Opportunity Evaluation for GottaCook.mobi

Opportunity Evaluation

Eyal Chipkiewicz

Donna Espana

Marc Holt

Jennifer Turnley

David Werdiger

Eyal Chipkiewicz Donna Espana Marc Holt Master of Entrepreneurship and Innovation Jennifer Turnley HEI 691 – Opportunity Evaluation David Werdiger

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Executive Summary:

Celebrity chefs are not only “cool”, but are also pushing home cooking as social, healthy, fun and within reach of the average person. The Trendsetters’1 unsatisfied needs are as a result of their situation, time poor (meal planning done a few hours before they eat), information poor (simple, tasty recipes) and wanting to try new recipes (simple, tasty but with a twist).

GottaCook is a recipe portal tailored for 3G-capable mobile phones that allows on-demand access to a wide range of fully indexed recipes and recipe related information. The recipes are scalable according to the number of people for whom they will be prepared. A shopping list for a recipe is also generated including product recommendations. Detailed printable instructions and/or videos are then directly sent to the user’s email. In addition, GottaCook will also be accessible via traditional computer.

As an advertising platform, GottaCook gives brands the opportunity to promote their products while the consumer is choosing a recipe, in the point of purchase and ready to buy. Advertisers have never been offered a more precise, accurately targeted and timely product placement opportunity that is underpinned by measurable, rich campaign and customer profile information.

Locking-in solid and exclusive relationships with telecommunication carriers, celebrity chef and advertisers are integral to the sustainability of GottaCook .

Implementing sharp and focused marketing tools like e-mailing, SMS and Google AdWords to drive traffic to GottaCook targets to draw a pool of 2,200 new regular users every month and 44,000 new casual users that will generate monthly revenues of $75,000 from advertising and product placements 12 months after the product is launched.

GottaCook is the first of a series of equivalent platforms, which will be developed for other segments (such as wine, gardening, DIY, etc.) allowing for different audiences, to attract a wider scope of advertisers. Expansion to the new sectors is expected to begin in year 3.

Financial projections estimate break-even during early Q7, and show an EBIT of $1,3 million at year 3, growing at the accelerated expected rate of the novel Mobile Advertising market.

Given the risks and uncertainties associated with this project at the present time, the business team has adopted a two-stage fundraising process. A seed capital round, expected to raise $50k and a Stage 2 round expected to raise $500k. The expected ROI is a brisk 32% over the first 5 years of operation, not taking into consideration the successive revenue streams that will be generated by the release of the new Gotta products.

1 Trendsetters are the primary target for GottaCook. The Trendsetters segment in Australia is approximately 500,000 people willing to experiment with new gadgets and products. They are likely to be the opinion leaders on food-related subjects.


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Table of Contents

1. The Opportunity ..................................................................................................................................... 3

2. The Product .............................................................................................................................................. 3

3. The User .................................................................................................................................................... 6

4. Value Proposition .................................................................................................................................. 7

5. Market Analysis ...................................................................................................................................... 9

6. Industry Analysis ................................................................................................................................... 9

7. Sustainable Competitive Advantage ............................................................................................. 11

8. Business Model ..................................................................................................................................... 12

a. Unique Benefits of Mobile Advertising ................................................................................... 13

9. Financial Analysis ................................................................................................................................ 13

a. Revenue Model ................................................................................................................................. 13

b. Financial Projections ..................................................................................................................... 15

c. Sensitivity Analysis ......................................................................................................................... 16

10. Marketing Strategy ........................................................................................................................... 18

a. Targeted lists: Email/SMS............................................................................................................ 18

b. Google AdWords .............................................................................................................................. 18

c. Print ads .............................................................................................................................................. 18

11. Internal Analysis ............................................................................................................................... 19

a. Risks and Contingencies ............................................................................................................... 19

b. Management and Team ................................................................................................................ 20

c. Capitalisation and Structure ....................................................................................................... 21

12. Timescales ........................................................................................................................................... 22

13. Exit Strategy ........................................................................................................................................ 23

14. Terms of Investment ........................................................................................................................ 24

a. Funding Summary ........................................................................................................................... 24

15. References ........................................................................................................................................... 25

16. Appendix A – Financial Tables ..................................................................................................... 27


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List of Figures

Figure 1 – GottaCook Main Menu ............................................................................................................. 3

Figure 2 – GottaCook on Mobile Handsets. .......................................................................................... 4

Figure 3 – Operational Flow Chart of the GottaCook system ........................................................ 5

Figure 4 – Comparative Analysis of Competing Sources ................................................................ 8

Figure 5 – Product Placement Example .............................................................................................. 10

Figure 6 – Projected Mobile Advertising Market Size (Frost & Sullivan, 2008) .................. 12

Figure 7 – Summarized Revenue Model .............................................................................................. 14

Figure 8 – Projected Financials for Years 1 to 3............................................................................... 15

Figure 9 – Projected Financials with Sensitivity to Advertising Revenue (-30%) ............. 16

Figure 10 – Projected Financials with Sensitivity to User Take-Up (-50%) ......................... 17

Figure 11 – Initial Organisational Structure ...................................................................................... 21

Figure 12 – Equity structure .................................................................................................................... 21

List of Tables

Table 1 - Links between User Motivation and Value Proposition ............................................... 8

Table 2 – Average Advertising Rates .................................................................................................... 14

Table 3 – Marketing Strategies ............................................................................................................... 18

Table 4 – Key Risks and Contingencies ............................................................................................... 20

Table 5 – Completed activities. ............................................................................................................... 22

Table 6 – Plan of Action ............................................................................................................................. 23

Table 7 – Summary of Financial Performance .................................................................................. 24


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1. The Opportunity

An important current technological and social trend is the so-called “third screen” or “small screen” – the mobile phone. While the devices and the 3G networks that are able to deliver high-speed data to them are becoming very popular, applications that take advantage of these features are slim.

GottaCook is a recipe portal tailored for the mobile phone that allows on-demand, anywhere access to a wide range of recipes and recipe related information for people who require it away from their homes.

Taking advantage of the growing popularity and capabilities of the 3G network, GottaCook integrates content and advertising to provide the user with a streamlined, fast and easy to use interface, and to offer brands and advertisers a highly target specific medium to promote their goods and services.

Furthermore, GottaCook is the first of a series of equivalent platforms, which will be developed for other segments (wine, gardening, DIY, etc.) allowing for different audiences, to attract a wider scope of advertisers.

2. The Product

The GottaCook portal allows the user to browse a large selection of recipes, fully indexed and searchable and obtain a shopping list for any one of them. An important feature of the product is that recipes can be scaled according to the number of people, for whom it will be prepared, updating both the ingredient list and cooking instructions. Next, a shopping list for a recipe is generated, which includes specific (branded) product recommendations. Detailed printable instructions and/or videos are then directly sent to the user’s email.

Figure 1 – GottaCook Main Menu


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Additional (branded) product recommendations are presented to the user at the end (wine/beverages, appetizers, desserts, etc.).

The site will be accessible either from the mobile phone, or from a regular web browser.

The mobile version scales and adapts the browsing experience according to the user’s handset. Direct links between the computer and mobile versions are established so that recipes selected on a computer can be viewed as shopping list in the mobile phone, and vice-versa.

Registered users will create a personal profile and be able to save their basic preferences and special requirements, as well as access their recipe history and opt-in to receive additional offers.

Furthermore, a rating system will enable users to provide feedback on their particular experience with a given recipe and use other users’ opinion to help them with their choice of recipes.

A reward program is built into the platform, by which users accumulate “loyalty points”, which can be redeemed for products or special discounts. Users are awarded additional “points” for rating recipes and for following through advertising links, thus encouraging two fundamental issues: trustworthiness of the recipes and advertising effectiveness.

Figure 3 outlines the complete flow chart for the use of the service.

Figure 2 – GottaCook on Mobile Handsets.


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Figure 3 – Operational Flow Chart of the GottaCook system


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3. The User

A recent study (Food Now, 2005) of Australian lifestyle and values, directly related to food and cooking, divided the general population into the following categories:

• House-proud (21%): A large segment made up of dedicated, family oriented, conscientious cooks. They are big grocery spenders and will experiment with new products.

• Trendsetter (9%): A significant segment due to their willingness to experiment with new gadgets and products. They are likely to be the opinion leaders on food-related subjects.

• Old-fashioned cook (10%): Relatively big grocery spenders who are loyal to brands and tend to stick to tried and true recipes and products, it’s not easy to attract them to new products.

• Entertainer (10%): Entertainers would rather dine out than cook on the whole, but their high-income levels make them a target for gourmet food, wine and upmarket appliances.

• Zappit (17%): Busy people who aren’t willing to spend time cooking, other than heating pre-prepared food. They are an important target for frozen and ready-made foods.

• Take-it-away (11%): The classic takeaway junkies. This segment spends a lot of time away from home – at work, the movies or socialising, so they just grab food on the run.

• Just-feed-me (22%): This segment is made up largely of older men. They just eat whatever they are given and are not really involved or interested in cooking or grocery buying.

Two of these were identified as appropriate target users for the GottaCook service: Trendsetters (as an initial target) and House-proud (as an expanded target).

The key definition of this sector of the population is:

• Age: 25-45.

• Single or married.

• Shops and/or cooks for him/herself.

• Enjoys disposable income.

• Experiments with new gadgets and products.

This market can be quantified as follows:

• Current population (20-49 years of age): 9,013,731

• Urban population 20-34 years of age (63%): 5,678,651

• ‘3G-capable’ population (88%): 4,982,069

• “Trendsetters” (9%): 448,386

• “House-proud” (21%): 1,046,234


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4. Value Proposition

Two fundamental aspects related to the product were evaluated through primary market research conducted:

• The attitudes related to the use of recipes.

• The perception and intent to use GottaCook.

Some of the key results of this research are the following:

The key motivations for using recipes are:

• Novelty/Learning (69%).

• To ensure good results (13%).

• Other (including availability of ingredients and forgetfulness) (18%)

The most popular sources for obtaining recipes are:

• Cookbooks (50%)

• Internet (50%, 80% of which use Google rather than a particular cooking or recipe website)

• Magazines/Newspapers (44%)

• Cooking shows (13%)

• Friends/relatives (6%)

The most common timing related to the selection of recipes:

• Just before going shopping (75%)

• Well ahead of shopping (13%)

• While shopping (6%)

• After shopping (6%)

The key advantages of using recipes identified were:

• Precise ingredients, quantities and procedure measures (time, temperature, etc.): “Quantities of ingredients are specified. Proportion of each ingredient is critical in making a dish perfect.”

• Trust in proven expertise: “There is confidence in using published recipes, assuming that that they were pre-tested and pre-tasted.”

• Guide to learning: “With recipes I can cook practically anything, from anywhere in the world.”

Common user problems associated with recipes:

• Recipes not scalable: “Many times the recipe is for 4 but we are only 2 at home.”

• Recipes not trustworthy: “Sometimes recipes are disappointing, they look better than they taste.”

• Ingredients difficult to recognise or find: “Some recipes call for ingredients that are not locally available and substitutes are not mentioned.”

Initial customer feedback indicates positive reception of the service, with 50% of focus group participants saying they would use GottaCook regularly.


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The following table summarizes the direct link between the user drives and GottaCook value proposition and the customer drives and motivations.

USER MOTIVATION VALUE PROPOSITION

Recipe=Novelty Ample source of recipes.

Meals planned on the day they are cooked. On-demand, always available.

Chooses for him/herself Indexed, searchable recipes.

Buy for him/herself Auto-generated shopping list.

May cook for more people. Auto-scaling.

Need to trust recipes. Trusted sources. User Ratings.

Need for recognisable/accessible ingredients Recipes locally adapted/translated.

Table 1 - Links between User Motivation and Value Proposition

The comparative evaluation of the available sources of recipes clearly shows that although other sources share some of the benefits of the GottaCook platform, none can offer the product’s combination of choice, mobility and scalability. The issue of the low relative trust of the service will be overcome by the following actions:

• Work directly with brands and celebrity chefs as sources of the content, and ensure explicit

• Encourage the user rating system (A recent study (Nielsen, 2007) found that 78% of consumers trust “recommendations from other consumers”).

Figure 4 – Comparative Analysis of Competing Sources


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5. Market Analysis

GottaCook competes with media groups who blend content and advertising into their products. Cooking specific websites, such as (www.cuisine.com.au) who belong to the Fairfax media group, and Food and Lifestyle magazines such as Women’s Weekly and Gourmet Traveller (gourmettraveller.com.au) are currently dominating this advertising medium.

GottaCook is a new player in the mixed content/advertising industry however it is the only mobile cooking service to be proposed as yet.

Australia is around 6-12 months behind Europe in mobile trends, however more than 21 million Australians own a mobile phone. 47% of Telstra mobile subscribers are 3G capable. The Mobile Advertising Industry has grown from $2.5M in 2007 to $10.1M. It is projected to increase to $33.2M in 2009 and is set to reach $190.2M by 2011. (Frost and Sullivan, 2007). This indicates a positive time to join the market.

Comprehensive research into other providers of both recipe content and advertising identified countless websites and magazines yet few had value add dimensions offered by GottaCook such as such as dietary requirements, calories per meal, specific foods or occasions. None were able to scale recipes to the number of guests and provide shopping lists.

Advertisers have never been offered a more specific placement, than at the exact moment the consumer is making a purchase.

In terms of the Mobile Advertising market, Telstra reported revenue increases of 92.4% ($458 million) in 2006/07 which were attributed to increases in 3G mobile services. (IBISWorld, 2008) This represents 8% of total mobile phone revenue and is expected to increase, particularly once customer fears of the costs of downloading are alleviated through familiarity and cost effective use options being refined.

6. Industry Analysis

Recent findings of Monash University's Australian Centre of Retail Studies indicated the current economic climate has forced a change in Australians' recreational habits, with 75% of respondents eating meals at home instead of restaurants (Euromonitor, 2008, 1). The digital communication and media sector is also affected by potential recession. However the availability and technological advancements to date have seen mobile phones become an essential rather than a luxury (Euromonitor, 2008, 2). The food industry was once considered recession proof, in that people will always have to eat. Consumer needs in current times are more concerned with communication and entertainment, with Euromonitor claiming this need to be as basic as that to eat.

GottaCook fills both the need for reduced spending on outings in harsher economic climates, whilst providing access to entertaining in the home.


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As mobile advertising is a new emerging industry, insufficient metrics to measure its impact have been cited by 52% of advertisers as a reason why they may not use the medium (McKinsey, 2007). Proof of concept in the real world will be an alleviator to this in time. Whilst some advertisers may be wary of an unproven medium, others may see the benefit of being one of few utilising the most powerful-targeted advertising platforms available.

An independent review of the 61 top food manufacturers in Australia revealed that 52% currently provided recipes on their website. However, the quality and range varied greatly with no comprehensive recipe service available. GottaCook offers manufactures much wider scope with placement of individual items within multiple recipes, increasing their menu, so to speak.

The number of advertisers is highly fragmented, and segmented, in that there are a multitude of food and related lifestyle products for which GottaCook would be the perfect advertising medium. GottaCook attends to the consumer’s request at the exact time they are making a purchase. If Bertolli Olive Oil, for example, is displayed as a core ingredient in a recipe, the likeliness a customer actually follows through with the purchase is much higher with GottaCook than if they see the same product advertised on television, in a magazine, or on a billboard, away from the actual purchase context. The customer is literally asking for a solution, and the product placed in front of them will be the first in their mind.

Research and Development, Marketing and other entry costs are moderate. Emerging software for conversion of conventional websites to mobile applications may decrease the need for dual software platforms to operate in mobile contexts. This would reduce barriers to entry and indicates that timing is key for successful entry into the mobile advertising industry.

Competitor Reaction is expected to be fierce. A number of high quality recipe providers exist who are currently dominating the market in magazines, and online content. The possibility of a well-established competitor and market leader such as Gourmet Traveller or Fairfax Media developing a mobile site is highly likely. GottaCook does however offer value add features that even our most lethal competitor currently does not, such as the ability to scale recipes for a particular number of recipes, and produce shopping lists. The dietary search function provides consumers with the ability to select healthy balanced meals. These features are replicable however, and strategies to sustainability are devised.

Figure 5 – Product Placement Example


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7. Sustainable Competitive Advantage

Solid relationships with key partners are integral to the sustainability of GottaCook. There are several categories of partners that we seek to obtain exclusive relationships with:

Telecommunications carriers: Initially, lock the mobile carriers in (Telstra, Optus, Vodafone, 3) as “off-deck” partners exclusively for any product in the cooking/recipe space. That means a link to GottaCook will feature on their mobile portal, and be the exclusive link in our sector. When clicked on, the user will be taken to our web site. Regular data charges will apply from that point on. In return for being listed, we return a small share of advertising revenue to the carrier. These relationships, once established, will increase the barriers to entry for competitors.

We may consider, at a future stage, moving to an “on-deck” exclusive relationship with one carrier. This means that the data charges are “free” (i.e. included) in that carrier’s standard offering. The benefit is that the carrier would actively promote our site, in exchange for a larger share of advertising revenue. A closer relationship with one carrier may also help set them up as a potential acquirer of the business to add to their content portfolio. However, this potentially excludes deals with other carriers, which may be risky in a market dominated by a small number of large providers.

Celebrity Chefs: For brand recognition and cross promotion, it is essential to align ourselves with a celebrity chef. The association will also add credibility to the product and the recipes themselves. An agreement will offer equity to a celebrity chef in exchange for their exclusive endorsement of GottaCook. This will increase barriers to entry for competitors.

Advertisers: locking in major advertisers who would find this platform attractive will help make it more difficult for new entrants seeking to operate in this space. We have identified several partners, including large food brands (such as Kraft, Nestle), and retailers, who would benefit significantly from either product placements at point of sale, or from integration with their online retailing.

Because all of these elements are so important to the business, we have chosen to address them at the seed stage before full implementation of GottaCook. See "Terms of Investment" below for further details.

Because the switching costs for customers of a service such as this are very low, we will offer additional benefits to members for staying with GottaCook. These will include special offers, competitions, as well as tracking all of their favourite recipes. All of these actions will make customers, once they start using the service, less likely to switch to any competitor. In turn, this makes the industry less attractive for new entrants.


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8. Business Model

The business model of GottaCook is to attract revenue primarily from advertising. The process works as follows: establish a web site (accessible either via a traditional computer, a mobile device, or both) with a regular stream of visitors (which in advertising terminology is known as “inventory”). This visitor stream can then be monetised by placing advertisements or product placements on the site.

There are several channels for doing this. The Google AdSense program is an example of what is effectively an online ad agency. It uses the text on each page to choose an appropriate advertisement from a set of advertisers who anonymously bid based on keywords. Each time someone “clicks-through” an advertisement, the site owner receives revenue (from Google, and indirectly the advertiser themselves). In other models, the site owner is not paid per click-through (CPC), but rather per thousand impressions of the advertisement (CPM). GottaCook intends to use the CPM model.

There are many examples of successful advertising-driven web sites; the largest is probably Google itself, who pioneered the concept. Many web sites also use advertising to augment other revenue streams. The mobile advertising market is a subset of the web advertising market, and is emerging as a high growth area in coming years. Frost and Sullivan (2008) predict significant growth in this sector of the advertising market as more users adopt the mobile device for internet browsing, which suggests that it is now a good time to enter this market.

Figure 6 – Projected Mobile Advertising Market Size (Frost & Sullivan, 2008)


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a. Unique Benefits of Mobile Advertising

The mobile device is especially attractive as an advertising medium because of the personal and targeted way in which messages can be delivered. The mobile device is always carried on the person, and is always on. It is also able to capture accurate customer information, for example, using GPS (included on more and more handsets) to know where the customer is at any time. The mobile device also has a built-in payment mechanism, which is already in use in applications such as parking and vending machines.

GottaCook will support member registration, which gives us the opportunity to capture even more information about our customers. This includes age, gender, suburb, mobile number, e-mail address, and other personal information the customer is willing to provide on an “opt-in” basis. We will also retain a history of all recipes the customer ever browses, and the products the customer buys through their shopping list. So unlike traditional broadcast advertising such as billboards, TV, radio, and newspaper, we know a lot about our prospective customer. This information can establish a valuable profile of the customer, which supports targeted offers that have much greater chance of success.

In addition, GottaCook is a product that will be used as an adjunct to the cooking, and therefore the food and entertaining shopping process. Unlike other web sites where advertising is incidental to the content on the site itself, we are dealing with a customer base who is interested in making a purchase, and may even be at the point of sale while using it. The effect of a product placement or a recommendation to a customer in this situation is far stronger.

All of the information we collect about our customer base gives rise to a further revenue stream: this information can be sold, on an aggregate and/or anonymous basis, to research and consulting organisations. This information is then used to publish industry reports, and primary research material is therefore important to them. We expect this revenue source to have some realizable value after about 12 months of operations, when the customer base reaches critical mass.

9. Financial Analysis

a. Revenue Model

As explained above, the main source of revenue for GottaCook is advertising. This is divided into two different streams: ads and placements.

Some market average advertising pricing figures, measured in Cost per Thousand impressions (CPM), are the following:


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CPM ($) Average Min Max

Magazine (Mass) 65 25 90 Magazine (Targeted) 167 74 255

Newspaper (Regional) 96 30 126

Newspaper (National) 112 72 160

Outdoor 18 5 40

Online 60 25 120

Table 2 – Average Advertising Rates

Taking into consideration the considerable competitive advantages of the mobile medium and the extremely precise targeting possible, the initial CPM established for the GottaCook advertising offer are the following:

• Ads: $75

• Placement: $100

Placement CPM is higher because of the premium advertising assets, explained below, of having the consumer at the point of sale, identifying his/her immediate need (what

they are looking to buy) and offering them a specific recommendation in response to this information.

Since, however, the mobile advertising platform is in its very early stages, and there is little empirical measurement to support it, the costs of the first 6 months of live operation will be absorbed by GottaCook without expecting significant advertising revenues. After this period, enough traffic will have been attracted to the site to support a stronger business case for brands and media agencies to accept the pricing for the platform.

The figure below illustrates the streams of revenue for GottaCook, with a snapshot of performance taken at Q6 (12 months after the product goes live in the marketplace).

Figure 7 – Summarized Revenue Model


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b. Financial Projections

The basic parameters taken into account to project the financial performance of the GottaCook business model are the following:

• Monthly marketing audience (estimated): 230,000

• Average conversion rate (marketing): 0.96%

• Revenue: o Revenue/ad: $0.075 o Ads/recipe: 4 o Revenue/Product placement: $0.10 o Placements/recipe: 3 o Revenue/recipe: $0.60

• Usage: o Regular user: 4 recipes/month o Casual user (new hit): 1 recipe/month

The resulting financial performance graph, shown below, reports a peak cash requirement of under $600k reaching the end of year 1, at the peak of marketing activities, and when advertising sales have only begun to generate an income.

Break-even occurs just after month 24, by which time 36,000 regular users and 44,000 new monthly hits (for a total of approximately 190,000 recipes broadcast) should visit GottaCook every month.

Figure 8 – Projected Financials for Years 1 to 3


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c. Sensitivity Analysis

Two sensitive scenarios for the business were evaluated:

Advertising revenue: To assess the effect of the market price of the GottaCook advertising space not reaching the expected targets. A 30% reduction in price was modelled, maintaining general expenditure and usage figures. The resulting projection is still profitable by the end year 3, with the expected break-even pushed forward by up to 8 months.

Figure 9 – Projected Financials with Sensitivity to Advertising Revenue (-30%)


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User take-up: To assess the effect of the end-user count for the product not reaching the expected targets, a 50% reduction in user take-up was modelled, maintaining general expenditure and advertising pricing figures. The resulting projection is still profitable by the end year 3, with the expected break-even pushed forward by up to 12 months.

Figure 10 – Projected Financials with Sensitivity to User Take-Up (-50%)


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10. Marketing Strategy

A comprehensive marketing campaign will commence in month 9, at the launch of GottaCook. Table 5 outlines the initial marketing plan.

Strategy Reach Cost/month ($) Conversion2 Regulars Email 10,000 3000 3.5% 350 SMS 10,000 3000 3.5% 350 AdWords 10,000 6,500 5.0% 500 Print 200,000 10,000 0.5% 1000

TOTAL 22,500 2,200 Table 3 – Marketing Strategies

Strategies will aim to build a customer base of 2,200 new regular users per month, specific details of each strategy are to be developed prior to launch, and refined on examination of their effectiveness. Initial marketing strategies include:

a. Targeted lists: Email/SMS

Marketing list brokers such as mediamgroup.com provide details of specific consumers for targeted E-mail and SMS marketing campaigns. Initially, 10,000 “trend-setters” will be selected. Estimated conversion rates of 3.5% will be tested, with an anticipated 350 regular members being sought through the initial drive.

b. Google AdWords

AdWords is an advertising product offering pay-per-click (PPC) advertising, and site-targeted advertising for both text and banner ads. GottaCook have identified the top 150 recipe and cooking related Google search terms, and are able to advertise on a PPC basis for an average of 0.65 cents per click. The benefit of AdWords is that advertisements pop up when people are searching for related content and are therefore more likely to enter. An initial budget of $6,500 will drive an approximate 10,000 site visits, with an expectation of 5% becoming regulars.

c. Print ads

Print advertisements will be displayed in food and lifestyle magazines such as:

• Better Homes & Gardens

• Donna Hay Magazine

• Delicious

• WHO

• Super Food Ideas

• Notebook

• Men's Health

2 Regular Users/Total Audience


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• Alpha Magazine

• Australian Beautiful Home

• In Style

• Vogue Entertainment + Travel

11. Internal Analysis

An internal assessment of capabilities against competitors’ capabilities highlighted following relative key strengths and weaknesses.

Strengths:

• Team competencies, shared values, flat structure and company performance reward system supports innovation, risk taking, swift decision-making and focus on commercial outcomes.

• A new product pipeline has been defined that reuses the core GottaCook technology platform and advertiser and media buyer channels. The new products help consumer make an informed buying decision based on their needs while at the point of sale. The new product pipeline includes:

o GottaVino: choose the best wine for the meal. o GottaGarden: choose the best plant for that spot in the garden.

Weaknesses:

• Financial and contractual resources from which to invest from or safeguard revenue.

• A new service for consumers (e.g. no brand) creates a hurdle to change

• No track record on delivering advertising results creates a barrier to change away from the status quo.

In assessing these strengths and weaknesses against the market drivers and key threats to success the following picture outlines the specific actions to be taken.

a. Risks and Contingencies

Risk Likelihood Impact Mitigation Actions

User (consumer) take-up is lower than forecast.

Medium High • Implement product developments as identified from on-going focus group and user feedback to increase user value.

• Short, contained, focussed advertising campaigns to establish best ROI.

• Implement tight expenditure controls and minimise fixed costs.

• Plan to achieve breakeven target if


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usage is 50% under forecast.

Risk Likelihood Impact Mitigation Actions

No advertiser take-up.

Low High • Do not proceed beyond seed stage without advertiser commitment.

Advertiser take-up is lower than forecast.

Medium High • Deploy Google AdSense to reduce revenue shortfall and collect advertising statistics to support sales effort.


Advertising sales price lower than forecast.

Medium High • Sell total value proposition, not only price.


• Plan to achieve breakeven target if sales price is 30% under forecast.

Key staff leaves prior to trade sale.

Low Medium • Establish “golden equity handcuffs” in founders’ agreement.

Table 4 – Key Risks and Contingencies

b. Management and Team

GottaCook is led by Marc Holt, CEO, who has 15 years experience in developing, launching and running businesses based around IT, in retail and corporate contexts in Europe and Australia. The team’s combined experience and competencies include:

• New business start-up

• New product development, sales and marketing.

• Consumer web application development.

• Engaging, simple user-interface design.

• Consumer needs and motivations profiling and insight.

• Great network within mobile telecommunications industry.

• Sound financial management.

• Commercial focus.

• Successful business exit (trade sale).


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Figure 11 – Initial Organisational Structure

The core idea development team are to be augmented by:

• Advertising industry veteran who brings: o Great network within advertising industry. o Mobile phone advertising thought leadership. o Equity investment.

• Qualified chef who brings: o Simple, fast and healthy meal recipes. o Meal classification, for example, low fat. o Ability to apply scaling to recipe ingredients and approach.

c. Capitalisation and Structure

Internal analysis has shown that the team has gaps in experience relating to the core product (cooking), and the revenue model (advertising). These are addressed by offering sweat equity to two key people to fill those roles. Our team has already identified Leigh Monti, a mobile marketing and advertising consultant, who has reviewed the concept and assisted with some advice regarding marketing strategies and the mobile advertising market. He has agreed in principal to join as an equity partner when this project moves to the next stage.

External investors are required to fund the development of this product. More details can be found in the "terms of investment" section below.

Figure 12 – Equity structure


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12. Timescales

Aspect Activity Findings

• R&D/Technology. Proof of Concept.

• Conducted Market survey on motivation of potential users of the service.

• Conducted focus group discussions and mock demonstration with target users

• Product’s value proposition is confirmed and target users are identified.

• Potential users’ perception of the product is obtained; user feedback and recommendations for product improvement were taken into account.

• Legal and Financial Structure.

• Created Management Team.

• Capital Structure.

• Individual competencies of founding team members were integrated to develop a core team.

• Equity structure was discussed among key stakeholders like the founders business consultants (advertising specialist and chef), of which discussion is still continuing.

• Revenue Model. • Approached advertising specialists (name available upon request).

• Approached celebrity chef.

• Discussion is on-going on strategies to lock in effective advertising contracts.

• For content credibility and promotion, participation of a celebrity chef is deemed advantageous for the service.

Table 5 – Completed activities.

GottaCook is ready to be launched after the business plan has been approved. Following the launch, full implementation of the program will be in swing with intensive marketing communication campaigns to endorse product benefits to target users and create market awareness and repeat trials (regular users). The implementation will be spearheaded by the founding team.

The following table outlines the fundamental tasks planned for the next 6 to 9 months.


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Task � Time (months) � 1 2 3 4 5 6 7 8 9

Technology Proof of Concept

Prototype

α - Testing

β – Testing

Approach carriers

Approach advertisers

Approach retailers

Product live

Table 6 – Plan of Action

13. Exit Strategy

The team exit strategy is via a trade sale within 3 years from company start-up. The exit strategy targets companies that would view GottaCook as a strategic acquisition of GottaCook’s proven business model, technology, user (consumer) data, new distribution channel, access to innovation and contracts with mobile carriers and advertisers. Buyers that would benefit strategically from the above include Coles, Woolworths and mobile carriers who are targeted as key customers. When GottaCook contracts with the above it also gives GottaCook the ideal opportunity grow the relationship and sell the potential acquisition value.

In planning for a trade sale the CEO will ensure that the following policies are adhered to facilitate the buyer’s due diligence process and minimise perceived risk:

• Formal contracts with customers, employees and suppliers are established and filed.

• Respected industry accountants and lawyers are retained

• The ownership of company developed IP is formally recorded tracked and periodically valued.

• Key technology, planning and operational processes and work instructions are written down and maintained.

• Documented organisation structure and primary accountabilities.

• End of year financial records are formally signed by CEO and accountant and filed.

• Directors and staff are aware of and comply with their obligations under consumer, commercial, industry, health, safety and environmental laws and regulations.


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• Directors meeting and key decisions are minuted, for example planning and investment approvals.

14. Terms of Investment

Given the risks and uncertainties associated with this project at the present time, the business team has adopted a two-stage fundraising process.

At this time, we are seeking seed capital of $50k. The funds will be used to build a prototype and proof-of-concept, which will assist in securing key partners with exclusive agreements. These include major advertisers (large food brands), and mobile carriers. We will also formalize "sweat equity" agreements with an advertising consultant and a celebrity chef. We expect this stage to take up to three months.

At seed stage, we assess the value of the business at $850k, based on an NPV valuation using a discount rate of 60%, so the seed capital will secure 6% of the business.

Once this stage is successfully completed, some of the key risks associated with the business have been addressed, and we will be in a position to proceed with the development of the product. At that time, we will be seeking further investment capital of $500k, which will be used for the establishment of the company, R&D and marketing. This is sufficient capital for the first 12 months of operation, with an expected product launch after 6 months.

At this second stage, we assess the value of the business at $1.8M, based on an NPV valuation using a discount rate of 35%. The capital raising will therefore secure a further 28% of the business. The seed capital investor will have first option to inject further funds at this second stage. The second stage capital raising is subject to a review of the financial plan and possible revaluation after a reassessment of risk and input from partners.

($000) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

REVENUE - 1,000 2,200 3,400 4,400

MARKETING 140 260 260 200 200

R&D 180 40 40 40 40

GENERAL EXPENSES 200 200 600 800 800

NET PROFIT (LOSS) (520) 500 1,300 2,360 3,360

Table 7 – Summary of Financial Performance

a. Funding Summary

• SEED – Prototype/Approach Carriers & Advertisers o NPV: $850k @ 60% Discount Rate. o Funding: $50k for 6% Equity.

• STAGE 2 – Launch & Marketing


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o NPV: $1,800k @ 35% Discount Rate. o Funding: $500k for 28% Equity.

• BY YEAR 5: o Retained Profit: $7,000k o ROI (34% Equity): 32%

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16. Appendix A – Financial Tables

Opportunity Evaluation for GottaCook.mobi

Documents

Transcript of Opportunity Evaluation for GottaCook.mobi