Social Life Network - business presentation

welcome and thank you for taking just a few minutes to learn more about our company business model and how we value social life network licensees my name is ken tapp i am the co-founder and ceo of social life network a technology business incubator that was founded in january of 2013. now social life network which trades under the ticker symbol wdlf is a social networking and e-commerce technology business incubator or a tbi for short our tbi program focuses on incubating niche industry tech startups in the social networking and e-commerce space helping them grow and eventually reach a liquidity event such as an ipo or an acquisition by a larger company in the industries that they operate now not only do we take an active role in supporting their growth with the guidance and the experience of our more than 200 tech industry advisors that we have on our management team but we also provide our tbi companies with the use of our technology platform through a sas licensing agreement this also helps them get to market faster with their application while our leadership team aids them in fine-tuning their business model establishing strong industry partnerships making introduction to investors which of course then in turn increases the probability of each company reaching that liquidity event we also take a 15 stock position in each of the licensees and we charge them five percent of their revenues generated through the sas licensing agreement now if you've not done so yet please review our technology business incubator model by downloading our social life network presentation deck on our website at socialnetwork.ai so you might be asking yourself why niche industry social networks after all there's already larger social networks like facebook which started out by targeting college students or linkedin which targeted hr departments in the early years or even twitter which targeted news outlets oh yes each social network that has ever been launched even instagram or snapchat tick tock and so many others have all started out as niche social networks now most of the technology startups like the ones that i just mentioned get their start in a tech accelerator program or a technology business incubator which then helps them build the strategy to eventually go public or be acquired so let's take one of the most popular ones as an example y combinator if you have heard of reddit airbnb dropbox door dash stripe twitch and even coinbase then you now know that these once upon a time tiny little tech startups started out at the y combinator program now y combinator started in 2005 and over the next few years spent a few million dollars to help out just a few dozen tech startups and truthfully they struggled for many years to get their program working efficiently enough and finally hit their stride around 2014 when they changed their program so that they could receive seven percent of the stock in the companies that they brought into the program now you might be asking yourself why do we value ourselves privately like a y combinator when we are actually a publicly traded company isn't our valuation supposed to come from our market cap well the truth is a market cap only represents what a group of public shareholders think the company is worth based on the supply and the demand of the available stock that is outstanding this method is widely inaccurate for tech companies and more so for tech incubators that have multiple tech companies in their portfolio so we use a private valuation internally to gauge where we are with the growth of our incubator more so than we look at the market cap of our company or even the stock price of the company as it trades publicly so how does social life network or y combinator or any other tech incubator or accelerator value a company when they bring it into their program there are five early stage startup valuation methods used when raising capital for non-revenue producing tech startups and there are the burkus method the scorecard method the risk factor summation method the venture capital method and the first chicago method now we use a combination of all five methods to ensure that we have the most accurate estimate for the value of that company as we bring them into our program i'll walk you through each one of them briefly so that you have the foundation for how we value these companies now the first is the burkas method which is one of the simplest it was created by dave burkus an american venture capital expert and the method assigns a value of half a million dollars to various factors as that startup begins to make progress it describes five key factors first is the sound idea second is a prototype then the quality of management team strategic relationships and partnerships and then it finishes with the product rollout or the sales which would be determined by the startup value and a range of zero to two and a half million dollars now this method is only valid for pre-revenue companies the second is the scorecard method now this method uses the valuation assigned to an already funded company and it begins with finding a company of a similar stage operating in the same geographic or same domain for instance after we launched our very first network it was easy for us to go out and identify other niche industries that could benefit from the technology that we provide through our sas licensing agreement now after getting the average pre-money valuation of one of those companies that startup is then thoroughly analyzed to find its strengths and its weaknesses it is given a weighted average of various factors such as the size of the opportunity or the marketplace the technology that is provided or the product which in most cases is our own technology that we license the strength of management the competitive environment and of course the funding requirements now the risk factor summation method is the third and this method works as a combination of both the burkis method and the scorecard method while emphasizing on risk factors various types of risk associated with the investment are categorized as assigned grades for each category the major risk categories include management stage of the business sales and marketing risk funding requirements industry competition the technology any litigation or international and reputation risk and the potential lucrative exit the venture capital method is the fourth and this is the startup valuation method which emphasizes on the exit or the terminal value of the startup in this method the investor considers the expected future returns of the startup it is one of the most effective methods which makes it the easiest to estimate a potential exit value once certain targeted milestones are achieved this is where we primarily arrive at the final valuation of one of our companies that we bring into our program because we already know many of the risks can be eliminated because of our own management team our own technology the size of those markets that there isn't any major competition or litigation or international reputation risk any of these things if there are we simply don't bring them into our program and so because we know that we can likely bring the company public or have it acquired by a bigger player in one of those niche industries it makes the venture capital method the most valuable of all five as we arrive at the final valuation now the fifth and final method is called the first chicago method and it was first developed and named after the venture capital arm of the first chicago bank and it is a business valuation approach used by some venture capital and private equity investors this method combines elements of both multiple based valuations as well as cash flow based methods now the first chicago method does help investors understand just how viable and ambitious the startup plan is this method focuses on three different scenarios for the outcome the best case which as an example would be an ipo a normal case which would be for instance an acquisition of the company or the worst case which would be the company fails now again we take all five methods into account when we come up with a valuation for any of our licensees at any stage so not just when we bring the licensee into the program but for the entire process that licensee is in our program until it exits now after we have that evaluation set we can then go and create a three and five-year financial projection workbook for each licensee that is as accurate as possible each company grows on a quarterly basis so we go back and use all five methods to re-value that company at each stage this also helps them raise capital at the correct valuation when they need to using one or multiple or even all of these methods is how all tech startups move through their growth value stages and capital raising campaigns for instance the seed capital round a series a round a series b round a series c round and so on okay so now you understand the different ways that we value the companies in our portfolio and remember that we have a 15 position in each of our licensees as well as we receive five percent of their revenues now compare this to y combinator that only has a seven percent position in the companies that participate in their program this is very important to understand when comparing our potential value long term as a tech incubator that trades publicly versus y combinator as a privately valued company and remember that just this past january 2021 y combinator did announce their private valuation at more than 300 billion dollars so keep in mind that our potential especially as a publicly traded company is much greater long term as we continue down a similar business model path that they started back in 2014 for building up their portfolio so let's talk about our portfolio now before i break down the value of each company you first must understand that every company starts from nothing now i know that sounds obvious but track with me while i lay out the foundation for how every company starts now you obviously have a founder someone who created the idea sometimes that's two or more people and they then have to decide what are they going to build how is it going to solve some problems how large is the marketplace that it's going to go and solve the problem in what is the future growth of that product can it move from a local product to a national product to an international product how much money will it take to get that far how much money will it take just to get off the ground what are all of the steps in between to make certain that the company doesn't run out of money and can actually get to an exit strategy these are really really important questions because if you can't answer those which many founders cannot they just start a company and hope that it grows into something that one day could be sold or go public that you must first go through every step in that business plan to make certain that you can value the company and attract new investors now the good news is we are about 25 years along in this technology startup boom and it's very easy to go out and find companies that the new company is similar to or maybe aims to eventually replace when you identify those companies you can then take a closer look at their own valuation and how they arrive at that it's important to know what their current valuation is and if you can you have to go back and see how their company was valued as it began to grow until it became the valuation today then you want to see what they think their value will be in the future what do shareholders if it's a public company think the value of the company will be 1 5 even 10 years down the road how will that type of company grow and affect the marketplace then you can take these values and plug them into your own formulas to arrive at the value of your company as you first come off the starting line and begin to raise capital from angel investors it's an important note that you have to target that company to the right angel investors that understand that industry can completely grasp the problem that you're fixing and understand that if you can get from a to z and grow that company to an exit strategy that indeed the company will be valued at x down the road if they don't understand that then they're not going to be the best investors and eventually perhaps executives or advisors to the company to help you reach that goal so step one is to set the value of the company and then go out and test the waters by pitching to angel investors that would best fit that company you have to find the right investors who can get behind it make introductions to industry partnerships and associations and other players that will help make the company grow faster now that the company is growing and so long as the leadership is right and you're hitting all of the milestones in goals along the way you can move on to multiple stages of raising capital at higher valuations just so long as these milestones are being hit all too often companies miss those milestones or they may get down the road and find out that the potential of the company solving that particular problem isn't going to be as big as they originally expected and they have to pivot pivoting is common and it's really great so long as it's being done on time and before you run out of money it's also is important to pivot if you feel like there is a better opportunity that you didn't see in the first place when first starting the company this is exactly what we do when we come in as an incubator we help companies pivot if need be or if all they really need is more gas in the tank more introductions additional leadership the preparation of legal documents or whatever else is going to be needed down the road when they reach their exit strategy a better business plan better presentation then this is how we come in and really help out our licensees reach that next level of capital raise or the one after that and so on and so forth every time we do that our company increases in its own private valuation and thus as a public shareholder the value of the company is increasing for you maybe not right off the bat you don't see it necessarily in the trading price of the stock the next day week or month but you know that in the future those companies those licensees that are in our incubator and our portfolio are growing healthy and at the right pace and they will reach the exit strategy when that company can bear the greatest value for whatever that exit looks like if it's an ipo or if it's going to be acquired by a bigger player in that particular niche industry step two is then to lay out the future financial projections of the company year one year two year three and so on the financial projections have to be broken down on a monthly basis then in the future when you need to go out and raise additional capital at that next capital phase you can go to the investors and show them that each of these mile markers on a monthly quarterly and annual basis have all been met if you can't do that then the chances of you saying the company is worth x in the future and then being able to raise capital at that valuation are slim to none now step three is to define when that company will be ready for an exit strategy and what does that exit strategy potentially look like for instance if you know that the company is going to disrupt an existing industry that has been controlled by much larger companies for a really long time which by the way typically means that the people who are running those larger companies are either older and don't understand how technology is going to disrupt the industry or maybe they are younger but they don't want to disrupt the way the company has been running for decades then the opportunity for that company to grow into one that needs to be acquired by the larger companies is a good exit strategy just keep in mind that it is possible that by the time the company grows to the size in which it should be acquired by a bigger company in that existing industry it may have already changed the way consumers in that industry are behaving and therefore makes more sense for it to go public and potentially look to acquire those companies that it once hoped to be acquired by a great example of this scenario would be hunt pose now years ago when hunt posted launched it originally thought that it would grow into something that could be acquired by cabela's or bass pro shops gander mountain or even rei but as the years went on and the consumers changed and the system wrapped itself around that consumer change it began to make more sense that post should go public and then look to acquire other companies in the industry potentially those larger companies it was looking to be acquired by now this is a prime example of how social life network helped that company pivot and reposition itself to go public instead of being acquired and through the public offering it would raise hundreds of millions of dollars that could then be used to go back and roll up other industry companies even perhaps some of those that it was looking to potentially be acquired by in the first place so what is the takeaway of the three valuation steps well one we want to make certain that each company is valued properly by using the five methods at every stage of its growth and two every stage of its growth is laid out in advance so that we can ensure investors in those companies that the milestones are being met and the valuations are accurate and three that it equals a valuation at the end the exit strategy that can give them the greatest return on their investment through either an ipo or an acquisition by another industry player now with a 15 position in each of the licensees as well as five percent of their revenues we can then take those valuation numbers and future projected revenues and arrive at our own internal private valuation which at the time of this video is valued at 2.1 billion dollars for our portfolio but why do we come up with an internal private valuation on our portfolio when we are a public company and we have a market cap valuation well it's pretty simple there is always a possibility that another tech incubator would want to acquire our company or merge with our company or perhaps a venture capital firm or private equity group would want to invest or acquire the company the fact is we are the only tech incubator that is publicly traded on the otc markets and there are no other publicly traded tech incubators to use as a stocking horse or comparison we also must keep our options open in order to continue to grow the value of the company and bring on additional companies into our portfolio if we were only to depend on the market cap value of our stock then we would be doing a huge injustice to all of our public and private shareholders when going through one of those transactions now how do we break down this value of 2.1 billion dollars internally in our portfolio it's actually pretty simple you have two categories one is the fifteen percent stake that we have in each company that of course is based on their valuations remember that their valuations are based on their future growth so we take 15 percent of those future growth valuations and we apply it to our formula that equals 1 billion 26 million nine hundred and seventy thousand and thirty two dollars then we take five percent of the future revenues of all companies in our portfolio keeping in mind that if we were a tech startup company we would be valued based on our future revenues and in this case it's five percent of theirs that equals hundred 29 million three thousand and nine hundred and seventy seven dollars in the future revenues and now that we have that number we just plug that into our formula for future valuation on revenues which we use the same as the s p 500 which is forty times future earnings that totals one billion one hundred and four million nine hundred and sixty seven thousand and one hundred and forty nine dollars then we add that back into our 1 billion 26 million 970 032 dollar valuation on the 15 stake in all companies in our portfolio to get the total of 2.1 billion dollars now let me stop right there and remind everyone that this is not our public company valuation these numbers are not used in any of our filings this is simply an internal way for us to come up with a private company valuation of our portfolio in the event that we decide to move forward with any type of transaction in the future that would require us to come up with an internal valuation this also helps us gauge just how much we're growing on a quarterly and annual basis with that portfolio we would not want to go through a transaction in the future and use the public company valuation right now because it would not be fair to you as a public shareholder or our private shareholders because we would end up going through a transaction at a much lower value okay now that you have the big total number let's break that down by network because i think it's equally as important for you to understand the value in each network as it grows through that early startup stage and reaches that potential liquidity event such as an ipo and of course we have hunt post the biggest potential ipo in our network which when it goes public and moves through its future earnings it would be valued at just shy of three billion dollars it's an enormous marketplace currently worth in the united states alone 887 billion dollars now then we have like re which is the real estate social network stocking horses that are out there in the public market like zillow and redfin and eventually compass which is planning to go public as well puts the leica evaluation much lower than the valuation on any of those existing public companies at just two billion nine hundred and seven million four hundred and seventy four thousand seven hundred and eighty dollars mj link which of course is going to be the first company we take public as we started the reggae pre-ipo offering in september of last year and we will run that offering through the end of this year unless in between now and then there is an opportunity for us to take the company public earlier at the valuation that we want for the shareholders and again that can be done in a few different ways that can be done through a straight to nasdaq offering but we would only do that if there is policy change at the highest level in the federal government for marijuana reform on the other hand there are many opportunities for us to go public through other existing public cannabis companies or private companies that are also looking to go public on nasdaq or the new york stock exchange many of those companies out there have been using our network now for many years the valuation that we have for mj link as it would go public and begin to work through its future earnings is 743 million four hundred and eight thousand one hundred and seventy one dollars the next group of companies that are approaching their future liquidity events in the next year or two or three is racket star foot post cycle fans and golf link now the sum of all of those right now valuation wise is 94 million four hundred and twenty three thousand six hundred and six dollars as we have mentioned before those sports networks would likely be acquired as a group of networks potentially by a big box sporting goods store or a sporting goods manufacturer there of course are many other ways those companies as a group could reach a liquidity event through an acquisition of another technology company or merger with another technology company or even through a spac and finally we have our three new networks that are currently out raising capital from angel investors at a valuation pre-money of 4.7 million dollars on average between the three of them we expect over the next year not only for the capital to be raised but the networks to grow and have those valuations increase to a point in which we can then predict a higher valuation based on future revenues and let's not forget that the rest of this year we are looking at additional candidates for our tech incubator program so at the end of this year we will update this valuation and continue to do so twice per year as we have additional companies coming into our program and companies leaving our program and going off and becoming public companies or acquired companies by other industry players we hope that you found this video presentation very educational and you now have a better idea of how we value the companies in our incubator program as well as help them value themselves properly so that they can continue to grow through every stage of raising capital increasing usership defining their revenue model and growing until they reach that liquidity event we can't thank you enough for being fantastic shareholders great private investors advisors executives and partners with our company to help our tech incubators grow to their potential my name is ken tapp and i appreciate you supporting our company

Channel: Social Life Network, Inc. / OTC: WDLF

Views: 19,521

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Id: qVYJey4pkIQ

Length: 32min 22sec (1942 seconds)

Published: Mon Jun 07 2021