2013 North American Internet Software and Services Industry Early Stage Investment Opportunity Award

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1 2013 North American Internet Software and Services Industry Early Stage Investment Opportunity Award 2013

2 Early Stage Investment Opportunity Award Internet Software and Services Industry North America, 2013 Frost & Sullivan s Global Research Platform Frost & Sullivan is in its 50th year in business with a global research organization of 1,800 analysts and consultants who monitor more than 300 industries and 250,000 companies. The company s research philosophy originates with the CEO s 360-Degree Perspective, which serves as the foundation of its TEAM Research methodology. This unique approach enables us to determine how best-in-class companies worldwide manage growth, innovation and leadership. Based on the findings of this Best Practices research, Frost & Sullivan is proud to present the 2013 North American Early Stage Investment Opportunity Award in the Internet Software and Services Industry to LinguaSys, Inc. Significance of the Early Stage Investment Opportunity Award Key Industry Challenges Addressed by Superior Innovations and Leadership The growth of social media has significantly affected the Internet Software and Services Industry. Social media is becoming an increasingly important tool for organizations to establish a better relationship with their customers. However, Frost & Sullivan notes that the use of social media is constrained by the quality and variety of content. The content generated by social media sites is quite voluminous and highly unstructured in nature. Furthermore, the diversity of languages makes it even more difficult for firms to reach customers who are separated by language barriers. As a result, Frost & Sullivan points out that firms need innovative social marketing solutions in order to properly leverage the power of social media. One of the key challenges in the Internet Software and Services Industry is the ability to offer a solution in multiple languages across geographies. The effectiveness of the solution is determined by the correct interpretation of the semantics of the message. As the implementation of such solutions can vary widely, intellectual property becomes a critical factor in ensuring success of the firm. Even in the absence of such intellectual property, the uniqueness of the solution to gather multiple social media networks across a spectrum of languages becomes essential and serves as an indicator of the product differentiation capabilities of the firm in comparison with the competition. This industry is characterized by extremely low barriers to entry. As a result, the number of participants in this industry is very high. Apart from the technical capabilities, the success of a firm also depends on their ability to succeed as a business. This requires a general understanding of the market and the ability to leverage latent opportunities. An effective 2013 Frost & Sullivan 1 We Accelerate Growth

3 indicator of the firm s business capabilities can be determined by analyzing the quality and overall expertise of the management team. Another indication of the effectiveness of the firm is to determine the quality of venture capital funding available with the firm. Venture capital firms report to Frost & Sullivan the various stringent due diligence processes they utilize in order to select firms that truly demonstrate a potential for success. Startups with high potential for success hopefully clear this process and receive funding. In addition, VC firms are also able to provide strategic guidance to firms top management and leverage their vast network to attract additional clients. Key Benchmarking Criteria for Early Stage Investment Opportunity Award For the Early Stage Investment Opportunity Award, the following criteria were used to benchmark LinguaSys performance against key competitors: Strength of Intellectual Property Experience and Expertise of Management Team (successful track record, ability to execute, industry experience) Funding History, Strength and Quality of Other Investors Market Growth and Positioning Product Differentiation Capabilities Expansion Strategy Decision Support Matrix and Measurement Criteria To support its evaluation of best practices across multiple business performance categories, Frost & Sullivan employs a customized Decision Support Matrix (DSM). The DSM is an analytical tool that compares companies performance relative to each other with an integration of quantitative and qualitative metrics. The DSM features criteria unique to each Award category and ranks importance by assigning weights to each criterion. The relative weighting reflects current market conditions and illustrates the associated importance of each criterion according to Frost & Sullivan. Fundamentally, each DSM is distinct for each market and Award category. The DSM allows our research and consulting teams to objectively analyze each company's performance on each criterion relative to its top competitors and assign performance ratings on that basis. The DSM follows a 10-point scale that allows for nuances in performance evaluation Frost & Sullivan 2 We Accelerate Growth

4 Performance-Based Ratings for Decision Support Matrix This exercise encompasses all criteria, leading to a weighted average ranking of each company. Researchers can then easily identify the company with the highest ranking. As a final step, the research team confirms the veracity of the model by ensuring that small changes to the ratings for a specific criterion do not lead to a significant change in the overall relative rankings of the companies. Frost & Sullivan s 10-Step Process for Identifying Award Recipients Best Practice Award Analysis for LinguaSys, Inc. The Decision Support Matrix illustrates the relative importance of each criterion for the Early Stage Investment Opportunity Award and the ratings for each company under evaluation. To remain unbiased while also protecting the interests of the other organizations reviewed, we have chosen to refer to the other key players as Competitor 1 and Competitor Frost & Sullivan 3 We Accelerate Growth

5 Decision Support Matrix for the Early Stage Investment Opportunity Award Measurement of 1 10 (1 = lowest; 10 = highest) Award Criteria Strength of Intellectual Property Experience and Expertise of Management Team Funding History, Strength and Quality of Other Investors Market Growth and Positioning Product Differentiation Capabilities Expansion Strategy Weighted Rating Relative Weight (%) 25% 15% 15% 15% 15% 15% 100% LinguaSys, Inc Competitor Competitor Criterion 1: Strength of Intellectual Property As with any early stage company, one of the key success factors for LinguaSys is its intellectual property. The firm has two pending patents. These patents, along with its software solutions, enable the firm to add additional language packages within a span of 4 months; Frost & Sullivan appreciates the fact that this delivery is around one-third the industry average time. Criterion 2: Experience and Expertise of Management Team As detailed earlier, the success of any firm can be estimated by ascertaining the quality of the management team. The first indicator of the effectiveness of LinguaSys management team is the extensive experience behind its founders. The firm was founded by Mr. Brian Garr (CEO), Mr. Can Unal (VP of Development) and Mr. Vadim Berman (CTO). The CEO has more than 15 years of experience as an executive in various companies, including Globalink and IBM. Before his tenure at IBM, he served as the CTO of Globalink. Subsequently, at IBM he headed its speech recognition group. The CTO has been responsible for creating the Carabao Language kit, which is at the core of LinguaSys offerings of semantic analysis. He has over 10 years of experience in this field. Can Unal has more than 19 years of experience in an advisory role in IT. Apart from the top management, other employees also have extensive experience in the industry. For instance, the VP of Sales has more than 15 years of experience in the niche market of language translation. All of this serves as an excellent indicator of the strength and quality of the management team, which, in turn, serves to indicate the high potential 2013 Frost & Sullivan 4 We Accelerate Growth

6 for the firm s success. Criterion 3: Funding History, Strength and Quality of Other Investors The firm has received investment from five angel investors. The latest round of investment was received from Mr. Mark Cuban, a seasoned investor with prior investments in social software firms. The funding was received in two tranches, resulting in a total investment of $750,000. Criterion 4: Market Growth and Positioning Frost & Sullivan independent analysis indicates that LinguaSys ability to add additional language packages to its offerings in a relatively short span of time is a critical factor that helps in increasing its target market. As mentioned earlier, the ability of the firm to add support for additional languages within 120 days will significantly increase its chances to take advantage of any latent opportunities in newer markets. LinguaSys offers its products in two forms in order to properly ensure growth. In the first category, the solution is offered as a stand-alone package and is installed within the company s internal IT environment. This package helps the firm to target large Fortune 500 and 100 companies, along with firms having stringent security and privacy requirements. Apart from increased visibility to large firms, these packages also help to increase the firm s recurring revenue by means of annual maintenance and support services. The second model is a usage-based model, whereby the clients are charged based on the extent of usage and variety of language packages used. This model helps the firm to target small and mid-sized firms, along with organizations that have relatively less stringent data security requirements. As such, these two categories enable the firm to cater to firms of all sizes. Criterion 5: Product Differentiation Capabilities The main difference in LinguaSys product offering is its semantic-based language models that allows the software to analyze the content and detect the emotion/sentiment behind the content. Furthermore, the semantic-based model allows context-based translation. This is critical in analyzing the content, as the same word can mean different things in different contexts. For instance, the word tank can have one meaning in a construction environment (e.g. water tank) and a completely different meaning in a military context (army tank.) Since most of the other translation models evaluated and benchmarked by Frost & Sullivan are statistical-based models, they fall short on both counts. Thus, the chance of LinguaSys' success in attracting clients is much greater. Finally, using the same deep analysis that is used for sentiment and translation, it does Natural Language Understanding in all supported languages. There are few NLP providers that can create complex NLU applications, and even fewer that can span multiple languages Frost & Sullivan 5 We Accelerate Growth

7 Criterion 6: Expansion Strategy The firm s strategy is to focus on attracting small and medium-sized businesses by leveraging its usage-based model. The cost incurred by SMBs in a usage-based model is based on demand, making it cost effective for them to utilize. From LinguaSys' perspective, scaling up to meet the demand from SMBs is easier, as it only needs to add more servers to fulfill such demand. Additionally, the firm s growth is assisted by its partnership with other firms and OEM reseller agreements. Conclusion In today s globalized environment, firms operate across the globe; they need to communicate consistently in a variety of languages and listen to and process correctly their customers feedback. LinguaSys unique offering, based on semantic models, is combined with the team s extensive industry experience, serving as strong indicators of the company's overall success. Based on the aforementioned criteria as measured through Frost & Sullivan independent analysis, LinguaSys is the recipient of the 2013 Early Stage Investment Opportunity Award. Critical Importance of TEAM Research Frost & Sullivan s TEAM Research methodology represents the analytical rigor of our research process. It offers a 360-degree view of industry challenges, trends, and issues by integrating all seven of Frost & Sullivan's research methodologies. Our experience has shown over the years that companies too often make important growth decisions based on a narrow understanding of their environment, leading to errors of both omission and commission. Frost & Sullivan contends that successful growth strategies are founded on a thorough understanding of market, technical, economic, financial, customer, best practices, and demographic analyses. In that vein, the letters T, E, A and M reflect our core technical, economic, applied (financial and best practices) and market analyses. The integration of these research disciplines into the TEAM Research methodology provides an evaluation platform for benchmarking industry players and for creating high-potential growth strategies for our clients Frost & Sullivan 6 We Accelerate Growth

8 Benchmarking Performance with TEAM Research About Frost & Sullivan Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best-practice models to drive the generation, evaluation and implementation of powerful growth strategies. Frost & Sullivan leverages 50 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 40 offices on six continents. To join our Growth Partnership, please visit Frost & Sullivan 7 We Accelerate Growth