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?
