March 6 th , 2002 S356- Entrepreneurial Ventures Ann Monroe Steve Boord Sarah Elk Nancy Daniels

1. March 6th, 2002 S356- Entrepreneurial Ventures Ann Monroe Steve Boord Sarah Elk Nancy Daniels Elizabeth Kline

2. Roadmap • Business Opportunity • Product Development • Business Analysis • Economic Model • Risks

3. Roadmap • Business Opportunity • Product Development • Business Analysis • Economic Model • Risks

4. 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

5. 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

6. 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

7. Girls’ Play Patterns Five 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

8. Business Opportunity Barbie losing market share • To other dolls developed for older girls • To products with electronic components

9. 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 Toys Books Media Apparel Other Girls 6-8 Spark!

10. 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

11. Roadmap • Business Opportunity • Product Development • Business Analysis • Economic Model • Risks

12. Our Product Offering Vertical World • Behind every door is another adventure Modular Environments • Stackable, portable and fun! Dolls Website • Enhances play pattern • Different monthly theme • Daily news updates • Continuous world story

13. The Characters Kara Violet Julie Ana

14. The Characters

15. Initial House and World Concepts

17. Market Research Girls want the Spark! World • Research to date confirms our concept • Characters • World • Relationships we have established • Girl Scout • School groups

18. 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

19. 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

20. Roadmap • Business Opportunity • Product Development • Business Analysis • Economic Model • Risks

21. Our Competition Age

22. 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

23. 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

24. Sales & Distribution Plan Year 1* – Toys R Us Year 2 – Target and Kmart Year 3 – Walmart *Year of selling product into mass retail

25. 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%.

26. 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

27. Licensing When 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

28. Roadmap • Business Opportunity • Product Development • Business Analysis • Economic Model • Risks

29. Revenue Model Product revenue • Plastic dolls in 2003 • Houses in 2003 Licensing revenue • High margin, but requires recognizable brand or franchise New product introduction • Opportunities for brand expansion • No visibility to quantify financial impact

30. Financing Strategy Boot-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

31. Roadmap • Business Opportunity • Product Development • Business Analysis • Economic Model • Risks

32. 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

33. Forces Against Spark! New Entrants Suppliers Buyers Fierce Competitive Environment Substitutes

34. Forces Against Spark! Buyers • Force inventory risk on Spark! • Significant pricing pressure Suppliers • Small initial manufacturing batches give us little leverage over outsource manufacturers Competitive Environment • Fierce competition kills new entrants Substitutes • Threat looms of Mattel copying basic idea

35. R.I.P. • Polly Pockets • Purple Moon • Galoob Hanging on… • Get Real Girls • Hasbro Girls