Strategic Alternative Presentation -

SAMPLE
Overview
Objective: To review and evaluate paths for to proceed in order to maximize
shareholder value.

✓ Compare being a buyer vs being a seller.

✓ Identify the benefits and challenges of raising capital for growth while retaining
control.

✓ Identify the benefits and challenges of monetizing value creation to date.

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Are You a Buyer or a Seller?

Acquiror or Status Quo Target

Organic
Inorganic/
Growth Sell to a
Platform Sell to a
through Financial
for Roll- Strategic
Capital Sponsor
Ups (B1)
Raise (B2)
(A2)
(A1)

Capitalize
Monetize
(Spin Out?)
Non-Core
Non-Core
Assets
Assets
(B3)
(A3)

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Evaluating the Capital Raise Trade-offs
Path Pro Con

A1 Capital Raise  Shortest time to close  Delays full liquidity event.

– Organic  Could access a partial liquidity event.  Will have new shareholders with protective
Growth  Retain control. provisions and reporting requirements.

A2 Capital Raise  Fastest path to scale  Identify and evaluate qualified strategic or
– Inorganic  Realize cost saves and synergies. underperforming assets/businesses.
Growth/Platfo  Broaden portfolio and future avenues of  Integration risk
rm for Roll- growth.  Delays full liquidity event.
Ups  Could access a partial liquidity event.  Requires management’s focus and time.

A3 Invest in Non-  Conveys technological differentiation.  Need to assess and value portfolio and
Core IP  Helps to sustain long-term growth. opportunities.
 Provides diversification from a nascent CRM  Distraction for management from leading sales
sub-vertical. enablement
 Significant executional risk to scaling multiple
business lines

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Evaluating the Trade-offs of Selling
Path Pro Con

B1 Sell to a  Shareholders experience full liquidity event.  May command a sub-optimal valuation multiple
Strategic  Access to a platform with more resources than to comps.
growth equity capital.  There may be no buyer as an industry
consolidator.
 Earn-out could be a sizeable portion of
consideration.
 Could swap illiquid stock for that of another’s.
B2 Sell to a  Paradoxically, could be easier to sell compared  May command a sub-optimal valuation multiple
Financial to raising given the invested VC money in the to comps and lower than that from a strategic.
Sponsor space.  No sufficient operating cashflow for meaningful
 Availability to more follow-on capital. debt leverage.

B3 Divest Non-  Monetizing existing and under-invested assets  May be time consuming to identify a
Core IP could unlock enough capital to preclude specialized investor base or strategics.
outside dilution.  Will require educating buyers.
 Need to conduct multiple sale processes,
draining resources and is not leverageable, nor
repeatable.
 Longer time to close from a cold start.
 Can IP be carved out neatly?
 May need to provide Transition Services to the
buyers.

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Timeline & Scope of Work – Capital Raise
Documentation &
Pre-Marketing Marketing Post-Close
Due Diligence

0.5 – 1 month 1 – 3 months 1 – 2 months 1 month

• Build and finalize • Line up 1st round • Negotiate & finalize • Implement monthly
fundraising model meetings, beginning term sheet. reporting protocols in
with 3 financing with “off-target” compliance with
scenarios: below, at, investors. • Conduct investor requirements.
and above target. documentation,
• Secure 2nd rounds with drafting, and due
• Create a one-page interested investors. diligence.
teaser.
• Prepare data room. • Finalize SPA, IRA,
• Refine and finalize Voting Agreement &
story & investor deck. • Provide pre-term sheet RoFR.
due diligence.
• Construct target • Receive funds.
investor list. • Identify a lead investor
and negotiate
• Soft market to valuation and terms.
investors.
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Deliverables & Timing – Capital Raise
• Gain fluency with and diligence the existing model, metrics and analyses, 0.5 - 1 week
and prepare questions for management.
❑ Conduct “sell-side preparedness” to identify gaps, weaknesses, or risks
in performance before prospective investors do.
❑ Ensure the published current quarter’s forecast is achievable.

• Refactor budget into a capital raise model. 1 week

❑ Determine target fundraise amount.

• Recast and iterate on investor deck with management’s feedback. 1 - 2 weeks

❑ Slides to add: Why Now, Market Opportunity, Competitive Analysis
Matrix, Product Roadmap and Technology Slide, Use of Proceeds.

• Create a one-page teaser for marketing purposes to institutional investors. 0.5 - 1 week

• Establish investor list 0.5 - 1 week

❑ Share previous investors contacted and summarize interactions.

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Timeline & Scope of Work – M&A
Documentation &
Pre-Marketing Marketing & Bidding Post-Close
Due Diligence

1 – 1.5 month 1.5 – 2.5 months 1 – 2 months 1 - ? month

• Finalize operating • Distribute teaser and • Conduct • If applicable, execute

model & craft story. receive NDAs.
• Prepare & populate
• Conduct sell-side
data room.
preparedness.
• Distribute CIM.
• Create a one-page • Request IOIs
teaser.
• Conduct 1st round
• Draft & finalize meetings, beginning
Confidential Info with firms.
Memo (CIM)/Mgmt • Provide pre-LOI due
deck. diligence.
• Request LOIs.
• Build acquiror list.
• Secure 2nd rounds with
• Soft market to buyers. interested parties.
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documentation, on post-merger
drafting, and integration plans.
complete diligence.
• Negotiate valuation, • If applicable, achieve
terms & select earn-out thresholds.
acquiror.
• Finalize purchase • Release escrow.
agreement.
• Fulfill conditions to
close.
• Receive funds.
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Deliverables & Timing – M&A
• Gain fluency with and diligence the existing model, metrics and analyses, 0.5 - 1 week
and prepare questions for management.
❑ Conduct “sell-side preparedness” to identify gaps, weaknesses, or risks
in performance before prospective buyers do.
❑ Ensure the published current quarter’s forecast is achievable.

• Construct a Confidential Info Memo with an abridged Management Deck, 2 - 4 weeks

soliciting management’s feedback.

• Create a one-page teaser for marketing purposes with a buyer’s 1 week

perspective.

• Develop a buyer list – strategic and private equity. 0.5 - 1 week

❑ Share previous acquisition conversations.

• Establish a request list to populate a data room. 0.5 - 1 week

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VC Funding Landscape
Activity in CRM, Marketing Automation, Sales Automation & Document Management
$ in millions

Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17
$250.0 14

12
$200.0
10
$150.0 8

$100.0 6

4
$50.0
2

$0.0 0
1 2 3 4 5 6 7 8 9 10 11
Amount Raised $60.5 $54.5 $85.0 $88.2 $106.1 $77.9 $133.8 $169.5 $222.4 $166.0 $80.4
# of Deals 4 6 6 7 8 7 11 11 13 13 8

Source: Crunchbase

Equity funding has been steadily gathering speed.

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Sales Automation Has Received $270 mm
Direct competitors have raised considerable funding.
Company Name Last Funding Dat e Last Funding Amount Last Funding Ty pe Tot al Funding Amount
Conversica 12/14/2016 $34,000,000 Series B $56,000,000
Aktana 6/8/2016 $17,500,000 Series Unknown $30,039,999
Pipedrive 1/18/2017 $17,000,000 Series B $31,196,325
Tenfold 3/27/2017 $15,800,000 Series A $17,228,000
Drift 01/13/15 $15,000,000 Series A $15,000,000
ToutApp 03/03/15 $15,000,000 Series B $21,480,000
Cogito Corporation 11/18/2016 $15,000,000 Series B $22,500,000
Tact 12/12/2016 $15,000,000 Series B $26,200,000
PandaDoc 5/23/2017 $15,000,000 Series B $21,055,000
Highspot 6/15/2017 $15,000,000 Series B $26,850,000
Usermind 03/16/16 $14,500,000 Series B $22,100,000
SalesLoft 1/23/2017 $14,500,000 Series B $25,700,000
Handshake 03/17/16 $14,000,000 Series B $23,500,000
MindTickle 11/19/15 $12,500,000 Series A $14,300,000
Workato 7/17/2017 $10,000,000 Series A $10,000,000
DocSend 4/11/2016 $8,000,000 Series A $9,700,000
Colabo 06/07/15 $7,000,000 Series A $10,500,000
Entytle, Inc. 6/7/2017 $6,000,000 Series A $8,052,030
DataFox 07/22/15 $5,000,000 Series Unknown $6,800,000
DialSource 11/4/2016 $5,000,000 Series Unknown $5,000,000

Source: Crunchbase

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Comparable M&A Transactions
Dat e Ent erprise EV/
Announced Target Ticker Sect or Buy er Value (EV) Revenue
Commentary:
12/2012 Eloqua ELOQ Marketing Automation Oracle $871.0 9.7x
06/2013 ExactTarget ET Email Salesforce $2,249.6 7.1x
12/2013 Responsys MKTG Email Oracle $1,589.2 8.2x Multiples have
04/2014 Vocus VOCS PR GTCR $441.7 2.4x
11/2015 Constant Contact CTCT Email Endurance International Group $931.6 2.6x contracted by
05/2016
05/2016
inContact
Marketo
SAAS
MKTO
CRM
Marketing Automation
NICE Systems
Vista Equity Partners
$881.2
$1,560.1
3.8x
6.9x
1x turn since
12/2016 Intralinks IL ECM Synchronoss $854.5 2.9x ‘12 to ’15.
05/2017 Jive JIVE Collaboration Wave Systems (ESW Capital) $334.4 1.6x
05/2017 Xactly XTLY Sales performance Vista Equity Partners $535.9 5.6x
Mean $1,024.9 5.1x Acquirors
Median $876.1 4.7x
High $2,249.6 9.7x
appear to be
Low $334.4 1.6x valuing
Source: Pharus Advisors software
EV/ Revenue
businesses at
4x – 5x LTM
9.7x
8.2x
Revenue.
7.1x 6.9x
2.6x 2.9x 5.6x
3.8x

2.4x
1.6x

Eloqua ExactTarget Responsys Vocus Constant inContact Marketo Intralinks Jive Xactly
Contact

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Going A Layer Deeper
• The mean and median figures are misleading. Transactions are more tail-end weighted than
uniform.

• There is no correlation between purchase size and multiple.

Histogram of Multiples EV vs Multiple

12.0x
3 R² = 0.3536
10.0x

8.0x
2

6.0x

1 1 1 1 1 4.0x

2.0x
0
0.0x
0.0x 2.0x 3.0x 4.0x 5.0x 6.0x 7.0x 8.0x $0.0 $500.0 $1,000.0 $1,500.0 $2,000.0 $2,500.0

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Publicly-Traded Comps
Share Price Market Ent erprise LTM EV / LTM
Company Ticker Sect or 9/11/2017 Cap Value (EV) Revenue Revenue
Salesforce CRM CRM $97.71 $70,200 $68,665 $9,388 7.3x
LifePerson LPSN CRM $13.65 $804 $750 $216 3.5x
ZenDesk ZEN CRM $29.40 $3,000 $2,760 $364 7.6x
BazaarVoice BV CRM $4.95 $424 $366 $203 1.8x
Hubspot HUBS Marketing Automation $72.95 $2,700 $2,497 $318 7.9x
Box BOX ECM $18.31 $2,400 $2,318 $453 5.1x
OpenText OTEX ECM $32.33 $8,500 $10,627 $2,291 4.6x
Callidus CALD S&M LMS $25.05 $1,700 $1,528 $228 6.7x
Instructure INST LMS $30.55 $898 $872 $134 6.5x
LogMeIn LOGM Sales Support $110.90 $5,800 $5,515 $618 8.9x
Mean $9,643 $9,590 $1,421 6.0x
Median $2,550 $2,408 $341 6.6x
High $70,200 $68,665 $9,388 8.9x
Low $424 $366 $134 1.8x

Source: Morningstar

The public equity markets appear to be valuing SaaS businesses a full revenue turn above those
of comparable M&A valuations.

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Analyzing Multiples
Similarly with that of the M&A transactions there is no uniform distribution to valuation multiples
as well as correlation between enterprise value and multiple.

H I S TO G R A M O F M U L TI PL E S E V V S M U L TI PL E
12.0x
3
10.0x R² = 0.0553

8.0x
2
6.0x

4.0x
1 1 1 1 1
2.0x

0.0x
0
$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000
0.0x 2.0x 3.0x 4.0x 5.0x 6.0x 7.0x 8.0x
Note: Excludes Salesforce with $69 B in Enterprise Value

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Summary of Financials and Unit Economics
2013 2014 2015 2016 2017 2018 2019 2020
Revenue $3,804,207 $3,958,640 $4,536,994 $5,656,434 $7,919,008 $11,086,611 $15,521,256 $20,177,633
Growth 4% 15% 25% 40% 40% 40% 30%

WITH EX PANSION @ 10% T=0 Year 1 Year 2 Year 3 Year 4 Year 5

Average Revenue Per Client $120,000 $120,000 $132,000 $145,200 $159,720
Net Ex pansion Rate 10% 10% 10% 10%
Expansion Revenue $0 $12,000 $13,200 $14,520 $15,972
Total Average Revenue Per Client $120,000 $132,000 $145,200 $159,720 $175,692
Gross Margin 83% 83% 83% 83% 83%
Gross Profit $99,600 $109,560 $120,516 $132,568 $145,824
Customer Acquisition Cost Ratio 90% 0% 0% 0% 0% 0%
Customer Acquisition Cost (CAC) ($108,000) $0 $0 $0 $0 $0
Customer Implementation Cost (CIC) $0 $0 $0 $0 $0 $0
Net Customer Profitability ($108,000) $99,600 $109,560 $120,516 $132,568 $145,824
IRR 82% 92% 97%
Lifetime Customer Value (LTV) $329,676 $462,244 $608,068
LTV / CAC 3.1x 4.3x 5.6x
Payback period 13.0

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Range of Valuations
A further examination is required for the appropriate multiples (growth, % recurring revenue,
margin, etc.), but a valuation in-line with the average and possibly in between the high and mean
posts could be warranted.
$ in millions

$90.0

$80.0 $76.8
$70.7
$70.0 $63.2
$60.0 $54.9
$50.5
$50.0
$47.4
$40.0 $40.2 $37.6
$33.9
$30.0 $28.7
$20.0
$11.5
$10.0
$14.3 $12.7
$10.2 $9.1
$0.0
2016 - Trading 2017 - Trading 2016 - M&A 2017 - M&A

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Operational Metrics to Maximize Valuation
The Company is within or exceeds a majority of the operating metrics that SaaS investors
evaluate.
Metric Measurement Company
MoM Net MRR > 10% ~8%

Cash Efficiency (Net New MRR + Expansion / Net Monthly Burn) < -1x or > 0 -0.5x

Run-Rate ARR > $10 mm ~$9 mm

Revenue Growth + EBITDA/FCF margin > 40% 36% for 2016

Quick Ratio (New MRR + Expansion / Churn) > 4x ~11x

LTV/(CAC+CIC) over 3 year period > 3x 3.1x

Payback Period < 12 months 13 months

Below range and look to improve

In the range and tweaks could drive value

Above the range and improvements will have marginal impact

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Current Relationship Landscape – More to Come
Traditional VCs Private Equity (Roll-up Strategic Acquirors Alternative Investors (IP
Investors) (Parts or Whole) asset class, family
office, HNW, other)

MidCap Private Equity

(Financial Acquirors)

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Next Steps
❑ Determine whether there is a desire and appetite to be the consolidator in the
space.

❑ Evaluate competitive positioning (value proposition, go-to-market strategy, IP,

balance sheet, etc.).

❑ Need to understand the scale and scope of the existing patent portfolio.

❑ Depending on the preferred direction, a further examination of comparable

SaaS companies is required to better understand how to position the Company
for a premium valuation multiple.

❑ If the Company wants to be buyer, build and score a list of potential targets.

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APPENDIX – M&A as a Strategy
M&A as a Growth & Value Creation Strategy
Rationale Requirement Applicable
1. Improving Target’s Performance: Detailed analysis on where cuts can
Reduce operating costs to improve margins or be made to ensure top-line
accelerate growth performance
2. Removing Capacity from the Industry: Market analysis to understand pricing
Eliminate or absorb supply in the market and profitability with less capacity
3. Accelerating Target’s or Buyer’s Go-To-Market: Evaluation of product and sale &
Leverage existing distribution channels to push more marketing overlap
product
4. Gaining Buy vs Build Knowledge: In-depth technology review and post-
Access to skills or technology sooner or defensively integration architecture
5. Leveraging Buyer’s Scale: Understanding unit economic and
Apply pricing power for cost saves fixed cost levers
6. Nurturing a Nascent Challenger: Forecasting future investments to
Tucking in an immature business to gestate grow Target
7. Expanding reach: Research go-to-market aspect of new
Penetrating a new geography territory
Source: McKinsey & Company, “The Six Types of Successful Acquisitions,” May 2017

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M&A as a Growth & Value Creation Strategy

Source: McKinsey & Company, “The Six Types of Successful Acquisitions,” May 2017

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Less Successful Reasons for M&A - Checklist
Rationale Requirement Applicable
Rolling Up Competitors: Identification of value drivers with
Achieving scale in fragmented markets scale (cost saves or revenue)

Pursuing a Transformational Merger: Thorough vetting of synergies and

Redefining the company’s mission strategic alignment

Shopping on a Budget: Assessment to avoid buying a value

Purchasing assets on the cheap with expectations for trap
multiple expansion

Alternatives to M&A Requirement Applicable

Partnering for Technical Development

Partnering for Sales & Marketing Distribution

Dedicating resources to a Joint Venture

Source: McKinsey & Company, “The Six Types of Successful Acquisitions,” May 2017

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Potential Value Creation vs Complexity
Value Creation Opportunity

Incubate Transfor
Catalyze mation
Adoption

Acquire
Know-
How
Expand
Reach Roll-Up
Economies
of Scale

Remove
Capacity Bargain
Cost
cutting Buying

Integration Risk

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