Dollinger index

Continuing product development to add

modules to Coreworx and reduce

reliance on OEM products incorporat-

ed into Coreworx.

Research and development (R&D) costs

targeted at roughly 10 percent of rev-

enue for 2009 reflecting a mature soft-

ware product.

SI at January 2005

As Park contemplated an investment in SI, he
knew that the company had a marquee cus-
tomer in Fluor. Coreworx was live and in use
by more than 10,000 users on more than 55
projects in 25 countries. It was demonstrably
enterprise-grade software built on robust
technology. If Fluor wasn’t proof enough,
Park also had validation from technical eval-
uations done by Microsoft and Deloitte
Consulting.
In addition, the company had an impres-
sive sales pipeline comprising Chevron,
ExxonMobil, Dow Chemical, Bechtel and
British Petroleum. The pipeline illustrated
one of the valuable features of this market: its
interconnectedness; that is, many potential
SI customers were already customers of
Fluor. Yet this was the same prospect list Park
had seen when he first met the company in
April 2004. The company had made no sales
since Fluor.

The company expected to continue to

burn through cash for at least the next couple

of years. At the moment, Verdexus and some

members of management were funding the

company directly, as evidenced by the recent

convertible debenture.

As Park considered the investment in SI,

he believed that the company had another

financing alternative in the form of a group

of high net worth individuals. They appeared

less valuation-sensitive than Covington but

they were only willing to put up about $1.5

million.

Park stood at his office window, viewed

the sometimes calm and sometimes choppy

Lake Ontario and wondered: “Should we

make this investment? And if so, how should

we structure it to take its unique characteris-

tics into account?”

NOTES

1. All dollar amounts are in US$ except for
   references to the Covington Funds.


2. “Funded Development” means that
   Fluor paid SI for the development of the
   product that became Coreworx.


3. EBITDA is earnings before interest,
   taxes, depreciation, and amortization.

534 ENTREPRENEURSHIP CASE

Company

Chevron Texaco Pilot

ExxonMobil Pilot TX

ExxonMobil Pilot VA

Dow Chemical Pilot

Bechtel Pilot

BP Pilot

1 2 3 4 5 6

Project

Revenue$

250,000

250,000

100,000

150,000

250,000

250,000

Expected

Project

Sales 2005

Q2

Q2

Q2

Q3

Q2

Q3

Expected

Divisional

Sales 2005

Q4

Q4

Q4

Q4+

Q4

Q4+

Notes

Fluor customer.

Fluor customer.

Requirement agreed by

management. Fluor customer.

Probably Q1 06. RFI to be

submitted in Jan/Feb, Demo done.

Fluor customer.

Demo done. Fluor competitor.

Probably Q1 06. Fluor customer.

EXHIBIT 3