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1. Proposal Title/Headline

Establised software for global construction industry

2. Business Summary

Business sells web-enabled software applications to its construction industry customers which reduce costs incurred and time spent managing and controlling the vast amount of information and documentation required for medium and large projects. Software applications achieve this by enabling all participants in a project to communicate,share and transfer project documentation electronically. Business has committed revenues of $1.3 million across 40 construction projects primarily from large developers and construction company customers in Australia, including Grocon, Multiplex, Probuild, The Gandel Group, McConnell Dowell, Hansen Yuncken, Becton, Buxton, Fletcher Projects, Abigroup, CMR Project Managers, Australand and Smorgan. 30 of the 40 projects under management are from repeat customers or customers using the product across multiple projects. The product is globally competitive and scaleable and is currently being trialled in Singapore and Europe. Business is projected to be cash flow positive in Q1 2003, and produce EBITDA of $6.8 million by 2006. Business has raised $3.1 million at $2.00 per convertible preference share since July 2000 and is seeking further funding of $1.7 million, also at $2.00 per convertible preference share.

Updates

3. Estimate of Market Size and Growth Potential

Financials relate only to Australia as management is concentrating on firmly establishing the product in that market before going offshore. The business has achieved sales so far of about $300,000 and an additional $1 million in forward sales orders. There are attractive offshore markets, for example, we are currently scoping the UK and Scandanavian markets and the product is being trialled in Singapore and Europe.

4. Market Demand

In the construction industry significant costs and time are incurred managing large volumes of complex information. This is essentially in the form of printed plans and specifications and frequent amending documentation. On large projects it is not uncommon for these tendering documents to go to more than 100 subcontractors and once selected every time a small change is made to the project they all require notification of the amendments. This requires time and expenses to update documents,log all details, couriers etc. We reduce customer's costs by more than 3% of a project's value for a fee between 0.1 - 0.2%.

5. Competitive Advantage

Lower Sale Price
Large MarketShare
Intellectual Property

There are 2 levels of competitive advantage. 1. Our product versus the status quo: Cost savings are in reduced labour, printing & courier costs and amount to approximately 3% of a projects value. Beneficiaries are a mixture of developer, head contractor and sub-contractors. Additional significant cost and time savings are made when changes are made to the design of the building as all participants must be notified. This is normally done by reprinting all documents for the project and couriering them to all participants who have to reprocess them. Our software eliminates all this time and cost and updates any changes to all participants immediately. 2.Our product versus other software products: In Australia there are 2 other known competitors or potential competitors. One is an internal system currently being developed by a construction company. This is unlikely to be used by others in the industry. A second competitive product evolved from a small print centre. Offshore, there are a number of other businesses offering similar products. An assessment of their product offerings and value proposition suggests our product can successfully compete with those products offshore.

6. Market Distribution

The pre-sale phase focuses on the influencers on a project - developer, head contractor and project manager. Pre-sales is currently undertaken by 1.5 people (full time equivalent) and the 2 founders. This is done by initial phone call to senior management of developers / head contractors / project managers followed by detailed presentations. Once an inital sale is made it is highly likely (>75%) that the client will add other projects to the system. Far less sales effort is required for this.

7. Management

Founder and Director: formerly worked with McKinsey & Company, specialising in e-commerce strategy and implementation across a range of industries including IT, media, financial services and construction products. Has a Bachelor of Engineering (Honours),Bachelor of Science (Mathematics) and Diploma of Modern Languages (French) Founder and Director: formerly worked with Multiplex Construction as Project Coordinato/Site Supervisor on high-rise residential developments. Previously worked with Deloitte Touche Tohmatsu as an auditor. Has Masters of Property & Construction, Bachelor of Planning & Design - Building (Honours) and Bachelor of Commerce. Development Director: has over 25 years construction industry experience in both project management and estimating, working with companies including Salzer (Abigroup), Costain and Kumagai. Has Bachelor of Building. Technical Software Architect: has over 25 years IT experience. Has specialised system achitecture and design, programming and IT project management. Previously worked in IT with Ernst and Young, CitiPower, Traveland and InvestorWeb. Business also has an IT team of 6 java programmers and a graphic designer. Several significent advisers are available when needed.

8. Technology

System is based on open source technologies and runs on the Linux platform. Java and XML is used to deliver the web application. No software needs to be installed to use the technology; - users just access the system through a standard web browser. The company owns 100% of the system and has patented a key aspect of its tendering process.

9. Product Development

Product is fully developed and is currently being used on more than 40 construction projects, worth more than $4 billion, by over 1000 companies. Improvements/refinements to the current product and new products are also under development.

10. Scalability

Product is highly scaleable in both Australia and offshore. Most fixed costs are in product development and sales & marketing. Variable costs represent only a small proportion of the sales price enabling the sales team to generate significant revenue and profit margins.

11. Intellectual Property in SME's Business

Copyright
Patents
Trademark

Original software and website are protected by standard copyright law. Key element of the software system is the Cascading Tender System. Business has developed an entirely original application that offers significant efficiency and cost savings for users. A patent application for the Cascading Tender System has been filed. All relevant trademarks have been registered to protect the brands owned by the business.

12. Barriers to Entry

Once our systems have market share and industry acceptance, barriers to entry will discourage new players from entering the market. The network effects generated will add value to the business's customers and provide a disincentive to leave and join a less established system. Unless new competitors can immediately match the business's level of service and information provision, switching costs will prevent customers from leaving.

13. Milestones

$5.0 billion of projects under management - by Sept 2002 Maintain 80% of sales to repeat customers Cash flow breakeven by March 2003

14. Risks

Competitors - Company’s success will depend on innovation and service levels that enable it to outperform its competitors. Management of Potential Growth - Management of such growth will depend upon the skill of the Company’s executive officers to operate effectively and meet the challenges. Intellectual Property Rights - business relies on the protection afforded by a combination of copyright and trademark laws, trade secrets, patents, confidentiality procedures and contractual provisions. Reliance on Key Personnel- Directors own shares in the company and employees hold options over shares, providing an incentive to perform and remain with the Company. All employees have executive employment contracts governing the terms of their employment.

15. Company Valuation

The company has not been valued by an external valuer. A discounted cash flow valuation has been completed by the company. Details are available to intersted investors.

16. Abridged Profit & Loss

 

The financials relate only to the Australian market. A detailed financial model is available for potential investors. Details of the balance sheet are also available to interested investors.

17. Balance Sheet

18. Accumulated Sales since business started

Sales
$300,000

Years Established
2

19. Is the business solvent

yes

Solvency History

20. No. of Employees

11 to 20

21. Shareholding % to be issued to new investor for investing.

19%

22. CAPstart Matching Product

  CM

23. Business Stage

Expansion

24. Role the investor would play

Non Executive Director

25. Main Location

Victoria