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NeighborWeb

Adam Smith
Ben Entezam
Robbie Allen

Team Business Plan


15.390B: New Enterprises

May 9th 2005


Confidentiality Agreement

The undersigned reader acknowledges that the information provided by NeighborWeb


Company in this business plan is confidential; therefore, reader agrees not to disclose it
without the express written permission of NeighborWeb representative.

It is acknowledged by reader that information to be furnished in this business plan is in


all respects confidential in nature, other than information which is in the public domain
through other means and that any disclosure or use of same by reader may cause serous
harm or damage to ___________________________.

Upon request, this document is to be immediately returned to NeighborWeb Company.

____________________________
Signature

____________________________
Name (typed or printed)

____________________________
Date

This is a business plan. It does not imply an offering of securities.


NeighborWeb......................................................................................................................1
Adam Smith....................................................................................................................1
Ben Entezam...................................................................................................................1
Robbie Allen...................................................................................................................1
1. Executive Summary.........................................................................................................4
1.1. The Product...............................................................................................................4
1.2. Market Size...............................................................................................................4
1.3. Business Model.........................................................................................................4
1.4. Competition...............................................................................................................5
1.5. Product Development Status and Plan......................................................................5
1.6. Initial Capital Requirements ....................................................................................5
1.7. Financial Prospects...................................................................................................5
1.8. Exit Strategy..............................................................................................................5
1.9. Team..........................................................................................................................5
2. Business Concept and Description...................................................................................7
3. Market Opportunity Overview.........................................................................................8
4. Product Offering..............................................................................................................9
5. Business Model and Strategy.........................................................................................10
6. Competition and Competitive Advantage......................................................................11
7. Marketing Plan...............................................................................................................12
8. Product Design and Development Plan.........................................................................13
9. Team...............................................................................................................................14
10. Financial Prospects......................................................................................................15
11. Company Milestones....................................................................................................16
12. The Offering.................................................................................................................17
NeighborWeb is a Cambridge, MA based company whose online product offering allows
neighbors in suburban communities to share location-sensitive information. Paid for by
neighborhood homeowner associations’ fixed budgets, each community website will be
the central contact point used to communicate about neighborhood events, babysitting
services, ride sharing, items for sale, and other community-centered happenings.
NeighborWeb is in its early stages; we are seeking a $1MM seed round to create the
product and collect early customers.

1. Executive Summary
1.1.The Product
Our primary product is the NeighborWeb website, which allows neighborhoods and
communities to create an online presence. Some of the features of the website include:
• Service advertising (lawn maintenance, babysitting, etc.),
• Online garage sale,
• Recommendations and reviews,
• Community calendar,
• Discussion forum,
• Social profiles,
• Ride sharing, and
• Frequently asked questions
• Access to utility companies webpage and other service providers

Neighborhoods that are geographically close can be linked together.

1.2.Market Size
Our first target market includes new or existing neighborhoods whose homeowners
associations collect a yearly fee from its residents. The Community Association Institute
(CAI) estimates 9,000 to 11,000 new community associations are formed every year with
annual dues ranging from $100 to $10,000 per household. CAI also estimates that there
are over 205,000 existing residential condominium associations, cooperative, and
homeowner associations in Unites States.

1.3.Business Model
Our pricing structure is to charge $10 ($24*) per household per year covered by the
homeowners association. With the average neighborhood having 100 homes, we can
expect $1000 ($24000) per neighborhood per year. Initially for the new neighborhoods
we will start sales in the Raleigh-Durham and Boston metropolitan areas, but will expand
to other cities within a year. Since the product is software-based, gross margins are near
100%. We also are planning to offer sales in existing neighborhoods in the entire state of
Massachusetts.

*We can charge $24/year to make it more attractive which is $2/month


1.4.Competition
We have no competitor visiting household associations and marketing similar products.
Craigslist, EBay, CitySearch, and other information exchange sites target large audiences.
The most geographically centered of these, Craigslist, targets an audience of millions of
people for each site. NeighborWeb fills the gap for more fine-grained information
exchange; we enable new interactions, offer the familiarity of neighbors, and provide the
convenience of locality.

1.5.Product Development Status and Plan


A live product demonstration is under construction which will illustrate the big ideas of
our company. Following development of the demo, additional software developers will
be brought on-board and full product development will get underway. A Beta release will
occur in October 2005, to be followed by version 1.00 release in December 2005.
Product development will continue into the future, as we add customer-demanded
functionality. NeighborWeb 2.0 is targeted for release in May 2006.

1.6.Initial Capital Requirements


Our plan calls for a $1MM seed round to be funded by angels, all of which will be used
for product development and preparing for market. We have a detailed plan outlining the
use of this money, which is expected to get us through the beta test cycle and initial sales
deals. Thereafter, a second round of $3MM will be needed to drive continued
development and deep market penetration; since we are a web software company we do
not have many expenses.

1.7.Financial Prospects
Household-driven subscriptions paid for by housing associations are our primary sources
of revenue. By 2009 we project $5MM in revenue and $3MM in operating profit after
operating expenses driven primarily by engineering and sales.

1.8.Exit Strategy
We will be an attractive takeover candidate by some of the larger players in the social
software space such as Ebay and Microsoft. Ebay established a minority stake in
Craigslist in 2004 and Microsoft recently purchased Groove Networks (another social
software company) both of which set a good precedence for market consolidation with
social software startups.

1.9.Team
The executive team includes four leaders in business and technology. Robbie Allen, the
CEO, is an 8 year veteran of Cisco Systems where he lead the organization responsible
Cisco’s web-based network management applications. Adam Smith, CTO, is an MIT
student and researcher whom has hard-hitting R&D background combined with real
business experience. Ben Entezam, VP of Engineering, is an MIT SDM student who will
oversee all engineering activity. Finally, Janet Allen will act as VP of Marketing and
Sales; she has worked in real estate for 10 years and understands our primary market very
well.
2. Business Concept and Description
Over the last year, social software has entered the mainstream lexicon and become a hot
topic on the Internet. One untapped market we believe social software can make a big
impact is with residential neighborhoods. Today, communication within most
neighborhoods is largely ad-hoc and inefficient. Often, people have things they’d like to
get rid of or sell (without the hassle of organizing a garage sell), but cannot find any
takers. Ebay is one option, but for low cost or large items, it is not practical. Another
problem is finding local services, such as a babysitter or yard maintenance person. Even
in small neighborhoods, there are generally several teenagers that would be willing to
make some extra money if they just knew of the need. Finding recommendations on
restaurants and other services, such as doctors, dentists, and tax preparation is also
something that is not efficient with person-to-person communication. The fundamental
problem is that the collective wisdom of the neighborhood goes unrealized.
There are several existing Internet-based companies that provide some form of these
services whether it is eBay for buying and selling goods, Epinions and Citysearch for
product and service reviews, or Craigslist for a combination of them all. The biggest issue
with these services from a neighborhood perspective is they have too large of a scope and
the target audience is actually too big. With each of these websites, you could be
interacting with people in a different part of the country (or another part of the world for
that matter). Even with reviewer ratings, you still can’t feel as comfortable with your
online counterpart as you would your neighbor. If you want to sell something to a
neighbor, you can have a much higher confidence level about the transaction. With
reviews and recommendations, you are much more likely to get relevant information if
someone within your community provides the information.
NeighborWeb fills this gap by providing a web site that allows neighborhoods to create a
virtual environment to advertise services, buy and sell items, and post general
information about the community and surrounding area.
3. Market Opportunity Overview

NeighborWeb’s primary market is homeowners associations that collect a monthly or


yearly fee from its residents. About one in six Americans lives in an association-managed
community, according to the Community Association Institute (CAI). An estimated four
out of five houses built since the late 1990s are governed by a homeowners association
and subsequently pay dues ranging from $100 to $10,000 a year.

Based on the records of several homeowners associations in the Raleigh-Durham area,


there is often thousands of dollars left in the association coffers at the end of the year.
The associations have to do something with this money eventually and usually find new
projects such as deploying new street lights or improving landscaping.
The majority of these neighborhoods have not tapped into the power of the Internet. We
feel a portion of this money could be going to a community website. It is not uncommon
for members of a homeowners association to question what their dues are used for. A
helpful website that is used by large portion of the community would be seen as a
worthwhile cost to residents.
So far we’ve touched on only neighborhoods, but many of the same concepts apply to the
employees of a corporation or even students within a university department. In fact, any
sufficiently large group of people that has a certain amount of trust within the group and
that is geographically close to one another could take advantage of this software. While
initially our primary market is going to be residential neighborhoods, we are also going to
investigate these other markets.
4. Product Offering
Our product is a web site that supports the following features:

• Service advertising (lawn maintenance, babysitting, etc.),


• Online garage sale,
• Recommendations and reviews,
• Community calendar,
• Discussion forum,
• Social profiles,
• Ride sharing, and
• Frequently asked questions.
• Access to utility companies webpage and other service providers

When a homeowner wishes to get on the website, they log in with a username and
password supplied by our system. They then are shown a page from which they can
access each of the parts of our service.

For example, each person or family can maintain a social profile with their picture and
basic information about them, similar to Friendster.

Each of the features is straightforward. This is a win for both NeighborWeb and the user;
our site will be easy to use, and understand.
5. Business Model and Strategy

We are going to market strongly to both existing neighborhoods and new neighborhoods
that aren’t fully developed. The best opportunity for implementing NeighborWeb is when
a neighborhood is in its infancy. Community Association Institute (CAI) estimates 9,000
to 11,000 new community associations are formed every year and often that these
associations are not being marketed to for services such as NeighborWeb. CAI also
reports that there are over 205,000 existing residential condominium associations,
cooperative, and homeowner associations in Unites States.
We have no competitor visiting these associations and marketing similar products. This
may change over time, but the key is to get in early and establish a customer base. Again,
one of our key features the ability for neighborhoods to link with each other. This can
only happen if both neighborhoods are using NeighborWeb. We have first-mover
advantage and will need to sustain our competitive advantage by providing our customers
ample opportunity to customize their experience and add as much content to the site as
possible.
Our initial pricing structure is going to be on a per-household basis. We’ll charge $10
($24) per household covered by the homeowners association. With the average
neighborhood having 100 homes, we can expect $1000 ($2400) per neighborhood. This
will vary significantly. Initially we plan to start in the Raleigh-Durham and Boston
metropolitan areas, but want to expand to other cities within a year. We also are planning
to offer sales in existing neighborhoods in the entire state of Massachusetts.
6. Competition and Competitive Advantage

NeighborWeb’s most direct competition comes from a non-profit firm, i-Neighbor, which
provides a free service but far fewer features. i-Neighbor is a research project being led
by MIT to investigate how people use social software in community settings.
NeighborWeb’s architecture provides features that i-Neighbor doesn’t such as the ability
to buy and sell items and link neighborhood webs together to allow resource sharing.
Craigslist also provides a similar service, but to-date has been focused at the city-level.
NeighborWeb’s primary competitive advantage comes from the fact that our audience is
smaller communities whose members have a higher level of comfort and trust with one
another than someone they’ve never met or come in contact with.
From an online auction perspective Ebay is our biggest competition. Ebay could start
catering smaller communities, but to-date they haven’t made any moves into this area.
Other social software companies such as Socialtext and JotSpot provide enterprise
software, but nothing geared toward neighborhoods. Their primary focus is more on
productivity and process improvement.
As NeighborWeb gets more customers who in turn start using our software and entering
more information into the system, the harder it will be for them to switch to another
system later on. So even if other competitors implement similar features, developing the
customer base as early as possible creates a barrier for our competitors.
7. Marketing Plan
NeighborWeb’s value proposition for the end user is based on providing customers with
an easier and new ways to interact with neighbors. Because of their geographical
proximity there are significant extraordinary opportunities for value (e.g. borrow a cup of
sugar).

Because we expect to make about $1k (2.4k)/year for each sale, each salesman should
sell about 5 or 6 neighborhoods per business day. This will be done by direct sales to the
higher end neighborhoods (we contact the customer) and by following up on leads
generated by advertisements for all other neighborhoods. Our advertising will be
directed to vertical market publications whose readership is mostly neighborhood
construction companies, or strongly family-oriented consumers.

We also approach the existing associations by sending them information and later contact
the customers. Most of the existing associations are managing several others associations
as well.

Comment: (Also we can make money from local stores advertisement)


8. Product Design and Development Plan
Our product is very basic; there is no new technology. It is well known how to develop
dynamic web sites, what the potential pitfalls are, and how long it takes.

The development milestones for the web product, with target dates, are:

Month 1
• Dedicated web hosting provider selected
• Select development platform, license software
• Server-side algorithmic work is detailed

Month 2
• Detailed development plan drafted
• Begin constructing customer support apparatus
• Client-side user interface drafted
• Basic backend infrastructure prototyped
• ¼ of main features are prototyped

Month 3
• Basic infrastructure set up
• ¼ of main features are operational
• ½ of main features are prototyped
• Web hosting passes harsh redundancy and reliability tests

Month 4
• Feature development continues…
• All main features are operational

Month 5
• Alpha version of site internally released
• Many bugs are squashed

Month 6
• More bug squashing
• Dressing up user-facing pieces
• Continuing customer support preparations

Month 7
• Beta testing & bug fixing
9. Team

The NeighborWeb executive team consists of the following members:


• Robbie Allen – Co-Founder, CEO
Robbie is an 8 year veteran of Cisco Systems where he lead the organization
responsible Cisco’s web-based network management applications. He will oversee
day-to-day operations for NeighborWeb. He is also responsible for obtaining funding
and setting business strategy.
• Adam Smith – Co-Founder, Chief Technology Officer
Adam is an MIT undergraduate senior who has a varied and deep technical
background. He has 7 years of programming experience and has technical skills in
artificial intelligence. He has worked in a startup on the business side, and also has
strong communication and leadership skills. Adam is responsible for technical
strategy direction and leads our product development effort.
• Ben Entezam – Co-Founder, VP of Engineering
Ben is responsible for overseeing all engineering activity. PLEASE ADD
DETAILED BIO
• Janet Allen – VP of Marketing and Sales
Janet has worked in real estate for 10 years and understands our primary market
very well. She’ll head up marketing efforts and be responsible for the sales force.
10.Financial Prospects
Cashflow-based Income Statement
Year 1 Year 2 Year 3 Year 4

Revenues
Neighborhoods 100 2000 3500 5000
Total ($) 100k 2M 3.5M 5M

Expenses
COGS 5k 10k 15k 20k

Gross Profit ($) 95k 2M 3.5M 5M


Gross Margin (%) 95 1 1 1

Operating Expenses
R&D 200k 300k 600k 800k
S&M 100k 300k 400k 700k
G&A 200k 300k 400k 500k
Total 500k 900k 1.4M 2M

Operating Profit -405k 1.1M 2.1M 3M


11.Company Milestones

The following is a breakdown of our short-term and long-term milestones:

Short-term:
July 2005 – Sign-up 10 customers for NeighborWeb 1.0 Beta
August 2005 – Release of NeighborWeb 1.0 Beta
September 2005 – Sign-up 30 customers
September 2005 – 5 members on advisory board
October 2005 – Release NeighborWeb 1.0
December 2005 – Define NeighborWeb 2.0 requirements
December 2005 – 15 total employees

Long-term:
January 2006 – 100 customers
February 2006 – Release NeighborWeb 2.0
July 2006 – 20 employees
January 2007 – 1000 customers
November 2007 – Breakeven
January 2008 – 5000 customers
12.The Offering

We are seeking $1 million in VC funding for the next two years of operation. In 2007,
we will need our second round of funding. We anticipate that we will need an additional
$3 million to continue to grow and penetrate major metropolitan areas nationwide.
In order to proceed, we anticipate the following funding needs over the next two years:
• $800,000: operating expenses such as rent, leases, salaries, etc.
• $100,000: infrastructure expenses related to hosting our website
• $100,000: unforeseen expenses that we may incur