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FUNDING READINESS REPORT

st
1 May 2017

Note: This report has been prepared by business, industry and financial experts relying on the various
documentary submissions of the company. These include their investment pitch, promotional videos,
marketing material, business plans, strategic plans and other documents requested by us. One on One
meetings with the Founders have been conducted to get clarity on the state of the business, to accurately
assess the business opportunity, to provide investors with a fair sense of investability of the business venture.
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1. Overall Qualitative Commentary 3

2. Overall Funding Readiness Score 6

3. Funding readiness Score by Criteria 6

4. Strengths 7

5. Areas of Focus 8

6. Recommended Funding Strategy 9

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OVERALL QUALITATIVE COMMENTARY

700 800
Potential of the Idea:
Mobile Apps are proliferating at a rapid rate, aided by the
600 900
boom in smart phone usage. There is a need for credible 70% 80%
testing companies that can provide credible performance 60% 90%
& security testing and certification. While the service itself
is not unique or disruptive in nature; it is a niche market 500 50% 100% 1000

with an established need and high growth potential. Score - 850

Percentile of Peer Group - 91

Corporate Setup: 700 800

XXXX is a private limited company with three directors

incorporated on 10th June 2013. The company is 600 900
70% 80%
registered and headquartered in Hyderabad and has a
60% 90%
staff strength of 55 employees including 7 management
staff. The company is adequately supported for statutory 500 50% 100% 1000

and legal matters through external consultants. Score - 812

Percentile of Peer Group - 88

700 800
Market Size & Opportunity:
The estimated market size for mobile app testing globally
600 900
is USD 1.9 billion and USD 650 million in India. It has grown 70% 80%
at 12% CAGR over the past three years and is estimated to 60% 90%
grow at 16% CAGR over the next four years. The company
is among the top two players in its segment in India and all 500 50% 100% 1000

players put together (approx. 8-10) have barely scratched Score - 910
Percentile of Peer Group - 93
the top layer of the market.

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Competitive Advantage: 700 800

The company has an early mover advantage. It has built
proprietary applications and applied for a patent for the 900
600
same. The application coupled with its established 70% 80%

workforce & processes has resulted in a client list in India 60% 90%

of the largest ecommerce & web based companies. It also

500 50% 100% 1000
has overseas clients in the major markets like the US and
Europe. Score - 734
Percentile of Peer Group - 84

700 800
Quality, Skill & Diversity Of Team:
The company is led by its founder Mr. XXXXXX and a group
of two other co-founders. One of the founders at the start 600
70% 80%
900

of the venture exited amicably in March 2014. The team 60% 90%
has the requisite domain experience and diversity of skills
to execute on its stated growth plans. The founders are 500 50% 100% 1000

into their second startups with a reasonable exit from the Score - 686
earlier venture three years ago. Percentile of Peer Group - 62

700 800
Product / Service Maturity:
The service of the company is well established and its
600 900
product developed with the requisite standards. The 70% 80%
service and product are well documented and regular 60% 90%
improvements made based on market feedback. Client
feedback has been consistently high and client retention is 500 50% 100% 1000

greater than 90%. The marketing and advertising spend Score - 846
Percentile of Peer Group - 93
may be underestimated in relation to the business size,
maturity and growth plans.

Executable Business Plan: 700 800

There is a documented business plan for the future
growth plans of the company. There is clarity of ownership 600 900
and accountability for the various components of the 70% 80%

plan. The plan is realistic and seems achievable at the pace 60% 90%

it is set. The requirement of the resources and skills as per 50% 100%
500 1000
the plan are normal with no possible show stoppers from
Score - 722
an availability perspective. Percentile of Peer Group - 81

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700 800
Financial Robustness:
The company broke even at an EBITDA level 14 months ago
600 900
and will report nett profits for the financial year ending 70% 80%
March 2017. The revenues for the year ending March 2016 are 60% 90%
at USD 0.6 million and the EBITDA at USD 0.08 million. The
March 2017 revenues are estimated at USD 1.1 million and 500 50% 100% 1000

EBITDA at USD 0.19 million. The accounts of the company Score - 657
Percentile of Peer Group - 79
adhere to the current accounting standards and are up to date.

Investability:
The promoters are inviting an investment of USD 300K for
a 15% equity stake. They are open to non-equity options
700 800
as well. The company currently has 8 shareholders and has
raised 10K from the primary promoter, 15K from other
600 900
promoters and 32K from friends & family. The offer is 70% 80%
based on a professional valuation using the weighted 60% 90%

average discounted cash flow method.

500 50% 100% 1000
Funds raised will be 100% deployed within the company.
Score - 943
28% will go to retire bank loans resulting in saving of Percentile of Peer Group - 94
interest costs and the balance will be deployed to scale the
workforce and the technology resulting in a eight fold
increase in revenues and threefold increase in EBITDA.

Exit Strategy & Probability: 700 800

The most likely exit, after the company receives its patent
and further consolidates its market position, is like 600 900
through an acquisition by a global web or IT player. Other 70% 80%

options for early stage investors are to exit in future 60% 90%

rounds of funding. The current shareholding agreements 500 50% 100% 1000
are loosely worded with exit options for current
Score - 910
shareholders not clearly articulated or agreed to. Percentile of Peer Group - 96

700 800
Governance & Risks:
There is a market and technology risk in a large global
600 900
player releasing free testing kits for mobile apps. However, 70% 80%
this should only cause a minor ripple in the overall market 60% 90%
as the commercial players will continue to use rigorous
and independent credible testing companies. The statutory 500 50% 100% 1000

compliances are in place and the financial controls Score - 578

Percentile of Peer Group - 79
adequate for the current size of the business. Board
meetings are informal with no formal minutes maintained.

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OVERALL FUNDING READINESS SCORE

10 20 30 40 50 60 70 80 90

83%
for Company
XXXXXX

20 30 40 50 60 70 80 100

90
th

Percentile of closest
peer group

FUNDING READINESS SCORE BY CRITERIA

120 910 943 910 1000

850 812 846 900
100 734 686 722 800
657 700
80 578
600
60 500
400
40 300
20 200
100
0 0
Potential Of Corporate Market Size Competitive Quality, Skill Product / Executable Financial Investability Exit Governance
Idea Setup & Advantage & Diversity Service Business Robustness Strategy & & Risks
Opportunity Of Team Maturity Plan Probability
850 812 910 734 686 846 722 657 943 910 578
91 88 93 84 62 93 81 79 94 96 79

Score XXX
Percentile of Peer Group

Note:
1. The minimum score for funding readiness is 500 with an overall percentile to peer group of a minimum of 65%
2. Higher the score the better the funding readiness under the criteria; except for risk, where a lower score means lower risk
3. The minimum score for risk is 485 at which point the venture is too risky for third party funding

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STRENGTHS

The company is well setup with high quality accounting and governance standards and has
broken even at an EBITDA level.

The management team is highly skilled and possess the requisite domain knowledge and
diversity of skills to execute the business plan.

The product of the company is pending patent with a provisional patent already granted. The
market reception has been positive and the client list is impressive.

The client churn rate is in single digits with client acquisition costs for long term annuity
contracts at less than 2% of total contract value.

The growth of the company has been impressive with a sizeable market opportunity available
with significant valuation upside for the investor.

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AREAS OF FOCUS

Friends & family have been issued equity with a fairly loosely worded shareholding agreement
with no clear exit option agreed to.

The founders have been self or closely funded thus far and an assessment of their
compatibility with external investors in day to day functioning and overall governance needs
to be assessed.

Some significant but non material statutory filing dates have been missed but do not pose a
risk to the financials of the company.

Advertising and marketing spend may be under estimated in the business plan.

The founders need a more robust founder's agreement and a non-compete clause.

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RECOMMENDED FUNDING STRATEGY

The company should get an updated valuation report as the current report is more than six
months old and significant positive changes have occurred since then. A focus on High Net
Worth Individuals, Angel Investors and early stage investors in the technology space will be
more rewarding. The company must reach out to potential investors in other parts of the
world as the proposition is global and easily identifiable with the value it brings for any
investor.

The company should be open to having a holding entity overseas if an investor requires it. This
will complement its globalization strategy as well. The company must appoint a professional
investment advisory company for fund raising of this size and complexity, as none of the
founders have raised institutional funds in the past.

Disclaimer: This report is a subjective analysis and opinion of an independent subject matter expert based on documents provided by the company and one on one
meetings with the founding team. This report is also relevant for the limited period during which the facts do not change and /or there is no significant change in the
business environment. For any clarifications you are encouraged to contact Natio Cultus Consultancy Pvt. Ltd. at [email protected]
This report is intended for general guidance and information purposes only. This report is under no circumstances intended to be used or considered as financial or
investment advice, a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. Please note that this is not an
offer document. The report is to be considered as marketing material, and is not prepared in accordance with the regulation regarding investment analysis.
The material in the report is obtained from various sources per dating of the report. All reasonable care has been taken to ensure that the material is true and not
misleading, The estimates are based on fair assumptions supported by objective data. The estimates are subject to risks, uncertainties and other factors that may cause
actual events to differ materially from any anticipated development.
There may have been changes in matters which affect the companies subsequent to the date of this report. This report does not regard any specific investment
objectives, financial situation or the particular needs of any specific person. The contents of this report are not to be construed as legal, business, investment or tax
advice. Each recipient should consult with its legal, business, investment and tax advisors as to legal, business, investment and tax advice.
Investors should understand that statements regarding future prospects may not be realised, and should also understand that past performance is not necessarily a
guide to future performance. All investments mentioned in this report have attached risk of loss.
Natio Cultus Consultancy Pvt. Ltd. do not accept any form of liability, neither legally nor financially, for loss (direct or indirect) caused by the understanding and/or use of
this report or its content. This report is only intended for the recipients, and should not be copied or otherwise distributed, in whole or in part, to any other person.
This report is subject to Indian law, and any dispute arising in respect of this report is subject to the exclusive jurisdiction of Indian courts.

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