Lucid Connect, Inc. Business Plan

Lucid Connect, Inc. Business Plan

Lucid Connect, Inc.

“The Future of Knowledge”

Business Plan for Lucid Connect, Inc.

By Erhardt Preitauer and Som Sinha

November 8, 2002

Executive Summary

As we rapidly move toward a knowledge-based economy, the ability for individuals to effectively store, organize, and access information gained from a multitude of sources will be critical to one’s personal success. The average professional changes jobs every 3 years while changing computers even more frequently. During this time, the average professional has information inputs from many different sources; school, projects, seminars, the internet, medical services, work, tax, hobbies, etc… In a relatively short time, thousands of files (hard or soft) are stored and lost by the average individual, resulting in dramatic reductions in productivity and a tremendous amount of lost knowledge. In addition to this trend, future technologies will increase ease of access to the web with the growth of wireless, handheld devices and the introduction of Internet II. Thus, the amount of information available to the average person is expected to increase by a factor of ten over the next five years.

Our service will allow an individual to store, organize, and access information through a secure and convenient web-portal, creating a “Personal Knowledge Management” service. The interfaces are simple, quick, and effective; proprietary technology provides a search engine for personal files through any web access point. Once a user builds their own PKM base, the platform allows seamless file sharing with other users providing a valuable network effect in the marketplace. The central portal will foster a community oriented approach and provide access to knowledge seekers and other sources to build one’s own PKM base.

The PKM holds tremendous opportunity. In the United States alone, there are over 33 million possible users in our primary target market. The target market segment is based on ‘service providing professionals’ that rely on knowledge for their livelihood. The secondary market, which includes service providers with a wider scope, includes another 33 million individuals. Just a 5% market share in the United States alone equates to over $20 million in net revenue.

Currently, the only competition comes from pure online storage services, which equates to a minor part of our service. XDrive (see appendix for screen shot), the main player in the industry, has simple capabilities that are inferior to our offering. While many vertical knowledge management systems exist within organizations, Lucid believes that there are no knowledge management systems that exist on the personal level that can be used horizontally. This provides for a unique competitive position for Lucid.

It is very important to note that the PKM service is only the first step in a process of the coming knowledge based economy. As acceptance of knowledge as an ‘asset’ is gained, the opportunities for Lucid are tremendous. Having the installed base will allow Lucid to gain a competitive advantage in personal medical records management, insurance management, government records management, and more. In addition, as our economy continues to shift towards a service-based economy, our target markets will only grow.

I. Company Overview

Lucid Connect will initially focus on the development of the Personal Knowledge Management (PKM) service, which allows individuals to effectively manage, easily store, and efficiently access personal information through any web based application. For today’s professional, information is rapidly gathered from multiple channels and the pace and volume of this information is only increasing. Demand is present in the marketplace for professionals to collect, transport, share, and access data across organizations and personal circles. PKM will provide unique and significant value in this pursuit.

The overall strategy of Lucid Connect is to begin fostering the recognition of knowledge as a tangible asset. Lucid expects to usher users into the next phase of our economy through the use of a best in class personal knowledge management system. As we have moved through the industrial age, the technological age, and the information age, the next phase of our economy will be the “knowledge age.” Organizations are currently embracing the concept of knowledge management - However, professional individuals have no way of creating and using their knowledge in a seamless way across organizations or social webs.

In the long run, two main avenues for further development exist. First, as the network of users grows, organizations will begin to recognize an individuals’ PKM base as a valuable asset to ‘plug into’ the organization. This will open opportunities to begin selling enterprise-wide knowledge management services to organizations. Second, after trust for the service becomes less of an issue, users can move towards a central service that will manage more of their personal assets. It is envisioned that medical records, passwords, government records, and financial assets could all be stored, managed, and used through the PKM. The potential for Lucid Connect is tremendous.

Currently, Lucid Connect is in the conceptual phase. The basic service frameworks are being formed, and validation of concept is being performed via review of this business plan. If the concept is validated, Lucid expects to begin development of PKM by December of 2002.

II. Products and Services

PKM is a web based storage site that will foster a community-oriented approach to personal knowledge management. A user would upload a file into the system via a web portal. This web portal will be designed like a home page for professionals, with links to community boards, professional services, business related news, and standard interactive offerings. When accessing any given file, the user would type in a search phrase and click ‘submit.’ The search engine will act and look much like Google.com; Upon entering search term(s), the user will retrieve a relevant list of files/documents/web pages from the PKM using a proprietary, protected technology (see ‘Operations’). Each listing will return several pieces of information; the names of the file/document/web page, the size, source, a brief description, type, last hit/update, etc… as to allow the user to best identify the information quickly. Over time, this database will begin to reflect the hard contents of an individuals’ knowledge and will become tremendously tangible and valuable.

There are initially seven primary value added features of PKM:

• Simple, functional, and familiar interface maximizes effectiveness
• Value added file management system saves time
• Enhanced security assuring safety of sensitive information
• Knowledge Collaboration leverages exterior knowledge network
• Multiple access points maximizing utility of web-enabled technologies
• Common web-based access point base building a valuable PKM community
• Virtual Workplace increases flexibility

The Interface

The interface for the user will be very simple and extremely user friendly. It will consist of three tabs: the first tab will look and act much like Google.com, where a simple input box is presented. The second tab is a more detailed search mechanism where additional criteria can be selected. The final tab will be a manual search, organized much like MS Explorer is now.

File Management System

Once a user has compiled a large amount of knowledge, two or more people can agree to share their knowledge assets. Since the structures will be set in much the same manner, simply giving access to another person will allow them to use your “personal knowledge.” This value proposition will increase the value of the PKM enterprise exponentially as the network grows. In addition, this will present the opportunity to cultivate a web based knowledge community, entrenching our service even further. The ultimate vision is for every professional to have a tangible set of personal knowledge assets that sits on our PKM platform.

Security

Security is a major issue today, and the security of this service is a value added service. Proximity is not the same as security – any computer on-line is not secure; 500,000 laptop computers are stolen every year (see operations for more information). PKM will operate over secure servers and connections. Data will be stored through a service like EMC, which is completely disaster-proof and backed up on multiple areas.

Knowledge Collaboration

A client will have the ability to share entire folders of information (knowledge assets) or just specific files. Because of the proprietary frameworks by which data is loaded and cataloged, interfacing with another PKM account will increase the knowledge content available. As the network of users grows, the value of the network will grow exponentially. When the PKM service hits critical mass, we will be able to leverage our name to sell enterprise-wide knowledge management systems.

Multiple Access Points

As wireless devices grow in popularity and internet hookups become commonplace, multiple-point secure access to an individuals knowledge assets becomes extremely valuable. PKM will facilitate this activity, providing extraordinary value to the user as well as the hardware providers. Note that files will be read through a browser, allowing a handheld device with minimal storage to access large files.

Community

A key value added feature of Lucid Connect will be the portal by which the service is accessed. The index page will have links to community boards, search engines, news, and personal net content of interest. It will become a homepage for users, creating a thriving knowledge based community.

Virtual Workspace

Another value added service that PKM will provide is the ability to work on a given document, post it, have another user work on the document and post it. The user(s) can access and work on the document from many different points across the world. This will organize and create tremendous value for users.

Patented Search System

The heart of the offering would be a powerful and unique (patent protected) system to index, store and retrieve knowledge assets. The system would use database techniques in conjunction with indexing methods to enable users to conduct multifaceted searches and get to the files they want faster then anywhere else.

III. Market Analysis and Strategy

According to the Bureau of Labor Statistics, there are over 33 million people employed as Professional Service Providers. This will be a strong initial target market – as the understanding of the value of Personal Knowledge Management grows, retail, trade, and financial professionals will be targeted, increasing the potential target market to approximately 66 million individuals. The ‘Professional Service Provider’ typically has a high acceptance of technology, is driven by information (knowledge), and is highly mobile (professionally and personally). These attributes all drive demand for a service which will dramatically increase the efficiency of personal knowledge management.

The marketplace does not currently have a service that provides the set of value added services that PKM provides. Competition is primarily focused on data storage, not on knowledge management. The key difference is that knowledge management is focused on building a community around efficient searching and cataloging of information. For PKM, data storage is only a minor part of the total value offering.

Primary competition comes from on-line storage companies. The main competitor is XDrive (see appendix for screen shot), which provides a very simple service of web-based storage that is driven on collaborative accessibility. It does not have a functional search engine nor is it focused on knowledge management for the individual. Furthermore, it does not seem that the infrastructure will allow XDrive to build on its value like PKM. We believe that our service is directed in a much different direction than XDrive, and will offer significantly more value added services.

Sales and Distribution

The challenge is selling PKM will be reaching the target audience in a cost efficient manner. Since companies (at least initially) will probably not endorse our service for various reasons, we must target individual professionals. We will do this through several avenues; a main avenue will be professional associations. These professional associations will be a strong method to leverage selling efforts – in addition, professional service providers have a high rate of membership to these associations. There are about 25 major professional associations that will be initially covered.

Another marketing avenue will be the tremendous network and resources available to us while here at PSU. We can leverage our position and contacts to gain media coverage and networking possibilities. In addition, we will be looking to spread the use of this through academic communities starting with PSU.

After these two methods of advertising, we will be looking for strategic partnerships. Internet Service Providers (ISPs) might be especially interested – our service would be help to effectively ‘lock in’ customers of the ISP. Obviously, the benefit for Lucid would be the wide reach afforded by the ISP coverage.

Once money is raised and a substantial base is recognized, traditional methods of marketing will be developed. The target market of service providing professionals will be maintained, as just a 5% market share of these professionals will generate over $20 million in net revenues.

Risk

The primary risk for Lucid lies in competition. While the intellectual property will be protected through a process and concept patent, there are many ways that another company could conceivably copy the service through other processes. To counter this, Lucid will look to build a network of users that are well entrenched with our service. The cost of switching will be relatively high (since one would have to download all the files and upload everything back into another system) and our network of ‘early adopters’ will be worth buying instead of copying (see Exit Strategy).

IV. Operations Review

Basic operations are currently under development. However, the major process points of the system security are outlined below:

Security Infrastructure

Database Capabilities

The system would be hosted on a RDBMS (Relational Database Management System) and the system would be flexible enough to work either an Oracle or IBM DB2 depending on price and payment flexibility.

The database requirements would obviously depend on the number of users we have. For the first year, 660 customers @ 100 MB each, we would require 66 GB, for the next year 660 GB and the year after that 6600 GB. So for the first three years the database requirements would not be very high and the system would be scalable enough to add modular database capacities as and when need arises. So we would be expecting to buy very small database capacities to start with and add additional amounts as we move along.

Patented Search System Design

V. Management and Ownership

The current management and owners of Lucid Connect is Erhardt Preitauer and Som Sinha.

Erhardt Preitauer has a varied background including a startup supply chain services company, P&L responsibility for a $13m territory, national business management, and systems sales experiences. Erhardt is currently concentrating in corporate innovation and entrepreneurship in the Smeal College MBA program.

Som Sinha has consulted worldwide for Infosys. His primary area of expertise is in IT consulting, where he has managed multiple projects worth over $100m. Som is currently concentrating in e-business in the Smeal College MBA program.

Initially, Erhardt will be responsible for business development and finance. Som will begin the construction of the system itself. Soon after the launch of the company, legal and accounting resources will be sought after as strategic partners.

VI. Financial Data

There are several different ways the revenue model can work at this point. The main option is as follows: The user will download the software for free and will store the contents of their PKM on the web. About 20 megabytes will be given for free for 30 days, and after that a monthly charge will be incurred on an increasing scale based on the size of the account. The idea being that, after a person exceeds 10 Megs of space, this will be a long term customer and the monthly charge will willingly be paid. In addition, advertising space may be sold. In the current advertising market, rates are very low. We expect, however, that rates will stabilize in the coming years. Obviously, this model relies on a large amount of capital up front to launch.

2003 / 2004 / 2005 / 2006 / 2007 / 2008
Total Mkt (users) / 66,000,000 / 66,000,000 / 66,000,000 / 66,000,000 / 66,000,000 / 66,000,000
Market Share / 0.001% / 0.01% / 1.00% / 2.00% / 3.00% / 5.00%
Subscribers / 660 / 6,600 / 660,000 / 1,320,000 / 1,980,000 / 3,300,000
Average Price / 5.00 / 5.00 / 5.50 / 6.00 / 6.50 / 6.50
Gross Revenue / 3,300 / 33,000 / 3,630,000 / 7,920,000 / 12,870,000 / 21,450,000
Development / 80,000 / 80,000 / 80,000 / 80,000 / 80,000 / 80,000
Marketing / 25,000 / 50,000 / 75,000 / 120,000 / 150,000 / 150,000
Operations / 40,000 / 80,000 / 120,000 / 380,000 / 520,000 / 600,000
EBITDA / $ (141,700) / $ (177,000) / $ 3,355,000 / $ 7,340,000 / $12,120,000 / $20,620,000

Exit Strategy

There are two primary possibilities of an exit strategy for Lucid. First, and most likely, will be a strategic buyout from a firm such as Microsoft, Yahoo, or AOL Time Warner, who are actively competing to control valuable web content that can significantly compliment their existing businesses.

The second possibility would be an initial public offering (IPO). In five years, when Lucid is ready for exit, it will be expected that the IPO market will gain momentum again. Taking the company public will also allow us to further develop the system into its next phases of secure personal management of medical and government records.