Auction Denver Ventures Priority Screening

¶ … Auction

Denver Ventures

Priority Screening Memorandum

DV Team FILLIN

Quick & Easy Auction

Amount Requested:

$5M

Source of Deal:

Brilliant

Last Post-Money:

$22 million (Yr.2004)

Anticipated Pre-Money:

$7 million

Existing Institutions:

West Ventures

Projected CY Revenues:

$5.5 million

Location:

Somewhere, CO

Preliminary Investment Thesis

What do they do?

Quick & Easy Auctions provides technological solutions that help to improve and enhance auctions held by nonprofit and school organizations. The company was founded in 2002, beginning with a focus on fundraising events and payments at auctions. The company has grown to provide a full set of fundraising solutions to these organizations.

The company has also instituted a Q&E Auction University; an online and offline learning center to provide learners with a set of fundraising competencies and tools.

What is the market size/opportunity?

Having been established for a number of years, the company serves a large potential market including 1.6 million nonprofit and school organizations. This market is underserved, and the company's current customer base amounts to 3,800 loyal clients. Because of the unique nature of Q&E's service and the lack of similar services, future opportunities in terms of increased clients are many.

3. What do they do in comparison to competition or alternatives?

Q&E Auctions provides a unique service in a market plagued by logistical difficulties such as long lines and non-payment after the event. The core of the company's mission is to improve and automate fundraising. Furthermore, the sales/marketing segment of the organization is furnished with intimate knowledge of nonprofit markets, while additional products are regularly added through the direct channel.

Because of these features, the company has an excellent reputation for its event and online fundraising expertise. What makes the company unique is its automated management of auction-related elements that are traditionally assigned to volunteers. It uses Automated Event Management to provide a single solution to clients. A complete set of tools allows everything from online registration to event management and secure credit card transaction processing.

4. What do we know about the status of the technology maturity?

Technological maturity is good, although there is no mention of specific software versions being used. It is however clear that the latest technology is used to provide clients with optima solutions. The Complete Event Suite for example is an integrated bundle of three products: Event Payments, Online Payments, and Event Software. In addition, Auction Booster provides travel packages for sale at auction events, while Online Auctions provides a web-based solution to complement live auction events. Bridge to Blackbaud & Kintera provides integration with market leader Blackbaud and Kintera's Sphere donor management systems.

5. What do we know about the financial performance to date?

Q&E Auction's financial performance has grown exponentially from $6 million in 2005 to $47 million in 2009. The company became profitable by the end of 2007, and had a net income of 13% in 2008.

6. What do we know about the proposed investment round?

Because of the company's high growth, it is seeking investment funding to provide room for growth in its business foundation, human capital and leadership team, and infrastructure to facilitate large-scale business.

The current strength of the business is such that it provides for an underserved market; it is therefore likely that the growth rate to date will continue and return the investment profitably.

7. What do we know about the exit opportunity?

No information appears to be available regarding an exit strategy. This may be a useful starting point for future discussions.

8. What do we know about management?

The management team appears to be competent and mature, with a large amount of collective experience in their respective fields. Sam Mortensen, founder and CEO for example hols a number nonprofit board positions. Dr. Steve Sherill, VP of Technology, has more than 25 years of software industry experience and comes from a CIO and VP position in Engineering. President Brian Carlson also previously held financial and IT positions, and VP of Sales and Marketing Brad Nelson comes from a sales management background. Finally, Jon Liberman, VP of Business Development, has experience in both start-up and established companies.

All members of the management team therefore bring a large amount of experience and maturity to the Q&E Auctions venture.

Key Diligence Items: (Key risks / questions to be answered)

A. Customers / Competition:

1.

More information is needed regarding potential competitors.

2.

Existing customers have been mentioned, but what are the strategies to gain more customers?

3.

Who are potential customers to be targeted?

B. Financials / Burn Rate analysis:

1.

More information is needed regarding expenditures.

2.

How will the investment be applied to optimize the strengths of the company?

3.

How will these strengths be used to provide a positive return on investment?

C. Technology:

1.

More information is needed regarding the maturity level of the existing technology.

2.

What future solutions are envisioned to optimize the functioning of the venture?

3.

More information is needed regarding the technology used for the learning institution.

D. Exit:

1.

There does not seem to be any information regarding an exist strategy.

2.

What is the exit strategy for existing investors?

3.

What will the exit strategy be for potential investors?

E. Management:

1.

Is there any potential for future development for management personnel?

2.

Is there a management strategy to match the projected growth of the company?

3.

How do managers interact with the rest of the company's personnel to optimize the functioning and leadership within Q&E?

Investment Process Recommendation:

2. "Conduct pre-meeting conference call."