ment or business unit were managed
with Coreworx, followed by- $4 million+ in enterprise license sales.
Based on its success with Fluor and a
proven customer return on investment
(ROI) for the product, the company felt it
could penetrate a small number of new cus-
tomers each year, while adding users and
modules, and hence earning additional rev-
enue from existing customers.
SI envisioned a partner strategy that
would embrace technology vendors, such as
Microsoft, HP and Adobe, as well as comple-
mentary product providers, such as
Documentum, Primavera and Intergraph. SI
also planned to use systems integrators (e.g.
Deloitte, Sapient and others) who served the
target market.
Management
Park first learned of SI from its CEO, Randall
Howard. Howard had formed Verdexus
along with Waqar Zaidi and Ray Simonson.
Each had significant experience as operators
in high-tech companies, although they had
not worked together previously. The
Verdexus partners viewed SI as their stepping
stone in establishing their boutique invest-
ment firm.
The partners formed the senior manage-
ment team at SI, with Howard as CEO,
Zaidi as chief operating officer (COO), and
Simonson as chief technical officer (CTO).
Park felt comfortable that the team had
extraordinary experience. Howard was a
founder and former CEO of MKS, and had
led it through its listing on the Toronto Stock
Exchange (TSX) and for three years there-
after. MKS provided software application
lifecycle management solutions to enterprise
customers. Simonson founded BlueGill,
which was subsequently acquired by
CheckFree, a NASDAQ-listed company that
provided financial electronic commerce serv-
ices and products. Other key roles that had
been filled were chief financial officer (CFO),
vice-president operations and development,
and director of marketing.
Financial Plan.Park had received the pro-
jected financial statements seen in Exhibits 5
and 6. In light of his past experience with
early stage companies, he felt that the finan-
cial statements might be optimistic. Sales
estimates made by the company could be as
much as double what could be expected.
Gross margins were also forecast by the com-
pany to improve considerably over the
planned time period. The company expected
to be EBITDA^3 negative through 2006,
explaining the need for the planned round of
financing.
The financial forecast seen in Exhibits 5
and 6 was built on some key assumptions:
A three-stage sale to global customers:
Initial deployment project expected to
total $250,000 plus the expenses asso-
ciated with annual maintenance and
support to comprise:
$175,000 license revenue
$75,000 consulting services
$35,000 annual maintenance and
support
One-third of initial deployment proj-
ects progress to divisional sales expect-
ed to total $920,000 and to comprise:
$600,000 license revenue
$200,000 consulting services
$120,000 annual maintenance and
support
Global sale totally $3,480,000 a year
after the divisional sale to comprise:
$2,400,000 license revenue
$600,000 consulting services
$480,000 annual maintenance and
support
Additional revenue from maintenance,
support, and additional services gener-
ating 35 percent of license revenue on
an annual basis.
Additional sales offices as follows:
2005: Houston
2006: Calgary
2007: Europe
Revenue per sales staff projected at $2.4
millionSoftware Innovation Inc. 533