Entry Price: $0.07
An investment at pre-IPO stage at $0.07 per share (with subsequent listing at $0.20).
INVESTMENT PROCESS
1. Business model and revenue generation process
Family Zone provides a universal cyber safety and parental control platform to combat the concerns parents have about their children accessing harmful content online
There are several revenue streams:
Direct to consumer (monthly or annual subscription)
Re-sale through telecommunications carriers
Access partnerships
We viewed the relationships with the telecommunications carriers was a logical way to bootstrap early revenue growth. We believed the relation ship with the large Philippines carrier to be material to future revenue growth prospects
2. Assessment of management
Tim Levy (MD) has a strong background in building successful telecommunications businesses while Crispin Swan (ED sales) comes from a strong IT sales background
The sales expertise is also enhanced by way of agency agreement with Fidelio giving Family Zone access to global telecommunications and sales experts
We concluded this was the right mix of back grounds, and were particularly supportive of the Fidelio relationship given the reliance on success full execution of a sales strategy
3. Financial due diligence and valuation
The global parental control software market is estimated to be US$1 billion
Family Zone had not made a cash profit at the time of investment, and had only booked $0.4m of revenue for FY16 at the time of prospectus
Family Zone had a small amount of debt on issue ($1.3 million in convertible notes)
We viewed the size of the market and the advancement of contract talks with various telecommunications carriers as key catalysts material revenue, enough to justify a $10 million IPO with limited revenue and earnings
4. Risk identification
Limited operating history: certainly a major risk, and generally prefer investments with strong track records, however some allowances were made given the industry itself is new and relatively high growth
Sales execution: an ongoing risk with this company given the reliance on key agreements with telecommunications carriers
5. Assessment of risk versus reward
BUY
Our view was the size of the market and the international opportunities diverse enough to warrant an investment
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