AudienceView Case (attached) Questions

1. Identify which issues are the most important to come to grips with (that is if you do not get a positive answer, you would not go forward with this investment?
2. How would you go about getting the information you decide that you need?

For the exclusive use of D. Hacohen, 2022. Richard Ivey School of Business The University of Western Ontario IVEY 907N06 AUDIENCEVIEW Teddy Rosenberg wrote this case solely to provide material for class discussion. The author does not intend to illustrate either effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying information to protect confidentiality. Ivey Management Services prohibits any form of reproduction, storage or transmittal without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Management Services, clo Richard Ivey School of Business, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca Copyright @ 2007, Ivey Management Services Version: (A) 2007-03-13 Robin Axon had an assignment and he wasn't happy about it. As a vice-president of Ventures West (VW), it had fallen to Axon to find a speaker for VW's CEO Event, an annual gathering where the chief executive officers (CEOs) of VW's portfolio companies met for networking and education. But Robin thought he might have found the right speaker in Kevin Kimsa, a co-founder and former chief operating officer (COO) of Solect, a telephone company billing software provider acquired in 2000 by Amdocs for $1.2 billion. Surely Kimsa would have good advice for VW's CEOs, and Axon had only to drag Ted Andersen, his managing partner, across the street to meet Kimsa. And so, on January 1 1, 2005, Axon and Andersen walked across the street to see whether Kimsa would be an appropriate and willing speaker. An hour later, after listening to Kimsa and learning more about his past, especially his current venture, they headed back to their office believing not only had they found their speaker, they might also have stumbled on a company to invest in. VENTURES WEST Ventures West was Canada's oldest and one of its most respected venture capital firms, focusing on early stage technology investments. Since its founding in 1968, Ventures West had formed eight venture capital funds totaling more than $700 million, and had invested in more than 130 companies. The company maintained offices in Vancouver, Toronto and Ottawa. Robin Axon joined Ventures West's Toronto office in 2001, after spending three years at MD Robotics (formerly Spar Aerospace) and the Canadian Space Agency where he had helped to prepare the Canadarm2 for installation onto the International Space Station. Axon had earned a bachelor of applied science (BAS) degree in aerospace engineering from the University of Toronto and an MBA from Queen's University, Kingston, Ontario At VW, Axon was responsible for sourcing, evaluating and closing investments. He maintained an ongoing relationship with the companies in which he invested by serving on their boards of directors. Axon worked This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to VC taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022.For the exclusive use of D. Hacohen, 2022. Page 2 9B07N006 with a senior Vice-president on each transaction, but he had been lead on investments since his promotion to vice-president in 2004, and had latitude in pursuing companies of interest. THE VENTURE CAPITAL MARKET IN 2005 After several years in the doldrurns, following the lntemet and telecommunications boom and bust in the late 1990s to 2000/01, the venture capital market was starting to perk up. Venture capitalists (VCs), who had been struggling with their problem companies coming out of the bust, were past those difculties and still had a lot of money to invest, courtesy of large funds that had been raised during the boom but had not yet been invested. They were anxious to become active investors again. At the same time, more high- quality companies were being formed, but the competition to invest in them was becoming increasingly intense. Ventures West found its best approach was to get in early with a promising company and then stay with it as it grew, increasing the VW stake as necessary and appropriate. In an early stage investment, Ventures West liked to see the potential to return 10 times its money. THE FORTUITOUS FIND When Robin Axon and Ted Andersen met Kevin Kimsa, Kimsa was not resting on his considerable Solect laurels. In mid-2002, Kimsa and his Solect co-founder, Paul Atkinson, had founded another company, AudienceView. This was the company that piqued Axon and Andersen's interest in their meeting with Kimsa. The Ventures West process for considering a potential investment was straightforward. Any professional in the rm could identify a company of interest. It was then necessary to nd another senior professional (i.c. a senior vice-president, often referred to as a partner) to co-sponsor the opportunity. Together these deal sponsors would conduct preliminary discussions with the company of interest and then, based on these discussions, and before doing any signicant research, they would prepare an \"Investment 2-Pager\" that was presented to the whole investment team for feedback at the firm's regular Monday meetings. During the meeting, the other partners would ask questions, poke holes in the thesis and ultimately decide whether the opportunity warranted a presentation by the company to a larger group of VW professionals. If that meeting went well, VW would proceed to conduct full due diligence, while beginning to think about the structure of the deal under which they might invest. Finally, if due diligence was positive, the deal sponsors would produce a comprehensive investment memo, including terms of the deal, for review by the VW partners, asking for agreement to present a term sheet to the company. But most of that activity was still well in the future for Axon and AudienceVieW. THE FIRST IMPRESSION AudienceView was a software company that provided an integrated ticketing and customer relationship management (CRMI) solution combined with business intelligence for the sports and entertainment 1 Customer Relationship Management (CRM) is integrated information system that is used to plan, schedule and control the presales and postsales activities in an organization. CRM embraces all aspects of dealing with prospects and customers, including the call center, sales force, marketing, technical support and eld service. The primary goal of CRM is to improve long-term growth and protability through a better understanding of customer behavior. CRM aims to provide more effective feedback and improved integration to better gauge the return on investment (ROI) in these areas. Source: www.answers.com, accessed August, 2006. This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to V0 taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022. For the exclusive use of D. Hacohen, 2022. Page 3 9B07N006 industry. What Axon and Andersen liked right off the bat was the strength of the founding team guys who had done it before along with the quality of the other management and technical staff they had recruited. In total there were about 35 employees. The technical challenges of the AudienceView product were not dissimilar to what Axon and Atkinson had already cracked at Select. And not only did they have a product in the market that seemed to be a cheaper and more exible solution to traditional ticketing systems, they had some important customers. They had recruited a CEO who came out of the sports management world and seemed to know the right people to call on to keep growing the customer base. With that basic information and a few background checks Axon had done on the founders and a couple of calls to customers, Axon and Andersen were ready to put the company in front of a larger group from Ventures West. THE PRESENTATION On March 4, 2005, Kevin Kimsa and Mark Cohen, the president and CEO of AudienceView, walked into the VW board room to make the initial presentation to more of the VW team. The Toronto partners were in the board room, while partners in Ottawa and Vancouver participated via videoconference. This meeting would determine not only whether the deal would proceed to the next stage but would also provide the basis on which Axon (primarily) and Andersen would conduct their due diligence. WHAT NEXT? It was clear from the response during the meeting, that the VW team felt Axon should keep working on AudienceView. For Axon, this meant conducting his due diligence and constructing a term sheet. By now, Axon had several pieces of information: o The PowerPoint presentation made by the company (see Exhibit 1) Biographies of the senior management team (see Exhibit 2) AudienceView's product literature (see Exhibit 3) His own notes om this meeting and a couple of earlier ones with Kimsa and Atkinson (see Exhibit 4) An estimate of the market size (Exhibit 5) In prior discussions with the company, Axon had been able to secure proprietary access to the deal for a limited period of time, which was a major concession on the part of management. Kimsa and Atkinson's previous success at Select, also a venture-backed company, gave them access to leading VCs in the United States. Axon knew if he didn't move fast, Kimsa and Atkinson would move on. With little time, Axon had to set priorities and work quickly. By the next group meeting, he wanted to be able to present his due diligence plan. In addition, he intended to fashion a term sheet, complete with valuation and nancing structure,2 on the assumption that AudienceView checked out. 2 In preparing a term sheet, Robin expected to make reference to the Capitalization Table (see Exhibit 6). This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to V0 taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022. For the exclusive use of D. Hacohen, 2022. Page 4 907N006 Exhibit 1 POWERPOINT PRESENTATION AUDIENCEVIEW AudienceView Software Corporation Private Placement Presentation to Ventures West AUDIENCEVIEW AudienceView Business Market Demand Technology Meeting The Demands Market Size North America Europe Competitors Market Consolidation Audience View Distinct Advantage AudienceView Value Proposition Customer Updates - Proof Of Our Early Success Near and Long Term Opportunities Private Placement Summary: Revenue, Margin and Net Income Recurring Revenue Stream Sales Backlog Key Investment Considerations Offering Summary and Timing This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to VC taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022.For the exclusive use of D. Hacohen, 2022. Page 5 907N006 Exhibit 1 (continued) AUDIENCEVIEW Audience View is a software company providing business intelligence for the sports & entertainment industry through the sale of our real time integrated ticketing and CRM software solution. The Audience View Software enables arts, entertainment & sports properties to cost effectively bring their ticketing and database management in-house: removing the need for traditional ticketing agencies! AUDIENCEVIEW Push By Venues, Theatres and Arenas To Own The Customer Relationship (CRM) O Pressure To Develop New Revenue Streams In An Increasingly Competitive Entertainment Marketplace Growing Dissatisfaction With Current Ticketing Agencies & Legacy In- House Systems - Systems That Can't Build For The Future This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to VC taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022.For the exclusive use of D. Hacohen, 2022. Page 6 907N006 Exhibit 1 (continued) AUDIENCEVIEW Explosive growth of on-line ticket sales: Matching the changes in the travel industry Most efficient distribution vehicle - print at home technology Diminishing need for traditional retail distribution channels: Only 3% of Blue Jays tickets are sold through 40 Rogers retail outlets New Hardware & Software technologies decrease capital & operational costs Abundance of cost effective 3rd party Call Centers to handle events or high demand touring exhibitions AUDIENCEVIEW Theatrical: 1146 Not-for-profit theatres and performing arts centres in the U.S. generating $1.4 billion in ticketing revenues Hundreds of large commercial theatres including Clear Channel, Casinos, Dinner Theatres and Broadway Shows Arenas: 764 arenas - over $3 billion in concert sales 158 golf tournaments selling tickets 110 motor sports Hundreds of horse and dog racing tracks Attractions: Over 500 museums and arts organizations amounting to 865 million visits per year Hundreds of amusement parks, zoos and aquariums This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to VC taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022.For the exclusive use of D. Hacohen, 2022. Page 7 907N006 Exhibit 1 (continued) AUDIENCEVIEW Professional Sports: 30 MLB teams selling over 70 million tickets per year 162 Minor League Teams selling over 40 million tickets per year Between the NBA, NFL and NHL over 60 million tickets per year Colleges: 1000 colleges with basketball programs 1 864 with baseball programs 617 with football Adding programs such as soccer, field hockey, track, tennis and swimming, US colleges dwarf the professional sports in the number of venues and tickets sold annually Other: Thousands of yearly festivals, state fairs, convention centres and smaller venues AUDIENCEVIEW 0 Europe: There are over 1350 European stadiums and arenas At the present time we are focused solely on the UK market which similar to the US has hundreds of theatres, stadiums and attractions Competition: Ticketmaster has revenues of $800 million with 9000 clients Tickets. com approximately $65 million with over 2000 clients. Paciolan $40 million with 250 clients Just factoring in the major players in North America and assuming 5 year deal terms, every year there are over 2000 of our competitor's clients that come up for renewal. This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to VC taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022.For the exclusive use of D. Hacohen, 2022. Page 8 907N006 Exhibit 1 (continued) AUDIENCEVIEW 0 Maturing market results in consolidation amongst ticketing and CRM companies Major League Baseball Advanced Media purchased Tickets. com. Comcast Spectacor makes $5 million investment in Paciolan Smart DM, CRM software solution for various sports properties, is purchased by Axiom for $22 million AudienceView in discussions with selected strategic investors. AUDIENCEVIEW Product Solution: our product is driving our success! Only in market web based real-time integrated ticketing and CRM software that enables customers to draw out business intelligence to effectively manage and grow their business. Where competitors with legacy systems are trying to evolve to!! Web architected as opposed to web enabled - able to seamlessly incorporate new technologies as they become available Open systems architecture based upon today's industry standards allowing ease of integration with Brd party systems - not a legacy system with ongoing high maintenance costs or difficulty in- upgrading 10 This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to VC taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022.For the exclusive use of D. Hacohen, 2022. Page 9 907N006 Exhibit 1 (continued) AUDIENCEVIEW Value Proposition ECONOMICS Your revenue streams VS. Their revenue streams TECHNOLOGY A Real-Time, Single Platform Built For Today & Tomorrow VS. A Web Enabled group of Systems Bolted Together SERVICES "CRM you can see" VS. "It's CRM, can't you see it?" RELATIONSHIP Partner approach VS. Vendor approach AUDIENCEVIEW Customer Updates 25 high profile clients in several key verticals including theatre, casinos, sports and not-for-profit. 18 clients live with 7 in production: Selected Theatrical/Entertainment Organizations: Clear Channel Entertainment (CCE): Passed initial test to manage online ticketing for 11 theatres or CCE, the largest theatrical entertainment company in the world. AudienceView is the only ticketing company selected in addition to Ticketmaster to support CCE's theatrical division. Mirvish Productions: Canada's leading theatrical company. Sell over 2.5 million tickets annually including world premiere of "Lord of the Rings". Mesa Arts Center: New $50 million arts complex with four theatres and conference facilities being built in Arizona. AudienceView won closed city RFP against Ticketmaster and Paciolan Chanhassen Dinner Theatres: Largest dinner theatre in the United States attracting 300,000 patrons a year This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to VC taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022.For the exclusive use of D. Hacohen, 2022. Page 10 9B07N006 Exhibit 1 (continued) AUDIENCEVIEW O Selected Casinos: Wynn Las Vegas: New $2.5 billion casino and entertainment complex opening in Vegas, April 2005 y legendary Vegas entrepreneur Steve Wynn. Providing ticketing for Wynn Las Vegas showrooms and Steve Wynn's world renowned Fine Art Collection MGM Mirage: signed first phase of long-term agreement for all MGM properties in Las Vegas - over 4 million tickets annually. Roll-out of Mandalay properties in 2006 Selected Not-for-profit: CanStage: Canada's leading non-for profit theatrical company Trinity Repertory Company: First US based not-for-profit Britt Festivals - leading performing arts festival in Oregan AUDIENCEVIEW Selected Tier 1 Sports Organizations: Major League Baseball Advanced Media: One of only four vendors chosen to provide online ticketing for MLB Clubs Toronto Blue Jays: Leading Major League Baseball Club selling approximately 2 million tickets annually Southampton Football Club: Provide ticketing solution for this leading UK Premiership League team. Over 800,000 tickets sold annually in their 32,000 seat stadium AFC Bournemouth Football Club and Brentford Football Club: Coca-Cola UK League Churchill Downs Inc: Live at Churchill Downs and Arlington race Track Durham Bulls and Myrtle Beach Pelicans: Leading Triple AAA Minor League Baseball teams in the United States 15 This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to VC taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022.For the exclusive use of D. Hacohen, 2022. Page 11 9B07N006 Exhibit 1 (continued) AUDIENCEVIEW Sales Pipeline Highlights AUDIENCEKIEN Near Term Sales Strategy . Vegas Leverage existing . Theatrical client base Commercial . NFP Professional Baseball Attack weaker . Tickets.com legacy systems . Football Leagues Europe / . Theatrical UK Market Venues 17 This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to VC taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022.For the exclusive use of D. Hacohen, 2022. Page 12 907N006 Exhibit 1 (continued) AUDIENCEVIEW Entertainment: O Sports: Vegas: Calgary Flames OMGM (signed 1st phase of our Moncton Coliseum contract) Venetian Casino Wycombe Wanderers Vegas.con Millwall FC UK: Colleges: NEC Dartmouth College SECC University of Mass Sheffield International Venues Duke University (signed 1st phase of our contract) NFP: Dalhousie University New Theatre Restaurant New Jersey Community Theatre 0000 Center for Puppetry Arts Ordway Center Confederation Centre (PEI) 18 AUDIENCEVIEW Penetrate Tier 1 sporting properties beyond MLB: NBA, NHL & NFL US Colleges (Division 1) 0 Expand presence in North American arenas to penetrate concert industry Develop long term relationships with AEG, SMG and House of Blues Audience View Direct: Offer incremental marketing and database services to drive new revenue streams for AudienceView O Flush out more hosted opportunities and long term ASP model This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to VC taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022.For the exclusive use of D. Hacohen, 2022. Page 13 9B07N006 Exhibit 1 (continued) AUDIENCEVIEW Financial Summary USDSM 20.0 Operating Income Margin $15.2 O Revenue Rapid revenue growth $12.5 projected $10.6 10.0 $7.2 Breakeven in 2005 $4.5 $2.7 Forward model highly $1.2 profitable $0.6 $0 6 -$3.3 2004 2005 2006 2007 2008 *10.0) 21 AUDIENCEVIEW 100% 80% - 53% 60% - 81% Non-Recurring Revenue Recurring Revenue % 40% 47%% 20% 19% 0% 2004E 2005E 2006E Both Sales types result in recurring revenue (Support or Transaction Fees) Increasing customer base causes increasing percentage of revenue to be recurring 22 creating stability in revenue stream This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to VC taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022.For the exclusive use of D. Hacohen, 2022. Page 14 9B07N006 Exhibit 1 (continued) AUDIENCEVIEW USD$M $60.0 O Period Revenue O Revenue Backlog $41.5 $40.0 $34.9 $20.0 $15.3 $ 15.2 $10.6 $8.7 $7.2 $1.2 $2.7 $4.0 $0.0 2004E 2005E 2006E 2007E 2008E 3 -5 year deals create future revenue stream Significant build up of revenue to be realized 23 AUDIENCEVIEW Industry positioned and ready for a radical change - clear signs of consolation and shift in attitudes: " Ticketmaster = Kodak Audience View = Digital Camera Highly capital efficient model as software supplier not ticketing agency. Solid projected financial performance. Strong customer base demonstrates early industry leadership. Leading R&D team defining technology for the industry - no expensive legacy systems to try to integrate or maintain. Audience View solution is where the market is trying to get to! Talented management team with extensive software development experience and years of operations in the sports & entertainment industry. Founders sold previous company, Solect Technology Group for $1.2 Billion. 24 This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to VC taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022.For the exclusive use of D. Hacohen, 2022. Page 15 907N006 Exhibit 1 (continued) AUDIENCEVIEW 0 Issuer: AudienceView Software Corporation Offering Size: USD $5 MM Security: Common Shares Pre-money valuation: USD $10 MM Closing: April 2005 25 Source: Company tiles. This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to VC taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022.For the exclusive use of D. Hacohen, 2022. Page 16 9B07N006 Exhibit 2 FOUNDERS AND MANAGEMENT TEAMBIOGRAPHIES Paul Atkinson, Co-Founder Paul Atkinson is a co-founder of Audience View and the Chairman and CEO of Casero Inc., a Toronto- based software company that delivers solutions to Broadband Service Providers, allowing them to deploy value-added services to consumers. Tightly integrated with OSS solutions and compliant with third-party hardware devices, consumers can quickly register and access services, while Broadband Service Providers effortlessly deploy, manage and support the solution. Until March 2002, Paul was the Senior Vice-President of Marketing for Amdocs Management Limited. He served on the Board of Solect Technology Group in 1993 and joined as CEO in 1994 to direct Solect's transition from a services-based company to a software solutions organization. On April 6, 2000, Amdocs announced that it had completed the acquisition of Solect. Shortly after the acquisition, Paul was appointed to oversee worldwide marketing for Amdocs. Prior to joining Amdocs' Solect division, Paul was the President and Co-Founder of Southwest Sun, central Canada's independent sales organization for Sun Microsystems. At Southwest Sun, he was responsible for growing Sun's sales revenue in Southern Ontario from under $1 million to over $40 million Kevin Kimsa, Co-Founder Kevin Kimsa brings 15 years of experience in the high-tech marketplace, and a focus on Internet technologies. He has a broad knowledge base, including direct experience in Operations, Technology, Communications, Product Development & Capital Financing. He is also a partner in a number of sports ventures, including the Ottawa Renegades (CFL) and the Toronto Rock (NLL). Kevin's first five years in the industry were spent with Sun Microsystems in Toronto, where his responsibilities included the design & deployment of UNIX based networks for Canada's largest brokerages and banks. Leveraging the significant experience he gained at Sun, Kevin went on to start Solect Technology Group in 1993. Initially, Solect was a system integration and consulting services company specializing in the Financial and Communications markets. Following the 1994 launch of the first commercial Internet browser, Solect shifted focus and became a product-centric ISP Billing company. Kevin and the Solect management team completed 5 rounds of financing with a mixture of venture capitalists and strategic investors, including notable organizations Technology Crossover Ventures, SAIC/Telcordia, Bain Capital, British Telecom and Nokia. Kevin acted as Solect's President and COO until April 2000, when Amdocs Inc. acquired Solect for $1.2 Billion USD. At the time of the acquisition, Solect had grown to 400 employees with revenues of over $50 Million USD, offices in 5 countries and over 75 successful installations of its flagship product IAF Horizon. This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to VC taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022.For the exclusive use of D. Hacohen, 2022. Page 17 9B07N006 Mark Cohon, President and CEO Mark Cohon has served in several prominent executive capacities at Major League Baseball International and the National Basketball Association. During the early 90's, Mark was the Director of Corporate and Game development for Major League baseball International. Following his time at MLB International, Mark was recruited by David Stern, the commissioner of the NBA and served as Director and Group Manager of International Marketing, Managing Director of NBA Europe and Vice President of Business Development. Geoff Wells, VP Technology Geoff began his career in technology with the Royal Bank of Canada working to develop their point of sale transaction management systems. He has since developed a strong background in technology startups, including Toronto's Sitraka (formally KL Group). Most recently, Geoff was involved with the rapid growth of Solect Technology Group, participating in all aspects of the company business where he held senior roles in Software Development, Professional Services as well as Sales. Chris Skyrme, VP Sales and Operations Chris's background dates back to the World Series Championship days of the Toronto Blue Jays where he was with the team for 12 years, working in Operations, Tickets, and as Manager of Information Technology. Recently, Chris spent 3+ years as a Systems Architect at Solect Technology Group working closely with customers to redefine their software platforms to support their changing business processes as a result of the Internet revolution. The latter half of his time at Solect was spent in Solect's London (UK) European Professional Services department where Chris was the first and senior technical employee of the department, which grew to 70 team members during his time there. Source: Company documents, December 2004. This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to VC taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022.For the exclusive use of D. Hacohen, 2022. Page 18 9B07N006 Exhibit 3 EXCERPTS FROM AUDIENCEVIEW'S PRODUCT LITERATURE The industry is changing. Market trends are emerging that are forcing the sports, arts and entertainment industry to think differently about how they are currently doing business. Some trends include: o The need to own your customer relationship and data 0 Explosive online sales growth 0 A diminishing need for retail distribution due to: 0 Print at home tickets 0 Kiosks 0 Cell phone/FDA ticketing bar codes 0 Swipe cards AudienceView is the answer. AudienceView has embraced this market shift, by architecting webbased integrated Ticketing. Customer Relationship Management (CRM) and Funds Management software, that delivers on all your ticketing operation business needs. AudienceView enables you to take on the market change that is driving you to think differently about how you interact with your customers, take advantage of emerging technologies, and enable a customercentric business that will ultimately deliver superior service. AudienceView has built CRM at the core of our ticketing system, enabling real-time configuration that is quick and easy to implement, with no system down time. Its OPEN architecture provides ease of integration with existing third party applications, and has been architected with the exibility to grow and adapt to your business practices. Whether you're a theatre, sports team, arena, or not-for-prot organization, AudienceView allows you to take full control of your revenue, customer, and brand. With AudienceView, you sell tickets the way you want, when you want, to the right audience every time. TICKETING POINT-AND-CLICK SIMPLICITY Our easy-to-use point-and-click web-based interface makes managing group and single ticket sales as easy as: 1/ view the venue; 2/ instantly select the best available seats; 3/ quickly process payment, all in realtime! And with AudienceView's up-to-theminute reporting, Executive sales and marketing reports are a single key stroke away. Within seconds you have sales reports the way you want them. CUSTOMER RELATIONSHIP MANAGEMENT PERSONALIZED COMMUNICATION WITH YOUR CUSTOMER Now every ticket tells a story. Know and understand your customer, how to effectively communicate with then, and deliver a personalized experience utilizing a single view of historical and demographic data. When you think outside the box office, you can offer personalized text message alerts or email updates, and reward loyal customers with special offers through targeting sales tracking. This personalized service extends the customer experience outside the box ofce. BUSINESS INTELLIGENCE MANAGE CUSTOMER DATA IN REAL-TIME TO DRIVE MORE REVENUE AudienceView helps you extract the right data, for the right campaign, while measuring your return on investment. The AudienceView data mining tools allow you to search any number of criteria across your customer data, whether it is dollars spent to date, gender, performance attended, or location. You can view buyer segments and sales activity, any way you choose. AudienceView's Business Intelligence allows you to identify occasional buyers, their preferences and customize promotions to target specic segments. In addition, armed with a wealth of data you are able to attract more advertisers who would like to appeal to the same buyer segments. This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to V0 taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022. For the exclusive use of D. Hacohen, 2022. Page 19 9B07N006 Exhibit 3 (continued) AudienceView Benefits THE BENEFITS OF SEEING YOUR CUSTOMER BETI'ER SINGLE CUSTOMER VIEW. Allows customer data to be accessed across your entire organization. REAL-TIME DATA CAPTURE. Data is captured from multiple sales channels into a single database in real-time. BUILD CUSTOMER PROFILES. Customize a list of attributes and capture pertinent customer data to enhance your communication with customers. THE BENEFITS OF GETTING ONLINE TO THE FUTURE INCREASE SALES. Issue special promotions to targeted buyer segments allowing for more cross-sell and upsell opportunities. COST EFFECTIVE SALES CHANNEL. With AudienceView you can easily launch and manage online sales and donations, if you're a notforprofit organization. PRINT AT HOME TICKETS. With AudienceView's access control bar coding you can give your customers the convenience of printing tickets at home. CUSTOMER ECARE. Give season ticket holders, subscribers, or repeat donors the 24/7 convenience of updating personal information online or requesting more information. THE BENEFITS FO KNOWING YOUR BEST CUSTOMERS CUSTOMER LIFETIME MANAGEMENT. Build a graphical view of your most loyal customer and stay in touch with their buying preferences and requirements. BUILDING PROSPECT PROFILES. By understanding your top tier customers you can uncover target prospects. STRATEGICALLY UPSELL CUSTOMERS. Monitor buying patterns to move customers to the next membership or season ticket level. Take Ownership OWN YOUR CUSTOMER Not only will you now be able to own and control your customer data, our advanced technology allows you to communicate with your entire audience . . . within minutes of formulating an idea. Our solution enables in-house ticketing, with point-and-click simplicity to quickly process ticket sales, combined with CRM functionality that give you control of your most valuable asset: your customer data. With a robust n-house system, your organization will immediately see the return on investment of our new way of thinking about your customer relationships. OWN YOUR REVENUE AudienceView empowers you to take advantage of the huge potential growth of online selling and can help you generate greater revenues and prots. AudienceView's web-based interface gives you a time-tomarket advantage, enabling you to quickly launch new online sales and marketing programs. AudienceView allows you to control your conventional revenue streams, attract new sponsors and advertisers, and take advantage of up-sell and cross-sell opportunities. OWN YOUR BRAND Why let someone else have control of your most valuable commodity? By thinking outside the box office, we have designed AudienceView to provide a single view of your customer. This enables you to streamline your business flow operations and take control of every aspect of your customer relationship, from ticketing to personalized communication to managing season ticket renewals and updates online, and in turn, generating brand value! Source: Audience View Product Brochure, December 2004. This document is authorized for use only by Dolev Hecohen in Saul Orbach Hebrew U Intro to V0 taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022. For the exclusive use of D. Hacohen, 2022. Page 20 9B07N006 Exhibit 4 ROBIN AXON'S MEETING NOTES 0 AudienceView has been in discussions to be acquired but the lock-up period on the acquisition process has expired (subsequent to our rst meeting, but before the March 4th presentation). 0 Funding to date was coming largely from Kevin and Paul themselves, along with some \"friends and family\" money. 0 The company has 22 customers (18 live and 4 going into production) including these \"Tier 1\" customers: Toronto Blue Jays MLB Southampton Football Club 7 UK Premiership League Football Churchill Downs Host of the Kentucky Derby Clear Channel Entertainment 7 Mirvish Productions Wynn Casino MGM (selling over four million tickets in Las Vegas annually) 0 Kevin characterizes the customers as \"unsophisticated.\" How does that impact market dynamics and the selling situation? 0 Competition 7 Ticketmaster is a huge competitor with roughly $800 million in revenues and 9,000 customers. Very strong, with long term contracts with major league sports and entertainment producers in North America. Ticketmaster is an \"outsourced\" solution in contrast to AudienceView's \"in house\" solution. Some indications that Ticketmaster is not well-liked by its customers where it has had a close-to- monopoly position. Used to be that most ticket sales were made by talking to a representative; now over 50% are made on- line reducing the need for consolidating middlemen (like Ticketmaster) in the same way that travel agents have been affected in the airline industry. Tickets.com has roughly $60 million in revenues. It was built through the acquisition of smaller companies so it has a conglomeration of solutions none of which was as \"modern\" as AudienceView. Nevertheless it is in negotiation to be bought by Maj or League Baseball. Does that rule out MLB franchises for AudienceView? What's going to happen to its other customers??? Paciolan has roughly $40 million in revenues and 250 customers but it's built on old and expensive technology. Not clear they can move easily into the web-based world. Are its customers vulnerable? Large market opportunitypossibly two-thirds of the totalis outside the U.S. but competitors are focused on the US (See the chart I put together on the next page.) 0 Kevin rst learned about the ticketing marketplace when he was asked by an investor group to perform due diligence on another software company that was trying to enter the market. Kevin advised the group against making that investment. 0 Kevin and Paul are founders of another software company in an unrelated market where they are currently playing the same roles as they did with AudienceView. - What makes AudienceView different? Allows customers (e. g. MLB, NHL) to bring ticketing in-house rather than depending on an out- sourced solution like Ticketmaster. In-house solution means that customers have access to data about their clients (i.e. the ticket buyers). 7 AudienceView was designed from the ground-up as Customer Relationship Management (CRM) system so that when a client buys a ticket, the AudienceView customer (like the Blue Jays) keeps a database of that information and can correlate it; for example, they bought Jays tickets and they also bought tickets for the Tragically Hip when they played at the SkyDome. Should we send them an email announcement when other Canadian bands are scheduled? A lot more cost effectivell An in-house system means the customer can keep the percentage of the ticket price (around 7%) that otherwise would go to the ticket distributor (e. g. TicketMaster). This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to V0 taught by saul orbaeh, Hebrew University of Jerusalem from Mar 2022 to Aug 2022. For the exclusive use of D. Hacohen, 2022. Page 21 9B07N006 0 Some nancial data (summary history and forecasts are in the presentation) 2004 Financials are not closed or audited yet (no surprise) Company has a bank line of $1.25 million with an interest rate of prime + 1.5% 0 $1.0 million is an operating line (guaranteed by founders who got warrants in return) a $275,000 is an advance on Investment Tax Credit (ITC) refund; but the refund has been received and this portion repaid so the line is really only $1.0 million at present - Of the $1.0 million, $830,000 had been drawn at December 31, 2004 - Accounts Receivable are $731,131 at December 31 011 sales of about $1.4 million in 2004 a Share capital invested to date is $2,447,589 0 Most recent money has gone in as convertible debt and totals $4,563,990 with accrued interest of about $300,000 Source: Personal Notes of Robin Axon, January 2005. This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to V0 taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022. For the exclusive use of D. Hacohen, 2022. Page 22 9B07N006 Exhibit 5 MARKET SIZE ESTIMATE, INCLUDING ANNUAL TICKETS SOLD Annual Ticket Sales Percentage of Market North American Sports MLB 73,000,000 5.90% NHL 19,850,000 1.60% NFL 17,300,000 1.40% NBA 19,980,000 1.61% NCAA (basketball and football)) 87,000,000 7.03% North American Sports Total 217,130,000 17.54% European Sports Soccer (England, Scotland, Spain, Italy, Germany, France, Holland) 85,000,000 6.87% European Sports Total 85,000,000 6.87% Entertainment Top 100 Concert Tours 37,600,000 3.04% Museums & Galleries - UK 35,000,000 2.83% Museums & Galleries - USA (16,000 museums) 650,000,000 52.52% Museums & Galleries - Canada 8,000,000 0.65% Theatre - UK 20,000,000 1.62% Theatre - USA 150,000,000 12.12% Theatre - Canada 15,000,000 1.21% Entertainment Total 915,600,000 73.97% Las Vegas Vegas Shows - All Tickets Sold 20,000,000 1.62% Las Vegas Total 20,000,000 1.62% TOTAL MARKET SIZE 1,237,730,000 100.00% Source: Company Documents, December 2004. This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to VC taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022.For the exclusive use of D. Hacohen, 2022. Page 23 9B07N006 Exhibit 6 PRE-FINANCING CAPITALIZATION TABLE Common Warrants Shares from Total % Fully Shares Convertible Debt Diluted Founders Paul Atkinson 3, 1 16,667 980,047 2,532, 119 6,628,833 19% Kevin Kimsa 3, 116,667 980,047 2,535, 146 6,631,860 9% Mark Cohon (CEO) 491,914 491,914 1% Board Member #1 2,000,000 1,000,000 3,000,000 8% Board Member #2 3,617,061 1, 137,397 2,914,494 7,668,952 22% Board Member #3 750,000 235,840 484,511 1,470,351 4% Others 5,673,286 5,673,286 16% Employee Options 3,800,000 3,800,000 11% Total 22,073,681 4,333,331 8,958, 184 35,365, 196 100% Notes: Of the employee options, 1.8 million are held by Mark Cohon. Employee options vest over 4 years. Convertible debt: principal in the amount of $4.7 million; convertible at $0.23 Warrants: Board Member #1 warrants have an exercise price of $0.23 and expiry of August 12, 2005. Warrants held by founders have an exercise price of $0.30 and expiry of September 2, 2006. 'Others" are about 15 individuals. Source: Company Documents, December 2004. This document is authorized for use only by Dolev Hacohen in Saul Orbach Hebrew U Intro to VC taught by saul orbach, Hebrew University of Jerusalem from Mar 2022 to Aug 2022