iPredikt.it Business Plan v1.9

Version 1.9 28 December 2011

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iPredikt.it Business Plan

December 2011

2 | P a g e Version 1.9

Table of Contents

Contents 1.0 Executive Summary .................................................................................................... 3

1.1 Key Assumptions and Projections ................................................................................... 5 2.0 The Company ............................................................................................................. 6

2.1 Mission ............................................................................................................................ 6 2.2 Overview ......................................................................................................................... 6 2.3 Start-up cost summary .................................................................................................... 6

3.0 The iPredikt.it Service ................................................................................................. 7 3.1 Positioning ....................................................................................................................... 9 3.2 Pricing Strategy ............................................................................................................... 9

4.0 The Market .............................................................................................................. 11 4.1 An overview of the sports industry ............................................................................... 11

4.2 Customers ................................................................................................................. 13 4.2.1 Integration Service ................................................................................................. 13 4.2.2 iPredikt.it Plus ........................................................................................................ 13

4.3 The Competition ............................................................................................................ 14 4.4 Estimated Sales ............................................................................................................. 17

4.4.1 Assumptions .......................................................................................................... 17 5.0 Development and Production ................................................................................... 19

5.1 Development Status ...................................................................................................... 19 5.1.2 Beta Version ........................................................................................................... 19

5.2 Cost of Development .................................................................................................... 21 5.3 Labor Requirements ...................................................................................................... 21 5.4 Expenses and Capital Requirements ............................................................................. 22

6.0 Sales and Marketing ................................................................................................. 23 6.1 Strategy ......................................................................................................................... 23 6.2 Promotion ..................................................................................................................... 23

7.0 Management ............................................................................................................ 25 7.1 Officers and Key Employees .......................................................................................... 25

7.1.1 Patrick Dodd, 44: Managing Director and Co-founder .......................................... 25 7.1.2 Philip VIckers, 40: Lead Developer and Co-Founder .............................................. 25

7.2 Ownership ..................................................................................................................... 25 8.0 Financials ................................................................................................................. 26

8.1 Risks ............................................................................................................................... 26 8.2 Cash Flow Statement .................................................................................................... 27

8.2.1 Year 1 ..................................................................................................................... 27 8.2.2 Year 2 ..................................................................................................................... 28 8.2.3 Year 3 ..................................................................................................................... 29

8.5 Funding Request and Return ......................................................................................... 30 8.5.1 Exit Strategy ........................................................................................................... 31


1.0 Executive Summary Sports are an undeniable and integral part of society - both online and offline. In 2010 ESPN conducted market research on sports fans in America in which they asked the following question:

“On a scale from 0 to 10 where zero means you are not a sports fan at all, 5 means you are an average sports fan and 10 means you are a super sports fan, where would you place yourself on that scale?”

The results of the survey showed that 222 million Americans stated that they were sports fans of which, 71 million fell into a segment ESPN called the 'Avid Sports Fan' – People who gave themselves a rating of 8 out of 10 or higher. 'Avid Sports Fans' do more than just watch the matches on the weekend – they are going online to extend and enhance their sports experience. They are playing in fantasy sports leagues, betting with bookmakers and going on social networks, blogs, forums and fan sites to read up on the latest news, interact with other fans and make predictions about the upcoming match. In fact, passionate sports fans have one thing in common – when talking about an upcoming match the conversation will invariably end with predictions about the final score. True sports fans know that the closer your prediction is to the actual score the more clout you carry. Unfortunately there isn’t an easy way to keep track of your picks over time, announce your picks to your network of friends and family or easily assign rank and reputation once the match has ended. This is the problem that iPredikt.it solves. iPredikt.it is a New Zealand registered limited liability company that provides a web application that can be embedded in any website that improves community and dramatically increases traffic by allowing avid sports fans the ability to predict the final score of an upcoming match. The predictions are announced to their respective friends and followers with a message similar to the following example: I predict Steelers 24 Saints 14. What do you think? #Steelers #Saints #iPredikt.it Because of the network effect, one prediction could elicit the predictions from thousands of other sports fans. Moreover, the link in the message goes to the website where the prediction was made, thus significantly increasing traffic to partner websites. Once the match has ended iPredikt.it then assigns rank and reputation to all of the participants based on the accuracy of their predictions. The biggest competitor, UPICKEM, charges their customers up to $850/mo for the privilege of embedding their pick the score application into their respective websites. In spite of this cost, UPICKEM has been integrated into over 1900 websites and has had more than 6 million players participate.


The primary goal of iPredikt.it is to have its application integrated into as many third party sites as possible. In doing so, iPredikt.it will have more users and process more predictions for more types of sports than any other pick the score service. To accomplish this, the iPredikt.it service will be free to integrate and be free to play. iPredikt.it will generate revenue from advertising, affiliate fees from online bookmakers and selling subscriptions to premium services - “iPredikt.it Plus” and “iPredikt.it Alert”. The “iPredikt.it Plus” package will provide users with access to much more functionality and statistics than is available with basic (free) access. This includes access to the iPredikt.it betting line and odds comparison tables and the ability to see how their prognosticating ability compares with all participants or interesting subsets of participants, such as celebrities, sports figures, friends and followers. The recurring monthly charge for this service will be $.99 – a price made commonplace by smart phone applications. The “iPredikt.it Alert” service is a notification service that alerts people when a top ranked member makes a prediction. This service is targeted at the subset of customers who regularly bet on sports. iPredikt.it will charge a recurring monthly fee of $9.99 for this service. The iPredikt.it application has been in development for 3 months. It was decided that the first major milestone would be to produce a minimum viable product that was limited in functionality yet robust enough to be able to determine proof of concept and gauge demand. This minimum viable product is now referred to as the ‘beta version’ and was launched on 11 November. Both of the founders of iPredikt.it – Patrick Dodd, MBA and Philip Vickers will be actively managing the operations. Overall management of the company goes to Dodd who brings 15 years of experience in marketing management, consulting and entrepreneurism to the company. Vickers, the development manager, brings 15 years of software and web application development as well as significant experience in building and managing teams of developers. For the past 7 years Vickers has been managing Codenza, a successful Auckland based web application development company which he founded. The iPredikt.it founders have collectively invested $22,500 in developing the beta version of the service. The founders are now seeking an additional $150,000 in order to build out the application to a point where it has the capability of generating revenue and become a viable business. From the research conducted, start up, pre revenue businesses that have an exciting business idea or business plan, a strong management team in place to execute on the plan and a final product or technology prototype have valuations between $1 million – $2 million. As iPredikt.it meets all of the above criteria, a valuation of of $1.5 million has been set. In exchange for an investment of $150,000, iPredikt.it will offer a 10% equity stake in the company. The minimum amount to participate is $25,000.


1.1 Key Assumptions and Projections The following are the key assumptions and projections for year 1:

Market Size

# of avid sports fans America 71,000,000*

# of avid sports fans UK 15,620,000**

# of avid sports fans CA 7,810,000**

# of avid sports fans Aus 4,970,000**

Total # of avid sports fans 99,400,000 * Source ESPN ** Estimate

Revenue Assumptions Year 1 Year 2 Year 3

Avg # of active users/mo 2,462,500 6,625,000 7,291,667

Avg # of unique visitors/mo to the website

492,500 1,325,000 1,458,333

Avg # of page views per person 3 3 3

CPM rates $5

% of website visitors who purchase ‘iPredikt.it Plus’ service

15%

Price for ‘iPredikt.it Plus’ service $.99

% of website visitors who purchase ‘iPredikt.it Alert’ service

.75%

Price for ‘iPredikt.it Alert’ service $9.95

Revenue projections Year 1 Year 2 Year 3

Affiliate revenue $428,475 $1,152,750 $1,268,750

Advertising revenue $88,650 $238,500 $262,500

‘iPredikt.it Plus’ Revenue $831,600 $3,148,200 $4,331,250

‘iPredikt.it Alert’ $2,089,500 $5,932,688 $6,529,688

Total Revenue $3,411,100 $10,472,138 $12,392,188


2.0 The Company

2.1 Mission It is the Mission of iPredikt.it to become the most used sports application in the world by providing the technology, both mobile and web based, that allows passionate fans the ability to predict the outcome of popular events and then be accurately ranked among their peers based on their predictions.

2.2 Overview iPredikt.it is a limited liability company founded in Auckland, New Zealand in 2011 by Patrick Dodd and Philip Vickers. Dodd brings 15 years of experience in marketing management, consulting and entrepreneurism to the company. The melding of sport with technology started in 2004 for Dodd when he co-founded Resonance Ventures, a company that went on to build the first peer-to-peer sports betting exchange. Vickers brings 15 years of software and web application development as well as significant experience in building and managing teams of developers. For the past 7 years Vickers has been managing Codenza, a web application development company he founded. When it receives the required financing, iPredikt.it will bring on two full time developers that have been working for Codenza. iPredikt.it has spent three months developing a minimum viable product that will be ready for beta testing on 15 November. The one month beta test period will provide proof of concept and gauge end user demand as well as the demand from websites, blogs and forums that would like to embed the iPredikt.it application.

2.3 Start-up cost summary The Company’s start-up costs include the technical equipment and infrastructure necessary to develop the service and website so as to begin capturing the commercial potential via advertising and subscription services as well as to help cover the operating expenses for the first 12 months of operation.


3.0 The iPredikt.it Service Passionate sports fans have one thing in common – when talking about an upcoming match the conversation will invariably end with predictions about the final score. True sports fans know that the closer your prediction is to the actual score the more clout you carry. Passionate sports fans make their predictions on Twitter.

They make their predictions in forums.

And they make their predictions in the comments section of fan sites.


Unfortunately there isn’t an easy way to keep track of your picks over time, announce your picks to your network of friends and family or easily assign rank and reputation once the match has ended. Furthermore, there are many sports related websites, fan blogs and news outlets that run pick the score contests. The problem these websites have is that they must pay a significant amount of money to use services that manage pick the score competitions or spend an inordinate amount of time trying to run the competition manually. This is the problem that iPredikt.it solves. iPredikt.it’s unique selling proposition is that it provides a free and easy way for online sports communities to build camaraderie and community among their members and increase traffic to their websites. This is accomplished by providing an application that can be easily integrated in any website or forum that provides all of the functionality required to host a pick the score competition. Let’s imagine that you are an avid sports fan and you decide to go to your favourite online sports community/ news resource. Once there you are prompted to participate in a pick the score contest and are then presented with a list of upcoming sporting events from a menu tree. Because you are a fan of the Pittsburgh Steelers you choose the upcoming Steelers vs. Saints game. You predict that the Steelers will beat the Saints by a score of 24-14. Once you've made your pick the following message is sent out to all of your contacts on Facebook, Twitter and/or Google+: I predict Steelers 24 Saints 14. What do you think? #Steelers #Saints #iPredikt.it As a result of this message, 10 of your contacts also make predictions that then get sent out to their contacts. Due to the network effect your prediction alone elicits the opinion of well over 10,000 members across the popular social networks. iPredikt.it will then track those predictions and assign rank and reputation to all of the participants based on the outcome of the game.


Because iPredikt.it will offer the largest number of sporting events from around the world on which a prediction can be made, coupled with the ubiquity of its service in popular sports blogs, forums and social networking sites, it is anticipated that iPredikt.it will process millions of predictions each week. iPredikt.it can then aggregate these predictions, much like a traditional bookmaker, and use this 'Wisdom of Crowds' to become the most accurate predictor of sporting events in the world – something that would surely garner significant attention in traditional sports media.

3.1 Positioning Serious sports fans always make a prediction about the outcome of an upcoming match. They do this as a way of demonstrating their expertise and knowledge. Online sports sites that cater to serious sports fans are always looking for ways to increase community and drive traffic. iPredikt.it brings the two parties together in a way that no other pick the score service does. This is why iPredikt.it is positioned as the application provider of choice for sports websites who want to attract and retain serious sports fans.

3.2 Pricing Strategy The goal of iPredikt.it is to have its application integrated into as many third party sites as possible. In doing so, iPredikt.it will have more users and process more predictions for more types of sports than any other pick the score service. To accomplish this, the iPredikt.it service will be free to integrate in any website and be free to play for any sports fan. This is a different business model than all other pick the score services that are 1) either standalone websites that make money from advertising or use the service as a loss leader to drive traffic to their websites or 2) services that charge up to USD $850/mo for the privilege of integrating their service into a third party website. iPredikt.it will derive revenue from advertising, affiliate fees from online bookmakers and selling subscriptions to premium services.

3.2.3 ‘Freemium’ services Freemium is a business model that works by offering basic services or products for free, while charging a premium for advanced or special features. iPredikt.it will have initially two premium services - “iPredikt.it Plus” and “iPredikt.it Alert”. The “iPredikt.it Plus” package will provide users with access to much more functionality than the basic access. This includes, but is not limited to the following services:

Flexible league table comparison - Rather than being limited to seeing how they rank within the community where the prediction was made, iPredikt.it Plus subscribers will be able to see how they rank globally, as well as how they rank within their Facebook friends, Twitter followers and within particular demographic groups such as professional athletes, celebrities, etc.).


iPredikt.it betting line and odds comparison table - iPredikt.it will harness the wisdom of crowds to become the most accurate predictor of sporting event outcomes in the world. By aggregating predictions iPredikt.it will be able to generate odds and point spreads that are more accurate than those set by the bookmakers. iPredikt.it betting line and odds comparison table will compare the iPredikt.it odds with those from the leading bookmakers.

The price for the “iPredikt.it Plus” package will be $.99/mo. and will be a recurring charge. This price was determined in part because most paid smart phone apps are $.99 and people have become accustomed to seeing this price associated with casual online services. It is also believed that a price of $.99 is low enough that would not pose any barriers to purchase. The second premium service is the “iPredikt.it Alert” service. This is a notification service that alerts people when a top ranked member makes a prediction. There are many similar services which charge a significant monthly fee (>$20/mo.). iPredikt.it will charge a recurring monthly fee of $9.99 for this service.


4.0 The Market

4.1 An overview of the sports industry Sports are an undeniable and integral part of society - both online and offline. In 2010 ESPN conducted market research in America in which they asked the following question:

“On a scale from 0 to 10 where zero means you are not a sports fan at all, 5 means you are an average sports fan and 10 means you are a super sports fan, where would you place yourself on that scale?”

The results of the survey showed that 222 million Americans stated that they were sports fans of which, 71 million fell into a segment ESPN called the 'Avid Sports Fan' – people who indicated that they were either 'Serious Fans' (41.5m) or 'Super Fans' (29.5m).

Being a fan no longer means watching a few matches on the weekend and reading the sports page on Monday to catch up on all of the sporting news. Rather, people are going online to extend and enhance their sports experience. These highly engaged audiences are actively seeking more from online destinations. The top sports destination websites such as ESPN, Yahoo, AOL, Fox and CBS are massive and collectively attract hundreds of millions of unique monthly users. ESPN.com has recently broken a 41-month hold by Yahoo Sports atop ComScore’s monthly rankings of online reach


among U.S. sports sites by returning to the top slot for the first time since '08 with a company-record 52.2 million unique visitors in September 2011. It’s not just these mega sports sites that are attracting sports fans. According to Technorati, there are 11,234 sports related blogs on the Internet. Many of these blogs have formed formal networks, primarily for advertising purposes. The largest of these is the Yard Barker Network, a conglomeration of 875+ unique and independent sports blogs that reaches 15 million unique users a month. Sports fans are also after different activities that let them extend the sporting experience. Two such activities are fantasy sports leagues and sports betting. The Fantasy Sports Trade Association estimates that 32 million people age 12 and above in the U.S. and Canada played fantasy sports in 2010 (this roughly correlates to the same number of people who call themselves ‘Avid Sports Fans’). Participation has grown over 60% the past four years with 19% of males in the US playing fantasy sports [source]. Fantasy Sports is estimated to have a $3–$4 Billion annual economic impact across the sports industry [source]. The hobby has also moved beyond the U.S. with fantasy leagues for soccer, cricket and other sports. For example, according to a 2008 study by Ipsos, the number of British fantasy sports players aged 16-64 is estimated to range between 5.5 and 7.5 million. Of those, 80% of these players participate in fantasy soccer [source]. Another activity in which sport fans engage is sports betting. Betting on sports events is massive. For example, sport England estimates the value of spending on sport-related gambling in England grew from £1.7bn in 1985 to £2.8bn in 2008. And that figure is likely to have grown further, with an estimated £1bn bet on the most recent World Cup alone in the UK [source]. Sports betting is illegal throughout most of the United States. This makes it difficult to figure out how much money is bet on sports since the majority of it is done illegally. However, experts estimate a "handle" of more than $200 billion annually [source]. These sports betting revenues are impressive but even more impressive are the actual number of people/bets that make up those revenues. The world's leading online betting exchange, Betfair, processes a staggering 3 million transactions per day and at peak times matches more than 12,000 bets per minute. Betfair also has more than 350,000 users and about 95,000 active monthly users. Making a prediction on the outcome of a sporting event does not require one to place a corresponding wager, however. Sports fans from all over the world are able to make predictions via websites and Facebook applications such as Canal+ Pronostics Ligue 1, a Facebook application for making predictions on French 1st division soccer matches. This application currently has 195,000 monthly active users, which is quite impressive given that it is only available as a Facebook application and that it is limited predicting the outcome of French 1st division soccer matches. Sport is more than a preoccupation with avid fans - it’s a passion. And passionate fans involve themselves in online activities such as fantasy sports, sports betting and predicting the outcome of upcoming events to extend their sporting experience. There has never been

http://technorati.com/

http://en.wikipedia.org/wiki/Fantasy_Sports_Trade_Association







http://en.wikipedia.org/wiki/Fantasy_sport#cite_note-0



http://www.bbc.co.uk/news/mobile/business-11309620

http://apps.facebook.com/canalpluspronostics/


a better time to be a sports fan with the ubiquity of internet and mobile technologies. A true sports fan can eat, sleep and breath sports 24/7 - and they are.

4.2 Customers iPredikt.it has two types of customers: 1) the websites, blogs and forums that have integrated the iPredikt.it application into their respective sites and 2) the sports fans that are participating in the pick the score contests.

4.2.1 Integration Service

The primary customers for the iPredikt.it integration services are English language sports related websites, blogs and forums that would like to increase traffic and strengthen their online communities. Most of these websites will be located in North America but some will be located in the UK given the depth of soccer matches in the event menu tree. Many of these websites already run some type of pick this score competition, either as a manual process done in the comment sections or pay a third party pick the score provider to manage the contests.

4.2.2 iPredikt.it Plus

It is believed that there are many similarities between those fans that make well researched and educated predictions on the outcome of upcoming matches and those fans who participate in fantasy sports leagues. Therefore, it is believed that the demographics for each group will be similar if not identical. The following table presents the user demographics for Fantasy Football participants in America.

Age Group: - 12-48 - 25-34 strongest demographic

- 13% teenagers

Gender: 93% male

Household Income:

$60-100,000 avg annual income per year

Education:

70% have a Bachelor’s Degree or higher

How Many are Playing: - 29.9 million fantasy football participants - 11% of US population

- 69% growth rate from 2003

- 50% consider themselves die hard football fans

Fantasy Players Spend:

- $200/person on fantasy football per year - $800 million on fantasy sports products

- $3 billion spent on related media products

- 3-4 hours per week managing teams

- 30 minutes per day managing teams

Source: http://www.thefantasyfootballtimes.com/fantasy-football-demographics/

http://www.thefantasyfootballtimes.com/fantasy-football-demographics/















It is forecasted that 15% of the monthly active users (MAUs) who visit the website will pay for the iPredikt.it Plus package.

4.2.3 iPredikt.it Alert The iPredikt.it Alert service is designed for people who regularly bet on sports. Unfortunately it is difficult to determine the US market size in terms of the number of participants due to the illegality of sports betting in the US. Even in the UK where sports betting is legal, market size is expressed in terms of pounds (£s) rather than participant numbers. It is predicted that 1% of the MAUs who visit the iPredikt.it website will pay for the “iPredikt.it Alert” service.

4.3 The Competition The most common competitor is the sports editor of an online journal or the owner of a fan site or forum that runs a pick the score competition by having participants make their picks in the comments section of the site. While this method does generate significant reader participation, it is cumbersome and difficult if not impossible to rank participants over time. The primary advantage of this method is that it is free.


There are not many automated services that allow users to predict the actual scores of sporting events. Most follow a ‘pick the side’ model and are often set up as a contest. For example, the contest would be to pick the winning side for all of the NFL games played each week. In this scenario contestants are asked to predict the score for the marquee matchup, which acts as a tie breaker. The drawbacks to this type of prediction model are that it requires much less skill and contestants are forced to pick the outcome of a match/game for which they may not have much knowledge. Furthermore, without collecting predictions on the actual scores, these service providers miss out on the real value of the business, which are the aggregated scores that can be converted into a betting line.

There are a few pick ‘em services currently on the market. The most notable is UPICKEM, a contest platform developed by Second Street that can be integrated into any website and allows users to pick the winners of popular sporting events such as NFL and NBA games. To date, UPICKEM has been integrated into over 1900 websites and has had more than 6 million players participate. UPICKEM is targeted at local and regional newspapers in North America. Their service, though technically not a ‘pick the score’ service, as contestants are limited to simply picking a side rather than the actual scores, is positioned as a managed contest platform. This means that UPICKEM handles everything associated with the contest from customer service to the sourcing of prizes. The service is white labelled so that their partners can control the branding and the cost to license the technology is USD $850/mo.

Another notable competitor is PicktheScore.com. The Pick the Score business model is similar to that used by UPICKEM in that it charges websites an integration fee. However Pick

http://secondstreet.com/about/




the Score also offers a different service that is targeted at not for profit organisations interested in fund raising and operates as follows. A not for profit organisation creates a branded contest space on the Pick the Score server. Participants in the pick ‘em contest are charged $5. 70% of the prize money goes to the winner of the contest, 20% to the not for profit and 10% to Pick the Score. This is a new service and is being targeted at the North American market. The rest of the competitors are small websites or Facebook applications. These tend to be niche focused that are targeted at particular teams or leagues. There is no charge to participate and are used to build community.

The following table illustrates the key differences between iPredikt.it and its two main competitors.

Feature iPredikt.it UPICKEM PicktheScore

Integrate into 3rd party website yes yes yes

Free to integrate yes no no

Predict an actual score yes no no

Uses predictions to determine betting odds

yes no no

Provides overall contest management including procurement

no yes no

Participants can compete for a pool of prize money

no no yes

Revenue share opportunities no no yes


4.4 Estimated Sales

4.4.1 Assumptions

At the outset, the market for iPredikt.it is comprised of people from America, Canada, UK, and Australia who classify themselves as ‘Avid Sports Fans’. According to the ESPN poll, there are 71 million ‘Avid Sports Fans’ in America. The number of ‘Avid Sports Fans’ for the other countries was extrapolated by determining the percentage of the American population who were ‘Avid Sports Fans’ and then applying that percentage to the overall populations in the other countries.

# of avid sports fans America 71,000,000

# of avid sports fans UK 15,620,000

# of avid sports fans CA 7,810,000

# of avid sports fans Aus 4,970,000

Total # of avid sports fans 99,400,000

There were two approaches used to determine monthly active users (MAU) both of which yielded similar results. The first method was to simply estimate that the first month of commercial operation MAUs would be roughly 1% of the total market or 448,000. The second method was to assume that initial MAUs for iPredikt.it should be at least 3 times greater than the Canal+ Pronostics Ligue 1 pick the score Facebook application or 585,000. Taking a rough average of the two, it was estimated that initial MAUs would be 500,000.

Initial MAUs : 500,000

The monthly growth rate is seasonal with September through March being the peak season. The percentage of MAUs who would visit the iPredikt.it website was assumed to be 40%. Therefore unique visitors to the iPredikt.it website in the first month are estimated to be 200,000.

% of MAUs visiting iPredikt.it website: 40%

MAUs visiting iPredikt.it website in month 1:

200,000

Avg # of page views/MAU 3

eCPM rate $5

4.4.2 Advertising Because the iPredikt.it widget is embedded in third party sites, most of the interaction that participants have with iPredikt.it will be limited to those sites. However, if participants would like to see how they rank globally or view the iPredikt.it odds for a particular match up, they will need to visit the iPredikt.it website. The ads on the website will be a mixture of sports related ads from a banner network and ads for online bookmakers. In terms of the traditional banner ads, it is believed that


iPredikt.it will be able to garner USD $5 eCPM rates. This is based on the Adify Vertical Gauge (AVG) Q2 2010 report which found that median eCPM was $5.29 across all verticals with a minimum of $2.63 and a maximum of $6.58. Revenue from the online bookmaker ads is based on an affiliate model. Affiliate marketing is a marketing practice in which a business rewards one or more affiliates for each visitor or customer brought about by the affiliate's own marketing efforts. Online sports books have fantastic affiliate programmes. The top affiliates for one of the largest online bookmaker, Bet365, earn between USD $40,000 and $80,000. Top affiliates have over 100k unique visitors/mo. Because affiliate revenue is a function of the number of MAUs, it is assumed that it will follow the same growth pattern as MAUs

Year 1 Year 2 Year 3

Banner Ad Revenue $84,000 $238,500 $262,500

Affiliate Revenue $406,000 $1,152,750 $1,268,750

Total Advertising Revenue 517,125 $1,391,250 $1,531,250

4.4.3 ‘Freemium’ services It is estimated that 15% of the MAUs who visit the website will pay for the iPredikt.it Plus package. The price is set at $.99.

It is further estimated that 1% of the MAUs who visit the website will pay for the iPredikt.it Alert service.

Year 1 Year 2 Year 3

iPredikt.it Plus Revenue $831,600 $3,148,200 $4,331,250

iPredikt.it Alert Revenue $2,089,500 $5,932,688 $6,529,688

Total Advertising Revenue $3,411,100 $10,472,138 $12,392,188


5.0 Development and Production

5.1 Development Status The iPredikt.it application has been in development for 3 months. It was decided that the first major milestone would be to produce a minimum viable product that was limited in functionality yet robust enough to be able to determine proof of concept. This minimum viable product is now referred to as the ‘beta version’ and was launched on 11 November.

5.1.2 Beta Version

The beta version has the following characteristics.

Website

● Homepage - Professionally designed logo with a notice in the body of the page that says ‘iPredikt.it is currently beta testing. If you are the owner of a sports related site and would like to help us test, please click here to sign up.’

● Sign up form - form that prospective partners will need to fill out in order to participate in the beta test.

● Blog - basic business blog used to keep partners and interested parties up to speed with current developments.

● No end user functionality

Partner Functionality

● Partner sign up - The ability for a website owner to register for the service and automatically generate a unique embed code. By having a unique embed code all of the predictions that are announced via the various social networks will have a link back to the site where the prediction was made.

● Choose the range of sports - Some websites may wish to limit the sport menu tree to a particular sport such as football, or to a league such as the NFL or even to a specific team such as the Denver Broncos. The beta version will give partners the flexibility to choose the range of sports that will be available in their respective menu trees.

End User Functionality

● Log in via Facebook

● Be presented with a menu tree that displays a list of upcoming events. Events will be limited to Soccer (English Premier League), Football (NFL and NCAA) and Basketball (NBA and NCAA).

● The ability to predict the final score of a selected event.

● Once the prediction is made it is announced to the person's Facebook wall page.

● Results - The ability for the end user to see how he/she ranks against other people from the same community (domain) based on the actual results and a predetermined algorithm.

Back end Functionality

● Results - the ability to show which events have a prediction against them and then the ability to easily input the actual results (final score) into the database.


● Apply an algorithm to the results to rank the users. It is expected that the algorithm will result in a numeric value. Users will be ranked based on this numeric value.

Beta testing is now underway and iPredikt.it is using the opportunity to:

● Gauge partner and end user sentiment with the aim to improve the service

● Quantify demand both at the partner and end user level

● Identify potential bugs or glitches in the system

● Measure the network effect - how much additional traffic does it drive to the partner website?

5.1.2 Commercial Version The first commercial version will be the next minimum viable product that will have the features required to begin generating revenue and will have the following characteristics:

iPredikt.it Website - The website during the beta test was minimal and provided only enough functionality for partners to join and generate an embed code. The website for the commercial version will have all of the information and functionality required for users to enjoy the iPredikt.it service to its fullest and to motivate users to subscribe to the “iPredikt.it Plus” package and “iPredikt.it Alert” service. End User Functionality

Increased log in options - in addition to Facebook Connect, users will be able log in via Google, Twitter (OAuth) and Open ID

Prediction announcements - users will be able to choose whether to announce their predictions on Facebook and/or Twitter

More events - the menu tree will have more sporting events from which predictions can be made. Events will be extended to include the following sport categories: Soccer, Football, Basketball, Hockey Baseball, Rugby and Cricket. Events will include all of the leagues found on the menu at http://www.pinnaclesports.com/

Results - The ability for the end user to see how he/she ranks globally based on the actual results and a predetermined algorithm.

“iPredikt.it Plus” package

Ability to view the odds generated by aggregating predictions

Flexible league table comparison - subscribers will be able to see how they rank globally, as well as how they rank within their Facebook friends, Twitter followers and within particular demographic groups such as professional athletes, celebrities, etc.).

“iPredikt.it Alert” - notification service that alerts people when a top ranked member makes a prediction.

The time required to develop the commercial version is 3 months.

http://www.pinnaclesports.com/









5.2 Cost of Development

5.2.1 Beta version The beta version was developed part time over the course of 4 months. It is estimated that the cost associated with the development is $22,500 if billed at commercial rates.

Logo development $2,500

Widget development $8,500

Template (look and feel) $3,500

Testing and issue fixing $4,000

Results page $4,000

Total $22,500

5.2.2 Commercial version The time required to develop the previously mentioned functionality for the commercial version is 3 months. The costs associated with building are found in Section 5.4 Expenses and Capital Requirements below.

5.3 Labor Requirements Personnel required to go from the beta to the commercial version will be kept to a minimum to ensure that costs are kept low while iPredikt.it is proving commercial viability. iPredikt.it will have three fulltime developers on staff, which includes Lead Developer and co-founder Philip Vickers. The two full time developers are current employees of Codenza, the software development firm founded by Vickers. Dodd will also be working full time with focus on business development and overall company management. In addition to the developers, iPredikt.it will use outsourced labour to manage the data entry required for event arbitration. Lastly, website development will also be outsourced to a qualified team.


5.4 Expenses and Capital Requirements

Month 1 Month 2 Month 3

Feb-11 Mar-11 Apr-11

Office Expenses Rent $1,000 $1,000 $1,000

Internet $100 $100 $100 Phone (landline) $50 $50 $50 Incidentals $150 $150 $150 Total Office Expenses $1,300 $1,300 $1,300

Hosting $500 $500 $500

Professional services $750 $750 $750

Salaries Patrick $4,000 $4,000 $4,500

Lead developer (Phil) $3,500 $3,500 $4,000 Programmer 1 $5,000 $5,000 $5,000 Programmer 2 $5,000 $5,000 $5,000 Programmer 3

Total salaries $17,500 $17,500 $18,500

Outsourced Development Mobile app development iPredikt.it Website $5,000 $5,000

WordPress Plugin Total Outsourced Development $5,000 $5,000 $0

Outsourced Data Input $1,500 $1,500 $1,500

Contingency expenses $2,655 $2,655 $2,255

Corporate Income Tax (28%) $0 $0 $0

Capital Expenditures $10,560 Desks $1,760 Chairs $1,100 Computers $5,200 Monitors $2,500

Total Expenses $39,765 $29,205 $24,805


6.0 Sales and Marketing

6.1 Strategy iPredikt.it has two fundamental goals on which the sales and marketing strategy is based:

1. Attract as many participants as possible who then make frequent predictions across a wide variety of sporting events.

2. Create a market environment such that it creates barriers to entry that discourage new entrants and severely disrupts the competition.

The strategy to realise these goals is simple, straight forward and effective. To attract millions of participants, iPredikt.it will make it easy for the tens of thousands of fan sites, forums, blogs and online newspapers to embed the iPredikt.it widget into their website at no charge. Getting the iPredikt.it widget in front of millions of sports fans at the places online where they currently visit is much preferred over trying to attract those fans to one single website. By offering the service for free, competitors such as UPICKEM will be forced to rethink their entire business model – no longer will they be able to charge these sites $850 per month. Furthermore, iPredikt.it will offer the widest and deepest range of sporting events on which participants can lodge a prediction. This will include all of the major sports and many of the more obscure events as well. If there is an event on which bookmakers are taking bets, it will be included in the iPredikt.it menu tree. Lastly iPredikt.it encourages participants to announce their predictions to their network of friends. The message that gets posted also solicits the opinion from those who read the post thereby creating a network effect. This means that one prediction can be the catalyst for thousands of other predictions. iPredikt.it partners will also benefit because each prediction notification contains a link to the website where the prediction was made which drives traffic to partners’ websites. This provides the added incentive for partners to actively promote pick the score contests.

6.2 Promotion There are few, if any, reasons why a sports related website would not want to embed the iPredikt.it widget. Therefore, success for iPredikt.it depends on effectively communicating the offer to potential partner websites. There are three ways that fan websites will learn about iPredikt.it. The first is direct sales - iPredikt.it contacting them directly informing them of the offer. The second is via advertising on the widget.


“Powered by iPredikt.it” will be present on every screen in the embedded widget and will link directly to the iPredikt.it website. The third method is via social search. Each prediction that is announced over the social networks will carry with it the names of each team mentioned in the prediction preceded by the hashtag (#). The following is an example of a prediction announcement: I predict the score will be Steelers 24 Saints 14. What do you think? #Steelers #Saints #iPredikt.it Hashtags were originally a way for Twitter users to categorise their tweets. However they have gained acceptance across other social networks such as Facebook and Google+. With all of the anticipated predictions being made, it is expected that iPredikt.it will come up very high in sport related social search. It is anticipated that initial success will be dependent on securing ~10-20 prominent partner websites after which time word of mouth amplified by the network effect will be sufficient to realise growth projections.


7.0 Management

The Company’s management philosophy is based on responsibility and mutual respect. The Company operates in an environment and structure that encourages productivity and respect for customers and fellow employees. Its goal is to create an environment where:

• Creativity can flourish; • Generating new ideas and products is well rewarded; • Management is structured around expertise rather than chains of command; and • Mutual respect and sharing of knowledge are encouraged.

7.1 Officers and Key Employees

7.1.1 Patrick Dodd, 44: Managing Director and Co-founder

Patrick Dodd received his MBA from Thunderbird, The American Graduate School of International Management (Glendale, Arizona), in 1995. Since that time Dodd has worked in management positions in the US and Europe primarily in a marketing function. Dodd also has entrepreneurial experience including opening two successful restaurants in Kiev, cofounding a company that built the first java based peer-to-peer betting exchange, (which failed miserably) and cofounding a software development firm in Kiev that provided offshore software development services primarily to US based clientele. Since arriving in New Zealand in February 2010, Dodd has been providing consulting services to small and medium sized businesses via Reson8 Consulting a boutique marketing consultancy that focuses on digital strategy.

7.1.2 Philip VIckers, 40: Lead Developer and Co-Founder

Philip Vickers received his BSc in Computer Science from Auckland University in 1997. Since graduating, Vickers has worked in software development for 15 years – 6 of those years as an Enterprise Java developer in the corporate environment. In 2004, Vickers founded Codenza, which started out as a business that developed distributed peer-to-peer desktop search software but then pivoted and changed its business model to providing website development and web technology development services. Vickers professional areas of expertise include:

• Software architecture • Project management • Software development • Business management

Vickers is a keen technologist and is always interested in exploring innovative solutions to problems, and utilizing the latest in technology.

7.2 Ownership iPredikt.it is a limited company registered New Zealand. Ownership of the company is divided equally between both founders – Dodd and Vickers.


8.0 Financials

8.1 Risks The major risk that start-ups face is proof of concept – is there sufficient demand for the service and will the product work as anticipated. iPredikt.it has mitigated much of this risk by following the minimum viable product development model. The first milestone was releasing a beta product that had just enough functionality to satisfy the following:

● Quantify demand both at the partner and end user level

● Does the product work and to identify potential bugs or glitches in the system

● Gauge partner and end user sentiment with the aim to improve the service

● Measure the network effect - how much additional traffic does it drive to the partner website?

Only after the beta testing has justified the financial projections and ensured product stability will iPredikt.it seek investment needed to reach the next milestone – a commercial product that has just enough functionality that can be leveraged to provide the previously mentioned revenue streams. Another risk confronting iPredikt.it is the low barriers to entry caused by having a relatively low start-up cost. iPredikt.it has helped mitigate this risk through its pricing policy – offering the service free of charge to partner websites. As long as rapid adoption of the service occurs, then there will be very little incentive for new entrants to join the market. There still exists the risk that a current competitor such as UPICKEM will begin offering its service for free. However, their entire business/revenue model is based on charging the partner websites a monthly integration fee. Changing this model is not impossible, but is difficult. Again, as long as rapid adoption of the service occurs, it makes it much more difficult for competitors to make the necessary changes to the software that are required to make such a pivot.


8.2 Cash Flow Statement

8.2.1 Year 1

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Total Year 1

Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12

Revenues $0 $0 $0 $36,548 $12,183 $12,183 $60,913 $243,650 $487,300 $609,125 $730,950 $1,218,250 $3,411,100

Office Expenses $1,300 $1,300 $1,300 $1,460 $1,460 $1,460 $1,610 $1,610 $1,610 $1,610 $1,610 $1,610 $17,940

Hosting $500 $500 $500 $750 $750 $750 $750 $750 $750 $750 $750 $750 $8,250

Professional services $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $9,000

Salaries $17,500 $17,500 $18,500 $18,500 $22,500 $22,500 $27,500 $30,000 $30,000 $30,000 $30,000 $31,500 $296,000

Outsourced Data Input $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $18,000

Contingency expenses $2,655 $2,655 $2,255 $2,296 $3,363 $3,363 $3,878 $4,128 $4,128 $4,128 $3,461 $3,611 $39,919

Corporate Income Tax $0 $0 $0 $10,233 $3,411 $3,411 $17,056 $68,222 $136,444 $170,555 $204,666 $341,110 $955,108

Net Operating Cash Flow -$24,205 -$24,205 -$24,805 $1,058 -$21,551 -$21,551 $7,869 $136,690 $312,118 $399,832 $488,213 $837,419 $2,066,883

Outsourced Development $5,000 $5,000 $0 $0 $6,666 $6,666 $6,668 $6,668 $6,668 $6,668 $0 $0 $50,004

Capital Expenditures 10560 0 0 0 0 0 0 0 0 0 0 0 $10,560

Net Cash Flow -$39,765 -$29,205 -$24,805 $1,058 -$28,217 -$28,217 $1,201 $130,022 $305,450 $393,164 $488,213 $837,419 $2,006,319


8.2.2 Year 2



Revenues $856,213 $856,213 $263,450 $263,450 $197,588 $131,725 $197,588 $1,317,250 $1,580,700 $1,580,700 $1,580,700 $1,646,563 $10,472,138

Office Expenses $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $31,320

Hosting $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $9,000

Professional services $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $12,000

Salaries $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $504,000



Corporate Income Tax $239,740 $239,740 $73,766 $73,766 $55,325 $36,883 $55,325 $368,830 $442,596 $442,596 $442,596 $461,038 $2,932,199

Net Operating Cash Flow $563,277 $563,277 $136,488 $136,488 $89,067 $41,646 $89,067 $895,224 $1,084,908 $1,084,908 $1,084,908 $1,132,329 $6,901,587

Outsourced Development $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Capital Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 $0

Net Cash Flow $563,277 $563,277 $136,488 $136,488 $89,067 $41,646 $89,067 $895,224 $1,084,908 $1,084,908 $1,084,908 $1,132,329 $6,901,587


8.2.3 Year 3



Revenues $920,563 $1,416,250 $920,563 $283,250 $212,438 $141,625 $212,438 $1,416,250 $1,699,500 $1,699,500 $1,699,500 $1,770,313 $12,392,188

Office Expenses $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $31,320

Hosting $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $9,000

Professional services $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $12,000

Salaries $48,500 $48,500 $48,500 $48,500 $48,500 $48,500 $48,500 $48,500 $48,500 $48,500 $48,500 $48,500 $582,000



Corporate Income Tax $257,758 $396,550 $257,758 $79,310 $59,483 $39,655 $59,483 $396,550 $475,860 $475,860 $475,860 $495,688 $3,469,813

Net Operating Cash Flow $601,909 $958,804 $601,909 $143,044 $92,059 $41,074 $92,059 $958,804 $1,162,744 $1,162,744 $1,162,744 $1,213,729 $8,191,623

Outsourced Development $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Capital Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 $0

Net Cash Flow $601,909 $958,804 $601,909 $143,044 $92,059 $41,074 $92,059 $958,804 $1,162,744 $1,162,744 $1,162,744 $1,213,729 $8,191,623


8.5 Funding Request and Return The iPredikt.it founders have collectively invested $22,500 in developing the beta version of the service. The founders are now seeking an additional $150,000 in order to build out the application to a point where it has the capability of generating revenue and become a viable business. From the research conducted, start up, pre revenue businesses that have an exciting business idea or business plan, a strong management team in place to execute on the plan and a final product or technology prototype have valuations between $1 million – $2 million. Therefore, an arbitrary valuation of $1.5 million has been set (source). In exchange for an investment of $150,000, iPredikt.it will offer a 10% equity stake in the company. The minimum amount to participate is $25,000. It is expected that this investment will be sufficient to allow iPredikt.it to reach a point in its development where it can generate enough revenues to cover its expenses and future development. The following Statement of Cash Flow illustrates the amount of money required until the business is cash flow positive, how the investment will be utilised and when it will be needed.

Projected Cash Flows – Months 1 - 6

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Total

Revenues $0 $0 $0 $35,798 $11,933 $11,933 $59,663

Office Expenses $1,300 $1,300 $1,300 $1,460 $1,460 $1,460 $8,280

Hosting $500 $500 $500 $750 $750 $750 $3,750

Professional services $500 $500 $500 $500 $500 $500 $3,000

Salaries $17,500 $17,500 $17,500 $17,500 $30,500 $30,500 $131,000

Outsourced Data Input $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $9,000

Contingency expenses $2,630 $2,630 $2,130 $2,171 $4,138 $4,138 $17,836

Corporate Income Tax $10,233 $3,411 $3,411 $17,056

Net Operating Cash Flow -$24,205 -$24,205 -$24,805 $1,058 -$21,551 -$21,551 -$115,259

Outsourced Development $5,000 $5,000 $0 $0 $6,666 $6,666 $23,332

Capital Expenditures $10,560 $0 $0 $0 $0 $0 $10,560

Net Cash Flow -$39,765 -$29,.205 -$24,805 $1,058 -$28,217 -$28,217 -$149,151

http://billpayne.com/wp-content/uploads/2011/01/Scorecard-Valuation-Methodology-Jan111.pdf


8.5.1 Exit Strategy

The online sport industry is extremely profitable and thus hyper competitive. The top players in the market have all made significant acquisitions over the past 5 years to help them maintain and grow their share of market. For example News Corp‘s Fox Sports Interactive purchased Yardbarker, the popular sports opinion site and blog network. Financial terms of this deal were not disclosed. Yardbarker had raised over $7.5 million in funding, most recently last September (2009). Fox Sports Interactive has made several other digital deals over the years, including picking up Scout Media for $60 million five years ago, and, more recently, taking a stake in OpenSports (source). In March 2010 Yahoos! Sports acquired Citizen Sports, a company that owns a series of popular sports apps on the iPhone and on social networking sites, including what it says is the most popular fantasy football app on Facebook. Financial terms of the acquisition were not released, although AllThingsD’s Kara Swisher put the price at between $40 million and $50 million (source). Because of its ability to build community and drive traffic to partner sites, it is believed that iPredikt.it will be an ideal acquisition target for any of the major online sports media players. Further, owing to the strong similarities between predicting a score of a match and betting on the match iPredikt.it would also be a very strong acquisition candidate for an online bookmaker.

http://paidcontent.org/article/419-fox-sports-buys-sports-blog-network-yardbarker/

http://paidcontent.org/article/419-yahoo-buys-social-sports-startup-citizen-sports/

Documents

iPredikt.it Business Plan v1.9