NORCAT Entrepreneurship 101 - "Lived it Lecture" featuring Mike Amos, Founder/CEO, Empathica

The content of this presentation is strictly confidential and may not be shared without expressed written consent of Mike Amos.

10 LESSONS - THE

EMPATHICA STORY

The content of this presentation is strictly confidential and may not be shared without expressed written consent of Mike Amos.

2

BACKGROUND

Founded – 2002, Mississauga ON

Problem – Lack of consumer insight lead retailers to waste billions on failed promotions and attrite billions due to poor operational execution.

Market - $28B market research / $1B mystery shopping

Enabling Technologies – Consumer Internet usage + IVR + flexible POS systems

3

BACKGROUND

4

BACKGROUND

Disruptive Components

- Real – time data collection = speed to market

- High end professional services integrated into a

recurring revenue stream

- Online (ASP) delivery

- Service-based fee structure (SaaS) (+rev visibility / -

customer funding limitations)

- Team mobilization features

- Target buyer and cost positioning

5

EMPATHICA STORY

‘02 Founded

/ Rev.+

– 375k deal

with FP

‘03 – CDN

Inflection Point

booked $3M+ in

ARR

‘05 – Chart a

New Course

- 15% EBITDA

- V2

- UK entry

- JPN entry

‘06 - $7M PE

(2M secondary)

- US / UK

acceleration

07 – Tidal

Wave

$11M ARR

- 89% Rev

Growth,

150%

Bookings

‘08 – Go Message =

1.5M Disaster

-Launch Campaign

- $4M debt

09 – Roller Coaster

- 9M

Bookings

-4M debt covenants

breached

- $6M debt restructure

- 18% decrease in ee’s

- Flat Revenue @13M

- Go Recommend – has

anyone every heard of

facebook?

10 – Team Reboot

- GR sell in first

11 – Sbux –

largest deal in Co.

History @ 2.5M

- Forrester Argh!

12 – Go Recommend

-UX Rebuild

- Social Intell.

- iBank Hired

- Senior Ops

13 – 22M ARR,

Acquisition

‘02 Beach

Head

~$1M SDM

- Angel round

$250k

1

10

5 64 7

9

82 3

11

6

1. I HAVE TO SELL? – HOLY S#*T!

• You need to be your company’s best sales person

whether you close or not

• The sales process informs everything else

• Investors need market validation

• Prospects demand market validation

7

EMPATHICA STORY

‘02 Founded

/ Rev.+

– 375k deal

with FP

‘03 – CDN

Inflection Point

booked $3M+ in

ARR

‘05 – Chart a

New Course

- 15% EBITDA

- V2

- UK entry

- JPN entry

‘06 - $7M PE

(2M secondary)

- US / UK

acceleration

07 – Tidal

Wave

$11M ARR

- 89% Rev

Growth,

150%

Bookings

‘08 – Go Message =

1.5M Disaster

-Launch Campaign

- $4M debt

09 – Roller Coaster

- 9M

Bookings

-4M debt covenants

breached

- $6M debt restructure

- 18% decrease in ee’s

- Flat Revenue @13M

- Go Recommend – has

anyone every heard of

facebook?

10 – Team Reboot

- GR sell in first

11 – Sbux –

largest deal in Co.

History @ 2.5M

- Forrester Argh!

12 – Go Recommend

-UX Rebuild

- Social Intell.

- iBank Hired

- Senior Ops

13 – 22M ARR,

Acquisition

‘02 Beach

Head

~$1M SDM

- Angel round

$250k

1

10

5 64 7

9

82 3

11

8

2. TERMS ARE MORE IMPORTANT

THAN VALUATION

• Understand all the gotcha’s:

– Anti dilution

– Liquidity preference

– Put options

– Board and committees

– ROFR’s

– Drag along dividends

– Covenants? Yes, covenants.

– Who’s the Chairman?

– Number of seats

9

EMPATHICA STORY

‘02 Founded

/ Rev.+

– 375k deal

with FP

‘03 – CDN

Inflection Point

booked $3M+ in

ARR

‘05 – Chart a

New Course

- 15% EBITDA

- V2

- UK entry

- JPN entry

‘06 - $7M PE

(2M secondary)

- US / UK

acceleration

07 – Tidal

Wave

$11M ARR

- 89% Rev

Growth,

150%

Bookings

‘08 – Go Message =

1.5M Disaster

-Launch Campaign

- $4M debt

09 – Roller Coaster

- 9M

Bookings

-4M debt covenants

breached

- $6M debt restructure

- 18% decrease in ee’s

- Flat Revenue @13M

- Go Recommend – has

anyone every heard of

facebook?

10 – Team Reboot

- GR sell in first

11 – Sbux –

largest deal in Co.

History @ 2.5M

- Forrester Argh!

12 – Go Recommend

-UX Rebuild

- Social Intell.

- iBank Hired

- Senior Ops

13 – 22M ARR,

Acquisition

‘02 Beach

Head

~$1M SDM

- Angel round

$250k

1

10

5 64 7

9

82 3

11

10

3. YOUR FIRST CUSTOMERS ARE

WORTH 100X THEIR REVENUE IN

FUTURE ENTERPRISE VALUE

• Over invest in initial customers

• People buy from people they like and

trust

• Get on their side as quickly as

possible

• Be clear in your expectations of each

other

Market Entry Domino’s

Famous Players Shoppers Drug Mart (~ 6M) Cara Foods (~ 3M)/Petro Can (~ 3M) / HBC (~ 1M) / Esso (~ 2M) etc.

McDonald’s Canada

McDonald’s US Brinker (~5M) / Pizza Hut (~7M) / Applebee’s (~3M) / Starbucks (~ 6M)

Mitchell’s and Butlers Boots PLC (~ 12M) ASDA (~ 2M) / Tesco (~ 1.5M) / Waitrose (~ 2M) / TJX / New Look / etc.

11

EMPATHICA STORY

‘02 Founded

/ Rev.+

– 375k deal

with FP

‘03 – CDN

Inflection Point

booked $3M+ in

ARR

‘05 – Chart a

New Course

- 15% EBITDA

- V2

- UK entry

- JPN entry

‘06 - $7M PE

(2M secondary)

- US / UK

acceleration

07 – Tidal

Wave

$11M ARR

- 89% Rev

Growth,

150%

Bookings

‘08 – Go Message =

1.5M Disaster

-Launch Campaign

- $4M debt

09 – Roller Coaster

- 9M

Bookings

-4M debt covenants

breached

- $6M debt restructure

- 18% decrease in ee’s

- Flat Revenue @13M

- Go Recommend – has

anyone every heard of

facebook?

10 – Team Reboot

- GR sell in first

11 – Sbux –

largest deal in Co.

History @ 2.5M

- Forrester Argh!

12 – Go Recommend

-UX Rebuild

- Social Intell.

- iBank Hired

- Senior Ops

13 – 22M ARR,

Acquisition

‘02 Beach

Head

~$1M SDM

- Angel round

$250k

1

10

5 64 7

9

82 3

11

12

4. PROGRESS DOESN’T FEEL

GOOD

• Put your head up from inside the trenches and

get a good look at what’s really happening

• Transformative events are painful

• Benchmark and be BOLD

13

EMPATHICA STORY

‘02 Founded

/ Rev.+

– 375k deal

with FP

‘03 – CDN

Inflection Point

booked $3M+ in

ARR

‘05 – Chart a

New Course

- 15% EBITDA

- V2

- UK entry

- JPN entry

‘06 - $7M PE

(2M secondary)

- US / UK

acceleration

07 – Tidal

Wave

$11M ARR

- 89% Rev

Growth,

150%

Bookings

‘08 – Go Message =

1.5M Disaster

-Launch Campaign

- $4M debt

09 – Roller Coaster

- 9M

Bookings

-4M debt covenants

breached

- $6M debt restructure

- 18% decrease in ee’s

- Flat Revenue @13M

- Go Recommend – has

anyone every heard of

facebook?

10 – Team Reboot

- GR sell in first

11 – Sbux –

largest deal in Co.

History @ 2.5M

- Forrester Argh!

12 – Go Recommend

-UX Rebuild

- Social Intell.

- iBank Hired

- Senior Ops

13 – 22M ARR,

Acquisition

‘02 Beach

Head

~$1M SDM

- Angel round

$250k

1

10

5 64 7

9

82 3

11

14

5. YOU NEED TO BAKE

• 3 Cities, 16 meetings, 8 term sheets, 2 deals

• If you don’t like each other, don’t get into business together

• It’s not over until the wire transfers are completed

• Take secondary if you can get it, negotiate the second tranche

15

EMPATHICA STORY

‘02 Founded

/ Rev.+

– 375k deal

with FP

‘03 – CDN

Inflection Point

booked $3M+ in

ARR

‘05 – Chart a

New Course

- 15% EBITDA

- V2

- UK entry

- JPN entry

‘06 - $7M PE

(2M secondary)

- US / UK

acceleration

07 – Tidal

Wave

$11M ARR

- 89% Rev

Growth,

150%

Bookings

‘08 – Go Message =

1.5M Disaster

-Launch Campaign

- $4M debt

09 – Roller Coaster

- 9M

Bookings

-4M debt covenants

breached

- $6M debt restructure

- 18% decrease in ee’s

- Flat Revenue @13M

- Go Recommend – has

anyone every heard of

facebook?

10 – Team Reboot

- GR sell in first

11 – Sbux –

largest deal in Co.

History @ 2.5M

- Forrester Argh!

12 – Go Recommend

-UX Rebuild

- Social Intell.

- iBank Hired

- Senior Ops

13 – 22M ARR,

Acquisition

‘02 Beach

Head

~$1M SDM

- Angel round

$250k

1

10

5 64 7

9

82 3

11

16

6A. EDUCATE YOUR BOARD ON

RESPONSIBLE GROWTH • No one wants to

rebuild

• Undeniable link between revenue growth and valuation

• Growth = bookings -attrition

• Reputation is critical to future success

17

6B. VALUATION ALCHEMISTS

• Acquirers buy the present value of discounted future earnings

• Correlation does not equal causation

• Timing is everything

• Capitalize on hot streaks

Insert alchemist pic

18

6C.UNDERSTAND YOUR LIMITS /

HAVE TWO PLANS

150% growth in booked sales

+89% growth in recognized revenue

+Successful acceleration in two key geographic

markets

=Failure

19

EMPATHICA STORY

‘02 Founded

/ Rev.+

– 375k deal

with FP

‘03 – CDN

Inflection Point

booked $3M+ in

ARR

‘05 – Chart a

New Course

- 15% EBITDA

- V2

- UK entry

- JPN entry

‘06 - $7M PE

(2M secondary)

- US / UK

acceleration

07 – Tidal

Wave

$11M ARR

- 89% Rev

Growth,

200%

Bookings

‘08 – Go Message =

1.5M Disaster

-Launch Campaign

- $4M debt

09 – Roller Coaster

- 9M

Bookings

-4M debt covenants

breached

- $6M debt restructure

- 18% decrease in ee’s

- Flat Revenue @13M

- Go Recommend – has

anyone every heard of

facebook?

10 – Team Reboot

- GR sell in first

11 – Sbux –

largest deal in Co.

History @ 2.5M

- Forrester Argh!

12 – Go Recommend

-UX Rebuild

- Social Intell.

- iBank Hired

- Senior Ops

13 – 22M ARR,

Acquisition

‘02 Beach

Head

~$1M SDM

- Angel round

$250k

1

11

5 64 7

9

82 3

1210

20

7. NEVER GET TOO FULL OF

YOURSELF

Innovate, Validate, Build, Validate, Refine,

Validate, Scale, Validate

21

EMPATHICA STORY

‘02 Founded

/ Rev.+

– 375k deal

with FP

‘03 – CDN

Inflection Point

booked $3M+ in

ARR

‘05 – Chart a

New Course

- 15% EBITDA

- V2

- UK entry

- JPN entry

‘06 - $7M PE

(2M secondary)

- US / UK

acceleration

07 – Tidal

Wave

$11M ARR

- 89% Rev

Growth,

150%

Bookings

‘08 – Go Message =

1.5M Disaster

-Launch Campaign

- $4M debt

09 – Roller Coaster

- 9M

Bookings

-4M debt covenants

breached

- $6M debt restructure

- 18% decrease in ee’s

- Flat Revenue @13M

- Go Recommend – has

anyone every heard of

facebook?

10 – Team Reboot

- GR sell in first

11 – Sbux –

largest deal in Co.

History @ 2.5M

- Forrester Argh!

12 – Go Recommend

-UX Rebuild

- Social Intell.

- iBank Hired

- Senior Ops

13 – 22M ARR,

Acquisition

‘02 Beach

Head

~$1M SDM

- Angel round

$250k

1

11

5 64 7

9

82 3

1210

22

8. TIMING IS EVERYTHING

23

EMPATHICA STORY

‘02 Founded

/ Rev.+

– 375k deal

with FP

‘03 – CDN

Inflection Point

booked $3M+ in

ARR

‘05 – Chart a

New Course

- 15% EBITDA

- V2

- UK entry

- JPN entry

‘06 - $7M PE

(2M secondary)

- US / UK

acceleration

07 – Tidal

Wave

$11M ARR

- 89% Rev

Growth,

150%

Bookings

‘08 – Go Message =

1.5M Disaster

-Launch Campaign

- $4M debt

09 – Roller Coaster

- 9M

Bookings

-4M debt covenants

breached

- $6M debt restructure

- 18% decrease in ee’s

- Flat Revenue @13M

- Go Recommend – has

anyone every heard of

facebook?

10 – Team Reboot

- GR sell in first

11 – Sbux –

largest deal in Co.

History @ 2.5M

- Forrester Argh!

12 – Go Recommend

-UX Rebuild

- Social Intell.

- iBank Hired

- Senior Ops

13 – 22M ARR,

Acquisition

‘02 Beach

Head

~$1M SDM

- Angel round

$250k

1

11

5 64 7

9

82 3

1210

24

9. MANAGE THE ANALYSTS

Think of 1,000,000 consecutive swear words….

25

EMPATHICA STORY

‘02 Founded

/ Rev.+

– 375k deal

with FP

‘03 – CDN

Inflection Point

booked $3M+ in

ARR

‘05 – Chart a

New Course

- 15% EBITDA

- V2

- UK entry

- JPN entry

‘06 - $7M PE

(2M secondary)

- US / UK

acceleration

07 – Tidal

Wave

$11M ARR

- 89% Rev

Growth,

150%

Bookings

‘08 – Go Message =

1.5M Disaster

-Launch Campaign

- $4M debt

09 – Roller Coaster

- 9M

Bookings

-4M debt covenants

breached

- $6M debt restructure

- 18% decrease in ee’s

- Flat Revenue @13M

- Go Recommend – has

anyone every heard of

facebook?

10 – Team Reboot

- GR sell in first

11 – Sbux –

largest deal in Co.

History @ 2.5M

- Forrester Argh!

12 – Go Recommend

-UX Rebuild

- Social Intell.

- iBank Hired

- Senior Ops

13 – 22M ARR,

Acquisition

‘02 Beach

Head

~$1M SDM

- Angel round

$250k

1

11

5 64 7

9

82 3

1210

26

10. IF YOU WANT TO GET A JOB

DONE FAST – WORK SLOW

• Change from waterfall – agile XP

• Completely different talent profile

• Rebuilt development team

• 4 UX designers

• Rebuilt the customer success team

27

EMPATHICA STORY

‘02 Founded

/ Rev.+

– 375k deal

with FP

‘03 – CDN

Inflection Point

booked $3M+ in

ARR

‘05 – Chart a

New Course

- 15% EBITDA

- V2

- UK entry

- JPN entry

‘06 - $7M PE

(2M secondary)

- US / UK

acceleration

07 – Tidal

Wave

$11M ARR

- 89% Rev

Growth,

150%

Bookings

‘08 – Go Message =

1.5M Disaster

-Launch Campaign

- $4M debt

09 – Roller Coaster

- 9M

Bookings

-4M debt covenants

breached

- $6M debt restructure

- 18% decrease in ee’s

- Flat Revenue @13M

- Go Recommend – has

anyone every heard of

facebook?

10 – Team Reboot

- GR sell in first

11 – Sbux –

largest deal in Co.

History @ 2.5M

- Forrester Argh!

12 – Go Recommend

-UX Rebuild

- Social Intell.

- iBank Hired

- Senior Ops

13 – 22M ARR,

Acquisition

‘02 Beach

Head

~$1M SDM

- Angel round

$250k

1

11

5 64 7

9

82 3

1210

28

IF 10 IS TOO MUCH,

REMEMBER 3

1. Do it because you love: it, the Team, and the

Customers

2. Everything takes twice as long and costs twice as

much

3. Move fast, work slow and build with scale in mind

29

QUESTIONS?