March 6th, 2002S356- Entrepreneurial Ventures

Ann MonroeSteve Boord

Sarah ElkNancy DanielsElizabeth Kline

Roadmap

Business Opportunity Product Development Business Analysis Economic Model Risks

Roadmap

Business Opportunity Product Development Business Analysis Economic Model Risks

Girls’ Toy Market

Girls 6 – 8 traditional toy market is almost $2 billion

Girls doll market is dominated by Mattel

Mattel has 65% of U.S. doll market

Characterized by seasonal buying Easter, Back-to-school, Christmas

Our Customer: Girls 6-8

Active-physical Busy– many activities Like to collect things Most interested in

relationships/communication Barbie is not “cool” Frequent use of computers Enjoy TV programs and books about

older girls

Girls 6-8 Buying Habits

Observations that there is a paucity of products to buy

Girl makes the buying decision with parent approval

Frequent purchasing of birthday party presents

Girls’ Play PatternsFive types of Play

Gross Motor/Active Constructive Creative Cognitive Imaginative

Girls’ play is social Practice social roles Establish bonds of friendship Play often gender segregated at ages 6-8

Business Opportunity

Barbie losing market share To other dolls developed for older

girls To products with electronic

components

Industry StructureMost companies operate within industry silos; Spark!’s strategy is to build a brand in toys, then focus on our target customer across all core product segments

Spark!Spark!Girls 6-8

BooksToys Media Apparel Other

Business Opportunity

(part 2) Lack of market focus

Products for girls 6-8 Incorporating multi-play patterns Lifestyle focus Capturing community movement Affordable price point

Internet component Girls use computers as much as boys Use is increasing every year

Roadmap

Business Opportunity Product Development Business Analysis Economic Model Risks

Our Product Offering

Vertical World Behind every door is another adventure

Modular Environments Stackable, portable and fun!

DollsWebsite

Enhances play pattern Different monthly theme Daily news updates Continuous world story

The CharactersKara Violet Julie Ana

The Characters

Initial House and World Concepts

Market Research

Girls want the Spark! World Research to date confirms our

concept Characters World

Relationships we have established Girl Scout School groups

Testimonials

“I want them all!” Korie, Chatsworth

“I would definitely ask my parents to buy it for me” Leila, Orinda

“It’s so cool!” Kara, Simi Valley

Launch Schedule

February 2003 – Toy Fair Smaller plastic dolls – 16 designs

With accessories for some packages Targeted for Toys R Us and mass market

Houses for plastic dolls – 4 designs Targeted for mass market

Roadmap

Business Opportunity Product Development Business Analysis Economic Model Risks

Our Competition

Age

The Spark Advantage

Superior market research Knowing girls ages 6 - 8

Relationships with girl organizations Established connection with Girl Scouts

Adaptation to market trends Not limited by existing product focus (e.g.

Barbie for Mattel) Flexible and nimble

Integration of technology

Marketing Plan

Targeted to the girls Event-based marketing

In-store With girl organizations

Website Cartoon

Targeted to Retailers Media: $2.5M ad budget Toy Fair, Product Catalog

Sales & Distribution Plan

Year 1* – Toys R UsYear 2 – Target and Kmart Year 3 – Walmart

*Year of selling product into mass retail

Retail Pricing Plan

5” Plastic (w/accessories) $9 5” Plastic $5 6-7” Houses $17 - $40

Typical retail margins are 25-30%Specialties will demand 55%.

Manufacturing

Outsource manufacturing in Asia

Use of manufacturers’ agents (3–8%)

Plastic has higher fixed cost because of tooling

High packaging costs for retail placement

LicensingWhen sufficient brand awareness has

been achieved, we foresee the following as potential product extensions: Apparel Back-to-School items (supplies, backpacks) Fashion accessories Publishing Candy/Food Furniture/Bedroom decor

Roadmap

Business Opportunity Product Development Business Analysis Economic Model Risks

Revenue ModelProduct revenue

Plastic dolls in 2003 Houses in 2003

Licensing revenue High margin, but requires recognizable

brand or franchiseNew product introduction

Opportunities for brand expansion No visibility to quantify financial impact

Financing StrategyBoot-strap financing

Unfavorable terms in purchasing contracts prevent using purchase orders as collateral for bridge loans

Insufficient capital for tooling for plastic toys; significant advertising spend requirements

Venture capital Highly dilutive with little strategic benefit Business risks make securing capital difficult

Social venture capital Minimum return to management or employees

Roadmap

Business Opportunity Product Development Business Analysis Economic Model Risks

Risks

Gaining access to distribution Securing capital Recruitment of key human resources Product or concept failure Unforeseen new competitors Ability to defend against competitors

hoping to copy our concept Limited licensing opportunities

Forces Against Spark!

Fierce Competitive EnvironmentSuppliers Buyers

Substitutes

New Entrants

Forces Against Spark!

Buyers Force inventory risk on Spark! Significant pricing pressure

Suppliers Small initial manufacturing batches give us

little leverage over outsource manufacturersCompetitive Environment

Fierce competition kills new entrantsSubstitutes

Threat looms of Mattel copying basic idea

R.I.P. Polly Pockets Purple Moon Galoob

Hanging on… Get Real Girls Hasbro Girls