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(1)

Out of the Cloud of Cloud Computing:

KPMG’s perspective on Financial and IP Aspects

(2)

Our case study begins..

License

Support

0

5

10

15

20

25

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

U.S.

Parent

Israeli

Sub

(3)

Our case study begins..

U.S.

Parent

Israeli

Sub

0

5

10

15

20

25

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

(4)

Amount of capital paid in prior to an IPO for public SaaS companies

Wachovia Securities, May 2008 “the state of the SaaS market”

Mean

43.5

Median

39.5

$M

Blackboard

100.7

Concur Technologies

30.2

Constant Contact

37.3

DealerTrack

48.0

DemandTrack

42.0

HireRight

29.2

Kenexa

54.5

LivePerson

41.6

NetSuite

84.9

Omniture

66.9

RightNow Technologies

32.2

Salary.com

5.7

Salesforce.com

64.5

Solera

5.7

SuccessFactors

54.5

Taleo

36.9

Ultimate Software

25.1

Vocus

26.4

2-3X the amount of capital required for a

traditional model software company to reach

profitability/IPO.

(5)

Amount of capital paid in prior to an IPO for public SaaS companies

Wachovia Securities, May 2008 “the state of the SaaS market”

Mean

43.5

Median

39.5

$M

Blackboard

100.7

Concur Technologies

30.2

Constant Contact

37.3

DealerTrack

48.0

DemandTrack

42.0

HireRight

29.2

Kenexa

54.5

LivePerson

41.6

NetSuite

84.9

Omniture

66.9

RightNow Technologies

32.2

Salary.com

5.7

Salesforce.com

64.5

Solera

5.7

SuccessFactors

54.5

Taleo

36.9

Ultimate Software

25.1

Vocus

26.4

2-3X the amount of capital required for a

traditional model software company to reach

profitability/IPO.

These public SaaS companies, on average,

raised about $25M at strong valuation mark ups,

and invested this amount primarily on sales and

marketing in the year prior to going public.

(6)

Amount of capital paid in prior to an IPO for public SaaS companies

Wachovia Securities, “the state of the SaaS market”

Mean

43.5

Median

39.5

$M

Blackboard

100.7

Concur Technologies

30.2

Constant Contact

37.3

DealerTrack

48.0

DemandTrack

42.0

HireRight

29.2

Kenexa

54.5

LivePerson

41.6

NetSuite

84.9

Omniture

66.9

RightNow Technologies

32.2

Salary.com

5.7

Salesforce.com

64.5

Solera

5.7

SuccessFactors

54.5

Taleo

36.9

Ultimate Software

25.1

Vocus

26.4

2-3X the amount of capital required for a

traditional model software company to reach

profitability/IPO.

These public SaaS companies, on average,

raised about $25M at strong valuation mark ups,

and invested this amount primarily on sales and

marketing in the year prior to going public.

Salesforce.com raised $47M in November 1999

at a 224% step up in valuation and IPO’d just

five months later in March 2000.

(7)

Amount of capital paid in prior to an IPO for public SaaS companies

Wachovia Securities, “the state of the SaaS market”

Mean

43.5

Median

39.5

$M

Blackboard

100.7

Concur Technologies

30.2

Constant Contact

37.3

DealerTrack

48.0

DemandTrack

42.0

HireRight

29.2

Kenexa

54.5

LivePerson

41.6

NetSuite

84.9

Omniture

66.9

RightNow Technologies

32.2

Salary.com

5.7

Salesforce.com

64.5

Solera

5.7

SuccessFactors

54.5

Taleo

36.9

Ultimate Software

25.1

Vocus

26.4

2-3X the amount of capital required for a

traditional model software company to reach

profitability/IPO.

These public SaaS companies, on average,

raised about $25M at strong valuation mark ups,

and invested this amount primarily on sales and

marketing in the year prior to going public.

Salesforce.com raised $47M in November 1999

at a 224% step up in valuation and IPO’d just

five months later in March 2000.

Data shows that Wall Street gives much better

valuations (multiples that are possibly 2x-3x

greater) to those SaaS companies able to

demonstrate strong revenue and subscriber

growth rates.

(8)

License vs. SAAS

U.S.

Parent

Israeli

Sub

Tech

IP

Government

(OCS) Grants

A US Based 3rd

Party Reseller

License

15% withholding

(9)

License vs. SAAS

U.S.

Parent

Israeli

Sub

Tech

IP

Government

(OCS) Grants

(10)

License vs. SAAS

U.S.

Parent

Israeli

Sub

Tech

IP

Government

(OCS) Grants

(11)

License vs. SAAS

U.S.

Parent

Israeli

Sub

Tech

IP

Government

(OCS) Grants

(12)

License vs. SAAS

U.S.

Parent

Israeli

Sub

Tech

IP

Government

(OCS) Grants

Technology

Risk

Innovation

(13)

Contractual terms

U.S.

Parent

Israeli

Sub

(14)

Being a service organization

U.S.

Parent

Israeli

Sub

(15)

Achieving growth through acquisitions

U.S.

Parent

Israeli

Sub

SAAS

Target

$7M

?

(16)

Achieving growth through acquisitions

U.S.

Parent

Israeli

Sub

SAAS

Target

Tech

IP

A US based Venture

Capital fund

?

(17)

Achieving growth through acquisitions

U.S.

Parent

Israeli

Sub

SAAS

Target

EARNOUT

?

(18)

Achieving growth through acquisitions

U.S.

Parent

Israeli

Sub

SAAS

Target

(19)

© 2011 KPMG Somekh Chaikin, an Israeli member firm of the KPMG network of independent member firms affiliated with

KPMG International Cooperative (“KPMG International”), a Swiss entity.

The information contained herein is of a general nature and is not intended to address

the circumstances of any particular individual or entity. Although we endeavour to provide

accurate and timely information, there can be no guarantee that such information is accurate

as of the date it is received or that it will continue to be accurate in the future. No one should

act on such information without appropriate professional advice after a thorough examination

of the particular situation.

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