CODETECH
CODETECH
(Sample Start-Up Business Plan)
Confidential Business Plan
August 1996
Codetech
Codetech
Jason Ushburn
33 North Street
New York, NY 11201
(212) 834-5699
This memorandum does not constitute an offer to sell, or a solicitation of an offer to purchase,
securities. This business plan has been submitted on a confidential basis solely for the benefit of
selected, highly qualified investors and is not for use by any other persons. Neither may it be
reproduced, stored, or copied in any form. By accepting delivery of this plan, the recipient
acknowledges and agrees that: i) in the event the recipient does not wish to pursue this matter, the
recipient will return this copy to Codetech, at the address listed above as soon as practical; ii) the
recipient will not copy, fax, reproduce, or distribute this Confidential Business Plan, in whole or in
part, without permission; iii) all of the information contained herein will be treated as confidential
material. Agreement executed by the recipient prior to, or contemporaneously with, its receipt of
this Confidential Business Plan.
Business Plan No._______________
Provided To_____________________________
Company________________________________
Date____________________________________
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Table Of Contents
I. Executive Overview ....................................................................................................................... 5
A. Summary of Business & Business Model ................................................................................... 5
B. Visual Trace - The Entry Product .............................................................................................. 6
II. The Company ............................................................................................................................... 7
A. Product Strategy.......................................................................................................................... 7
1. Application Development ....................................................................................................................... 7
2. Application Quality, Test and Deployment ............................................................................................ 7
3. Application Integration and Utilization .................................................................................................. 8
B. Technology.................................................................................................................................. 8
C. Value Proposition........................................................................................................................ 8
1. Improved Products.................................................................................................................................. 8
2. Developer Productivity ........................................................................................................................... 8
3. Product Quality ....................................................................................................................................... 9
4. Development Cost .................................................................................................................................. 9
5. Time to Market ....................................................................................................................................... 9
D. Management Team...................................................................................................................... 9
E. Organization .............................................................................................................................. 10
F. Patents & Copyrights ................................................................................................................. 11
G. Risks.......................................................................................................................................... 11
III. Market Analysis ........................................................................................................................ 11
A. Market Description ................................................................................................................... 11
B. Target Market ............................................................................................................................ 12
1. Seats...................................................................................................................................................... 13
IV. Competitive Analysis ................................................................................................................ 15
A. Competition .............................................................................................................................. 15
B. Barriers to Entry ........................................................................................................................ 16
V. Products & Services ................................................................................................................... 16
A. Product Line Plans .................................................................................................................... 16
1. Visual Trace ......................................................................................................................................... 16
2. Visual Tester ......................................................................................................................................... 20
3. Visual Service ....................................................................................................................................... 20
B. Future Product & Services Plan ................................................................................................ 21
C. Service and Support Plans ........................................................................................................ 21
VI. Marketing & Sales .................................................................................................................... 22
A. Sales Strategy............................................................................................................................ 22
B. Partnering & Bundling Opportunities ....................................................................................... 23
C. Sales Cycle ................................................................................................................................ 23
D. Pricing Strategy......................................................................................................................... 23
E. Marketing Communications ...................................................................................................... 24
F. University Program.................................................................................................................... 25
VII. Finance ..................................................................................................................................... 25
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A. Financial Overview ................................................................................................................... 25
B. Income Statement - Base Plan................................................................................................... 26
C. Balance Sheet - Base Plan ......................................................................................................... 26
D. Statement of Cash Flows - Base Plan ....................................................................................... 27
E. Revenue Sources - Base Plan .................................................................................................... 27
F. Expense - Base Plan .................................................................................................................. 27
G. Funding Requirements .............................................................................................................. 28
H. Additional Revenue Streams .................................................................................................... 29
VIII. Glossary .................................................................................................................................. 29
A. Overview of Development Process in the IT Industry.............................................................. 29
B. Definition of Terms................................................................................................................... 30
IX. Appendix .................................................................................................................................... 32
A. Resumes .................................................................................................................................... 32
B. Visual Trace Screen Shots ........................................................................................................ 32
C. Codetech Financial Model ........................................................................................................ 32
IX. Appendix………………………………………………………………………………….… 32
A. Resumes…………………………………………………………………………………… 32
B. Visual Trace Screen Shots……………………………………………………………..…
32
C. Codetech Financial Model…………………………………………………………………
…32
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Codetech
I. Executive Overview
A. Summary of Business & Business Model
Codetech has identified a significant market opportunity and developed technology ideally suited
for entry into the application development and deployment tools market. The client/server
database and application tools market is projected to reach $7.5 billion in revenues in 1995, an
increase of fifty per cent over 1994. This growth rate is expected to be maintained in 1996 and
then accelerate in 1997, reaching $20 billion through penetration of client/server architecture into
mainline mission-critical business applications.
These applications are dependent on the availability of scalable technologies and tools to support
the high performance, reliability and availability requirements of these users. The widespread
adoption of client/server and object-oriented technology will be enabled by the availability of more
powerful relational database software, stable 32-bit operating systems, and mature object-oriented
development and deployment tools.
Codetech plans a suite of tools to address this market need. These tools will:

Allow application developers to easily establish performance profiles and allow for
detailed analysis of their software – giving a system-level view of application performance
including response time and CPU usage, which can pinpoint bottlenecks and provide
diagnostics for optimization

Allow application integrators to easily perform system-level test of complex, distributed
applications that will identify performance bottlenecks in client applications, server
applications and networks

Allow developers and their users/customers to track performance, feature use, user error
rates, and overall system use characteristics
Codetech’s goal is to lead the software test tools market in terms of:

Ease of use, and tight integration with development environments

Compatibility with all leading development and operating environments

Non-invasiveness test and measurement tools that operate in the actual application
environment

Interactive user interfaces and productivity options
While some of these development and deployment tools exist in the mainframe and Unix
environments, the Windows environments have been severely underserved. Although the new
Microsoft operating systems have begun to address stability, the professional tools to create highperformance, high-quality, mission-critical applications are still missing.
This creates an attractive investment opportunity with high return. Quick time to market will be
crucial for success. Assuming an early and multi-stage funding commitment, Codetech’s revenues
are expected to reach $115 million in year five. Codetech’s market entry plan targets the
professional application development community, with follow-on products targeting application
integrators and systems managers. The products will be aggressively priced for these markets and
distributed through a combination of direct and indirect sales channels.
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The Company estimates a potential market cap of $600M+ for Codetech based on IPO
comparables. The Company is seeking a commitment of $500 thousand for market entry and an
additional $1.6M to fund continued implementation of the business plan, which will enable
Codetech to be first to market, and to gain and maintain the position of market leader. The
Company expects to generate a profit in its first year of operation.
B. Visual Trace - The Entry Product
Codetech’s first product to market will be its Visual Trace, built to help Windows developers
resolve their application performance problems. An application’s performance has been one of its
most important and visible characteristics and, in mission-critical processing, the customer has
come to expect sub-second response times. The developer encounters complicated interactions
between application code, third-party libraries, object components and the operating system. This
environment makes it difficult to identify and diagnose the causes of poor performance, and
therefore challenges the delivery of finely-tuned applications.
Codetech will be first to market with a comprehensive application performance tracing tool for
Windows developers. Codetech's tools will give developers a new capability which allows for
visibility into the internal performance of an application. Visual Trace is a powerful tool that peers
into a running program, identifies the portions of the application that are causing poor
performance, and gives the developer insight to quickly eliminate problems and better understand
the processing behavior of the program. Visual Trace is capable of tracing entire programs, thirdparty components and system level APIs (application program interfaces). It will work with all
popular client/server development environments on the Windows NT and WIN95 platforms.
Today, performance tracing tools on the Windows platform are either very difficult to use, limited
in scope, or non-existent. Visual Trace utilizes many low level techniques previously unavailable
on the Windows platform. The tool can trace and analyze libraries, components, and even stand
alone executables.
The direction for vendors of application development tools is to provide less and less focus on the
lower-level technology and more on productivity improvements and user interface, which sharpens
the need to deliver timely solutions to business problems. There are limited tracing tools that ship
with C/C++ compilers from vendors such as Microsoft, Borland, and Symantec. None have the
accuracy, depth, ease of use or commercial strength needed, to fulfill the needs of mission critical
client/server applications. The Visual Trace Suite addresses all of these deficiencies and more,
giving the developer a flexible, fast, intuitive and fun workbench to analyze programs easily and
repeatedly.
Development of the core technology of the system has been completed. Demonstration versions
are currently available. Development is continuing on a complete set of features and functions.
The initial release, which will enter Beta Test in April 1996, with general availability in third
quarter 1996, will support Microsoft’s Visual C++. Visual C++ currently represents 50% of the
two million C/C++ developers on the Windows platform. Visual Trace with support for Borland
and Symantec environments will quickly follow, representing an additional 40% of the market.
The second set of applications will target the growing market of fourth generation language (4GL)
tools. The first 4GL tool planned will be compatible with Microsoft’s Visual Basic, with
approximately two million users. Additional 4GL environments such as Sybase’s PowerBuilder
and Borland’s Delphi will follow, driven by market demand and partnership opportunities.
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II. The Company
A. Product Strategy
Codetech’s initial product strategy is to be first to market with application trace tools for
professional developers working in the 32-bit Windows environments. Continuing from this entry,
Codetech will be positioned as the pre-eminent supplier of professional application monitoring
tools, with a product family that addresses the application lifecycle from development, through
deployment and utilization. Codetech has developed proprietary core technology that allows many
aspects of how an application is working to be tracked in real time. This technology is first being
utilized to measure CPU cycles and elapsed time for all the functions within an application whether
or not the source code is available.
Three market segments have been identified for these types of tools: application development,
application integration and deployment, and application utilization and maintenance. Each of these
segments represents another stage in the lifecycle of software initiatives. Codetech's products will
make use of its core technology coupled with rich feature sets for each of these markets.
1. Application Development
This segment includes the professional programmers and software engineers who are using 3GL
and 4GL programming languages to create and modify applications. These programmers may be
developing products for software companies or projects for in-house use. Codetech's entry product
(Visual Trace) is targeted specifically for this market. These developers are looking for tools that
can be integrated with their development environment and provide them with capabilities that:

Improve the productivity of the development process

Improve the quality of applications

Improve the performance of applications

Have short learning curves

Improve cycle time
2. Application Quality, Test and Deployment
This segment includes the systems engineers who are responsible for putting an application into
use. This may involve installation of new applications, integration of applications with networking
infrastructure or integration of applications with applications. While these professionals may be
adding new functionality to applications, they are typically not fluent in programming languages.
These users will demand tools that:

Allow the performance of complex systems to be mapped, timed and analyzed for
development quality

Enable the evaluation of the performance impact of system changes

Are easy to use for technicians

Work with distributed systems

Promote consistent maintainable, supportable deployment
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3. Application Integration and Utilization
This segment includes systems engineers, operators and help desks personnel. These groups will be
targeted with application monitoring tools that can track and measure many aspects of an
application's performance, e.g., meantime to failure, reliability, test data availability and security.
Important features of these tools include:
While the Company is currently totally focused on the entry product, all products will derive and
build from the common core technology. There are many possibilities for these types of tools.
There are also significant positioning and partnering opportunities. Product requirements of this
segment will require additional research and development effort and its market is a slightly
different customer base.
B. Technology
Codetech has developed the first instruction tracing program for the Intel/Windows platform.
Utilizing proprietary Trace-Compilation Monitor (TCM), previously unavailable on Windows,
Visual Trace will be unsurpassed in accuracy and have little performance impact during testing.
The Windows platform currently offers only limited, inaccurate sampling tracers with a high
degree of overhead. Codetech’s customers will be encouraged to analyze, tune, map and test
regularly.
Trace and path analysis operates on the parts of a program for which the developer has either the
object code (libraries) or the source. Other advanced technologies operate on the system level
APIs and the operating system itself, recording a complete view of the runtime characteristics of
the application. Both techniques will be leveraged by the Company in the future and offer
significant possibilities for other types of tools.
The Company has written all of the product in C/C++ promoting object orientation, re-use and
extensibility wherever possible. Many parts of the entry application will be utilized in future
products keeping Codetech on an aggressive and profitable delivery schedule.
The Integrated Profiling Environment was developed from the ground up using industry standard
C++ class libraries from Microsoft and components to create an extensible, intuitive and fun
performance workbench. This will be another key selling point of the product.
C. Value Proposition
Codetech’s products are designed to deliver value to its customers in many ways:
1. Improved Products
Application performance is known to be an important feature of any software product. However,
without tools, there is no effective method for measuring and assuring any level of performance.
Visual Trace gives developers the visibility on performance characteristics that are required for
improving their software.
2. Developer Productivity
An integrated set of tools allows the developer to spend more time creating the application and less
time searching for the causes of problems. Since Visual Trace runs in real time without changing
the application, debugging is very efficient. The varied and flexible views available with the Visual
Trace can quickly isolate path problems and errors, and provide impact analysis.
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3. Product Quality
The new capabilities of Visual Trace allow software to be tested during development, in ways that
were not previously possible. The "coverage" view, for example, gives the developer a simple
indication of the quality of written and tested code.
4. Development Cost
By putting these testing capabilities in the hands of the developers, problems can be detected and
corrected earlier and more cost effectively.
5. Time to Market
Combined, all of these benefits speed the complete development process. Not only are
programmers more productive, they release more thoroughly tested code, with quantified
performance characteristics, faster than possible today.
The Company’s products will be used by IS departments that develop software to support internal
operations, engineering departments that develop software as a component of a manufactured
product, ISVs that develop software for resale, VARs that combine software components and
applications for resale and Systems Integrators.
D. Management Team
The Company was founded by Jason Ushburn, 28, who received his bachelor’s degree from
Columbia University in Computer Science. Mr. Ushburn began his computing career in high
school where he became a computer-aided design (CAD) expert and was instrumental in bringing
CAD automation to Columbia University. He worked in the financial services industry, at
Goldman Sachs, Inc. and Dillon, Read and Company for five plus years designing, developing, and
managing mission-critical software applications on Unix, mainframe, OS/2 and Windows
platforms and has been a pioneer in the implementation of object-oriented technology and
client/server solutions in investment banking.
Early in 1995, Mr. Ushburn began development of a prototype for the Visual Trace in his spare
time. In late July, he resigned his position as Vice President at Dillon, Read to start up Codetech.
Since then, he has devoted all of his time and resources to the development of prototype, market
research, the business plan and continued work towards the first release.
Mr. Thomas G. Bane, also 28, received his bachelor’s degree from Ithaca College in Accounting
and an Master’s Degree in Computer Science. He has held various management, finance and
business development positions with AT&T, and is currently working for Scientific Software Inc.
Before leaving AT&T, Mr. Bane was the Chief Financial Officer for Business Communication
Services - New Business Development. While in this position, Mr. Bane gained valuable new
venture experience while working with Bell Labs, Olgilvy and Mather, as well as Operations and
Product Development. He currently works with the Scientific Software Sales team in developing
new sales & marketing initiatives and product opportunities. Mr. Bane is prepared to leave his post
once Codetech is funded.
Mr. Bane will initially concentrate on the financial and operational management of the Company,
as well as external relationships, and Mr. Ushburn will be in charge of research and development.
They have a long, established relationship, complementary skills and are completely committed to
the success of the Company.
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The Company is currently looking to add a person to assume responsibility for the sales and
marketing of the Company’s products and three or four engineers to form the base team.
A Board of Directors will be formed consisting of:

Jason Ushburn, Founder & CEO

Thomas G. Bane, President

One voting seat to NorthPoint Software Ventures Inc.

One voting seat to Lead Investing Partners

One non-voting member with successful entrepreneurial experience in this market
Codetech entered into an agreement with NorthPoint Software Ventures Inc., a professional and
ventures services firm that mentors software start-ups. Through this relationship, Codetech will
have the advantage of up-to-date market research, competitive analysis, market analysis,
technology trends, access to new channels of distribution and alliances, competitive operational
and performance ratios and risk management tools.
NorthPoint will conduct an initial Risk Assessment of the Codetech, develop its Risk Index and
subsequently track Codetech’s progress over time in reducing its Risk Index. The alliance with
NorthPoint is expected to increase Codetech’s success, reduce its risk and increase its value.
Monthly checkpoint meetings will be help to measure and track financial and operational progress
and financial software and support packages will be installed for audit and control.
E. Organization
Codetech will be established as a “C” Corporation, incorporated in Delaware, and its offices will
initially be located outside the Boston area. The Company believes recently graduated software
engineers from a number of excellent computer science programs in the Boston area will be source
of creative talent that will be required to make the Company successful. The Company also
believes that a significant number of software startups in the Boston area will provide a source of
competent sales and support skills.
The initial organization will be a small team. Codetech plans to add four people to round out the
start-up team:

Sales and marketing executive with previous Windows development experience.

A technical marketing requirements analyst with substantial market and user knowledge

Three software engineers with the following skill requirements:

Compiler specialist

Windows internals specialist

User interface specialist
Documentation, product packaging, and advertising will initially be contracted with outside
vendors. The direct telesales force, inbound call center and product support will be operated
internally. They Company will rely on numerous partnerships and distribution channels to achieve
market reach.
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F. Patents & Copyrights
The Company plans to protect and exploit its proprietary core technology, Trace-Compilation
Monitor (TCM). It will rely on a combination of copyright, trademark and trade secret laws, and
contractual provisions to protect its intellectual property rights in its products. The Company does
not currently hold any patents for its techniques but will most likely choose to file applications in
the future.
G. Risks
Codetech’s Visual Trace is dependent on language features, operating system internals and
processor architecture. It is dependent on the vendor, in this case Microsoft, for timely
dissemination of internals and the ability to beta test prior to general release. The Company
believes that it will be able to keep up with upgrades and product stabilization and by leveraging
communications facilities such as the Internet and other on-line services will be able to support
such products. Future product plans are not as dependent on as many internals. The technical
hurdles have already been cleared.
The Company’s primary platform target will be the newer versions of Windows from Microsoft
such as Windows95 and Windows NT. The success and acceptance of these products at the
enterprise level will be vital to the success of Codetech. Recent sales figures of 7 million in the
first month for Windows95 indicate that acceptance is widespread and growing. Corporate
installations will most likely be the growth segment for 1996. Windows NT already has taken off
in the corporate arena. National Data Corporation reports in June 1996 that Windows NT has
grown from 12% in 1994 to 30% of the application server market in 1995. Foster Research Inc.
projects that NT shipment will increase from the estimated 150,000 in 1996 to over 300,000 by
1998, double that of Unix shipments estimated for 1998.
III. Market Analysis
A. Market Description
The client/sever database and application tools market is expected to reach $20 billion over the
next five years, with the tools sector estimated at about half, or $10 billion. Although the segments
within this market are still poorly defined, researchers and analysts agree that it is an attractive,
high growth market. Further, analysts estimate that there are over two million persons developing
software on the Windows platform today, with a 4:1 ratio of Windows to Unix developers.
According to a 1995 survey conducted by Software Market Research, Inc., 70% of IS shops are
targeting the client/server platform as their primary computing model. This survey confirms that
an extensive set of expectations exist for building applications for the client/server model, with
“better development tools” and “more efficient use of resources” being two primary needs.
There are many key factors driving this move to client/server:

Exploitation of rapidly declining, increasingly powerful PC and server hardware

End user empowerment, access to vast amounts of corporate data and productivity through
advanced technology

Ease of use through graphical user interfaces

Integration of PC applications
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
Flexibility and customizability of applications
The primary developers making this transition are IS departments that develop software to support
internal operations, engineering departments that develop software as a component of a
manufactured product, ISVs that develop software for resale, and VARs/SIs that combine software
components and applications for resale. Although the purposes for which these groups develop
software vary, developers in all organizations face many unrelenting forces:

Increasing complexity of software development and deployment

Software development continues to be labor-intensive, unpredictable, and prone to human
error

Pressure to move to object-orientation and reuse at many levels

Pressure to shorten time to market
Accordingly, developers have sought tools to improve software quality and to reduce development
and testing time. Wessels, Arnold & Henderson have termed this market, “Software Quality
Enhancement (SQE).” Their July 1996 estimate of the current market size of this segment alone to
be $330 million. They expect this incremental segment to grow to $2.1 billion by the year 2000.
Adoption rates for the SQE sector are very fast, as the need to increase the quality and the time-tomarket simultaneously is requiring new approaches and tools for software development.
Within this segment, application tracing and optimization tools are estimated at $50 million in
1996 with a compound growth rate of 50%.1 ABC estimates a CAGR of 70% for the client/server
and Graphical User Interface (GUI) tools segments, which are expected to dominate the market by
2000, as the number of mainframe computers continues to decrease.
Codetech plans to immediately address this segment with its introductory product. The newer
versions of 32-bit Windows on Intel PCs are quickly becoming the desktop of choice in the
enterprise. Codetech’s founder, through years of experience on the cutting edge of technology,
have identified a need for technical application quality and troubleshooting tools at various skill
levels for programmers on the Windows platform.
Secondary products will service application testers, quality assurance teams and help desk
departments with performance measurement tools. These tools will focus not merely on the
development process but on the entire spectrum of client/server computing from development to
deployment to maintenance and success measurement.
Today, these types of tools are broadly categorized as application management tools. This market
is expected to grow at an annual compound rate of 25-30%, reaching $4.8 billion in 1998.2
B. Target Market
The target customer for the entry product set is an educated buyer, typically a highly-skilled
programming professional. Today, programmers are bombarded with promises of productivity and
quality with the implementation of new technologies. In economically uncertain times, the method
of evaluating and selecting those technologies becomes a question of value. Unlike many of the
complex tools that promise productivity improvements, the Company’s products offer a high ROI
and the benefits of improving the run times and performance characteristics are intuitive to a
1
Source: Wessels, Arnold & Henderson
2
Source: ABC, March 1996
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developer. The alternative investment, re-design, analysis or database tools require longer financial
break-even and their inherent benefits are not certain.
About a year ago, Forrester Research Inc. conducted a survey of Fortune 1000 companies which
disclosed that fifty per cent of the respondents viewed performance tuning as an alarming state in
client/server offerings. Today’s buyer is looking for the application reliability and availability that
today is available only on the mainframe. Codetech’s target buyers understand the need to create
higher quality software faster.
1. Seats
Codetech’s target customer base is both the application development and management community,
and the professional services segments. ABC estimates a population of 11.9 million programmers
worldwide in 1996.
Visual Trace, at launch, will be integrated with Microsoft’s Visual C++ which currently holds over
49% of the 2.3 million estimated Windows C/C++ programmers (Source: ABC 1995). A version
for Borland and Symantec environments will quickly follow, and will be driven by market demand.
There are a number of reasons for targeting the C/C++ users first:

C/C++ developers are generally more concerned with performance, robustness and
reliability. This is one of their main reasons for choosing the language in the first place

Third-party libraries and components with potentially hidden performance problems are
commonly used in C/C++ applications

C/C++ developers have a purchase propensity toward tools like Visual Trace, and rely on
tools servicing performance measurement for the C/C++ professional on the Windows
platform
The second set of applications that Codetech will add to its suite will be versions for fourth
generation languages. The client/server platform has witnessed an explosion in the 4GL arena with
entrants such as Visual Basic, PowerBuilder and Delphi. The first version will target Visual Basic
developers with approximately two million users worldwide. Following 4GL environments will be
targeted based on market demand. Most likely the Company will target Sybase’s PowerBuilder
(estimated just over 500 million shipments by year end 1996) and Borland’s Delphi respectively.
4GL environments have their own set of performance problems that the Visual Trace Suite will
address:

Applications written in 4GLs, and the servers they work in tandem with, often suffer from
scalability problems

Often the performance problems are not discovered until late in the deployment stage when
re-architecting the application can be costly

Less sophisticated developers, those choosing 4GL tools, tend to pay little attention to
performance details when constructing software
There are numerous product positioning reasons for immediately targeting the 3GL developers,
although ideally the Company would like to target them all at once. The 3GL market is vast, with
over 3.5M COBOL developers alone. While the Company has some solutions in the works, the
performance tuning of 4GL environments will be best served with assistance from the product
vendor. To measure and tune at the level that the Company can provide for the C/C++ developer
would require some access to the internal architecture of the runtime environment that most 4GL
products use. By getting the 3GL version in the marketplace first, Codetech will be better
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positioned to approach vendors for technical relationships. Either way, the Company will have a
solution; but through positioning, the Company believes that it can have the best technology and
best solution.
Another reason for the C/C++ entry strategy is to be first to market, capturing both Windows
market and mindshare. Since development began on the Visual Trace, one of the potential
competitors, Quality Software, Inc. has become a public company whose investors are demanding
that they move products to the Windows platform. Codetech wants to be the first in application
performance troubleshooting for the many C/C++ developers and then “pour it on” for the 4GL
developers.
Both product lines will share much of the same underlying technology and interface. The
completion of every product will offer significant bundling opportunities and multiple customer
sales.
A May 1996 North American application development tools survey, with a sample size of 3000
enterprises, disclosed the following choices for new development:

Of the Object Oriented languages used, 49% selected C++, 33% used Visual Basic,
5% used Smalltalk, and 13% all other

Of the 3GLs used, over fifty per cent of the programmers used “C”
Purchase intentions beyond 1996 are projected as follows:
Segment
Projected Market
Penetration %
Compound
Growth Rate %
4GL (Graphical Tools)
75%
53%
4GL Language-Based
37%
19%
OO Tools
63%
80%
3GL (Graphical)
31%
41%
CASE (Model-based Development)
60%
46%
The following table identifies the targeted professional services segments as of year end 1995.
ABC’s September 1995 projection indicates a doubling of the revenues of the systems integration
market from 1993 to 1997.
Professional Services Segment
Seats
Percent of
Market
VARs, Consultants, SIs
125,000
10%
Embedded Systems Manufacturers
150,000
12%
ISVs
280,000
22%
Total
555,000
44%
Source: Systems Research, 1995
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Target customers for Codetech’s secondary products will be similar but slightly less technically
focused. It will be the programmers and integrators that take responsibility for all aspects of a
project from design to production to deployment to monitoring.
IV. Competitive Analysis
A. Competition
Although Codetech’s Visual Trace is unique in today's market, there are a number of potential
competitors. Quality Software, Inc., currently a Unix player, makes a suite of similar
tracing/development tools for the Unix market. They have recently gone public and hold a market
cap of $665M as of August 1996. Quality Software, according to their IPO, is planning a Windows
versions of their tools by the end of 1996, but the Company, as well as industry analysts, believes
that porting their toolset to the Windows/Intel platform will take considerably longer. Also, the
pricing and distribution models in the Windows market are very different than the Unix market.
It is not clear that Quality Software will be able to bring its distribution strategy or its technology
to the Windows market. Codetech expects to establish a substantial lead in price/performance for
tracing tools on the Windows platform.
A second potential entrant is a small, private Virginia based company, Core Technologies. They
dominates the Windows path analyzer, parsing and code mapping segments with OnTrack. The
Company believes that they have recently received investment capital and knows that they are
actively hiring. It is likely that they are intending to expand their line of business.
TECH Corporation in September introduced a product named Tracker which is for performance
analysis. The product focuses more on hardware disassembly then pinpointing bottlenecks of
application code. It is a sampling based tracer, inherently less accurate and targeted at the systems
engineer. It has also received poor press for the first version. The product currently does not run
on Windows95 or Windows NT, though they have announced support for Windows95 by the first
quarter of 1997. TECH Corporation has also demonstrated their lack of marketing strength with
software products.
It is conceivable that Microsoft, Borland, or Symantec could be future competitors. Microsoft has
exhibited a limited interest in the tools market. Approximately a year ago, Microsoft acquired the
rights to a small source code control and configuration management package. They now include
the product with Visual Basic Enterprise edition. Other than this, Microsoft is focused on
dominating the language and desktop database market with products like Visual C++, Visual Basic,
Visual FoxPro and Access. Microsoft will also be reluctant to reveal underlying performance
deficiencies in their own products.
Borland has recently shown a stronger position in the tools market with the release of Isolator, a
memory and bug detection tool that is a direct competitor with Core Technologies’ OnTrack.
Currently, the tool only works on older Windows systems but they have announced an upgrade. As
with Microsoft, and any of the other vendors that produce language products themselves, their
tools tend to integrate and operate only with their own language products. Each of these larger
players represents an opportunity as a distribution channel for Visual Trace.
The C/C++ version of the Visual Trace currently has no competition. There are limited use, limited
functionality source profilers that are packaged with various development environments but they
suffer from many problems. The 4GL version of the Visual Trace has one or two small
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competitors, including shareware tools (offered free over the Internet with no support) but they are
very simplistic, inaccurate and generally do not give a complete view of the system.
B. Barriers to Entry
The primary barriers to entry for Codetech’s first product are time to market (i.e., the first to
market with an commercial strength application tracing tool on the Windows/Intel platform) and
design/ development complexity. The time factor will allow Codetech’s early entry into the
market, capturing mindshare and marketshare. It is estimated that the Company has about a ninemonth lead over any of the potential competitors. Immediate and continued financing will ensure
the execution of the business plan to ensure that Codetech maintains this lead.
The second barrier is the difficulty of producing and maintaining program measurement tools of
this nature. The chief characteristics of the Visual Trace are its accuracy, non-invasiveness, and
integration with the native environments. These are not trivial accomplishments on any platform,
and the Windows/Intel architecture, in many ways, makes it even more challenging.
The product family rollout into an expanding set of market segments is intended to increase that
lead by getting maximum leverage from Codetech’s technology. The Company believes that many
vendors, even those in similar tools markets, will not be interested in undertaking such tasks. It is
more likely that these vendors represent licensing opportunities for Codetech’s underlying
technology. Development of a comparable technology will require a unique mix of highly
developed skills which are probably not readily available. Successful teams of compiler writers,
Windows internal and GUI experts are not built in a day.
The Company plans to maintain a continuous focus on technical talent. A strong incentive program
is planned to attract and keep a superior professional staff. Planned academic affiliations (see
below) are also expected to produce benefits in this area.
V. Products & Services
A. Product Line Plans
1. Visual Trace
Codetech’s plan includes the availability of the Visual Trace for beta testing by April of 1997, with
general availability in the third quarter of 1997. Literally, no risk exists regarding the selection and
deployment of technology at this time. All complex modules have been previously prototyped.
During that time period three design walkthroughs have been done; one with U.S. West, another
with CS First Boston, and another with NorthPoint Software Ventures Inc. Production versions of
all modules have been started. Product development is over 50% complete and ready for start of
test. Please see refer to Appendix B for sample screenshots.
The Company believes that the beta testing period will be extremely important to the success of its
products. All of Codetech’s products will be of such a technical nature that qualified beta testers
and extensive testing practices must be established. The Company has secured commitments for
beta testing from its early design evaluators as well as MCI and Relay Technologies, Inc. The
product will be released to other corporate prospects and ISVs for extensive testing as well.
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a) Product Description
Visual Trace is a powerful tool that analyzes the portions of an application and traces them. The
tool allows a developer to peer into a program, third party and system level code, giving him or her
the insight to quickly tighten program logic and performance problems. Some of Visual Traces
features are:

Highly graphical user-interface that helps developers easily analyze paths and isolate
performance problems

Integrated with the most popular development environments

Trace data can be filtered, sorted, and viewed in many different ways

Detailed analysis of dead, reusable code and performance data

Comparative views give a developer an easy way to gauge success in repairing
performance problems over the development cycle

Little overhead so as not to discourage frequent and early tuning and testing
Visual Trace C/C++ is a trace program which has previously been unavailable on the
Windows/Intel architecture. A program’s object code and libraries are analyzed and detailed traces
are documented at all levels. During a test or run of the program, machine cycles for each
procedure are counted and recorded. Every source function is immediately baselined, irrespective
of the other tasks running on the computer. For the many system level APIs, elapsed time is
measured and traced. Tracing programs are unparalleled in accuracy and have few of the
undesirable affects that other types of test tools possess. Here are a typical tracing session’s steps:
1. A programmer responsible for a business server has just been notified that they have rolled
out another 50 desktops of the group’s latest and greatest three-tier client/server system.
Response time has taken a drastic hit with the additional users.
2. From the native development environment, he or she quickly relinks the program enabled
for “Visual Tracing.” This is similar to how the developer would prepare for tracing
programs with the shipped tracing tool but an order of magnitude faster and easier.
3. The programmer re-installs the newly configured business server, in production, and
begins collecting execution data. As client requests are made, traces are saved to a run file
for analysis. The programmer has complete control over what parts of the program are
analyzed for performance.
4. After running in this tracing mode for a day or so, the developer collects the run files,
opens up the project from the Integrated Tracing Environment and begins the analysis.
5. The user can now open many different views of the data for exploration.

The Module View graphically displays the portions spent in each object, library or
DLL in the application, and allows him or her to “drill” down to the function level.

The Summary View allows a developer to sort the functions in a variety of ways:
minimum, maximum timing, code isolation and mapping.

The Navigator View gives the developer a graphical representation of the entire
program, where each node represents a function call with links to the various called
and calling functions.

The Source View relates the timing information back to the developer’s original source
code showing him or her the paths that each line of code takes.
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
The Timeline View shows the different threads of execution that occur as well as the
different events that occur during the run of the program.

The Coverage View shows what functions, percents of functions, and percents of
modules have been exercised during the session. In a future release, the programmer
will be able to collect and export this data to relational database and other SQE tools.
6. The developer immediately detects using the Visual Trace’s numerous views that there is a
concurrency problem when a dozen or so clients are connecting to the server and querying
for the same data. He or she also “drills down” through a particularly difficult business
logic module and sees that a procedure could be improved by making some specific system
calls less frequently.
7. He or she makes a few changes to the source code, relinks for tracing, which takes an even
smaller amount of time because only a small amount of the program has changed, and
reinstalls the business object server.
8. The server is exercised again, during real use, and more run files are collected for
comparison. The users have noticed better response time. There is no need to re-engineer
the system or throw more hardware at the system.
b) Enhancements
Codetech has identified many opportunities for future enhancements to the base product. The
following will be structured as upgrades or as add-ons.

Remote timing, tracing, testing and debugging

Repository storage of data

Coverage, testing statistics

Memory mapping

Code parsing
Research and development costs for such upgrades will be significantly smaller than for the
original suite. Visual Trace is being written with extensibility in mind.
The following chart gives an idea of the comparative features in the marketplace. Vendor Sources
Profilers represent the utilities that are included with the C/C++ development environments on the
Windows platforms. Many developers have attested to the utter unuseability of the profiler that
ships with Microsoft’s Visual C++. Visual Basic Profilers represent two tools that are in the
public domain and two small vendors with incomplete solutions. Profilers for other 4GL
environments such as PowerBuilder and Borland’s Delphi are non-existent.
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Feature Comparison
Features
Codetech’
s Visual
Trace
Vendor
Source
Profilers
TECH’s
Tracker
Visual
Basic
Vendors
(C/C++
only)
General
Highly graphical interface
Comprehensive profiling
Easy, fun to use
Accurate timing to the clock cycle
Low overhead
Quick, doesn’t require recompilation
Seamless integration with
development
Environments
Program discovery
and analysis















Specific
Code tracing
Reveals undocumented system calls
Allows comparisons between
successive runs
Collects all tracing statistics each
time the program is run
Traces third-party libraries and
components
Traces the underlying system calls
Runtime control over data collection
Program control over data collection
Line by line tracing
Procedure tracing
Module tracing
API by type of call
Event/message timings




partial

partial








partial





R2
R2
Graphical
Detailed statistics: min, max, first,
avg, deviation,…
Module
statistics/graphs
Call graph/called-caller relationships
Graphs by API type



partial

R2
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2. Visual Tester
The Company believes a new breed of systems engineer will emerge in the client/server model,
with different requirements from the traditional application developer. Applications Integrators are
increasingly responsible for the creation of systems both at many levels of an organization. This
engineer is responsible for weaving together and deploying disparate pieces of application,
components and database tools. As sophisticated suites of applications on the desktop (like
Microsoft’s Office) and on the server (like Microsoft’s BackOffice or standard packages such as
SAP’s R3) grow in popularity, this “Application Integrator” will play an important role in a
company’s client/server strategy.
Codetech believes that it can leverage some of the same technology that is used in the Visual Trace
to service the needs of this developer at the design, development, test and deployment stages. As
concepts like Application Partitioning, Distributed Objects, and Object Messaging become actual
products and take hold in the enterprise client/server arena, Codetech will be there to analyze, tune
and measure distributed program behavior.
Another set of products where similar technology and customer base could be leveraged is
client/server systems management tools. This is a somewhat overcrowded market with big players
like Sun Microsystems, Hewlett-Packard, IBM, and Tivoli Systems whose focus is more hardware
and network management-oriented for large corporations. The Company believes that there is a
strong need for management, monitoring and control at the application level that has only begun to
be explored. The Company also believes that a diversification of the target market for this type of
systems management exists on a smaller scale than what is being serviced by the larger, more
omnipotent, systems solutions/vendors.

For medium to smaller groups, the cost of the large systems management solutions is
prohibitive but the need is still there.

In many organizations, technology groups do not fall into the same management realm as
the network and hardware groups. Robertson, Stephens & Company have coined this the
“Departmental Market”. This market segment is severely underserved when it comes to
simple application management tools. The segmentation also implies that they may opt to
choose a different framework from the organization.

Tools from these vendors require an all or none approach. They have only just begun to
become open, flexible tools.

Only Tivoli Systems’ TME framework has begun to seriously address application
management.
Any tools that Codetech produces to service this customer’s need will offer significant partnering
opportunities with the larger vendors. The technology that Codetech has developed could be used
to “adapt” other commercial products for monitoring and management with the aforementioned big
systems players.
3. Visual Service
The true test of performance is the experience of the customers in real life settings. No matter how
much resource an applications development team invests in load balancing, distribution,
monitoring and maintenance, the users are the only ones who know whether they are satisfied with
system quality. Codetech has identified an opportunity to develop tools to measure this user
satisfaction and proficiency with the system at the desktop.
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When all users operated off the same machine, it was easy for a data center to judge, report and
proactively act on response time and usage patterns. The applications that ran on the mainframe
platform were also much simpler to use. A few “tab” and PF (Program Function) keys were all
that were needed to navigate an applications features. Client/server computing, with its vast array
of features, mice, and windowing systems have drastically changed this landscape. Today, the
tools for measuring, monitoring, and recording functional quality in this environment are absent.
Codetech’s founder, having spent years in the banking industry where traders are inundated with
high-priced features and capabilities, have seen users become completely disgruntled with the level
of proactive support, performance, and overabundance of ineffective features. The Company
believes that providing a way to track performance, reliability, data accuracy and proficiency will
become a growth area in the coming years for all systems.
Codetech will deliver these tools to not only in-house application developers and help desk staff
but also ISVs and VARs for remote application testing, monitoring, and feature tracking. Another
potential use for products of this type is at the management level. The Company can deliver
solutions that address these problems in many forms.
B. Future Product & Services Plan
Visual Trace addresses a present need in the marketplace and establishes a baseline with which to
leverage future offerings. There is already a demonstrated market for the product on Unix systems.
The product is near completion and will immediately give the Company an opportunity to:

Generate significant revenues and become profitable

Establish brand-name recognition for Codetech

Establish many indirect distribution channels and partnering opportunities

Establish a strong marketing and telesales force

Establish a superior support infrastructure for future products
The completion of the Visual Trace for other development environments will position the
Company as a provider of tools for multiple skill levels and multiple development environments.
Upgrades and ports of the application will be customer and market driven.
Once the Visual Trace suite establishes market reach, the Company will follow up with its strategy
for the Application Quality and Deployment, and Application Integration planned for the broader
market. As competition intensifies, Codetech would have established its niche validity and will be
well positioned to prosper as a market leader, as well niche player delivering early into these
market segments.
C. Service and Support Plans
The Company’s products will be of an extremely technical nature; dependent on CPUs, dependent
on platforms, and dependent on other vendors products. Superior electronic support of such
products will play a key role in the Company’s reputation and acceptance of the product. The
Company intends to utilize technology and automated systems to lower support costs and reduce
the time required to solve customer problems.
The following chart with data from a July 1996 Datasoft survey confirms the trend that most
software vendors are intensifying their electronic based support.
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Electronic Support Services Offered
Percent of Companies Surveyed
CompuServe Forum
100%
Fax-back
100%
CD-ROM knowledge base
71%
Internet Services
71%
Bulletin Board Systems
57%
E-Mail Tech Support
43%
Notes Servers
41%
Source: Data Research, 1995
VI. Marketing & Sales
A. Sales Strategy
The Company will rely on a combination of both direct and indirect channels to distribute its
products and services. Its initial vertical market focus will include Finance/Insurance,
Telecommunications and Manufacturing since these sectors are among the highest growth and tend
to be early adopters. These markets will be addressed through a direct sales force comprised of
telemarketing, telesales, field sales and field systems engineers who will focus on large accounts.
Codetech intends to market its offerings in a number of ways to suit both the product
characteristics, the economics and the specific customer bases, as follows:

Direct Telesales/Telemarketing
Initially, the plan calls for a limited telesales staff consisting of technically proficient sales
persons who will focus on enterprise accounts by market sectors. Future products with a
different pricing strategy may require a larger direct telesales force. The Company’s
telemarketing sales force will be prepared to serve the sophisticated needs of prospective
customers’ engineering and management staff.

Tie-in Sales
The Company will establish alliances with other application development tools vendors for
the Windows market. Visual Trace would benefit significantly from a relationship with
any of the automated testing tools that are currently on the market. Examples of potential
application tools companies would be: Mercury Interactive, Segue and Tivoli.

Partnership Sales
Ideally the sale of Visual Trace would be offered as a bundle with the underlying language
product. Unfortunately, those with the largest market share would be the least likely to
bundle and the most likely to take advantage of an early look at the Company’s product.
Symantec’s or Watcom’s compiler environments are a hodgepodge of development tools
with the smallest market share.

Resellers and Wholesalers
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
OEMs, VARs, and SIs

Mail Order and Inbound calls
B. Partnering & Bundling Opportunities
Today, the trend toward specialization, as well as the desire of the customer to interface with fewer
vendors, is driving the need for partnerships. Bundling its products will allow Codetech to
penetrate accounts at a high rate, bringing its offerings to a broader customer base.
The SQE and testing market has seen a number of venture capital investments over the past year.
Some of the more notable ones in the GUI/testing segment are Mercury Interactive, SQA, and
Seque. Many of the vendors have entered into the Windows market from the Unix side. Codetech
sees these companies as important opportunities for product integration. Most of their testing and
load balancing software deal with superficial aspects of the client/server platform rather than being
concerned with the underpinnings of the applications themselves.
Visual Trace is concerned with the application’s “real world” performance. Initially, this makes
the potential for partnerships large. Codetech’s secondary products will measure and troubleshoot
all aspects of the platform from a lower level within the software than the competition. Codetech’s
technology is easily integratible with the applications monitoring and management solutions of the
large, dominant systems vendors.
C. Sales Cycle
The target customer for the initial product suite is an educated buyer, typically a highly-skilled
programming professional. Today, programmers are bombarded with promises of productivity and
quality with the implementation of new technologies. In economically uncertain times, the method
of evaluating and selecting those technologies becomes a question of value. Unlike many of the
complex tools that promise productivity improvements, the Company’s products offer a high ROI
and the benefits of improving the run times and performance characteristics are intuitive to a
developer. The alternative investment, other design, analysis or database tools require longer
financial break-even and their inherent benefits are not certain.
The Company expects an extremely short sales cycle for its initial suite, i.e., no more than six
weeks from the reading cycle to the purchase. The price points will be such that they will not
require multiple management approvals or centralized control for the enterprise sale.
This educated programmer is also easily identified and easily reached through industry lead lists
and trade journals. This will contribute to the short sales cycle and early revenues.
For future products such as the Visual Tester, or Visual Service, the sales cycle and techniques
could be slightly different. A product of Visual Service nature would require more customer
education. Although the Company feels that it can aggressively price its products, these types of
enterprise solutions would require more purchasing power, therefore a longer sales cycle.
D. Pricing Strategy
The client/server model is based on selling higher volumes at lower prices and margins by utilizing
lower-cost indirect sales channels. Service and support are usually incremental sources of revenue.
In the mainframe model, the typical contract value was $300K+ with bundled service.
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Client/server has an average contract value of $3,400 with incremental services which generate
additional revenues.
Codetech’s products demand varied and very competitive pricing strategies. Examples of similar
products on Unix platform have demonstrated list prices in the area of $1200-$1900 per seat. The
Windows market would never tolerate such prices considering the complete development
environments themselves generally cost no more then $500 dollars.
For Visual Trace a starting list price of approximately $495 for the C/C++ versions with a 15%
discount rate based on multiple purchase scenarios. This price falls in line with offerings of
debugging tools from Code Technologies and TECH Corporation. Support will likely be free for
30 or 60 days and after that, customers will be offered a number of support options. Single
purchasers will be offered a support contract with free upgrades but the likely candidate for this
type of purchase is the corporate developer that purchases a multiple number of copies. Further,
the Company will utilize electronic support methodologies and charge for support then, in the
second or third year, it believes that support and services will generate an incremental revenue
stream.
The Company believes that Quality Software, Inc. will have significant trouble meeting these
prices competitively for the Windows market once they make it there. In addition, pricing conflicts
between the Windows and Unix markets will be problematic with the Unix customer base.
For 4GL versions of the Visual Trace the prices will vary dependent on the particular tool and
market segment. The latest version of Visual Basic Professional Edition has three different pricing
levels. The lowest-priced version is around $450 (street) but many users are upgrading from an
older version for only $200. Codetech plans to price the Visual Basic version at around $200 list
because of the number of smaller (incomplete solutions) competitors. A version for PowerBuilder,
though, would demand and tolerate a much higher price due to the cost of the enterprise
environment itself.
After the initial list price point of $495 for the first version, discounts will be granted on a 15%
price decline for each tiered-pricing category. Reseller channels would get a maximum pricing
discount of approx. $258 dollars per unit.
Pricing for the strategic, application management products will likely be on a seat by seat basis.
Since these products cater more to the enterprise market, support and service will be play a more
important role in the pricing and sales strategy, as well as contributing to the revenues. (Refer to
Pricing Model in Appendix , Financial Model.)
E. Marketing Communications
The Company will conduct a variety of programs to promote awareness of its business and
products, stimulate sales directly and establish the firm’s image:

Advertising
Advertising, combined with the leasing of direct mail lists, will initially play the most
significant role in the generation of sales. Over the five-year period, this strategy will
enable Codetech to reach the entire target market.

Press Releases
Press releases in the numerous trade journals will help build brand name recognition and
act as certification in Codetech’s collateral kit. Both customers and industry leaders will
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be sought out to publicly certify the products as they are released. Certifications will be
strategically targeted and will be incorporated in marketing materials.

Conferences/Trade Shows/Seminars
Codetech will plan to participate in targeted industry events, both independently and with
partners. The company believes that promotional “mini” tools or libraries can generate
sales and leads lists. Codetech has identified some tools that would excite the
development community but not “give away the farm” on its technology.

Promotional Bundles
With the introduction of products serving multiple languages environments, software
bundles will be a significant percentage of the sales and a large source of revenue.

Internet Participation
Codetech plans to make the Internet and other on-line services play a significant role in the
support and distribution of its products. This will also be a inexpensive way to advertise
and a natural force in attracting its prospects and customer base.

Trade Journal Articles
Magazine articles for publications such as Microsoft System Journal, Windows/DOS
Developers Journal and, especially performance-related articles, such as those published in
PC Techniques, will permit Codetech to stand out as industry experts with respect to
performance troubleshooting. For companies like Nu-Mega this has generated important
brand name recognition.

White Papers
The subject of the initial launch white paper will be achievement of sub-second response
for mission-critical client/server applications, followed by a piece on the new breed of
engineer – the new “Applications Integrator.”
The Company has designed its logo and, once funded, will develop a corporate backgrounder,
product specification sheets, a collateral kit and direct mail pieces. A tasteful and coordinated
theme will be utilized throughout the material and reflect a consistent, simple message to its
prospects and customer base.
F. University Program
Codetech will initiate and maintain affiliations with academic research in the field of software
design and test. These affiliations are expected to be the source of academic certifications of
Codetech's technology as well as future sources of core technology for Codetech's products. Initial
targets include the NASA/WVU Software Research Lab at West Virginia University and the
Software Quality Research Laboratory at the University of Tennessee.
VII. Finance
A. Financial Overview
With funding by year end 1996, Codetech believes that it can generate profit in the first year of
operations because of the advanced state of its entry product, the founder’s ability to successfully
complete product development on time, the low cost of reaching the initial target market and the
short sales cycle. The attached Five-Year Financial Model represents a Base Financial Plan, a
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© Copyright 1996 Codetech, Inc.
Codetech
longer term Strategic Plan and a Combined Statement of Income based on the previously outlined
product offerings and distribution channels.
Base plan revenues include Visual Trace for C++, Visual Basic, one additional 4GL (to be
determined) and Maintenance & Services; add-ons and enhancements are excluded. The Strategic
Plan reflects the Company’s broader vision, Application Integration and Deployment and
Application Utilization and Maintenance, and for planning purposes was built maintaining Base
Plan ratios.
The Company believes it has captured all relevant expense associated with the revenues planned
over the five-year period. Planning assumptions have been documented in the Financial Model.
The following tables outline (in millions) a summary of the attached Base Plan Income Statement,
Balance Sheet and Statement of Cash Flows.
B. Income Statement - Base Plan
Financial Summaries (in Millions)
1997
1998
1999
2000
2001
Revenue
$2.6
$9.1
$13.9
$18.7
$25.9
COGS
$0.4
$1.1
$1.6
$2.1
$2.8
Operating
Expense
$1.5
$3.3
$5.2
$7.1
$10.3
Gross Profit
$0.7
$4.8
$7.1
$9.5
$12.8
Net Income
$0.4
$2.9
$4.3
$5.8
$7.7
Note: Net Income is after depreciation and taxes.
C. Balance Sheet - Base Plan
1997
1998
1999
2000
2001
Assets
$1.1
$5.4
$7.8
$10.6
$14.2
Liabilities
$0.5
$1.5
$2.4
$3.2
$4.5
Shareholders
Equity
$0.6
$3.9
$5.4
$7.4
$9.7
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Codetech
D. Statement of Cash Flows - Base Plan
Cash Flows
1997
1998
1999
2000
2001
Cash Inflow
$1.8
$8.5
$12.7
$17.2
$23.5
Cash Outflow
$2.3
$6.2
$9.6
$12.9
$18.1
($0.5)
$2.3
$3.1
$4.3
$5.5
Total Cash Flow
Note: the above Cash Flow analysis excludes external funding sources.
E. Revenue Sources - Base Plan
The Company is going to achieve these financial projections by distributing our products through
multiple distribution channels, as previously discussed. In order to clearly identify these revenue
streams, the following chart details the projected product revenue generated through each channel
for the base operating plan (excluding maintenance and service revenues):
Channel
1997
1998
1999
2000
2001
Direct Sales
$1.3
$6.7
$10.5
$14.3
$20.3
Internet
$0.3
$0.5
$0.7
$1.0
$1.3
Retailers
$0.6
$0.8
$1.0
$1.2
$1.3
Systems
Integrators
$0.3
$0.7
$1.0
$1.4
$1.8
Maintenance &
Services
$0.1
$0.4
$0.6
$0.8
$1.1
Total
$2.6
$9.1
$13.9
$18.7
$25.9
Please note that while Direct Sales is projected to generate approximately 60-80% of total revenue
over the five-year base plan period, the Company believes that the additional distribution channels
will clearly provide financial benefit and brand recognition opportunities in future years. In
addition, the Company will generate significant revenue from Maintenance and Service contracts
ranging from 5-12% of total revenue.
F. Expense - Base Plan
From an expense perspective, the following table outlines the percentage cost of total revenues for
each major cost driver:
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© Copyright 1996 Codetech, Inc.
Codetech
Expense
1997
1998
1999
2000
2001
COGS
16%
11%
11%
11%
11%
R&D
12%
5%
6%
6%
7%
Sales &
Marketing
28%
20%
20%
19%
20%
G&A
20%
9%
8%
7%
6%
As is detailed in the above analysis, the Company will manage expenses downward as a percentage
of revenue during the analysis period by controlling discretionary spending and managing its
workforce effectively. In order to attract and retain the type of employees to ensure the continued
success of the Company, it will provide bonus and retirement savings opportunities. Refer to the
attached detailed expense analyses which provide the specifics for each of the major cost drivers
above.
For future strategic product development and to maintain a leading technological position, the
Company plans to shift more resource towards Research and Development.
G. Funding Requirements
In order to achieve the significant financial position as outlined above and on the attached financial
model, the Company is requesting funding totaling $2.1M. The following highlights the major cost
drivers:
Cost Drivers
Expense ($K)
Entry Product Completion
$0.4
Capital
$0.1
Advertising
$0.5
Packaging and Shipment
$0.4
Sales & Support
$0.2
Continued R & D
$0.3
G&A
$0.2
Total
$2.1
Please refer to Appendix C, Financial Model for detail plan, which describes the detail the
Company’s funding requirements.
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© Copyright 1996 Codetech, Inc.
Codetech
H. Additional Revenue Streams
The Five-Year Financial Model represents the sale of the Company’s profiling tools only. The
additional products represented in the product descriptions (Visual Integrator and Visual Metric)
were excluded from the above financial projections. In order to understand the significant
financial benefit to the Company, the following chart represents a high-level Income Statement (in
millions):
Strategic
1997
1998
1999
2000
2001
Revenue
N/A
N/A
$29.5
$45.0
$80.9
Expense
N/A
N/A
$19.8
$22.8
$40.9
Net Income
N/A
N/A
$6.8
$15.7
$29.3
Note: Net Income is after depreciation and taxes.
The introduction of these products will significantly enhance the financial picture of the Company.
The Company is projecting a combined gross revenue of $115M in 2001 (see Combined Income
Statement in Appendix). Additional distribution channels, such as international and product
bundling, will also be investigated to further enhance product sales and recognition. The Company
will update the financial model as appropriate.
The attached model provides the detail represented in this financial overview, including
assumptions, capital and headcount analysis. The Company expects this model to be a working
representation of its financial position. Updates with additional information will be done as
required.
VIII. Glossary
A. Overview of Development Process in the IT Industry
A major ten-year cycle of client/server application development is just beginning. Corporations
are in the early stages of designing and constructing a massive new generation of network-based
software applications and related databases that are much more advanced than traditional
applications in their underlying architecture, functional capabilities, user interaction and
deployment flexibility. This cycle represents a major opportunity for application development tool
investment.
In mainstream commercial computing industry, professional application developers have written,
debugged, tested and deployed well over five billion lines of software code. The most common
software “tools” used to design and construct these applications included first generation languages
(low-level machine instructions), second generation (“assembly”) languages, third generation
(“compiler”) languages, and fourth generation (higher level) languages.
Professional software developers will rely not only on third and fourth generation languages that
are still in use, but on more powerful, higher-level languages and development environments.
Selection of the tools or tool suites is usually a technical decision. Various alternatives provided
by today’s tools enforce varying degrees of structure on the developer and are centered on the
following language environments:
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Codetech
3GL (Third Generation Language) - procedural environments that allow developers to build
application components using direct access to various resource manager APIs (e.g., data access,
transaction monitor services, presentation services). Language examples are COBOL, FORTRAN,
PL/1 and C/C++.
Fourth-Generation Languages, or generators, by definition provide and enforce a higher level of
abstraction by providing consistent interfaces across multiple infrastructures and the interface
invocation parameters are built with prompts or templates.
Object-Oriented Languages focus on a business object perspective. Through OO development,
objects representing business processes and data are defined. The business objects are then
decomposed into classes, frameworks and parts, depending on the specific level of abstraction, for
use in building applications. These business objects when constructed to reflect the way the
business is run, can get distributed across business networks. Business objects are portable and
allow customers to exploit reusability of common business functions.
B. Definition of Terms
API - Application Programming Interface - A approach to communicate with software applications
where standard interfaces are published in order for ISVs to develop programs and point solutions
that can talk to core applications.
Client/Server Computing - A computing environment in which data and processing power is shared
or distributed among the computers on a LAN. Typically, the “clients” are desktop PCs which
request applications, data and/or files from more powerful computers known as “servers.”
Client - In a client/server or distributed computing environment, typically a desktop PC requests
applications, data, and /or files from the more powerful servers. Unlike a mainframe environment
in which dumb terminals were capable only of asking the mainframe to perform some task, the
client is able to process the data it receives from the server. The client requests the activity from
other systems or programs to accomplish specific tasks.
CPU (Central Processing Unit) - The primary integrated circuit which determines the processing
power and controls the functions of a computer or computer peripheral.
DLL (Dynamic Link Library) - a shared library environment where multiple applications do not
require separate instances of development components.
DOS (Disk Operating System) - The single user, command line, 16-bit, single tasking operating
system, which controls most IBM PCs and clones based on Intel’s 80X86 multiprocessors.
Driver - The software that enables peripheral devices, such as printers, hard drives and sound cards
to communicate with a computer and its operating system.
GUI (Graphical User Interface) - An interface allowing users to instruct a computer to perform a
function by selecting a command from a menu or by manipulating icons. The Macintosh operating
system first popularized the GUI. Other graphical user interfaces are Windows, Motif, Open Look
and NeXTStep.
ISVs (Independent Software Vendors) - ISVs are companies whose primary function is to develop
and distribute software. ISVs solutions are independent of and they have the freedom to select
architecture, platform and hardware compatibility.
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Legacy Applications - Software applications developed using conventional analysis, design and
programming methods, and which therefore, have no specifications resident in CASE (computeraided software engineering) tools or repositories.
LANs (Local Area Networks) - A group of computers which have been connected together,
allowing information to be shared and exchanged. They are generally user-owned and operated
data transmission facility connecting a number of communicating devices within a single building
or campus of buildings.
Mainframe - A powerful computer with centralized processing. In a mainframe environment, users
work at “dumb” terminals and request the mainframe to process or manipulate information in a
specific way, and all processing occurs at the central computer (vs. the client/server computing
model).
Mission-Critical Applications - Applications that must work. Applications so critical to the
company that they must never go down.
(Object-Oriented Programming) - Programming technique which creates objects or blocks of code
capable of executing specific functions or features. Think of OOP as software Legos. The objects
are independent, allowing them to be combined – as one would connect Legos pieces – to add
features, customize applications or create new programs.
OS (Operating System) - The software which controls the essential operations of a computer,
including memory management, information flow in and out of the CPU, task prioritization, and
input/output functions. The operating system enables the computer, various peripherals, and
applications to communicate.
Platform - Refers to a computer architecture or operating system standard. Certain software will
only run on certain hardware systems or platforms.
Server - In a client/server or a distributed computing environment, it is one of the larger more
powerful computers on which applications, data and files are stored for clients to access as
required.
Unix - The operating system originally develop by AT&T in 1969, it is an open system, 32-bit,
command line multitasking, networkable, multi-user operating system. The open system design
allows it to run on a variety of hardware architectures. The power and flexibility of Unix has made
it popular among technical professionals.
User Interface - Describes the front-of-the-screen appearance and function of an application or
system. VARs - Value Added Resellers - Companies that reseller another vendor hardware and/or
software integrated with its unique solution. An example would be an application software vendor
who develops a regional banking system for local and community banks, and the VARs offering
would include the hardware and other accessories to the sale.
Windows - Microsoft’s graphical user interface (GUI) which runs on top of DOS. Windows is not
an operating system, but an application which puts a graphical front end on DOS in an attempt to
provide the same ease of use as Apple’s Macintosh operating system.
Win95/Windows95 - Microsoft’s recently released 32-bit, preemptive multitasking operating
system, not a graphical user interface overlaid on DOS like Windows 3.1.
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© Copyright 1996 Codetech, Inc.
Codetech
Windows NT - The generation of Windows which is a true 32-bit operating system, not a graphical
front end for DOS-like Windows 3.1. 32-bit operating systems such as IBM’s OS/2, Apple’s
System 7 and Unix have been available for a number of years, offering many of the features of NT.
IX. Appendix
A. Resumes
(Attach key employee and board member resumes)
B. Visual Trace Screen Shots
(Include actual screen shots of your program – it makes your product come to life and adds
credibility to your venture.)
C. Codetech Financial Model
(This is the detailed five-year financial model. This plan includes just the summary
information for Codetech’s financial plans. In 1Q97, NorthPoint plans to launch a Web
service called, “Ask Emma.” This fee service will provide an expert who will evaluate the
business plan you have written, write your financial plan for you, using a NorthPoint tool
which has wide acceptance by the investment communities, or just critique you plan for
you.)
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THIS SAMPLE BUSINESS PLAN WAS PREPARED BY NORTHPOINT SOFTWARE VENTURES INC. FOR OUR WEB SITE.
© Copyright 1996 Codetech, Inc.