Www.homesphere.com “We bring it all together” “Anatomy of an Equity Capital Raise” Jim Waldrop President and CEO HomeSphere, Inc. “Ask not what your investor

www.homesphere.com

“We bring it all together”

“Anatomy of an Equity Capital Raise”

Jim Waldrop

President and CEO

HomeSphere, Inc.

“Ask not what your investor do for you, but what you can do for your investor”

University of Colorado 2/14/2007www.homesphere.com 2

TIMELINE

Began solicitation

of firms

9/05

Began drafting private

placement memorandum

(PPM)

Received 1st term sheet

Board approved

PPM

11/05 1/06 5/06 7/06

Decision

9/06

Received 2nd term

sheet

www.homesphere.com 3

OVERVIEW

• Capital raise goals

• HomeSphere business overview

• Software capital market overview

• Homebuilding market overview

• Offers received

• Ultimate decisionUniversity of Colorado 2/14/2007


CAPITAL RAISE GOALS

University of Colorado 2/14/2007

• Raise $6 million preferred equity

• Partner with strong equity partner:– Specialize in similar industry segment– Seasoned business operators, not just finance

• Minimize impact on current shareholder rights

• Mitigate shareholder dilution

CAPITAL RAISE GOALS

• Source of funds:– Venture capital market– Private equity market

• Use of funds:– Enhance our brand and marketing capability – Expand our sales force– Refresh our current Web functionality– Develop new revenue-based Web services


HOMESPHERE BUSINESS OVERVIEW


BUSINESS MODEL OVERVIEW

• Provide technology-leveraged supply chain services to the homebuilding industry– Material rebate management– Business intelligence– Sales force collaboration– Collaborative buying

• Use Software as a Service (SaaS) model



BUSINESS SERVICES OVERVIEW

Material usage

Cost savings rebates

Builder

SUPPLY CHANNEL

Home Buyer

Manufacturer

Dealer Distributor

Builder

Builder’s Desktop®

Subcontractor

GROUP BUYING

SALES FORCE COLLABORATION


SOFTWARE as a SERVICE MODEL



SaaS VERSUS HOMESPHERE MODEL


SaaS HomeSphere

Conclusion: Company should be valued higher

SOFTWARE CAPITAL MARKET OVERVIEW



VALUATION METRICS

INCLUDES LICENSED and SOFTWARE as a

SERVICE MODELS



SOFTWARE MARKET TRENDS


HOMEBUILDING MARKET OVERVIEW



MEDIA FEEDING MARKET VIEWS



IMPACT ON BUILDER VALUATIONS



IMPACT ON BUILDER VALUATIONS



ANNUAL TOTAL HOUSING STARTS

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2,800

3,000

1959 1966 1973 1980 1987 1994 2001 2008

AN

NU

AL

UN

ITS

(0

00

s)

SINGLE-FAMILY MULTI-FAMILY MANUFACTURED HOUSING

Source: US Census Bureau

HOUSING OUTLOOK STILL SOLID

FORECAST



NET MARKET EFFECTS

• Homebuilder valuations declining– Near historic bottoms – “guilt by association”– Upside in front

• Software valuations near bottom• Investors focus on risk protection

– Not just valuation offers– But also terms and conditions

• Our future view strong– Market upside ahead– Valuations will increase


OFFERS RECEIVED



VALUATION METHODOLOGY

Trailing 12 month revenues (TTM)

$1,000

Times: Multiplier 3x

Equals: Company valuation $3,000



VALUATION METRICS

INCLUDES LICENSED and SOFTWARE as a

SERVICE MODELS

HomeSphere’s Focus


COMPARATIVE PUBLICS ANALYSIS


Mean 5.5x

Mean 4.4x


IMPACT ON COMPANY VALUATION

SaaS UNIVERSE

CRM/MKT SUBSET OFFERS RECEIVED

($Millions) MEAN MEAN 1ST TERM SHEET

2ND TERM SHEET

Trailing 12 Month Rev $13.6 $13.6 $13.6 $13.6

EV/Revenue 4.4x 5.5x 3.2x 2.75x

Public Valuation $60.0 $75.0 $43.7 $37.4

Private Adjustment 75% 75% 75% 75%

Adjusted valuation $45.2 $56.3 $32.6 $28.0

Comparable Valuations 62% 50% 86%



IMPACT ON COMPANY OWNERSHIP

SaaS UNIVERSE

CRM/MKT SUBSET

SECOND TERM SHEET

($Millions) MEAN MEAN VALUATION

Pre-money valuation $45.2 $56.3 $28.0

Investment $6.0 $6.0 $6.0

Post money valuation $51.2 $62.3 $34.0

Investor’s ownership 11.7% 9.6% 17.6%

Conclusion: Company undervalued by market


SHAREHOLDER VOTING

PRE-MONEY POST-MONEY

COMMON:

LEAD INVESTOR 15.7% 12.6%FOUNDER 16.2% 13.9% Total 31.9% 26.5%

PREFERRED (LEAD):

SERIES A 13.8% 11.1% SERIES C 14.7% 11.7%

Total 28.5% 22.8%

Total Lead & Founder 60.4% 49.3%

SERIES D (NEW) 17.6%


DECISION??



CAPITAL RAISE CONCLUSION

• Stop capital raise– Market undervalues company– Investor fear of homebuilding industry– Re-visit investment opportunity later

• Sell other assets instead– Provided some capital to start plan– Eliminated dilution– Did not require finding desired capital partner


Questions and discussion


Documents

Www.homesphere.com “We bring it all together” “Anatomy of an Equity Capital Raise” Jim Waldrop President and CEO HomeSphere, Inc. “Ask not what your investor