Market Clamp plans to enter the marketing software industry by developing its own software and selling it as a service to businesses. The industry is growing rapidly due to high valuations of existing companies like Marketo, which indicate expected continued growth. Market Clamp will primarily sell through distribution partners to maximize fast sales growth and a potential quick exit. It projects $3 million in first year sales, doubling annually, and being valued at $880 million after 5 years, similar to Marketo's valuation. However, it faces risks from potential intellectual property lawsuits over software copyrights or license agreements with competitors.
2. Marketing Software
Market Clamp
Vision: Enter the Marketing Software Industry
2
RECENT INDUSTRY EXITS Sale Price Revenue Sale Date Age VC Capital Raised
Marketo 1.32 billion 75 million 8/21/2013 6 107 million
Eloqua 871 million 90 million 12/27/2012 14 41 million
Pardot 95 million 7 million 10/11/2012 6 0
The high valuations indicate high expected industry growth
Industry growth = “free” sales growth
Customers are new (not taken from existing businesses)
Market Clamp will enter the industry predicted by the stock market to grow the fastest in the
economy. It will sell software that manages marketing operations as a service to businesses.
Marketo is public (5/17/2013 with 65 million in sales and a 724 million valuation)
Eloqua was acquired by Oracle
Pardot was acquired by Salesforce.com
3. Marketing Software
Market Clamp
Opportunity = New Customers
3
Marketo Sales 75 million Industry Size 32 billion
Price to Sales Ratio 17.6
17.6xStock Market Average Price to Sales Ratio 1
Projected Future Marketo Sales 1.32 billion Potential Industry Size 563 billion
Due to the fact that the industry is
relatively new and small, limited
data exists on its potential size.
The only existing method of
projecting the potential industry
size is to calculate the sales
growth baked into Marketo’s Stock
and apply it to the industry.
$-
$100,000,000,000
$200,000,000,000
$300,000,000,000
$400,000,000,000
$500,000,000,000
$600,000,000,000
Now Industry
Maturity
New Customers
Current Industry
531 billion
4. Marketing Software
Market Clamp
Business Model
4
Increase Sales
Market Clamp will increase companies
sales and/or decrease companies
expenses to a greater extent than the
corresponding operating profits lost to
the purchase of Market Clamp.
Value PropositionMarket Clamp will be a business to business
software as a service company. It will sell its
software, like a service, to businesses.
Decrease Expenses
MARKETO BUSINESS MODEL
Average Amount Paid to Distribution Partner
per Customer $ 14,479
Average Annual Sales Per Customer $ 27,989
Marketo Price to Sales Ratio 17.6
Value per Customer $ 492,609
ROI on Distribution Partners 34
Market Clamp will purchase customers (through
distribution partners), obtain significant sales then
sell the company. Customers will cost around
$15,000 and have a value of $400,000 to
$500,000.
5. Marketing Software
Market Clamp
Magic – Why the business will succeed
5
The business is likely to succeed because it is entering the right industry.
Characteristics of the industry include:
Rapid growth
Large potential size
High Valuations
Fragmentation
Early in the product lifecycle indicating a long period of growth and sustained high
valuations
Known Competitors Sales Growth
MARKETO 2009 2010 2011 2012 ELOQUA 2009 2010 2011
Sales $4,478,000 $14,032,000$32,392,000$58,413,000 $40,958,000$50,799,000$71,348,000
% Growth 213% 131% 80% 24% 40%
6. Marketing Software
Market Clamp
Financial Projections
6
MARKETO 2009 2010 2011 2012 ELOQUA 2009 2010 2011
Subscription & Support (% of Sales) 48% 33% 29% 28% 16% 19% 17%
Professional Services 0% 18% 17% 14% 13% 14% 15%
Sales & Marketing 110% 79% 71% 65% 42% 44% 41%
General & Administrative 27% 15% 19% 19% 18% 16% 17%
Research & Development 57% 39% 33% 32% 21% 20% 16%
Operating Margin -142% -84% -69% -59% -10% -12% -7%
AVERAGES
Subscription & Support (% of Sales) 27%
Professional Services 13%
Sales & Marketing 65%
General & Administrative 19%
Research & Development 31%
Operating Margin -55%
Sales projections assume year one sales of
three million that double annually
Market Clamp will not conduct R&D
Market Clamp projects three rounds of
financing
Averages are used for projections
MARKET CLAMP PROJECTED Year 1 Year 2 Year 3 Year 4 Year 5
Sales $ 3,000,000 $ 6,000,000 $ 12,000,000 $ 25,000,000 $ 50,000,000
Subscription & Support $ 809,685 $ 1,619,371 $ 3,238,741 $ 6,747,378 $ 13,494,755
Professional Services $ 391,322 $ 782,644 $ 1,565,288 $ 3,261,016 $ 6,522,031
Sales & Marketing $ 1,935,321 $ 3,870,641 $ 7,741,283 $ 16,127,673 $ 32,255,346
General & Administrative $ 941,008 $ 1,882,016 $ 3,764,033 $ 7,841,735 $ 15,683,470
Operating Loss $ (1,077,336) $ (2,154,672) $ (4,309,345) $ (8,977,802) $ (17,955,603)
Total Operating Loss $ (1,077,336) $ (3,232,009) $ (7,541,353) $ (16,519,155) $ (34,474,758)
Operating Margin -36% -36% -36% -36% -36%
7. Marketing Software
Market Clamp
Competition
7
Cloud Based Competitors Monthly Fee Owned By
Marketo $1,195 to $3,195 Public
Eloqua $2,000 to $4,000 Oracle
Partdot $1,000 to $3,000 Salesforce.com
HubSpot $200 to $1,000
Act-On $500
Database Competitors Monthly Fee Owned By
Aprimo Customized & Expensive Teradata
SAS Institute Customized & Expensive
Unica Customized & Expensive IBM
$1,995
$4,000
$2,000
$600 $500
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
Most Popular
Package Monthly
Fee
Every competitor charges for the
storage of contacts or records in
addition to the monthly fee. A
contact/record is any information
about someone such as a name,
email address, phone number, etc.
Marketo Standard Package Fees by Number of Contacts
# Contacts < 10k 10k-30k 30k-100k 100k-250k 250k-500k
Price $ 1,995 $ 2,995 $ 3,995 $ 5,395 $ 7,195
Marketo had 2,300 customers at the time of its
IPO on 5/17/2013. Marketo’s estimated sales at
this time were 65 million. Marketo’s average
customer spent $2,300 monthly or $28,000
annually.
Traditional database software marketing companies are an indirect
potential source of competition
8. Marketing Software
Market Clamp
Sales & Marketing
8
Marketo's Top Distribution Partners Market Clamp's Leading Distribution Partner Prospects
Capgemini CDW
Century Link Dell
Citrix En Pointe Technologies
Gannett ePlus
General Electric Insight
Medtronic SHI International
Moody’s Softchoice
Panasonic
Symantec
Universal Music Group
Marketo primarily sells its software through distribution partners. Eloqua primarily sells its software
through a direct sales force (91% of 2011 revenue). Selling software through distribution partners allows
for faster sales growth. Selling software through a direct sales force allows for lower costs. Market Clamp
will primarily sell its software through distribution partners to maximize sales in minimal time. This
strategy will is more likely to produce a quick exit maximizing investor IRR. Marketo pays an estimated
average 52% of sales to distribution partners. Marketo and Market Clamp will purchase customers.
Market Clamp has chosen to raise capital then find its first distribution partner sales manager. The purpose
of this is to use investor resources (connections, collaboration, possible head hunter) to help find Market
Clamp’s first salesperson.
9. Marketing Software
Market Clamp
Use of Funds
9
Timeline
Capital at High Risk
STARTUP EXPENSES
Two Year Operating Loss $ 3,232,009 See slide 7 – Financial Projections
Software Subscriptions $ 122,340 Marketo, Eloqua & Pardot for one year (minimum term)
Development Phase $ 77,660 Software Copyright Attorney, Payroll, Office and Equipment
Total Capital Needed $ 3,500,000
3 months 2 Years
Software Development Phase Launch Market Clamp
CAPITAL AT HIGH RISK
3 Month Development Phase $ 200,000
Marketo, Eloqua and Pardot Subscriptions ($122,340),
Software Copyright Attorney, Founder and Software Developer
Payroll $ 300,000
Two Years Salary for Salesperson, Founder and Software
Developer
Total $500,000The Decision to Continue is up to the Investors.
10. Marketing Software
Market Clamp
Valuation
10
Exit
The exits of Marketo, Eloqua and Pardot were examined in the Vision section. Marketo, the
public company, has the highest valuation. Therefore, going public is the preferred exit option.
Marketo had 58 million in sales when it conducted its IPO. If Market Clamp can reach sales of
50 million within five years and Marketo’s valuation has not decreased, an IPO would likely
yield shareholders the highest valuation. However, shareholders may sell Market Clamp at
anytime for a favorable valuation. The industry’s M&A market is active.
PROJECTED VALUATION Year 1 Year 2 Year 3 Year 4 Year 5
Revenue $ 3,000,000 $ 6,000,000 $ 12,000,000 $ 25,000,000 $ 50,000,000
# Customers 107 214 429 893 1786
Valuation $ 52,800,000 $ 105,600,000 $ 211,200,000 $ 440,000,000 $ 880,000,000
Revenue projections double annually with year one revenues of three million. Valuations are
sales multiplied by Marketo’s price to sales ratio of 17.6. All industry participants have large
operating losses.
11. Marketing Software
Market Clamp
Summary
11
64
8
2
0
10
20
30
40
50
60
70
First Round Second Round Third Round
ROI
Round of Financing Beginning of Year Capital Needed
First 1 $ 3,500,000
Second 3 $ 10,000,000
Third 4.5 $ 21,500,000
EQUITY AT EXIT Round 1Round 2Round 3Exit Value
Founder 70% 63% 60% $ 526,680,000
First Round 30% 27% 26% $ 225,720,000
Second Round 10% 10% $ 83,600,000
Third Round 5% $ 44,000,000
Dilution projections assume Market Clamp can
raise ten million dollars for 10% and twenty
million for 5%. Exit Values, ROI and IRR
assume a year five exit of $880,000,000.
Market Clamp assumes it will acquire 34.5 million
in operating losses over five years and $500,000 in
software development costs.
130%
103%
43%
0%
20%
40%
60%
80%
100%
120%
140%
First Round Second Round Third Round
IRR
12. Marketing Software
Market Clamp
End User License Agreements
12
Market Clamp will design software based on Marketo’s and Eloqua’s form 424B4 documents and websites.
Then enter into contracts with Marketo, Eloqua and Pardot stating they own any derivatives or
improvements to their software. Then improve Market Clamp’s software based on Marketo’s, Eloqua’s and
Pardot’s software. The contracts are called end user license agreements.
No court has ruled on the validity of end user license agreements generally or pertaining to Market
Clamp’s future actions. Other specific rulings to end user license agreements are mixed by different federal
appeal courts. Functions used by two or more companies do not breach the contract.
Market Clamp is improving its existing software as opposed to making derivatives or improvements to
competitor’s software. However, investors’ should be aware of possible breach of contract lawsuits.
Software Copyrights
Software copyright law is extremely unclear. The primary test is called the abstract filtration comparison
test. It compares the elements of software at increasing levels of abstraction. Market Clamp will retain a
software copyright lawyer during its development phase to ensure Market Clamp’s software will hold up to
a copyright infringement lawsuit. Software copyright attorneys will be continually consulted as competitors
make improvements to their software and Market Clamp makes corresponding improvements.
The Industry & Intellectual Property
The following is taken from Marketo’s form 424B4. “From time to time, third parties, including certain of
these leading companies, have asserted patent, copyright, trademark, trade secret and other intellectual
property rights within the industry. Any of these third parties might make a claim of infringement against
us at any time.”
