19 42% 213.68 38% 112.29 20% 47.67 8% 319.94 57 15% 189 64.69 11% 427.98 76% 189 Comp Set November 2015 LTM Blackbaud Inc. (NasdaqGS:BLKB) Intuit Inc. (NasdaqGS:INTU) MicroStrategy Inc. (NasdaqGS:MSTR) Paycom Software, Inc. (NYSE:PAYC) Total Revenue Cost Of Revenues % COGS Gross Profit R&D % R&D SG&A % SGA Total Operating Expenses % OpEx Net Income % Net Profit Capex * Capex 614.9 296.7 48% 52% 84.9 14% 184.1 30% 567.4 92% 24.1 20.2 3% 4,192.00 695 17% 83% 798 19% 1,771.00 42% 3,306.00 79% 365 9% 142 3% 535.2 109.3 20% 80% 61.9 12% 239.2 45% 410.5 77% 89.5 17% 3.9 1% 203.6 29.4 14% 86% 757 4% 124.8 61% 170.6 84% 18.3 9% 12.5 6% Income Statement Assumptions As with many sectors of the economy, the nonprofit industry is comprised of small, medium, and large organizations. There are about 1.5M nonprofits in the United States and 10M nonprofits globally. The distribution of these organization is a hierarchy, with the greatest number of nonprofits in the "small" category, and the large amount of assets under management (AUM) consolidated in "large" organizations. Small organizations are often nimbler in their ability to try new products, but their budgets are smaller, and they may lack sophistication. Large organizations have bigger budgets, but the sales cycles may be slower due to larger implementations and more layers of sign off before committing to purchase decisions. Reven jan 16 Feb 16 Mar 16 Apr 16 $ 42,521 $ 49,551 S 42.582 $ 49,613 $ 42.6745 42,704 42,735$ 42.766 42,794 $ 42.825$ 42,855 S 42,886 $ 42,916 Annual & Semi-annual 03.01 2017 $ 2016 2,019 Revenue Net Clients O 6 6 13 $ 21 $ 29 $ 37 $ 45 $ 90$ $ 74 $ 133 $ 59 $ 05 156 3 0 SON 185 $ 216 $ 2535 730$ 3,085 9,925 1115 Os 1 os 298 $ OS 15 OS Medium 50 51 1 1 5235 09S TS 5 15 Os 15 os S 5 5 S os 0 DAL 299 0 50% 50% o 509 519 09 6 49% 51% 0% 13 $ 48% 52% 0% $ 21 S OS 1 s S 29 $ 0 S 1$ $ 37 $ OS - 1 s s 45 $ 0 S 15 s 59 $ 0 S 1 S $ 74 OS 15 05 90 $ OS 1 s 0 $ 111 $ 0 S 1 S OS 1335 OS 1 S OS 156 $ OS 1 S 1 s OS 185 $ OS 1 S OS 216 S OS 1 S 1s OS 253 $ 0 S 1 S 0 $ 298 S 0$ 1 S OS 730 $ 0 S 1 S 0S + 0% Clients By Size Small Medium Large 0 0 0 0 0 0 0 0 0 0 0 3 3 0 6 6 $ 7 $ 0 $ 13 S 10 $ 11 $ $ 21 $ 14 $ 15 $ $ 29 $ $ 17 $ 20 $ $ 37 $ 21 $ 24 $ $ 45 $ 27 $ 32 $ $ 59 $ 26 $ 40 $ 7 $ 74 $ 30 $ 50 $ 10 $ 90 $ 36 $ 62 $ 13 $ 111 $ 40 $ 75 $ 18 $ 133 $ 44 $ 89 $ 23 $ 156 $ 49 $ 106 $ 30 $ 185 $ 52 $ 125 $ 38 $ 216 $ 55 $ 148 $ 49 $ 253 $ 58 $ 176 $ 64 $ $ 298 $ 121 $ 437 $ 172 $ 730 $ 422 $ 1,865 $ 801 $ 3,088 $ 1,038 6,055 2,832 9.925 Net Clients Users By Size Small Medium Large Net Users 6 12 13 $ 27 $ $ 39 $ 20 $ 44 $ $ 64 $ 28 $ 61 $ $ 88 $ 35 $ 79 $ $ $ 113 S 42 $ $ 96 $ $ S 138 S 54 $ 128 $ $ 182 $ 52 $ 162 $ 74 $ 288 $ 61 $ 199 $ 99 $ 359 $ 71 $ 248 $ 134 $ 453 S 81 $ 300 $ 177 $ 557 S 89 $ 355 $ 228 $ 672 $ 98 $ 425 $ 298 $ 821 $ 105 s 502 $ 383 $ 989 $ 111 $ 593 $ 493 $ 1,197 $ 115 $ 706 $ 639 $ 1,460 $ 243 $ 1,746 $ 1,721 $ 3,710 $ 843 $ 7,461 $ 8,009 $ 16,314 $ 2,076 24,221 28,317 54,614 18 - Revenue by Size Small Medium Large Gross Revenue - $ s $ $ $ s $ $ $ $ $ $ $ $ $ $ $ $ $ s $ $ $ 294 $ 2,448 $ $ 2,742 $ 630 $ 5,358 $ $ 5,988 $ 1,007 s 8,741 $ $ 9,748 $ 1,376 $ 12,192 $ $ 13,568 $ 1,736 $ 15,710 $ $ 17,447 S 2,088 $ 19,298 $ $ 21,386 $ 2,706 $ 25,555 $ $ 28,261 $ 2,613 $ 3,039 $ 3,565 $ 4,036 $ 4,439 $ 4,888 $ 5,235 $ 32,373 $ $ 39,766 $ 49,536 $ 59,947 $ 71,017 $ 85,061 $ 100,308 $ 29,600 $ 39,600 $ 53,724 $ 70,809 $ 91,360 $ 119,178 $ 153,063 $ 64,586 $ 82,406 $ 106,825 $ 134,793 $ 166,816 $ 209,127 $ 258,606 $ 84,068 $ 506,079 $ 1,245,706 2,355,484 $ 17,907,074 $ 58,129,854 4,583,850 $ 38,445,488 $ 135,922.480 7,023,403 $ 56,858,641 $ 195,298,040 Income Statement Annual & Semi-Annual Gross Profit Jan-16 Feb-16 Mar-16 Apr-16 $ $ 42,521 $ 2,742 $ 42,582 $ 9,748 S 42,551 $ 5,988 $ 42,613 $ 13,568 $ 42,643 $ 17,447 S Revenue 42,674 $ 21,386 $ 42,735 $ 64,586 $ 42,704 $ 28,261 $ 42,794 $ 42,825 $ 106,825 $ 134,793 $ 42,766 $ 82,406 $ 42,855 $ 42,886 $ 42,916 166,816 $ 209,127 $ 258,606 $ $ Q3 + Q4 2017 $ 2,018 $ 2,019 7,023,403 $ 56,858,641 $ 195,298,040 $ $ $ Cost of Goods Sold Hosting, Storage, R&D Total Cost of Goods Sold $ 12.91 $ $ 13 $ 26 $ 26 $ 51.63 $ 52 $ 103 $ 103 $ 207 $ 207 $ 444 $ 444 $ 712 $ 712 $ 976 $ 976 $ 1.237 $ 1,237 $ 1,493 1,493 $ 1,944 $ 1,944 $ 4,376 $ 4,376 $ 5,499 $ 5,499 $ 7,022 $ 7,022 $ 8,727 $ 8,727 $ 10,638 $ 10,638 $ 13,136 $ 13,136 $ 16,001 $ 16,001 $ 396,891 $ 396,891 $ 2,680,122 $ 2,680,122 $ 7,678,753 7,678,753 Gross Profit $ 13 $ 26 $ 52 $ 103 $ 2,536 $ 5,544 $ 9,036 $ 12,591 $ 16,210 $ 19,893 $ 26,317 $ 60,211 $ 76,907 $ 99,803 $ 126,066 $ 156,177 $ 195,990 $ 242,605 $ 6,626,512 $ 54,178,519 $ 187,619,287 Operating Expenses Sales & Marketing & SG&A $ Subtotal $ $ $ $ $ $ $ $ 774 $ 774 $ 1,666 $ 1,666 $ 2,671 $ 2,671 $ 3,662 $ 3,662 $ 4,638 $ 4,638 $ 5,600 $ 5,600 $ 7,289 $ 7,289 $ $ 16,408 $ 16,408 $ 20,621 $ 20,621 $ 26,331 $ 26,331 $ 32,726 $ 32,726 $ 39,893 $ 39,893 $ 49,262 $ 49,262 $ 60,003 $ 60,003 $ 457,673 $ 457,673 $ 915,347 $ 915,347 $ 1,830,693 1,830,693 Operations Salaries Payroll Tax & Benefits Technology Operations $ 4,167 $ 4,167 $ $ 625 $ 625 $ $ 55$ 55 $ Subtotal $ 4,847 $ 4,847 $ 8,333 $ 8,333 $ 1,250 $ 1,250 $ 55 $ 55 $ 9,638 $ 9,638 $ 8,333 $ 1,250 $ 55 $ 9,638 $ 20,000 $ 3,000 $ 120 $ 23,120 $ 28,333 $ 4,250 $ 195 $ 32,778 $ 28,333 $ 4,250 $ 271 $ 32,855 $ 28,333 $ 4,250 $ 349 $ 32,932 $ 36,667 $ 5,500 $ 428 $ 42,594 $ 50,417 $ 7,563 $ 565 $ 58,544 $ 50,417 $ 7,563 $ 1,292 $ 59,271 $ 63,579 $ 9,537 $ 1,648 $ 74,764 $ 78,158 $ 11,724 $ 2,136 $ 92,019 $ 87,158 $ 13,074 S 2,696 $ 102,928 $ 100,325 $ 114,904 $ 123,904 $ 15,049 $ 17,236 $ 18,586 $ 3,336 $ 4,183 $ 5,172 $ 118,710 $ 136,322 $ 147,662 $ 1,894,275 $ 15,922,479 $ 54,526,484 284,141 $ 2,388,372 $ 8,178,973 140,468 $ 1,137,173 $ 3,905,961 2,318,884 $ 19,448,023 $ 66,611,417 Total Variable Cost Total Fixed Costs Total Operating Expenses Cummulative Operating Expenses $ 4,847 $ 4,847 $ 9,638 $ 9,638 $ $ $ 2,400 $ 2,000 $ $ $ $ 7,247 $ 6,847 $ 9,638 $ 9,638 $ $ 14,093 $ 16,485 $ 19,277 S 10,413 $ $ 10,413 S 20,051 S 24,785 $ 5,500 $ 30,285 $ 40,698 S 35,449 $ 500 $ 35,949 $ 66,235 S 36,516 $ 500 $ 37,016 $ 72,966 S 37,570 $ 500 $ 38,070 $ 75,087 S 48,194 $ 500 $ 48,694 $ 86,764 $ 65,833 $ 500 $ 66,333 $ 115,028 S 75,679 $ 95,385 $ 118,349 $ 135,654 $ 158,604 $ 158,604 $ 185,584 $ 207,665 $ 500 $ 1,900 $ 2,500 $ 500 $ 500 $ 500 $ 500 $ 76,179 $ 97,285 $ 120,849 $ 136,154 $ 159,104 $ 186,084 $ 208,165 $ 142,513 S 173,464 S 218,135 S 257,003 S 295,258 S 345,188 S 345,188 S 394,249 S 2,776,558 $ 20,363,370 $ 68,442,110 3,000 $ 64,400 $ 151,400 2,779,558 $ 20,427,770 $ 68,593,510 2,987,723 S 23,207,327 S 89,021,280 Net Income Before Taxes $ 7,260 $ 6,872 -$ 9,690 $ 9,742 -$ 7,877 $ 24,742 $ 26,913 -5 24,425 $ 21,860 $ 28,801 -$ 40,016 $ 15,968 $ 20,379 -$ 21,046 $ 10,088 $ 2,926 $ 9,906 $ 34,439 $ 3,846,955 $ 33,750,749 $ 119,025,777 $ Provision for Income Taxes Net Income $ $ $ $ 7,260 $ $ 6,872 $ $ 9,690 $ $ 9,7425 $ 7,877 $ $ 26,913 $ 24,742 $ 24,425 $ $ 28,801 -$ $ 40,016 $ S 15,968 $ $ 20,379 $ $ 21,046 $ $ 10,088 $ 21,860 - $ $ 2,926 $ 3,467 $ 6,439 $ 12,054 $ 22,386 $ 1,346,434 $ 11,812,762 $ 41,659,022 2,500,521 $ 21,937,987 $ 77,366,755 Valuation The idea of valuation, especially at the earliest stage is more art than science. As such, we want to approach the question of valuation from several different angles. e Before Taxes $ 7,250 $ 6,872 $ 9,690 $ 9,742 7,877 $ 24,742 $ 26,913 $24.425 21,860 28,801 $ 40,016 $ 15,968 $ 20,379 $ 21,046 $ 10,088 $ 2,926 $9.906 $ 34,439 300 or Income Taxes 3,846,955 $ 3 1,346,34 $ 11 2,500,521 $ 21 $ 7.250 6.8725 9.690 $ 9.7425 $ 28,801 $ 40,016 $ 15.963 $ 20.379 $ 21.046 $ 10,089 7.877 $ 24,742 $ 26,913 $ 24,425 $ 21,850 $ $ 3,467 $12051 2.926 $ 6,439 $ 22,386 Valuation The idea of valuation, especially at the earliest stage is more "art" than science." As such, we want to approach the question of valuation from several different angles. Frameworks. Two high-level approaches in the Risk Factor Summation Model as well as the Berkus Method for early-stage valuations. By nature, these are directionally correct rather than specific. Comparables. A look at public information about venture capital deals that had been done within the industry and our city. Discounted Cash Flow (DCF). A DCF analysis to see if there would be interesting insights gleaned. We are seeking $500k in funding and believe that an early sale of 20% of the business would leave ample upside potential while giving enough runway to gain significant traction. As all entrepreneurs do, we also calculate what a potential exit would look like, and model valuation based off both Revenue and Net Income multiples achieved by the end of 2019. Risk Factor Summation Method Angel List Valuation Comps Risk Factors Rank Value Boston Value 75th Percentile Management $ 3,000,000 2 $ 500,000 Mean $ 4,200,000 Stage of Business 0 $ 25th Percentile $5,000,000 Political 2 $ 500,000 Big Data Manufacturing 2 $ 500,000 75th Percentile $3,000,000 Sales -1 -$ 250,000 Mean $4,500,000 Funding/Capital Raising -1 -$ 250,000 25th Percentile $ 6,000,000 Predictive Analytics Competition 0 $ 75th Percentile $3,000,000 Technology -1 -$ 250,000 Mean $4,200,000 Litigation 2 $ 500,000 25th Percentile $5,000,000 Rank + Va $3,000,000 $ 4,200,000 $5,000,000 -00 Factor Summation Method THION Factors Management Stage of Business Political Manufacturing Sales Funding/Capital Raising Competition Technology Litigation International Reputation Potential Lucrative Exit $3,000,000 $ 4,500,000 $ 6,000,000 Value 2 $ 500,000 0 $ 2 $ 500,000 2 $ 500,000 -1 $ 250,000 -1 -$ 250,000 0 $ -1 -$ 250,000 2 $ 500,000 2 $ 500,000 1 $ 250,000 2 $ 500,000 $ 2,500,000 Angel List Valuation Comps Boston 75th Percentile Mean 25th Percentile Big Data 75th Percentile Mean 25th Percentile Predictive Analytics 75th Percentile Mean 25th Percentile Enterprise 2.0 75th Percentile Mean 25th Percentile Business Productivity 75th Percentile Mean 25th Percentile $3,000,000 $4,200,000 $5,000,000 $ 3,000,000 $ 4,100,000 $ 8,000,000 $ 2,000,000 $ 3,800,000 $6,000,000 Rank Berkus Method Risk Factors Sound Idea Prototype Quality Management Team Strategic Relationships Product Rollout or Sales Value 1 $ 500,000 1 $ 500,000 1 $ 500,000 1 $ 500,000 0$ $ 2,000,000 Average 75th Percentile Mean 25th Percentile $ 2,800,000 $ 4,160,000 $ 6,000,000 Overall Average $ 2,886,667 Case Gravyty: Understanding Your Market and Building Realistic Proformas Basis of Presentations This plan contains 18 months of projections. While we believe that the assumptions underlying the projections are reasonable, there can be no assurance that these results can be realized, the nature of the underlying assumption will stay the same, or that actual results will meet expectations. Top-Down vs. Bottom-Up Financials Gravyty believes that "bottom-up financial analysis is the best approach to business planning. This is in contrast to "top-down analysis, which states the percentage of a given total addressable market (TAM) an entrepreneur thinks can be captured. Bottom up financials allow us to think client-by-client, month-by-month about the strategies and personnel necessary to build the business. Nonprofits in the United States are required to file a Form 990 with the Internal Revenue Service (IRS) in order to maintain their status. Within the Form 990, is a National Taxonomy of Exempt Entities (NTEE) code, which is used by the IRS to classify these organizations into 24 different groups. Management has chosen to focus initially on those segments in the chart below for their bottom up approach based on size of the market, access to early adopters, and the initial perceived need based on the value proposition. Estimated Organizations 50% 40% 10% Based on Average Distributed Number of Organizations Filing Form 990 # of NPOs Small Medium Large Technology Spend Technology Spend Philanthropy, Voluntarism & Grantmaking Foundations 89,194 44,597 35,678 8,919 $ 10,207,628,942 $ 8,676,484,600.70 Education 40,033 32,026 8,007 $ 9,162,878,795 $ 7,788,446,976 Recreation & Sports 49,765 24,883 19,906 4,977 $ 5,695,255,895 $ 4,840,967,511 Community Improvement & Capacity Building 49,132 24,566 19,653 4,913 $ 5,622,813,476 $ 4,779,391,455 Human Services 46,843 23,422 18,737 4,684 $ 5,360,853,449 $ 4,556,725,432 Arts, Culture & Humanities 45,409 22,705 18,164 4,541 $ 5,196,742,187 $ 4,417,230,859 Religion-Related 30,554 15,277 12,222 3,055 $ 3,496,691,422 $ 2,972,187,709 Health Care 27,422 13,711 10,969 2,742 $ 3,138,255,946 $ 2,667,517,554 80,065 94 munity Improvement & Capacity Building an Services Arts, Culture & Humanities Religion-Related Health Care Housing & Shelter Public & Societal Benefit Mutual & Membership Benefit Employment 49,132 46,843 45,409 30,554 27,422 21,852 20,410 19,691 16,902 24,566 23,422 22,705 15,277 13,711 10,926 10,205 9,846 8,451 19,653 18,737 18,164 12,222 10,969 8,741 8,164 7,876 6,761 4,913 $ 4,684 $ 4,541 $ 3,055 $ 2,742 $ 2,185 $ 2,041 $ 1,969 $ 1,690 $ 5,622,813,476 $ 5,360,853,449 $ 5,196,742,187 $ 3,496,691,422 $ 3,138,255,946 $ 2,500,808,436 $ 2,335,781,630 $ 2,253,497,113 $ 1,934,315,586 $ 4,7 + 4,5 4,417,230,859 2,972,187,709 2,667,517,554 2,125,687,171 1,985,414,386 1,915,472,546 1,644,168,248 Customer Acquisition Given the high touch nature of the business, we chose to control early growth to maximize learning over revenue. Given our domain expertise, we had several existing connections to organizations who would be beta testers and potential early clients. However, we decided that we would only believe we were onto something when the first stranger bought for "full price. This means a customer would buy their services based on the merits of the value proposition and realization, rather than as a favor. When thinking about customer acquisition, we want to plan carefully around personnel numbers. Since our intention is to raise outside capital for the business, we tested for a breaking point. Could a customer success manager handle 25, 50, 75, or 100+ customers before quality or morale is impacted? We also believe that after an early investment in R&D, the business would scale based on an inside and outside sales team. High Level Assumptions Monthly Acquisition Growth Rate (20% Reduction) Churn Rate 20% Increase) Year 1 Year 2 Year 3 Year 4 20% 16% 13% 10% 1% 1% 1% 2% Annual & Semi-Annual Paying Customers Aquired by NPO Type Organizations Philanthropy, Voluntarism & Grantmaking Foundations Education Arts, Culture & Humanities Religion-Related Health Care Environment Science & Technology Medical Research Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Q3 +Q4 2017 1 2 3 4 5 6 8 10 12 15 18 21 25 29 34 40 98 1 2 5 10 12 15 18 21 25 29 34 40 98 1 2 3 4 5 10 12 15 18 21 25 29 34 40 98 1 2 3 4 5 6 8 10 12 15 18 21 25 29 34 40 98 1 2 4 5 6 8 10 12 14 17 20 24 28 33 81 1 2 3 4 5 6 8 10 12 14 17 20 24 28 69 1 2 3 4 5 6 8 10 12 15 18 21 25 29 34 40 98 1 2 3 4 5 6 8 10 12 15 18 21 25 29 34 40 98 2018 416 416 416 416 344 293 416 416 2019 1,341 1,341 1,341 1,341 1,109 944 1,341 1,341 1 3 6 10 Environment Science & Technology Medical Research Subtotal Customers Aquired Churn Net Customers 1 1 6 2 2 13 2 2 4 4 4 29 3 5 5 37 5 8 8 59 6 6 45 8 12 12 90 3 21 10 74 10 15 15 112 1 111 12 18 18 134 1 133 14 21 21 157 1 156 17 25 25 187 2 185 20 29 29 218 2 216 24 34 34 256 3 28 40 40 301 3 3 298 69 293 98 416 98 416 738 3,133 8 45 944 1,341 1,341 10,099 174 9,925 6 13 21 29 37 45 59 74 90 253 730 3,088 Headcount Requirements Headcount Needs Per X Organizations - Growth Team Type Sales Development Customer Success 1 Per 30 200 75 Annual & Semi-Annual Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Q3 Q4 2017 2018 2019 2 1 1 1 1 3 3 4 6 Head Count Needs Founding Team Management Team Initial Development Team Growth Team Sales New Hires Development New Hires Customer Success New Hires Hiring Total Headcount 2 1 5 1 1 1 F 7 1 1 1 2 8 1 1 9 1 11 F 24 15 3 3 2 9 6 23 40 27 102 78 15 12 41" 32 122 162 330 228 49 34 132 91 353 515 3 1 3 1 2 16 1 1 1 2 2 8 2 1 6 6 1 9 1 12 2 14 1 17 4 4 5 5 5 8 8 11 Headcount Based on our customer acquisition schedule and the headcount needs to support these customers, we put together an estimated cost schedule for salaries to bring into the Income Statement. Initially, these would be the main costs for the business, so it was important to keep them in check to extend runway of initial capital investments. Annual Salary Per Employee Type Management Salaries Salary Founder 1 Growth 10% $ $ 70,000 70,000 Founder 2 Annual Salary Per Employee Type 296 ment Salaries er 1 er 2 Salary $ 70,000 $ 70,000 Growth 10% + Engineering Salaries Developer Salary s 5 50,000 Growth 10% Operations Salary Customer Success Salary $ 65,000 Growth 3% Sales Salaries Sales Executive Salary $ 100,000 Growth 8% Headcount & Salaries Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 2019 Jun-17 Q3 Q4 2017 2018 Annual & Semi-Annual Head Count Needs Founding Team Founder 1 $ Founder 2 $ Subtotal s $ $ $ $ . $ $ $ $ $ $ $ $ $ 5,833 $ 5,833 $ 5,833 $ 5,833 $ 5,833 $ 5,833 5 5,833 $ 6,417 $ 6,417 $ 6,417 $ 6,417 $ 6,417 $ 6,417 S 38,500 $ 84,700 $ 93,170 $ 5,833 $ 5,833 $ 5,833 $ 5,833 S 5,833 $ 5,833 $ 5,833 S 6,417 $ 6,417 $ 6,417 $ 6,417 S 6,417 S 6,417 $ 38,500 $ 84,700 S 93,170 $11,667 $11,667 $11,667 $11,667 $11,667 $11,667 $11,667 $12,833 $12,833 $12,833 $ 12,833 $ 12,833 $ 12,833 $ 77,000 $ 169,400 $ 186,340 Engineering Initial Team $ Growth Team Subtotals 4,167 $ 4,167 $ 8,333 5 8,333 $ 8,333 $ 8,333 8,333 $ 8,333 $ 8,333 $ 8,333 $ 8,333 S 8,333 $ 9,167 S 9,167 $ 9,167 $ 9,167 S 9,167 $ 9,167 $ 55,000 $ $ $ $ 121,000 133,100 $.$ $ 4,167 $ 4,167 $ 4,167 $ 165,000 $907,500 $ 3,260,950 4,167 5 4,167 5 8,333 5 8,333 58,333 5 8,333 S 8,333 S 8,333 5 8,333 S 8,333 5 8,333 S 8,333 S 9,167 S 9,167 S 9,167 S 13,333 S 13,333 S 13,333 $ 220,000 $ 1,028,500 $ 3,394,050 Sales Sales Executive S Subtotal $ $ $ $ $ $ $ S $ $ $ $ 8,333 $ 8,333 $ 8,333 $ 16,667 $25,000 $25,000 $ 36,000 $ 45,000 $54,000 $ 63,000 $ 72,000 $ 81,000 $ 1,296,000 $11,897,280 $ 41,570,496 $ 8,333 $ 8,333 $ 8,333 $ 16,667 $ 25,000 $25,000 $36,000 $45,000 $54,000 $ 63,000 $ 72,000 $ 81,000 5 1,296,000 $11,897,280 $ 41,570,496 Operations Customer Success $ Subtotal $ S $ S $ S $ $ $ 5 $ S $ S $ S $ S $ $ 5,417 S 5,417 S 5,579 $11,158 511,158 $ 11,158 $ 16,738 S 16,738 $ 301,275 $ 2,827,299 $ 9,375,598 $ 5,417 S 5,417 $ 5.579 $11,158 $11,158 $ 11,158 $ 16,738 $ 16,738 $ 301,275 $ 2,827,299 $ 9,375,598 Total Salaries $ 4,167 $ 4,167 $ 8,333 5 8,333 $ 8,333 $20,000 $28,333 $28,333 $ 28,333 $ 36,667 $50,417 $50,417 $ 63,579 $78,158 $ 87,158 $ 100,325 $ 114,904 $123,904 $ 1,894,275 $ 15,922,479 $54,526,484 Cost Assumptions We model both variable and fixed costs for the business. These were often aggregate percentage numbers that were used to simplify some complexity within the financial model-so long as they could find rule-of-thumb numbers or reasonable comparables. We used a learning curve as a means to quantify efficiency. Through time, we believe we will get better and faster at various processes, which will bring down costs. We also believe that R&D as a percentage of Revenue will be on the lower end because most of the R&D costs will be tied up in Developer salaries. Similarly, we believe that SG&A percentages will be on the lower end of comparable companies due to initial 97 model both variable and fixed costs for the business. These were often aggregate percentage numbers that were used to si e complexity within the financial modelso long as they could find rule-of-thumb numbers or reasonable comparables. + We used a learning curve as a means to quantify efficiency. Through time, we believe we will get better and faster at various processes, which will bring down costs. We also believe that R&D as a percentage of Revenue will be on the lower end because most of the R&D costs will be tied up in Developer salaries. Similarly, we believe that SG&A percentages will be on the lower end of comparable companies due to initial sales/advertising efforts focused on the existing networks of the founding team and the word-of-mouth nature of product adoption within nonprofit sector. Cost Assumptions Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 - Annual & Semi-Annual Feb-17 Mar-17 Apr-17 May-17 Jun-17 Q3 +04 2017 2018 Jul 16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 2019 Select Variable costs Monthly % of Revenue) (excl Payroll) Payroll Tax & Benefits Hosting Storage, R&D Technology Operations Total Select Variable costs 15% % 15% 6% 2 23% 15% % 6N 2% 23% 15% 15% 6% 6% 2% 2% 23% 15% 6% 2% 23% 15% 6% 2% 23% 15% % 6% 2% 23% 15% 15% 6N 2% 2% 23% 23% 15% GX 2% 23% 15% 6% 2% 23% 15% 6% 2x 23% 15% 6X 6 2% 23% 15% 6% 2% 23% 15% G% 2% 23% 15% % 15% 6% 6% 2% 2% 23% 23% 15% 6% 2% 23% 15% 6% 2% 23% 15% 6% 2x 23% 23% 23N $ $ $ $ $500 $ 500 $ 500 $ 500 $500 $ 500 $ 500 $500 $500 $ 500 $500 $500 $500 $ 3,000 $ 48,000 $ 120,000 Flored Costs Monthly Office Cost Anual Franchise Tax Liability Insurance Accountant Fees Flared One-Time Setting Up Office Legal Fees for Corp $ $ 800 600 $ 800 $ 600 $ 800 $ 800 $ 600 $ 600 $ 5,000 $10,000 $ $ 2,000 $ 2,000 $ 5,000 $ 10,000 $20,000 $ Total Fixed costs $ 1,000 2.400 $ 2,000 $ $ $ - $ 5,500 $500 $500 $ 500 $500 $ 500 $1,900 $ 2.500 $500 $500 $500 $500 $ 3,000 $ 64,400 $ 151,400 Learning Curve Learning Curve Adjustment 100N 99% 97% 96% 94% 93% 91% 90% 89% 87% 86% 85% 83% 82% 81% 80% 79% 77% 71% 59% 49% Other Costs Monthly Income Taxes 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% Comparable Numbers Blackbaud Revenue Cost of Revenue 2014 564.42 273.44 2013 503.82 232.66 2012 447.42 202.46 2011 Growth 370.87 157.19 Blackbaud 2011 Growth 370.87 5% Revenue Cost of Revenue % of Revenue Gross Profit % of Revenue SG&A % of Revenue R&D % of Revenue Total Operating Expense % of Revenue 119 2014 564 42 273.44 48% 290.98 52% 165.64 29% 77.18 14% 519.05 92% 2012 447.42 202.46 45% 244.96 43% 158.35 2013 503.82 232.66 46% 271.16 48% 147.93 26% 65.64 12 452.27 80 157.19 42% 213.68 38% 112.29 20% 47.67 8% 319.94 57 15% 189 64.69 11% 427.98 76% 189 Comp Set November 2015 LTM Blackbaud Inc. (NasdaqGS:BLKB) Intuit Inc. (NasdaqGS:INTU) MicroStrategy Inc. (NasdaqGS:MSTR) Paycom Software, Inc. (NYSE:PAYC) Total Revenue Cost Of Revenues % COGS Gross Profit R&D % R&D SG&A % SGA Total Operating Expenses % OpEx Net Income % Net Profit Capex * Capex 614.9 296.7 48% 52% 84.9 14% 184.1 30% 567.4 92% 24.1 20.2 3% 4,192.00 695 17% 83% 798 19% 1,771.00 42% 3,306.00 79% 365 9% 142 3% 535.2 109.3 20% 80% 61.9 12% 239.2 45% 410.5 77% 89.5 17% 3.9 1% 203.6 29.4 14% 86% 757 4% 124.8 61% 170.6 84% 18.3 9% 12.5 6% Income Statement Assumptions As with many sectors of the economy, the nonprofit industry is comprised of small, medium, and large organizations. There are about 1.5M nonprofits in the United States and 10M nonprofits globally. The distribution of these organization is a hierarchy, with the greatest number of nonprofits in the "small" category, and the large amount of assets under management (AUM) consolidated in "large" organizations. Small organizations are often nimbler in their ability to try new products, but their budgets are smaller, and they may lack sophistication. Large organizations have bigger budgets, but the sales cycles may be slower due to larger implementations and more layers of sign off before committing to purchase decisions. Reven jan 16 Feb 16 Mar 16 Apr 16 $ 42,521 $ 49,551 S 42.582 $ 49,613 $ 42.6745 42,704 42,735$ 42.766 42,794 $ 42.825$ 42,855 S 42,886 $ 42,916 Annual & Semi-annual 03.01 2017 $ 2016 2,019 Revenue Net Clients O 6 6 13 $ 21 $ 29 $ 37 $ 45 $ 90$ $ 74 $ 133 $ 59 $ 05 156 3 0 SON 185 $ 216 $ 2535 730$ 3,085 9,925 1115 Os 1 os 298 $ OS 15 OS Medium 50 51 1 1 5235 09S TS 5 15 Os 15 os S 5 5 S os 0 DAL 299 0 50% 50% o 509 519 09 6 49% 51% 0% 13 $ 48% 52% 0% $ 21 S OS 1 s S 29 $ 0 S 1$ $ 37 $ OS - 1 s s 45 $ 0 S 15 s 59 $ 0 S 1 S $ 74 OS 15 05 90 $ OS 1 s 0 $ 111 $ 0 S 1 S OS 1335 OS 1 S OS 156 $ OS 1 S 1 s OS 185 $ OS 1 S OS 216 S OS 1 S 1s OS 253 $ 0 S 1 S 0 $ 298 S 0$ 1 S OS 730 $ 0 S 1 S 0S + 0% Clients By Size Small Medium Large 0 0 0 0 0 0 0 0 0 0 0 3 3 0 6 6 $ 7 $ 0 $ 13 S 10 $ 11 $ $ 21 $ 14 $ 15 $ $ 29 $ $ 17 $ 20 $ $ 37 $ 21 $ 24 $ $ 45 $ 27 $ 32 $ $ 59 $ 26 $ 40 $ 7 $ 74 $ 30 $ 50 $ 10 $ 90 $ 36 $ 62 $ 13 $ 111 $ 40 $ 75 $ 18 $ 133 $ 44 $ 89 $ 23 $ 156 $ 49 $ 106 $ 30 $ 185 $ 52 $ 125 $ 38 $ 216 $ 55 $ 148 $ 49 $ 253 $ 58 $ 176 $ 64 $ $ 298 $ 121 $ 437 $ 172 $ 730 $ 422 $ 1,865 $ 801 $ 3,088 $ 1,038 6,055 2,832 9.925 Net Clients Users By Size Small Medium Large Net Users 6 12 13 $ 27 $ $ 39 $ 20 $ 44 $ $ 64 $ 28 $ 61 $ $ 88 $ 35 $ 79 $ $ $ 113 S 42 $ $ 96 $ $ S 138 S 54 $ 128 $ $ 182 $ 52 $ 162 $ 74 $ 288 $ 61 $ 199 $ 99 $ 359 $ 71 $ 248 $ 134 $ 453 S 81 $ 300 $ 177 $ 557 S 89 $ 355 $ 228 $ 672 $ 98 $ 425 $ 298 $ 821 $ 105 s 502 $ 383 $ 989 $ 111 $ 593 $ 493 $ 1,197 $ 115 $ 706 $ 639 $ 1,460 $ 243 $ 1,746 $ 1,721 $ 3,710 $ 843 $ 7,461 $ 8,009 $ 16,314 $ 2,076 24,221 28,317 54,614 18 - Revenue by Size Small Medium Large Gross Revenue - $ s $ $ $ s $ $ $ $ $ $ $ $ $ $ $ $ $ s $ $ $ 294 $ 2,448 $ $ 2,742 $ 630 $ 5,358 $ $ 5,988 $ 1,007 s 8,741 $ $ 9,748 $ 1,376 $ 12,192 $ $ 13,568 $ 1,736 $ 15,710 $ $ 17,447 S 2,088 $ 19,298 $ $ 21,386 $ 2,706 $ 25,555 $ $ 28,261 $ 2,613 $ 3,039 $ 3,565 $ 4,036 $ 4,439 $ 4,888 $ 5,235 $ 32,373 $ $ 39,766 $ 49,536 $ 59,947 $ 71,017 $ 85,061 $ 100,308 $ 29,600 $ 39,600 $ 53,724 $ 70,809 $ 91,360 $ 119,178 $ 153,063 $ 64,586 $ 82,406 $ 106,825 $ 134,793 $ 166,816 $ 209,127 $ 258,606 $ 84,068 $ 506,079 $ 1,245,706 2,355,484 $ 17,907,074 $ 58,129,854 4,583,850 $ 38,445,488 $ 135,922.480 7,023,403 $ 56,858,641 $ 195,298,040 Income Statement Annual & Semi-Annual Gross Profit Jan-16 Feb-16 Mar-16 Apr-16 $ $ 42,521 $ 2,742 $ 42,582 $ 9,748 S 42,551 $ 5,988 $ 42,613 $ 13,568 $ 42,643 $ 17,447 S Revenue 42,674 $ 21,386 $ 42,735 $ 64,586 $ 42,704 $ 28,261 $ 42,794 $ 42,825 $ 106,825 $ 134,793 $ 42,766 $ 82,406 $ 42,855 $ 42,886 $ 42,916 166,816 $ 209,127 $ 258,606 $ $ Q3 + Q4 2017 $ 2,018 $ 2,019 7,023,403 $ 56,858,641 $ 195,298,040 $ $ $ Cost of Goods Sold Hosting, Storage, R&D Total Cost of Goods Sold $ 12.91 $ $ 13 $ 26 $ 26 $ 51.63 $ 52 $ 103 $ 103 $ 207 $ 207 $ 444 $ 444 $ 712 $ 712 $ 976 $ 976 $ 1.237 $ 1,237 $ 1,493 1,493 $ 1,944 $ 1,944 $ 4,376 $ 4,376 $ 5,499 $ 5,499 $ 7,022 $ 7,022 $ 8,727 $ 8,727 $ 10,638 $ 10,638 $ 13,136 $ 13,136 $ 16,001 $ 16,001 $ 396,891 $ 396,891 $ 2,680,122 $ 2,680,122 $ 7,678,753 7,678,753 Gross Profit $ 13 $ 26 $ 52 $ 103 $ 2,536 $ 5,544 $ 9,036 $ 12,591 $ 16,210 $ 19,893 $ 26,317 $ 60,211 $ 76,907 $ 99,803 $ 126,066 $ 156,177 $ 195,990 $ 242,605 $ 6,626,512 $ 54,178,519 $ 187,619,287 Operating Expenses Sales & Marketing & SG&A $ Subtotal $ $ $ $ $ $ $ $ 774 $ 774 $ 1,666 $ 1,666 $ 2,671 $ 2,671 $ 3,662 $ 3,662 $ 4,638 $ 4,638 $ 5,600 $ 5,600 $ 7,289 $ 7,289 $ $ 16,408 $ 16,408 $ 20,621 $ 20,621 $ 26,331 $ 26,331 $ 32,726 $ 32,726 $ 39,893 $ 39,893 $ 49,262 $ 49,262 $ 60,003 $ 60,003 $ 457,673 $ 457,673 $ 915,347 $ 915,347 $ 1,830,693 1,830,693 Operations Salaries Payroll Tax & Benefits Technology Operations $ 4,167 $ 4,167 $ $ 625 $ 625 $ $ 55$ 55 $ Subtotal $ 4,847 $ 4,847 $ 8,333 $ 8,333 $ 1,250 $ 1,250 $ 55 $ 55 $ 9,638 $ 9,638 $ 8,333 $ 1,250 $ 55 $ 9,638 $ 20,000 $ 3,000 $ 120 $ 23,120 $ 28,333 $ 4,250 $ 195 $ 32,778 $ 28,333 $ 4,250 $ 271 $ 32,855 $ 28,333 $ 4,250 $ 349 $ 32,932 $ 36,667 $ 5,500 $ 428 $ 42,594 $ 50,417 $ 7,563 $ 565 $ 58,544 $ 50,417 $ 7,563 $ 1,292 $ 59,271 $ 63,579 $ 9,537 $ 1,648 $ 74,764 $ 78,158 $ 11,724 $ 2,136 $ 92,019 $ 87,158 $ 13,074 S 2,696 $ 102,928 $ 100,325 $ 114,904 $ 123,904 $ 15,049 $ 17,236 $ 18,586 $ 3,336 $ 4,183 $ 5,172 $ 118,710 $ 136,322 $ 147,662 $ 1,894,275 $ 15,922,479 $ 54,526,484 284,141 $ 2,388,372 $ 8,178,973 140,468 $ 1,137,173 $ 3,905,961 2,318,884 $ 19,448,023 $ 66,611,417 Total Variable Cost Total Fixed Costs Total Operating Expenses Cummulative Operating Expenses $ 4,847 $ 4,847 $ 9,638 $ 9,638 $ $ $ 2,400 $ 2,000 $ $ $ $ 7,247 $ 6,847 $ 9,638 $ 9,638 $ $ 14,093 $ 16,485 $ 19,277 S 10,413 $ $ 10,413 S 20,051 S 24,785 $ 5,500 $ 30,285 $ 40,698 S 35,449 $ 500 $ 35,949 $ 66,235 S 36,516 $ 500 $ 37,016 $ 72,966 S 37,570 $ 500 $ 38,070 $ 75,087 S 48,194 $ 500 $ 48,694 $ 86,764 $ 65,833 $ 500 $ 66,333 $ 115,028 S 75,679 $ 95,385 $ 118,349 $ 135,654 $ 158,604 $ 158,604 $ 185,584 $ 207,665 $ 500 $ 1,900 $ 2,500 $ 500 $ 500 $ 500 $ 500 $ 76,179 $ 97,285 $ 120,849 $ 136,154 $ 159,104 $ 186,084 $ 208,165 $ 142,513 S 173,464 S 218,135 S 257,003 S 295,258 S 345,188 S 345,188 S 394,249 S 2,776,558 $ 20,363,370 $ 68,442,110 3,000 $ 64,400 $ 151,400 2,779,558 $ 20,427,770 $ 68,593,510 2,987,723 S 23,207,327 S 89,021,280 Net Income Before Taxes $ 7,260 $ 6,872 -$ 9,690 $ 9,742 -$ 7,877 $ 24,742 $ 26,913 -5 24,425 $ 21,860 $ 28,801 -$ 40,016 $ 15,968 $ 20,379 -$ 21,046 $ 10,088 $ 2,926 $ 9,906 $ 34,439 $ 3,846,955 $ 33,750,749 $ 119,025,777 $ Provision for Income Taxes Net Income $ $ $ $ 7,260 $ $ 6,872 $ $ 9,690 $ $ 9,7425 $ 7,877 $ $ 26,913 $ 24,742 $ 24,425 $ $ 28,801 -$ $ 40,016 $ S 15,968 $ $ 20,379 $ $ 21,046 $ $ 10,088 $ 21,860 - $ $ 2,926 $ 3,467 $ 6,439 $ 12,054 $ 22,386 $ 1,346,434 $ 11,812,762 $ 41,659,022 2,500,521 $ 21,937,987 $ 77,366,755 Valuation The idea of valuation, especially at the earliest stage is more art than science. As such, we want to approach the question of valuation from several different angles. e Before Taxes $ 7,250 $ 6,872 $ 9,690 $ 9,742 7,877 $ 24,742 $ 26,913 $24.425 21,860 28,801 $ 40,016 $ 15,968 $ 20,379 $ 21,046 $ 10,088 $ 2,926 $9.906 $ 34,439 300 or Income Taxes 3,846,955 $ 3 1,346,34 $ 11 2,500,521 $ 21 $ 7.250 6.8725 9.690 $ 9.7425 $ 28,801 $ 40,016 $ 15.963 $ 20.379 $ 21.046 $ 10,089 7.877 $ 24,742 $ 26,913 $ 24,425 $ 21,850 $ $ 3,467 $12051 2.926 $ 6,439 $ 22,386 Valuation The idea of valuation, especially at the earliest stage is more "art" than science." As such, we want to approach the question of valuation from several different angles. Frameworks. Two high-level approaches in the Risk Factor Summation Model as well as the Berkus Method for early-stage valuations. By nature, these are directionally correct rather than specific. Comparables. A look at public information about venture capital deals that had been done within the industry and our city. Discounted Cash Flow (DCF). A DCF analysis to see if there would be interesting insights gleaned. We are seeking $500k in funding and believe that an early sale of 20% of the business would leave ample upside potential while giving enough runway to gain significant traction. As all entrepreneurs do, we also calculate what a potential exit would look like, and model valuation based off both Revenue and Net Income multiples achieved by the end of 2019. Risk Factor Summation Method Angel List Valuation Comps Risk Factors Rank Value Boston Value 75th Percentile Management $ 3,000,000 2 $ 500,000 Mean $ 4,200,000 Stage of Business 0 $ 25th Percentile $5,000,000 Political 2 $ 500,000 Big Data Manufacturing 2 $ 500,000 75th Percentile $3,000,000 Sales -1 -$ 250,000 Mean $4,500,000 Funding/Capital Raising -1 -$ 250,000 25th Percentile $ 6,000,000 Predictive Analytics Competition 0 $ 75th Percentile $3,000,000 Technology -1 -$ 250,000 Mean $4,200,000 Litigation 2 $ 500,000 25th Percentile $5,000,000 Rank + Va $3,000,000 $ 4,200,000 $5,000,000 -00 Factor Summation Method THION Factors Management Stage of Business Political Manufacturing Sales Funding/Capital Raising Competition Technology Litigation International Reputation Potential Lucrative Exit $3,000,000 $ 4,500,000 $ 6,000,000 Value 2 $ 500,000 0 $ 2 $ 500,000 2 $ 500,000 -1 $ 250,000 -1 -$ 250,000 0 $ -1 -$ 250,000 2 $ 500,000 2 $ 500,000 1 $ 250,000 2 $ 500,000 $ 2,500,000 Angel List Valuation Comps Boston 75th Percentile Mean 25th Percentile Big Data 75th Percentile Mean 25th Percentile Predictive Analytics 75th Percentile Mean 25th Percentile Enterprise 2.0 75th Percentile Mean 25th Percentile Business Productivity 75th Percentile Mean 25th Percentile $3,000,000 $4,200,000 $5,000,000 $ 3,000,000 $ 4,100,000 $ 8,000,000 $ 2,000,000 $ 3,800,000 $6,000,000 Rank Berkus Method Risk Factors Sound Idea Prototype Quality Management Team Strategic Relationships Product Rollout or Sales Value 1 $ 500,000 1 $ 500,000 1 $ 500,000 1 $ 500,000 0$ $ 2,000,000 Average 75th Percentile Mean 25th Percentile $ 2,800,000 $ 4,160,000 $ 6,000,000 Overall Average $ 2,886,667