Investor presentation                                                          March 2013                                 ...
Confidentiality and disclaimer             This presentation is strictly confidential, and recipients must not disclose an...
agenda   team   philosophy   solution   market   competition   financial projections   distribution channels   mil...
team                           Matthew Pleatman, CEO & founder                           • BSE Electrical Engineering & BS...
teamVP of Marketing – Xu Rui               BS Economics & Computer Science, Minor Statistics               Duke University...
apple – the forefront of innovation?Confidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Ch...
iPhone 1                                       iPhone 5                     Make phone calls                            ...
why has this been the case?         Every consumer has features that they need and features that they want         Feature...
so how are we currently satisfying our wants?                                                     •   Software-based      ...
so how are we currently satisfying our wants?                                         Apps                                ...
modzCase - first glimpse                                                          A protective case for your iPhone,      ...
modzCase - features                                                     laser                                             ...
consumer desire intersects with the modzCase•      In a survey of over 100 smartphone       users1, 68% and 77% indicated ...
with similar signals from the broader market    Spending on accessories rising rapidly1…                      … and cases ...
competitive landscape: wireless mouse                                                                          Traditional...
competitive landscape: case integrated battery                                                                            ...
competitive landscape: call recording                                                                              Hardwar...
financial projectionsBase case assumptions:                                    Modzify - Financial projections            ...
distribution channels       Crowd funding                                          Amazon                 Online storefron...
milestones  status:         — demonstrated consumer demand through market research         — prototyping design establishe...
sources and usespost-financing deliverables:                              Total round 1 fundraising sought:               ...
thank youConfidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge.   22
APPENDIXConfidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge.   23
breakeven analysis            Modzify - Breakeven analysis                                                          Downsi...
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Modzify Investor Presentation

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Modzify Investor Presentation

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Transcript of "Modzify Investor Presentation"

  1. 1. Investor presentation March 2013 Duke Startup ChallengeConfidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge.
  2. 2. Confidentiality and disclaimer This presentation is strictly confidential, and recipients must not disclose any written or verbal information provided to them in this presentation or thereafter to any third party, without the prior written consent of an authorized Modzify representative. This presentation does not constitute an offer to sell or a solicitation of an offer to buy any securities. Its sole purpose is to introduce prospective investors with Modzify, and it does not contain all information that may be material. Recipients should conduct their own independent evaluations of the information provided, and consult their own tax, financial and legal advisors. None of the Modzify companies makes any representation or warranty (expressed or implied), as to the accuracy or completeness of any of the information provided, and none of them shall have any liability relating to the use of any information provided. Any market analysis and financial projections in the information provided represent the subjective views of the management of the Modzify companies, and their current estimates of future performance based on assumptions which management believes are reasonable, but which may not prove to be correct. There can be no assurance that management’s view or projections are accurate, or that they will be realized. None of the Modzify companies intend to update this particular presentation.Confidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge. 2
  3. 3. agenda team philosophy solution market competition financial projections distribution channels milestones sources & usesConfidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge. 3
  4. 4. team Matthew Pleatman, CEO & founder • BSE Electrical Engineering & BS Economics (Duke University, Pratt School of Engineering) • Associate engineer, General Motors • 3+ startups, CTO - successful consumer products Mike Qu, CFO & co-founder • BSE Mechanical Engineering & BS Economics (Duke University, Pratt School of Engineering) • Investment banking - Deutsche Bank AG • Private equity - Huaneng Invesco WLR Michael Feng, CTO & co-founder • BSE Electrical/Mechanical Engineering & M.Eng Mechanical Engineering (Duke University, Pratt School of Engineering) • Associate engineer, General Motors • Race car vehicle engineerConfidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge. 4
  5. 5. teamVP of Marketing – Xu Rui BS Economics & Computer Science, Minor Statistics Duke University Class of 2014VP of Sales – Kristin Cole BS Economics, Minor Spanish, Politics Philosophy Economics Certificate Duke University Class of 2014VP of Strategy – Shadi Feddin BSc Chemistry Duke University Class of 2015Confidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge. 5
  6. 6. apple – the forefront of innovation?Confidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge. 6
  7. 7. iPhone 1 iPhone 5  Make phone calls  Make clearer phone calls  Send messages  Send more messages  Take pictures  Take better pictures  Surf the internet  Surf the internet faster  Check email  Check email faster  Listen to music  Listen to more music  FaceTime  GPS navigation The only truly innovative additions over 6 years of iPhones have been the frontward-Confidential and proprietary to Modzify LLC. facing camera and GPSDisclosed in confidence to Duke Startup Challenge. 7
  8. 8. why has this been the case? Every consumer has features that they need and features that they want Features that people need are largely similar among consumers Features that people want vary significantly from user to user For companies like Apple, catering towards fragmented wants is highly unprofitableWhat does this mean for you? You will never see all the features you want on your smartphone Confidential and proprietary to Modzify LLC. Disclosed in confidence to Duke Startup Challenge. 8
  9. 9. so how are we currently satisfying our wants? • Software-based • Highly diverse Inherently Apps • Low barriers to entry limited by (Internal) • Primarily personalization & hardware functionality After-market options Untapped potential • Physical enhancements Limited Cases • Primarily protection & creativity / (External) personalization out of box • Many similar options thinkingConfidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge. 9
  10. 10. so how are we currently satisfying our wants? Apps (Internal) After-market options Modzify believes in empowering users to distinctively expand the functionality of their smartphones through an elegant marriage of software and hardware Cases (External)Confidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge. 10
  11. 11. modzCase - first glimpse A protective case for your iPhone, but so much more…. laser pointer, call recorder, wireless mouse, and battery packConfidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge. 11
  12. 12. modzCase - features laser pointer integrated battery pack call recorder wireless mouse sensorConfidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge. 12
  13. 13. consumer desire intersects with the modzCase• In a survey of over 100 smartphone users1, 68% and 77% indicated an interest in call recording and laser pointer hardware respectively• For large OEMs such as Apple, however, 70% market interest may not be enough to merit implementation in the next hardware release• Even a smaller penetration rate – 42% among surveyed regarding wireless mice – represents over 25mm users2• As a result, these users will never have their desires fully satisfied• Modzify fills in the gap that Apple leaves behind, allowing users to fully customize smartphone functionality and satisfy all their wants Confidential and proprietary to Modzify LLC. Disclosed in confidence to Duke Startup Challenge. 13 1 Proprietary survey conducted by Modzify 2 Assuming 60mm active subscribers, according to comScore MobiLens research for 2012
  14. 14. with similar signals from the broader market Spending on accessories rising rapidly1… … and cases leading accessory sales2 Evolving accesory market Demonstrated demand3• Shift in consumer behavior means the iPhone • Revenues for mobile phone accessories in the accessory must hone an intelligent US increased 32% during first half of 2012 functionality – smartcase – to complement the • Mobile phone cases grew 69% in category size smartphone capabilities over a year• This market has been largely untouched by • Case sales grew as average prices for products large, traditional players increased 25%3 Confidential and proprietary to Modzify LLC. 1 ABI Research, 2012 Disclosed in confidence to Duke Startup Challenge. 14 2 NPD Group Mobile Telecommunications Factsheet, 2010 3 NDP Group, 21 August 2012
  15. 15. competitive landscape: wireless mouse Traditional Hardware Multi- Description Price Mouse? free? tasking? Traditional wireless $59.99 mouse Motion-based mouse, trackpad, and $1.99 wireless remote Logitech Controls PC Touch via server Free Mouse connection Built-in iPhone case $79.991Confidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge. 15 1 Informed by Modzify pricing study
  16. 16. competitive landscape: case integrated battery Case Other Description Price integrated? Battery Life capabilities?Anker® Astro Connects via 5600mAh USB to 2-3 full Backup iPhone, iPad, $49.99 Flash light External charges iPodBattery Pack Incipio® LED indicator offGRID lights inform Doubles Backup backup battery $69.99 battery lifeBattery Case life MiSuny iPower 4 Recharges Increases phone with $105.00 life by solar energy 200% laser, call Built-in Doubles recorder, iPhone case $79.991 battery life mouse, battery Confidential and proprietary to Modzify LLC. Disclosed in confidence to Duke Startup Challenge. 16 1 Informed by Modzify pricing study
  17. 17. competitive landscape: call recording Hardware Subscription Recording Description Pricing free? free? storage Olympus Audio splitter TP-7 External to recording $38.87Telephone device drive pickup FSV-510 External Mobile audio $189.99 Cassette Recorder recorderCallRec.me Third-party $0.67 iPhone + other dial-in record per rec only apps Internet- $29.99 – Cloud based $149.99 only subscription Built-in Cloud & iPhone case $79.991 iPhone Confidential and proprietary to Modzify LLC. Disclosed in confidence to Duke Startup Challenge. 17 1 Informed by Modzify pricing study
  18. 18. financial projectionsBase case assumptions: Modzify - Financial projections ($ in thousands) Year 1 Year 2 Year 3 Year 4 Year 5 — 0.01% initial overall iOS Unit sales 6.17 16.37 39.04 82.67 174.87 penetration rate growing to 0.25% % growth 165.4% 138.5% 111.8% 111.5% in five years Total revenues $ 493.35 $ 1,309.15 $ 3,122.65 $ 6,612.84 $ 13,988.10 — Weighed average price of $79.99 % growth 165.4% 138.5% 111.8% 111.5% — Domestic active mobile subscriber COGS 7.89 20.95 49.96 105.81 223.81 % revenue 1.60% 1.60% 1.60% 1.60% 1.60% growth of 0.9% SG&A 475.42 720.03 1,561.33 3,306.42 6,994.05 — Domestic iOS / mobile penetration % revenue 96.37% 55.00% 50.00% 50.00% 50.00% R&D 175.00 262.50 262.50 262.50 262.50 rate capped at 31.5% % revenue 35.47% 20.05% 8.41% 3.97% 1.88% EBIT $ (164.97) $ 305.67 $ 1,248.86 $ 2,938.11 $ 6,507.74 % growth 154.0% 308.6% 135.3% 121.5%Upside case assumptions: Case by case EBIT — Same as base case assumptions excluding: — Assumed penetration growing to 2% of total active iOS units — Cost structure same as base caseConfidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge. 18
  19. 19. distribution channels Crowd funding Amazon Online storefront De-risks business by  Amazon “Fulfillment  Initial lower cost demonstrating by Amazon” plan proprietary channel demand handles storage, providing first direct shipping and customer contact to customer Covers majority of service manufacturing costs  Planned penetration associated with first  No minimum unit into traditional brick production round requirement and mortar distributors by year 2 Helps generate  Net impact on margins publicity ~17% per unitConfidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge. 19
  20. 20. milestones status: — demonstrated consumer demand through market research — prototyping design established — initiated patent protection process — began Apple MFi approval process — seeking initial $50,000 investment for prototyping and IP costs timeline: February 15, July 31 November 30, 2013 2013 2013 Preliminary Investor Close of first Supply chain & distributor Begin mass production prototyping, presentations round contracts seek financing, seed fundraising prototype functionalConfidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge. 20
  21. 21. sources and usespost-financing deliverables: Total round 1 fundraising sought: $580,000 —Shipped 5,000 units (primarily crowd funding) Sources —Prototyping and R&D of first two Duke Startup Challenge 50,000 products completed Crowd funding campaign 330,000 Individual investors 200,000 —Production tooling completed Total sources 580,000 —First manufacturing run completed Uses —3 utility patents, 2 design patents filed Tooling 100,000 —Product placement on Amazon and online Contract engineering 150,000 storefront Market research 15,000 —Financing adequacy until January 1, 2014 Office rental 60,000 Travel 25,000 Salary 150,000 Patents 60,000 Other legal 20,000 Total uses 580,000Confidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge. 21
  22. 22. thank youConfidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge. 22
  23. 23. APPENDIXConfidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge. 23
  24. 24. breakeven analysis Modzify - Breakeven analysis Downside Base Upside Unit price $69.99 $79.99 $89.99 Units sold (mm) 6,071 10,158 5,698 Revenue $424,926 $812,525 $512,790 Unit COGS $14.40 $16.00 $17.60 COGS $87,426 $162,525 $100,290 Gross Profit $337,500 $650,000 $412,500 % GM 79.43% 80.00% 80.44% Fixed costs $337,500 $650,000 $412,500 Operating profit ($0.17) ($0.00) ($0.40) % margin 0.00% 0.00% 0.00%Confidential and proprietary to Modzify LLC.Disclosed in confidence to Duke Startup Challenge. 24

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