Executive Summary
October 9, 2000

Read about RealCommunities in Fast Company, September 2000 issue

RealCommunities provides web relationship infrastructure software to enable companies to cost effectively develop and maintain vibrant, ongoing business relationships with their natural communities of customers, suppliers, partners, distributors and employees through their web site.

RealCommunities provides a variety of licensed & ASP solutions with related consulting and training.

These solutions allow companies to:

· effectively tap into the knowledge of their users thus adding content and expertise to their web site

· lock members to their site by providing richer relationships for each member and by encouraging members to build a non-transferable reputation

· better manage and direct member activities by setting policy and rewards through the reputation manager

· manage site members more cost-effectively using the Producers Workbench

· develop unique purposeful applications to empower their community to accomplish their joint task

Initially, RealCommunities is primarily targeting companies with hi-tech customer support operations. The flexibility and configurability of the product, however, allows hi-tech solution vendors, eLearning and corporate portals, lifestyle & eCommerce web sites, B2B exchanges, indeed, almost any company with a web presence to benefit from it.

RealCommunities expects that the web relationship management market will grow to be as large as the web content management market in the next few years. RealCommunities is positioned to be the market leader and intends to become the dominant web relationship management platform, the largest supplier of applications, and the owner of the standard APIs in the web relationship management market. The company has shipped products to two charter customers, each of whom have signed license agreements of $750,000. This first product, CiviServer Experienceä, is already live on one of these charter customers.

This document outlines the state of the web today and why relationship management will be critical in the future, why and how RealCommunities will be the leading vendor in this space, and what the CiviServer product suite is.

Contact

Cynthia Typaldos, President & CEO, RealCommunities, Inc.

http://www.realcommunities.com/

ct@realcommunities.com (408) 342-4140, (408) 828-1370(cell)
(408) 342 5900(main), (408) 342 5919(fax)

20823 Stevens Creek Blvd., Suite 275, Cupertino, CA 95014

The Need for Web Relationship Infrastructure

The web today is largely a place where people go to find information or buy products alone. The products and topics may or may not be useful and, unless the user has offline experience or advice, there is often no way to tell which products or topics might work best. Where the opportunity exists to interact with others this is of poor quality as well as entirely separate from the shopping or information-gathering experience.

But what if a company could provide an integrated experience on its website? What if personalization could involve not just adapting content and commerce offerings to suit a particular member but also helping that member find others with whom they could build relationships?

Companies do not use the Internet, people do. People do not buy from companies they buy from people. People do not ask companies for advice, they ask people. Knowledge management is not about connecting people to information; it is about connecting people who know with people who want to know.

When people call the Internet the “web” they typically think of the links between content. In the future, they will think of the web of relationships of which they are a part. RealCommunities’ CiviServer product suite is the first attempt to provide a comprehensive infrastructure to enable this web of relationships.

Our Approach

At this early stage of the web relationship software market, it is essential to build demand in the first year. RealCommunities offers a series of “baby steps” that will entice customers to try the product, enable them to discover how powerful web relationship management can be and then allow them to extend and deepen their relationship with RealCommunities. We expect to develop OEM relationships to extend our reach.

· Potential customers are encouraged to try the software in a demonstration environment that exemplifies each target market.

· A direct sales force goes after leads, offering both an ASP and an introductory license solution.

· Consulting and training are offered to help customers take advantage of the products.

· Broader use of already licensed products is sold progressively using upgrade pricing

· ASP customers are offered incentives to convert to long-term software licenses.

· As new products are developed they are easily sold to existing customers as they are pre-integrated with the customer’s environment.

· Customers develop their own, unique applications, locking themselves in to the CiviServer platform.

Our Markets

Customer Support
Customers are the best source of solutions Customers help each other, reducing support costs Unbiased recommendations drive product sales
Content / Membership
Members create valuable but inexpensive content Reputation generates loyalty and boosts membership Community scales without additional personnel
Employee, Partner, Developer Portals
Peer support improves performance Increases employee retention Reputation makes stars employees visible
eLearning Portals
Teachers share best practices Students form study groups

The Competitive Landscape

No competitor of RealCommunities appears to be building a platform based product, nor an equivalent of the Producers Workbench. Companies that are building point products could be considered competitors though they are more likely to be potential partners. These include DigiGroups, Question.com, Orbital Software and Quiq.

There are many companies that provide communication tools such as discussion board software. These include Web Crossing, Inclusion and Prospero. These are not competitors but potential partners whose communication tools could be integrated into CiviServer.

Finally, companies that host and support corporate communities (e.g. Peoplelink) or consult and manage corporate communities (e.g. Participate.com) are not competitors, but potential distributors of the RealCommunities infrastructure software.

Key Competitive Advantages

RealCommunities has a number of key competitive advantages at this early stage of this relationship management market.

· Uniquely compelling application for market entry – CiviServer Experience

· Completeness of vision: “The 12 Principles of Civilization™” give a coherence and breadth to our product line.

· Our business is totally focused on web relationship technology.

· We are not building a portal so we can partner rather than compete.

· We are offering sophisticated configuration, monitoring and management via the Producers Workbench.

· We have developed our products and our product line to be extensible.

· We offer tight integration of the product line with itself and with customer site

· We use an open, standards based architecture allowing for third party and customer applications

The Company

RealCommunities has been incorporated for 3 years and actively developing its product line for over a year. Here is a quick overview:

· Currently raising $5M venture round (The $5M venture investment will be used to expand sales, marketing and business development and develop additional products)

· Incorporated November 1997.

· Market/customer research & prototype 1998 & early 1999.

· Started development June 1999 on first customer payment.

· Two charter customers; $750,000 each in booked license fees.

· Today 20 people with an experienced management team.

· Initial product – CiviServer Experience™ – enables users to solve complex problems one-on-one.
Comes with an easy-to-use configuration, monitoring and management tool – CiviServer Producers Workbench™.

· CiviServer™ Experience and Producers Workbench™ are live on a first customer site and will be publicly launched in October.

· Next product (CiviServer™ Fundamentals) will ship early next year.

· Capital structure: $1M Series A angel round November 1999 - $7.25M post valuation.

Recent Press:

o Fast Company feature article about RealCommunities in September 2000 issue

o WirtschaftWoche Heute feature article about RealCommunities in September 6, 2000 issue

o RealComputing radio interview by John Dvorak in August 2000

Staff

The founders, Cynthia Typaldos, CEO, and Bhaskar Prabhala, VP Product Development and Operations, are experienced software executives from Sun Microsystems.

Cynthia Typaldos was previously an entrepreneur; CBS Sportsline acquired her first company, GolfWeb, in January 1998. At GolfWeb she built one of the earliest and most comprehensive web communities (the GolfWeb Players Club). Prior to GolfWeb, she spent 5 years at Sun as Director of Software Marketing and Director of Standards. At Sun she worked for Bill Coleman, founder and CEO of BEA Systems. She has an MBA from MIT and an undergraduate science degree from the University of California at Berkeley. Cynthia also teaches courses on Web Communities for UC Berkeley and San Jose State.

Bhaskar Prabhala was previously the VP of Engineering at ePlay, a community site for children. Prior to ePlay he was VP of Engineering at Syntax, the leading provider of advanced server solutions for corporations who require cross-platform access to mission critical information. He was also at Sun Microsystems for 8 years in software development management positions. Bhaskar has a MS in Computer Science from Pennsylvania State University.

A CFO, VP Sales and VP of Business Development are already working part-time as consultants, and the company has a strong 5-person middle management team.

The CiviServer™ Product Suite

CiviServer provides companies with a powerful and fully integrated set of tools and applications for creating, configuring, managing and monitoring strategically important web-based relationships.

This platform-based design enables further differentiation and faster time to market of future products. Integration provides many additional benefits including development of member reputation across different types of interactions.

The product suite is based on the 12 Principles of Civilization™. CiviServer Fundamentals™ is the platform that delivers the core capabilities required to manage relationships on the web. Applications of purpose, such as CiviServer Experience are built upon this platform. Dividing the software into applications and fundamentals provides many benefits including faster time to market with new applications, ease of integration between the applications, and a single way for site producers to configure, monitor and manage using Producers Workbench.

CiviServer Fundamentals modules are integrated internally and with all applications of purpose, designed to be integrated with content and eCommerce applications, extensible through the Community Development Kit and manageable through the Producers Workbench. CiviServer Fundamentals modules include:

Identity Manager

The Identity Manager provides a persistent dynamic identity to each member of the community. Identity consists of information members provide about themselves, information others provide about them (such as feedback) and information automatically updated by CiviServer.

Reputation Manager

The Reputation Manager lets a community producer encourage and reward the activities of members. By establishing the criteria for reputation, producers can guide members to participate in ways that enhance reputation and further the overall goals of the site.

Producers Workbench - Governance

The Producers Workbench is the control panel for the site producers. Fully integrated with all aspects of CiviServer Fundamentals as well as applications, including CiviServer Experience.

Communication Manager

The Communication Manager consists of both a standard community discussion board and specializations of this for particular purposes. Partners will provide other communication tools.

Environment Manager

The Environment Manager, controlled through the Producers Workbench, lets a producer define a set of channels or broad areas of the site, as well as detailed topic hierarchies within these channels.

Group Manager

The Group Manager lets members form groups and subgroups within the community.

The 12 Principles of Civilization

All communities, on or off the web, have basic principles that they must follow in order to thrive. RealCommunities has codified these into the 12 Principles of Civilization. These 12 Principles form the sociological basis of our product design. The 12 Principles have a hierarchy. The principle of Purpose is at the top and the rest of the 11 principles are in support of this purpose.

In all successful human communities the members have a common purpose, and the community exists in order to enable members to jointly accomplish this purpose. RealCommunities implements Purpose through community applications, such as CiviServer Experience.

For a more in-depth analysis, please read our white paper — Shared Knowledge and a Common Purpose: Using the 12 Principles of Civilization™ to Build Web Communities. The paper can be downloaded from the www.realcommunities.com web site.

CiviServer Experience

CiviServer Experience is a community application that enables members of a community, such as a company's customers, to develop relationships between themselves for extensive problem solving and knowledge sharing. CiviServer Experience enables the members to obtain assistance from other more experienced members without any intervention from the web site's employees. Key components of the product are powerful implementations of the Principles of Identity and Reputation.

Because members are tapping into each other’s knowledge, the system scales with no need for additional site and support personnel. The more members there are, the more problems and issues they have, but also the more members there are to help them.

CiviServer Experience motivates members to help each other through unique feedback mechanisms that reward helpful members with reputation and status.

From the customer’s viewpoint, they have a complex problem to solve and so experience is critical. They can use CiviServer Experience to identify who can help, negotiate a relationship, manage this relationship and give feedback to build the reputation of the helper. From the company’s perspective, CiviServer Experience allows for customer self-service, identifies and reward star helpers, locks these star helpers to the site through reputation & status and provides tools to track resource allocation and needs quantitatively

Financial Forecast