Overview
Revenues
Data1Intel’s products are digital and our cost of production is very low, especially as we scale. Our data products are typically sold on a recurring revenue basis that leads to very high profit margins. This model is familiar and desirable to SaaS investors.
Once the data is collected and organized, numerous highly targeted, independent, distinct, and high-volume revenue sources can be generated for the company. At this time, we have identified only a few of the possible cyber security data products that will eventually be sold into both broad and specialty markets. Some of those products are:
- Vendor assessment via the VAaaS (B2B) SaaS application
- Vendor management services via a SaaS application
- Various cyber security product and company newsletters and daily bulletins customized and targeted at multiple global markets
- Other reports and customized data for specific industries, such as the insurance and financial services industries
- Consulting, partnership, and other identified revenue streams
Once the data collection systems are operational, our ability to generate revenues will be immediate. It is our assumption that once Data1Intel is fully funded, the demand for our products will be such that we will be able to pre-sell subscriptions and generate substantial and meaningful revenues ahead of our official launch.
Please refer to the "High-Level Pro-forma Summary" below and also the full pro-forma [see "Confidential Documents" section of this business plan] for a detailed description of products and anticipated revenues.
While it is impossible to accurately predict how many of our various subscriptions can be sold into our targeted global markets, it is meaningful to note that within the pro-forma, the sale of only 111,000 VAaaS subscription seats in 2017 would generate over $16M in revenues. Look at this number in the context of all the products we intend to launch, the enormity of the size of our target markets, and the current lack of meaningful competition—and you can get an idea of the potential of this opportunity.
Pro-forma
We are not actively raising money at this time. Instead, our founder is meeting with potential partners, determining interest levels and discussing possible valuations and terms.
We have developed an accountant-level, GAAP-compliant pro-forma model that contains compartmentalized business unit details and complete CAP tables. An abridged, but very detailed 3.5-year pro-forma is available to qualified investors. The following is a high-level summary of information contained in that pro-forma and some basic assumptions:
- Company funding and launch in July of 2015
- Initial product launch (VAaaS software, plus three newsletters/bulletins [all B2B]) in July 2016
- VAaaS and newsletter package pre-orders starting in January 2016
- VAaaS SMB (small-to-medium business) seat/subscription rates of $69/week, $179/month, $649/year
- Pre-order package rate of $199/year
High-Level Pro-forma Summary
| (6 months) | ||||||||
| 2015 Units | 2015 Revenues | 2016 Units | 2016 Revenues | 2017 Units | 2017 Revenues | 2018 Units | 2018 Revenues | |
| Total VAaaS subscriptions sold | - | - | 7,747 | 1,400,861 | 91,372 | 14,263,878 | 92,660 | 20,862,592 |
| Newsltr-Bulletin subscriptions sold | - | - | 2,160 | 1,483,660 | 9,050 | 4,167,750 | 13,275 | 5,321,100 |
| Pre-launch VAaaS orders sold | - | - | 3,000 | 597,000 | 1,300 | 258,700 | 1,300 | 258,700 |
| Data report product sales | - | - | - | - | 8,457 | 229,993 | 17,590 | 498,110 |
| Industry data sales | - | - | - | - | 21 | 3,300,000 | 59 | 19,050,000 |
| Consulting sales | - | - | - | - | 1,050 | 245,000 | 2,400 | 645,000 |
| Country rights sales | - | - | - | |||||
| Affiliated product sales | - | - | - | - | 1,796 | 44,906 | 1,808 | 45,194 |
| Data-as-a-Service sales | - | |||||||
| Silo sales | - | - | - | - | - | - | - | - |
| Total Sales | - | 3,481,521 | 22,510,227 | 46,680,696 | ||||
| Total Operational Expenses | 3,486,708 | 10,802,013 | 15,837,250 | 26,410,363 | ||||
| Cash Flow | (3,486,708) | (7,320,492) | 7,192,977 | 20,270,333 |
It is the Founder’s hope that the reader becomes interested enough in this opportunity to carefully study the various additional documents available to qualified investors, including the detailed pro-forma HERE.
NOTE: The Pro-forma referred to here and available to qualified investors/interested parties is a forward-looking tool and a set of possible projections that will help interested partners to better understand our business and intentions. However, the pro-forma’s primary function is to help us launch and operate the company in an organized and efficient fashion. It is a carefully thought-out document that will guide the deployment of any eventual funding resources. Anyone who might consider investing in Data1Intel LLC should not base any investment decision upon any information presented in the pro-forma and should seek professional legal and financial advice before making any decisions.
Use of Proceeds
The proceeds of any fundraising will be used to build the IT and human resource systems necessary to IPO (Input-Process-Output) the data and to market that data to our various target markets.
According to pro-forma projections, if $11M were raised by July 2015, it would take until July 2016 to launch the system. It would take approximately $10.8M to bring the operation to cash flow break-even at the end of 2017. From that point on (as a result of all the various possible data products we can sell), it becomes very profitable.
Please refer to the detailed pro-forma and "The Company" section of this business plan for more information. The reader will see that approximately half of all expenses are associated with U.S. and offshore personnel expenses, while the remainder is associated with U.S. and offshore infrastructure expenses.
Valuation
A meaningful valuation for a pre-revenue start-up company is not easy, but not impossible. Unlike efforts to value social media start-ups, for instance, this type of data company does have "comp" examples. Additionally, comp information for other cyber security companies is also available and useful to this effort.
1. Data company comp. As a data company comp, we'll use IHS, which happens to be a Denver-based, data collection and data sales business. It is a publicly traded information technology company focused on older, more established industries such as oil and gas, manufacturing, construction, and healthcare. While it is an IT company itself, its focus is not the IT industry and also not the cyber security industry. It may be noteworthy that IHS, in fact, served as part of the inspiration for the formation of Data1Intel.
IHS valuation highlights (https://www.ihs.com):
| Sales 2014 | $2B |
| Market cap 2014 | $8B |
| Earnings 2014 | $690M* |
| Market cap X earnings | 12X |
| Market cap X sales | 4X |
| Earnings as a % of sales | 31% |
*NOTE: The earnings for IHS would have been over $200M more in 2014 than reported, but $200M was spent on acquisitions. Historically, IHS spends a large percentage of earnings on acquisitions.
2. Cyber security company comps. As the cyber security crisis becomes ever more evident, valuations associated with cyber security companies are increasing rapidly. A good representation of what is going on in this space is revealed by an examination of the PureFunds ISE Cyber Security ETF. This is an exchange traded fund (symbol: HACK) that focuses on and invests in cyber security companies. Please go HERE for a detailed summary of this ETF fund as of March 6, 2015.
HACK Portfolio Company Valuation Highlights
| Total Net Assets | $434.9M* |
| Number of Cyber Security Stocks Owned by Fund | 32 |
| Price/Prospective Earnings | 31.63X |
| Price/Sales | 3.46X |
| Price/Cash Flow | 21.38X |
*NOTE: The HACK ETF has attracted almost half a billion investment dollars into these 32 cyber security companies in a very short period of time. This is indicative of the investment interest and potential in this space.
Valuation Summaries: For both IHS and the 32 companies in the HACK ETF, the companies are valued at about 4X sales. Additionally, IHS is valued at 12X earnings and the HACK companies are valued at a range of 21-31X earnings/cash flow.
Data1Intel Valuation Projections
Making the assumption that the Data1Intel founder raises $11M and sells a 30% stake in the company, the start-up/pre-revenue valuation for Data1Intel would be $33.3M.
The following tables use the 2017 and 2018 Data1Intel pro-forma revenue numbers (when revenues start to become meaningful) and perform various comps to IHS and the HACK ETF companies. We use IHS valuations as our base-line, but assume that our focus on cyber security will allow us to command a higher premium.
| IHS 2014 | HACK | D1Intel 2017 | D1Intel 2018 | |
| Sales/Projected Sales | $2B | - | $23M | $47M |
| Earnings or Cash Flow | $690M | - | $7M | $20M |
| Earnings as % of Sales | 31% | - | 35% | 43% |
| Market Cap | $8B | |||
| Market Cap/Valuation X Earnings | 12X | |||
| Market Cap/Valuation X Sales | 4X | 3.46X | ||
| Price/Prospective Earnings | 31.63X | |||
| Price/Projected Cash Flow | $21M | |||
| Data1Intel Valuation based on 4 X Sales | $90M | $187M | ||
| Data1Intel Valuation based on 12 X Cash Flow | $86M | $243M |
According to Crunchbase, the typical VC exit occurs between 6-7 years. Below are a few conservative exit scenarios for Data1Intel. Considering the business model, our many independent sources of revenues, and the many "platform" opportunities the company will have, readers will no doubt have higher sales/cash flow expectations for this company. A data company has extremely high margins. Various margins are assumed and expressed.
| Scenario 1 | Scenario 2 | Scenario 3 | Scenario 4 | |
| Sales at exit | $23M | $47M | $60M | $100M |
| Cash flow | $14M | $20M | $27M | $45M |
| Cash flow as % of sales | 35% | 43% | 45% | 45% |
| Valuation at 4X sales | $90M | $187M | $240M | $400M |
| 30% investor value based on 4X sales | $27M | $56M | $72M | $120M |
| ROI on $11M investment | 2.5X | 5X | 6.5X | 11X |
| Valuation at 12X cash flow | $165M | $243M | $324M | $540M |
| 30% investor value based on 12X cash flow | $49M | $73M | $97M | $162M |
| ROI on $11M investment | 4.5X | 6.5X | 9X | 15X |
Exit Strategy
The obvious exit strategy for a company of this kind is the sale of the company to a third party or an IPO. With that said, it should be noted that as mentioned in other places in this document, Data1Intel is designed as a "platform company." It will not only throw off substantial sums of cash because it will have achieved a monopoly on information related to a critical global market (cyber security), but the company’s data assets can be leveraged in many ways to enter numerous other businesses.
Data1Intel will be uniquely positioned to create and support other businesses or leverage off our business intelligence to profit from other cyber security company activities, thereby generating additional profits and opportunities. Therefore, an exit strategy that included retention of certain intellectual property rights, or access to certain data streams, could yield long-term cash flow beyond the exit.
Our current exit strategy assumes the sale of Data1Intel to a competitor or a large data customer in three to five years at a multiple of at least 4-7X sales. Therefore, we have identified various competitors and others as target buyers and will engineer our data collection processes to be of greater value to, and maximize our valuation to, those buyers.