Business Plan safe, secure and private Internet

Business Plan
Your gateway toCocoon:
a
a better way to browse
Your gateway
to a safe,Internet
secure and private Internet
safe, secure and
private
www.GetCocoon.com
5383 Hollister Ave, Suite 150 Santa Barbara, CA 93111
www.GetCocoon.com | 805-845-9200 | [email protected]
Executive Summary
Virtual World Computing
Every time you launch your Internet browser, you are risking your identity and security online. Online
retailers and websites sell your sensitive, personal information to the highest bidder. You’ve had no control
over your online identity, until now. . .
Virtual World Computing is developing an innovative new browser that resides in the cloud (cloud browser)
for individuals, kids, mobile users, and small business enterprises that will offer customers new and
increased levels of online privacy and security. Our corporate mission is to provide these services using
the power of the cloud, while eliminating installation and configuration hassles for end users.
Cocoon, utilizing VWC’s cloud platform provides users with a new way to experience the Internet through
cloud browsing. Whether it’s browsing the Internet, shopping or banking online, participating in social
or business networking, or investing, our cloud browser functions like any other browser, with one major
advantage: our customers can browse with absolute privacy, security, and versatility. Standard browsers
today are part of the problem, not a solution. Freeing your browser from a stand-alone machine means
being able to roam the Internet with a higher degree of safety and security, and with significantly more
versatility.
In fact, versatility is one of the main advantages the cloud has to offer. Our cloud browser offers users full
portability, which means they can access their information from any computer regardless of their location.
As long as they can get access to the Cocoon browser, they can access their information from home, at
work, on the road; wherever they might be located. What’s more, since the cloud is online, our users can
enjoy virtually unlimited storage, compared to the hard drive limits of their computers. In addition, our
users will have access to an array of other versatile features like in-the-cloud video and picture storage for
ease of access as well as password storage and generation for those hard to remember password on any
popular or obscure website.
Touching the Internet is dangerous stuff. That’s why Cocoon never lets our user’s touch it directly. We
keep the Internet at arms-length from our users. Users connect to us, and we touch the Internet for them.
We protect our users from within VWC’s private, encrypted cloud while still providing lighting fast results.
Unlike other solutions, nothing ever resides on their computers once they leave a Cocoon session. Trojan,
spyware, and malware attacks are a thing of the past. Hackers on insecure networks become an
afterthought. Government intrusions into personal privacy are kept at bay. Our technology is the next
logical step in defending their computer from the cloud.
VWC Executive Summary
Confidential
i
The Company was founded in 2008 on the belief that everyone has a right to use the Internet privately,
securely, and without the risk of getting malware, spyware or viruses. The Cocoon service officially launched
in August 2011 and by spring of this year has 500,000 sign-ups from around the world.
A Growing need for Privacy, Security and Versatility
The erosion of privacy and security go hand-in-hand when dealing with legitimate businesses. Social
networks, banks, tech companies, and retailers continue to make it easier than ever to create accounts,
share personal details, and do most activities on the Web. This is being driven largely by the advertisers’
desire to make online pitches to the person most likely to buy their products. “Marketers are getting more
and more devious,” says Susan Linn, director of Campaign for a Commercial-Free Childhood, a watchdog
group. With the growing use of smartphones and social media, she says, “They have new avenues for
targeting children” that parents might miss. Even ad-savvy parents are sometimes unaware how marketers
are reaching out to their children. The online advertising market is estimated at 80 billion dollars a year,
and is focused on gathering personal information about every user on the web.1
On the criminal side, the situation is equally disturbing. According to a study by Google, an ever-growing
number of web pages contain malware aimed at vulnerabilities in browsers. Millions of web pages engage
in “drive-by-downloads,” installing malicious software automatically when a user simply visits a web page.
According to the 2011 Cybercrime Report published by Norton, “There were 431 million global cybercrime
victims who lost $388 billion in real money losses and computer time. This is a lot more compared to
the estimated $288 billion in revenues from the black markets for cocaine, heroin and illegal drug trades
combined. For sure, not all of these losses were incurred due to Trojans, worms, viruses, rootkits and
malware. But when you consider that roughly 4.3% of cybercrimes involve damages to PC resulting from
online downloads of infected content over the Internet, you are looking at a computed $17 billion in annual
losses due to malware and virus infection.”
Internationally, multiple millions of Internet users live in countries that restrict access to information
and communication. In fact, according to a recent human rights report issued by the U.S. Department of
State, “More than 40 governments, covering billions of people, are now using a combination of regulatory
restrictions, technical controls on access to the Internet, and technologies designed to repress speech and
infringe on personal privacy...”
Finally, the world is moving fast, and so are our customers. They want instant access to everything, and that
requires a versatile browser that provides instant access to browsing history and new cloud technologies
regardless of the device they’re using.
1
According to MIT’s June 2012 Business Report on Privacy
VWC Executive Summary
Confidential
ii
The Cocoon™ Solution
In this online and mobile world, Cocoon Internet cloud browser enables the most easily accessible Internet
browsing independent of your access point around the world, seamlessly and securely. Cocoon provides
instant access to browsing history and other value data from the desktop, laptop, iPad, iPhone, or any other
device connected to Cocoon’s free service. The Cocoon browser also solves the problem of staying safe and
protecting your privacy when you go online, even while you roam from device to device. It effectively wraps
your browser in a “Cocoon” of privacy and security, plugging the holes average users cannot address. Cocoon
hides your IP address, blocks the tracking ability of websites and search engines, encrypts data flowing to
and from your computer, prevents unwanted downloads, and generates anonymous email addresses for
you on demand, so you don’t have to give your personal address to every website that requires one. When
you log out of Cocoon, nothing remains on your computer. Everything is stored in your own secured cloud.
Our password storage feature allows users to enter passwords on the sites they visit.
The Cocoon patent-pending system was built to deliver seamless virtual browsing and application flexibility.
In fact, Cocoon, Cocoon for KlaasKids, and Cocoon for Small Business all leverage the system’s core discrete
components. This gives Virtual World Computing the ability to offer new service offerings rapidly.
Market Focus - Privacy and Safety from Any Device
Online Users: People want privacy. According to MIT’s BusinessReport, 78 percent of people surveyed said
they believe advertising companies gathering data on them is an invasion of privacy. According to the same
study, 53 percent of the same people surveyed are very concerned about the data information gathered
about them.
International Markets Need Internet Access: The international market presents another huge opportunity for
Cocoon. This is a slightly different market than the online, free world Internet users where those users face
government “filtered” Internet restricting Internet access and online monitoring. We currently have a strong
presence of customers outside the United States.
Online Child Protection and Anti-Tracking: Cocoon for KlaasKids is a venture between worldrenowned child abduction authority, Marc Klaas and Virtual World Computing. Most parents care about
their children’s online safety. With this in mind, and in addition to protecting kids from being tracked,
Cocoon for KlaasKids will offer parents easy-to-use tools to limit access to age appropriate sites, locking
them in on any device. Cocoon for KlaasKids prohibits tracking, does not identify the family computer
online, and provides anti-virus scanning as well.
Online Shopping: Shoppers want privacy and security when they shop online. As part of our business
strategy, we plan to launch an online shopping mall exclusively for Cocoon customers where over 200 top
retailers will offer their merchandise at special discounts. Customers can shop with confidence because
their personal and financial information will always remain safe within the Cocoon. Cocoon has also applied
for a patent on a unique debit and credit card, only available to Cocoon members, will provide our
VWC Executive Summary
Confidential
4
customers with an even greater measure of security when shopping online. This card prevents credit and
debit card fraud by functioning only when a member is logged on to Cocoon and has authorized a purchase
using his or her private pin.
Cocoon for Small Businesses: Cocoon brings a set of valuable tools for small businesses (2014). Cocoon can
offer businesses a new level of both security and privacy through our cloud-based applications. Cocoon will
allow an administrator to turn the Internet on and off, limit bandwidth, and control download and
uploads. This will allow a company to regain lost employee productivity from the Web. In addition, Cocoon
will give businesses the advantage while online to be in stealth mode to avoid tracking from competitors,
and use our ad-hoc emails and Mailslots, to receive documents without giving away their business email
addresses. This all-in-one product is currently not available in today’s market.
Business Model
Direct Channels: Cocoon will be offered free of charge. Customers will have the option to customize the
product by choosing among an array of paid upgrades These upgrades will be designed to help fit the
individual needs of our customers, and will initially include valuable tools like ad hoc email addresses we
call Cocoon Mailslots, Upgraded Antivirus Protection, No-Download Online Storage, and Password Storage.
Cocoon is supported with advertising revenues, AdSense profits, and commissions earned through affiliate
shopping, paid devices such as iOS and android and features private and secure browsing, cloud access
to browsing history and preferences, and the GetCocoon iOS app (second quarter relaunch with a paid app).
We anticipate that the largest portion of our revenues, between 71-82% each year, will be from our free
services, about 9-14% will come from upgrades, and the remaining revenues will be from reseller
agreements, affiliate partners, and our small business product.
Indirect Channels: In addition to our direct to consumer approach through traditional Internet marketing,
we will focus our efforts on blogging to Moms and families, using viral videos, and developing hard-hitting
online commercials all pertaining to the issue of online safety. Currently, we use direct channels of sales
including Google AdWords, CNET, Softonic and SEO to find our customers. We plan on acquiring revenue
through three additional channels: strategic partnership, white-label and small business resale channels.
Competition
While products exist in the different markets that Cocoon tackles, none of our competitors comes close to
offering the all-in-one platform Virtual World Computing offers. Anchor Free, Hide My Ass, and Abine each
offers products tailored to proxy privacy and Internet freedom markets, but not for other privacy matters.
Current Browsers do not offer comprehensive privacy and security services. While it is possible for
advanced users to build their own through plugins, doing so can be a complicated and daunting task
for the less savvy user. The current market desires a new browser that will offer the utmost privacy,
and more. Competition on the security side of the coin is equally fractured and, while somewhat effective,
lacks Cocoon’s first line of defense capabilities. On the mobile side, while there are “cloud browsers”, VPNs,
and security software, there’s nothing that utilizes the strengths of all three in a simple package.
VWC Executive Summary
Confidential
5
Patents
Virtual World Computing has three patents pending on five inventions used in its technology.
Funding
We have two rounds of angel funding consisting of A-1 and A-2. In the A-1 round, we raised $1.5 million.
Our pre-money for the A-2 round was $5.684 million. We have raised $3.0 million of our series A-2 funding
to fund the company, and are currently seeking $1.4 million to complete the A-2 round. Some of this
capital in series A includes funding from one of the co-founders. In addition, that same co-founder initially
seeded the company in the amount of $745,000 dollars. The raising of this A-2 round is at $0.95 plus 20%
warrants. In the near future, we will be seeking funding for Series B round of $8 million. We expect to
achieve growth rates sufficient to deliver liquidity to our investors, through either acquisition or IPO, in 3
to 5 years.
Five-Year Financial Projections
2013
2014
2015
2016
2017
$98,000
$2.9 M
$11.4 M
$22.5 M
$43.6 M
$9,000
$685,000
$5.5 M
$15.1 M
$29.6 M
$18,000
$298,000
$1.6 M
$5.4 M
$13.5 M
Chinese Mobile
$3,000
$553,000
$1.6 M
$3.4 M
$6.8 M
Mobile (iOS & Android)
$3,000
$109,000
$355,000
$954,000
$1.9 M
$0
$0
$107,000
$336,000
$1.1 M
Total Revenue
$131,000
$4.6 M
$20.6 M
$47.7 M
$96.4 M
Total Cost of Sales
$518,000
$875,000
$1.9 M
$2.9 M
$4.2 M
Total G&A/Marketing
$1.0 M
$6.6 M
$13.9 M
$26.7 M
$50.1 M
Total Expenses
$1.5 M
$7.4 M
$15.8 M
$29.5 M
$54.3 M
Profit
$-1.4 M
$-2.9 M
$4.8 M
$18.2 M
$42.2 M
-1079.1%
-62.8%
23.1%
38.1%
43.7%
603,000
2.4 M
6.1 M
13.5 M
27.7 M
Yearly Active Users
98,000
1.2 M
3.1 M
5.4 M
10.1 M
Free Customers
97,000
1.1 M
3.0 M
5.2 M
9.5 M
Cocoon Shop
Ad Revenue
Subscriber Revenue
Reseller Revenue
Net Margin
Total Sign Ups
VWC Executive Summary
Confidential
6
Subscription Customers
1,000
22,000
90,000
280,000
651,000
*Numbers based on $8 million in funding by March 2014
Management Team
Jeffrey C. Bermant, Founder, CEO, started his career in real estate and now has turned his attention to
creating a new private and secure Internet. Mr. Bermant founded and ran one of the largest real estate
development companies in the Santa Barbara, California. He has been an entrepreneur from the beginning
of his business career, finding ways to solve complex problems and create success. He developed close
to three-quarters of a billion dollars in real estate with institutional partners, including UBS, Rockwood
Capital, and Copley Real Estate Advisors. Mr. Bermant holds a BA degree from the University of Southern
California. Many of the ideas around Virtual World Computing have come from his vision of how to make
the Internet a safer and more private place.
Brian VanLoo is director of Development and Operations. Brian is responsible for all technical aspects of
running the company's innovative Cocoon online protection product. Prior to VWC Brian has over 25
years’ experience in the software development and Internet services industries, working for equipment
test and measurement companies like Teradyne and Ixia and Internet service provider NetZero. He has
extensive experience developing and delivering complex software-driven solutions and building
exceptional teams. He has managed organizations responsible for the entire product lifecycle including
project management, development, QA, and production operations. Brian has an MBA from Pepperdine
University and a Bachelor of Science in Computer Science from Washington State University.
Thomas Bermant, Director of Customer Experience, graduated with a BA from Colorado College in 2009.
He has been working with Cocoon since 2009 and was the first employee hired. Since then, Thomas has
performed many roles in the company. He established Cocoon’s well-regarded customer service division
that responds to all customers with one business day, worked closely with Cocoon’s development team
as the lead quality assurance tester for the company, and currently is a product manager for Cocoon for
Firefox and iOS, pulling in knowledge from both QA and customer service to improve Cocoon’s current
and future product lineup.
Joshua Guthrie, Marketing Director, started his marketing career as a data broker in the direct marketing
space. He soon after started his own firm, Global-E Group, providing direct marketing databases to
companies like Vista Print and Toyota North America. After developing a passion for the “start-up”, he
left Global-E Group and has worked for a number of start-ups in industries such as online marketing and
real estate. Joshua served as Marketing Manager for the national residential real estate company
RebuildUS, where he played an integral part in developing the direct-to-consumer marketing strategy, as
well as forging partnerships with various online distribution channels.
VWC Executive Summary
Confidential
7
Blake Bronstad is Director of Social Marketing. Blake maintains social media coordination, branding, and
creative curator for Cocoon and CocoonKids. Blake has a BA from the University of California at Santa Cruz,
and more recently a background in iOS app consultation and new media.
Pete Gallagher, Controller, has over 20 years’ experience in the accounting field. After graduating from
UC Santa Barbara, with a Bachelor’s degree in Business Economics, with an emphasis in Accounting, Pete’s
varied accounting experience includes working in public accounting for Deloitte & Touche, the retail
industry with Copeland Sporting Goods, apparel manufacturing with Wells & Company and Performance
Apparel and real estate, working for Bermant Development Company.
VWC Executive Summary
Confidential
8