Neighborweb Biz Plan

NeighborWeb

Adam Smith Ben Entezam Robbie Allen

Team Business Plan 15.390B: New Enterprises May 9th 2005

Confidentiality Agreement The undersigned reader acknowledges that the information provided by NeighborWeb Company in this business plan is confidential; therefore, reader agrees not to disclose it without the express written permission of NeighborWeb representative. It is acknowledged by reader that information to be furnished in this business plan is in all respects confidential in nature, other than information which is in the public domain through other means and that any disclosure or use of same by reader may cause serous harm or damage to ___________________________. Upon request, this document is to be immediately returned to NeighborWeb Company.

____________________________ Signature ____________________________ Name (typed or printed) ____________________________ Date This is a business plan. It does not imply an offering of securities.

NeighborWeb......................................................................................................................1 Adam Smith....................................................................................................................1 Ben Entezam...................................................................................................................1 Robbie Allen...................................................................................................................1 1. Executive Summary.........................................................................................................4 1.1. The Product...............................................................................................................4 1.2. Market Size...............................................................................................................4 1.3. Business Model.........................................................................................................4 1.4. Competition...............................................................................................................5 1.5. Product Development Status and Plan......................................................................5 1.6. Initial Capital Requirements ....................................................................................5 1.7. Financial Prospects...................................................................................................5 1.8. Exit Strategy..............................................................................................................5 1.9. Team..........................................................................................................................5 2. Business Concept and Description...................................................................................7 3. Market Opportunity Overview.........................................................................................8 4. Product Offering..............................................................................................................9 5. Business Model and Strategy.........................................................................................10 6. Competition and Competitive Advantage......................................................................11 7. Marketing Plan...............................................................................................................12 8. Product Design and Development Plan.........................................................................13 9. Team...............................................................................................................................14 10. Financial Prospects......................................................................................................15 11. Company Milestones....................................................................................................16 12. The Offering.................................................................................................................17

NeighborWeb is a Cambridge, MA based company whose online product offering allows neighbors in suburban communities to share location-sensitive information. Paid for by neighborhood homeowner associations’ fixed budgets, each community website will be the central contact point used to communicate about neighborhood events, babysitting services, ride sharing, items for sale, and other community-centered happenings. NeighborWeb is in its early stages; we are seeking a $1MM seed round to create the product and collect early customers.

1. Executive Summary 1.1.The Product Our primary product is the NeighborWeb website, which allows neighborhoods and communities to create an online presence. Some of the features of the website include: • • • • • • • • •

Service advertising (lawn maintenance, babysitting, etc.), Online garage sale, Recommendations and reviews, Community calendar, Discussion forum, Social profiles, Ride sharing, and Frequently asked questions Access to utility companies webpage and other service providers

Neighborhoods that are geographically close can be linked together.

1.2.Market Size Our first target market includes new or existing neighborhoods whose homeowners associations collect a yearly fee from its residents. The Community Association Institute (CAI) estimates 9,000 to 11,000 new community associations are formed every year with annual dues ranging from $100 to $10,000 per household. CAI also estimates that there are over 205,000 existing residential condominium associations, cooperative, and homeowner associations in Unites States.

1.3.Business Model Our pricing structure is to charge $10 ($24*) per household per year covered by the homeowners association. With the average neighborhood having 100 homes, we can expect $1000 ($24000) per neighborhood per year. Initially for the new neighborhoods we will start sales in the Raleigh-Durham and Boston metropolitan areas, but will expand to other cities within a year. Since the product is software-based, gross margins are near 100%. We also are planning to offer sales in existing neighborhoods in the entire state of Massachusetts. *We can charge $24/year to make it more attractive which is $2/month

1.4.Competition We have no competitor visiting household associations and marketing similar products. Craigslist, EBay, CitySearch, and other information exchange sites target large audiences. The most geographically centered of these, Craigslist, targets an audience of millions of people for each site. NeighborWeb fills the gap for more fine-grained information exchange; we enable new interactions, offer the familiarity of neighbors, and provide the convenience of locality.

1.5.Product Development Status and Plan A live product demonstration is under construction which will illustrate the big ideas of our company. Following development of the demo, additional software developers will be brought on-board and full product development will get underway. A Beta release will occur in October 2005, to be followed by version 1.00 release in December 2005. Product development will continue into the future, as we add customer-demanded functionality. NeighborWeb 2.0 is targeted for release in May 2006.

1.6.Initial Capital Requirements Our plan calls for a $1MM seed round to be funded by angels, all of which will be used for product development and preparing for market. We have a detailed plan outlining the use of this money, which is expected to get us through the beta test cycle and initial sales deals. Thereafter, a second round of $3MM will be needed to drive continued development and deep market penetration; since we are a web software company we do not have many expenses.

1.7.Financial Prospects Household-driven subscriptions paid for by housing associations are our primary sources of revenue. By 2009 we project $5MM in revenue and $3MM in operating profit after operating expenses driven primarily by engineering and sales.

1.8.Exit Strategy We will be an attractive takeover candidate by some of the larger players in the social software space such as Ebay and Microsoft. Ebay established a minority stake in Craigslist in 2004 and Microsoft recently purchased Groove Networks (another social software company) both of which set a good precedence for market consolidation with social software startups.

1.9.Team The executive team includes four leaders in business and technology. Robbie Allen, the CEO, is an 8 year veteran of Cisco Systems where he lead the organization responsible Cisco’s web-based network management applications. Adam Smith, CTO, is an MIT student and researcher whom has hard-hitting R&D background combined with real business experience. Ben Entezam, VP of Engineering, is an MIT SDM student who will oversee all engineering activity. Finally, Janet Allen will act as VP of Marketing and

Sales; she has worked in real estate for 10 years and understands our primary market very well.

2. Business Concept and Description Over the last year, social software has entered the mainstream lexicon and become a hot topic on the Internet. One untapped market we believe social software can make a big impact is with residential neighborhoods. Today, communication within most neighborhoods is largely ad-hoc and inefficient. Often, people have things they’d like to get rid of or sell (without the hassle of organizing a garage sell), but cannot find any takers. Ebay is one option, but for low cost or large items, it is not practical. Another problem is finding local services, such as a babysitter or yard maintenance person. Even in small neighborhoods, there are generally several teenagers that would be willing to make some extra money if they just knew of the need. Finding recommendations on restaurants and other services, such as doctors, dentists, and tax preparation is also something that is not efficient with person-to-person communication. The fundamental problem is that the collective wisdom of the neighborhood goes unrealized. There are several existing Internet-based companies that provide some form of these services whether it is eBay for buying and selling goods, Epinions and Citysearch for product and service reviews, or Craigslist for a combination of them all. The biggest issue with these services from a neighborhood perspective is they have too large of a scope and the target audience is actually too big. With each of these websites, you could be interacting with people in a different part of the country (or another part of the world for that matter). Even with reviewer ratings, you still can’t feel as comfortable with your online counterpart as you would your neighbor. If you want to sell something to a neighbor, you can have a much higher confidence level about the transaction. With reviews and recommendations, you are much more likely to get relevant information if someone within your community provides the information. NeighborWeb fills this gap by providing a web site that allows neighborhoods to create a virtual environment to advertise services, buy and sell items, and post general information about the community and surrounding area.

3. Market Opportunity Overview NeighborWeb’s primary market is homeowners associations that collect a monthly or yearly fee from its residents. About one in six Americans lives in an association-managed community, according to the Community Association Institute (CAI). An estimated four out of five houses built since the late 1990s are governed by a homeowners association and subsequently pay dues ranging from $100 to $10,000 a year. Based on the records of several homeowners associations in the Raleigh-Durham area, there is often thousands of dollars left in the association coffers at the end of the year. The associations have to do something with this money eventually and usually find new projects such as deploying new street lights or improving landscaping. The majority of these neighborhoods have not tapped into the power of the Internet. We feel a portion of this money could be going to a community website. It is not uncommon for members of a homeowners association to question what their dues are used for. A helpful website that is used by large portion of the community would be seen as a worthwhile cost to residents. So far we’ve touched on only neighborhoods, but many of the same concepts apply to the employees of a corporation or even students within a university department. In fact, any sufficiently large group of people that has a certain amount of trust within the group and that is geographically close to one another could take advantage of this software. While initially our primary market is going to be residential neighborhoods, we are also going to investigate these other markets.

4. Product Offering Our product is a web site that supports the following features: • • • • • • • • •

Service advertising (lawn maintenance, babysitting, etc.), Online garage sale, Recommendations and reviews, Community calendar, Discussion forum, Social profiles, Ride sharing, and Frequently asked questions. Access to utility companies webpage and other service providers

When a homeowner wishes to get on the website, they log in with a username and password supplied by our system. They then are shown a page from which they can access each of the parts of our service. For example, each person or family can maintain a social profile with their picture and basic information about them, similar to Friendster. Each of the features is straightforward. This is a win for both NeighborWeb and the user; our site will be easy to use, and understand.

5. Business Model and Strategy We are going to market strongly to both existing neighborhoods and new neighborhoods that aren’t fully developed. The best opportunity for implementing NeighborWeb is when a neighborhood is in its infancy. Community Association Institute (CAI) estimates 9,000 to 11,000 new community associations are formed every year and often that these associations are not being marketed to for services such as NeighborWeb. CAI also reports that there are over 205,000 existing residential condominium associations, cooperative, and homeowner associations in Unites States. We have no competitor visiting these associations and marketing similar products. This may change over time, but the key is to get in early and establish a customer base. Again, one of our key features the ability for neighborhoods to link with each other. This can only happen if both neighborhoods are using NeighborWeb. We have first-mover advantage and will need to sustain our competitive advantage by providing our customers ample opportunity to customize their experience and add as much content to the site as possible. Our initial pricing structure is going to be on a per-household basis. We’ll charge $10 ($24) per household covered by the homeowners association. With the average neighborhood having 100 homes, we can expect $1000 ($2400) per neighborhood. This will vary significantly. Initially we plan to start in the Raleigh-Durham and Boston metropolitan areas, but want to expand to other cities within a year. We also are planning to offer sales in existing neighborhoods in the entire state of Massachusetts.

6. Competition and Competitive Advantage NeighborWeb’s most direct competition comes from a non-profit firm, i-Neighbor, which provides a free service but far fewer features. i-Neighbor is a research project being led by MIT to investigate how people use social software in community settings. NeighborWeb’s architecture provides features that i-Neighbor doesn’t such as the ability to buy and sell items and link neighborhood webs together to allow resource sharing. Craigslist also provides a similar service, but to-date has been focused at the city-level. NeighborWeb’s primary competitive advantage comes from the fact that our audience is smaller communities whose members have a higher level of comfort and trust with one another than someone they’ve never met or come in contact with. From an online auction perspective Ebay is our biggest competition. Ebay could start catering smaller communities, but to-date they haven’t made any moves into this area. Other social software companies such as Socialtext and JotSpot provide enterprise software, but nothing geared toward neighborhoods. Their primary focus is more on productivity and process improvement. As NeighborWeb gets more customers who in turn start using our software and entering more information into the system, the harder it will be for them to switch to another system later on. So even if other competitors implement similar features, developing the customer base as early as possible creates a barrier for our competitors.

7. Marketing Plan NeighborWeb’s value proposition for the end user is based on providing customers with an easier and new ways to interact with neighbors. Because of their geographical proximity there are significant extraordinary opportunities for value (e.g. borrow a cup of sugar). Because we expect to make about $1k (2.4k)/year for each sale, each salesman should sell about 5 or 6 neighborhoods per business day. This will be done by direct sales to the higher end neighborhoods (we contact the customer) and by following up on leads generated by advertisements for all other neighborhoods. Our advertising will be directed to vertical market publications whose readership is mostly neighborhood construction companies, or strongly family-oriented consumers. We also approach the existing associations by sending them information and later contact the customers. Most of the existing associations are managing several others associations as well. Comment: (Also we can make money from local stores advertisement)

8. Product Design and Development Plan Our product is very basic; there is no new technology. It is well known how to develop dynamic web sites, what the potential pitfalls are, and how long it takes. The development milestones for the web product, with target dates, are: Month 1 • Dedicated web hosting provider selected • Select development platform, license software • Server-side algorithmic work is detailed Month 2 • Detailed development plan drafted • Begin constructing customer support apparatus • Client-side user interface drafted • Basic backend infrastructure prototyped • ¼ of main features are prototyped Month 3 • Basic infrastructure set up • ¼ of main features are operational • ½ of main features are prototyped • Web hosting passes harsh redundancy and reliability tests Month 4 • Feature development continues… • All main features are operational Month 5 • Alpha version of site internally released • Many bugs are squashed Month 6 • More bug squashing • Dressing up user-facing pieces • Continuing customer support preparations Month 7 • Beta testing & bug fixing

9. Team The NeighborWeb executive team consists of the following members: •

Robbie Allen – Co-Founder, CEO Robbie is an 8 year veteran of Cisco Systems where he lead the organization responsible Cisco’s web-based network management applications. He will oversee day-to-day operations for NeighborWeb. He is also responsible for obtaining funding and setting business strategy. •

Adam Smith – Co-Founder, Chief Technology Officer Adam is an MIT undergraduate senior who has a varied and deep technical background. He has 7 years of programming experience and has technical skills in artificial intelligence. He has worked in a startup on the business side, and also has strong communication and leadership skills. Adam is responsible for technical strategy direction and leads our product development effort. •

Ben Entezam – Co-Founder, VP of Engineering Ben is responsible for overseeing all engineering activity. PLEASE ADD DETAILED BIO •

Janet Allen – VP of Marketing and Sales Janet has worked in real estate for 10 years and understands our primary market very well. She’ll head up marketing efforts and be responsible for the sales force.

10.Financial Prospects Cashflow-based Income Statement Year 1 Year 2 Year 3

Year 4

Revenues Neighborhoods Total ($)

100 100k

2000 2M

3500 3.5M

5000 5M

Expenses COGS

5k

10k

15k

20k

Gross Profit ($) Gross Margin (%)

95k 95

2M 1

3.5M 1

5M 1

Operating Expenses R&D S&M G&A Total

200k 100k 200k 500k

300k 300k 300k 900k

600k 400k 400k 1.4M

800k 700k 500k 2M

Operating Profit

-405k

1.1M

2.1M

3M

11.Company Milestones The following is a breakdown of our short-term and long-term milestones: Short-term: July 2005 – Sign-up 10 customers for NeighborWeb 1.0 Beta August 2005 – Release of NeighborWeb 1.0 Beta September 2005 – Sign-up 30 customers September 2005 – 5 members on advisory board October 2005 – Release NeighborWeb 1.0 December 2005 – Define NeighborWeb 2.0 requirements December 2005 – 15 total employees Long-term: January 2006 – 100 customers February 2006 – Release NeighborWeb 2.0 July 2006 – 20 employees January 2007 – 1000 customers November 2007 – Breakeven January 2008 – 5000 customers

12.The Offering We are seeking $1 million in VC funding for the next two years of operation. In 2007, we will need our second round of funding. We anticipate that we will need an additional $3 million to continue to grow and penetrate major metropolitan areas nationwide. In order to proceed, we anticipate the following funding needs over the next two years: • • •

$800,000: operating expenses such as rent, leases, salaries, etc. $100,000: infrastructure expenses related to hosting our website $100,000: unforeseen expenses that we may incur