Tài liệu Open Source Business Models docx

0DVWHU7KHVLVLQ
6RIWZDUH(QJLQHHULQJ
7KHVLVQR06(
0DUV
Open Source Business Models
Can they increase the chance of developing successful products
in terms of market shares?
Mats Nilsson
'HSDUWPHQWRI
6RIWZDUH(QJLQHHULQJDQG&RPSXWHU6FLHQFH
%OHNLQJH,QVWLWXWHRI7HFKQRORJ\
%R[
6( 5RQQHE\
6ZHGHQ
3DJH RI
7KLVWKHVLVLVVXEPLWWHGWRWKH'HSDUWPHQWRI6RIWZDUH(QJLQHHULQJDQG&RPSXWHU6FLHQFHDW
%OHNLQJH,QVWLWXWHRI7HFKQRORJ\LQSDUWLDOIXOILOPHQWRIWKHUHTXLUHPHQWVIRUWKHGHJUHHRI
0DVWHURI6FLHQFHLQ6RIWZDUH(QJLQHHULQJ7KHWKHVLVLVHTXLYDOHQWWRZHHNVRIIXOOWLPHVWXGLHV
&RQWDFW,QIRUPDWLRQ
$XWKRU
0DWV1LOVVRQ
$GGUHVV.DQDOJDWDQ%.ULVWLDQVWDG6ZHGHQ
(PDLOPDWV#NHIIR]]QFRP
([WHUQDODGYLVRUV
$QGHUV+HGHUVWLHUQD
'HSDUWPHQWRI(FRQRPLFVDQG0DQDJHPHQW
8QLYHUVLW\DGYLVRUV
&ODHV:RKOLQ
'HSDUWPHQWRI6RIWZDUH(QJLQHHULQJDQG&RPSXWHU6FLHQFH
'HSDUWPHQWRI ,QWHUQHW ZZZ LSGEWKVH
6RIWZDUH(QJLQHHULQJDQG&RPSXWHU6FLHQFH 3KRQH 

%OHNLQJH,QVWLWXWHRI7HFKQRORJ\ )D[ 
6( 5RQQHE\
6ZHGHQ
3DJH RI
Abstract
7KLV WKHVLV LV GHVFULELQJ D EXVLQHVV VWUDWHJ\ RI KRZ WR OLFHQVH D VRIWZDUH SURGXFW 7KH OLFHQVHV
GLVFXVVHGLQWKLVWKHVLVDUHFDOOHGRSHQVRXUFHOLFHQVHV7KHRSHQVRXUFHOLFHQVHVKDYHJD LQHGPXFK
DWWHQWLRQODWHO\E\FRPSDQLHVVXFKDV0LFURVRIW,%0DQG6XQ0LFURV\VWHPV7KHUHDVRQIRUWKLVLV
WKDW VRPH SURGXFWV FRQVLGHUHG EHLQJ RSHQ VRXUFH VRIWZDUH DUH YHU\ ZLGHO\ XVHG 7KHVH SURGXFWV
LQFOXGHWKHPRVWSRSXODUZHEVHUYHUWKH$SDFKHZHEVHUYHUZLWKPRUHWKDQPDUNHWVKDUH
RIWKH LQVWDOOHGRSHUDWLQJ V\VWHPVWKDWDUHUXQQLQJ $SDFKHDQG RWKHUZHE VHUYHUVDUHLQVWDOOHGZLWK
/LQX[ DV RSHUDWLQJ V\VWHP ZKLFK LV DOVR FRQVLGHUHG DVRSHQ VRXUFH VRIWZDUH 7KHVH DUHRQO\ WZR
H[DPSOHVRISRSXODUSURGXFWVWKDWDUHFRQVLGHUHGDVRSHQVRXUFHVRIWZDUHSURGXFWV7KHVHSURGXFWVDUH
FKRLFHVIRUPDQ\SHRSOHDQGFRPSDQLHVZKHQFKRRVLQJVRIWZDUHWRXVHIRUH[DPSOH1$6$
2SHQVRXUFHOLFHQVHVDUHFDOOHGRSHQLQWKHZD\WKDWWKHVRIWZDUHLVVKLSSHGQRWRQO\LQELQDU\IRUP
EXWDOVRZLWKWKHVRXUFHFRGHWKDWFDQEHPRGLILHGDQGUHFRPSLOHGWRVXLWWKHEX\HU¶VQHHGEHWWHU
$SDFKHZHEVHUYHUDQGWKH/LQX[RSHUDWLQJV\VWHPDUHIUHHIRUGRZQORDGLQVWDOOUXQDQGPRGLI\WR
VXLW\RXUQHHGV
,QWKLVWKHVLV,ZLOOGLVFXVVZKHWKHUWKHVHOLFHQVHVFDQLQFUHDVHWKHFKDQFHRIGHYHORSLQJDVXFFHVVIXO
SURGXFWRUQRWLQWHUPVRIPDUNHWVKDUHV
.H\Z RUGV
RSHQVWDQGDUGVRSHQVRXUFHVRIWZDUHOLFHQVHEXVLQHVVVWUDWHJ\
3DJH RI
Acknowledgement
, ZRXOG OLNH WR H[SUHVV P\ JUDWLWXGH WRZDUGV P\ DGYLVRU $QGHUV +HGHUVWLHUQD IRU JLYLQJ PH
FRQVWUXFWLYHFULWLFLVPDVVLVWLQJPHWRUHDFKWKHJRDORIWKLVUHSRUW
Abbreviations
$3,± $SSOLFDWLRQ3URJUDPPLQJ,QWHUIDFH
&$± &DOLIRUQLD
&96± &RQFXUUHQW9HUVLRQLQJ6\VWHP

'16± 'RPDLQ1DPH6HUYHU
/*3/± /LEUDU\*HQHUDO3XEOLF/LFHQVH
*3/± *HQHUDO3XEOLF/LFHQVH
0,7± 0DVVDFKXVHWWV,QVWLWXWHRI7HFKQRORJ\
26%0± 2SHQ6RXUFH%XVLQHVV0RGHOV
26,± 2SHQ6RXUFH,QLWLDWLYH
266± 2SHQ6RXUFH6RIWZDUH
3*3± 3UHWW\*RRG3ULYDF\
63,± 6RIWZDUHLQWKH3XEOLF,QWHUHVW
3DJH RI
1 INTRODUCTION ___________________________________________________________________ 7
1.1 Background ______________________________________________________________________ 7
1.2 Aim of the Thesis__________________________________________________________________ 9
1.3 Research Question_________________________________________________________________ 9
1.4 Method __________________________________________________________________________ 9
1.5 Limitations_______________________________________________________________________ 9
2 THEORETICAL STUDIES OF OPEN SOURCE SOFTWARE_____________________________ 10
2.1 Introduction_____________________________________________________________________ 10
 'LIIHUHQWFDWHJRULHVRIVRIWZDUHBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
2.2 Open Source Software ____________________________________________________________ 12
 7KHLGHDVEHKLQG2SHQ6RXUFH6RIWZDUH BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
 7KH2SHQ6RXUFH'HILQLWLR QBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
 7KHOLFHQVLQJPRGHOBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
 2SHQ6RXUFH*18*HQHUDO3XEOLF/LFHQVH *3/ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB BBBBBBBBBBBBBBBBBBBBBBB 
 2SHQ6RXUFH%6'/LFHQFH BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB BBBBBBBBB 
 6XPPDU\RIRWKHUOLFHQVHV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB BBBBBBBBBB 
 7KH2SHQ6RXUFH'HYHORSPHQW0RGHO BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
 7KH6RIWZDUH(QJLQHHULQJSURFHVVLQWKH2SHQ6RXUFH0RGHO BBBBBBBBBBBBBBBBBBBBBBBBBBBB 
 7KH%XVLQHVV6WUDWHJ\LQWKH2SHQ6RXUFH0RGHOBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
 1HWZRUNVBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB BBBBBBBBBBBBBBBBBBBBBBBB 

 1HWZRUNHIIHFWVBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB BBBBBBBBBBBBBBBBBBB 
 2SHQVWDQGDUGV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB BBBBBBBBBBBBBBBBBBB 
2.3 The Commercialisation of Open Source Software ______________________________________ 21
 5HYHQ XH6WUH DPVLQWKH2SHQ6RXUFH6RIWZDUH0RGHOBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
3 CASE STUDIES OF OPEN SOURCE SOFTWARE COMPANIES _________________________ 22
3.1 Open source software companies and their products ___________________________________ 22
  6HQGPDLO BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
 ± 3HUO BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
 ± *18 /LQX[BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
 ± $SDFKH+7736HUYHU BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
 ± 1 HWVFDSH1DYLJDWRU 0R]LOODBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
 0\64/'DWDEDVH0DQDJHPHQW6\VWHPBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
4 ANALYSES OF THE CASE STUDIES COMPARED TO THE THEORY____________________ 34
4.1 Case studies _____________________________________________________________________ 34
3DJH RI
 $QDO\VHRI6HQGPDLO ,QFD QGWKH6HQGPDLOSURGXFWBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
 $QDO\VHRI2¶5HLOO\DQGWKH3HUOSURGXFWBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
 $QDO\VHRI5HG+DWDQGWKH/LQX[SURGXFWBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 


$
QDO\VHRI1HWVFDSHDQGWKH0 R]LOODSURGXFW
BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
 $QDO\VHRI$SDFKH 6R IWZDUH)RXQGDWLRQDQGWKH$SDFKHZHEVHUYHUSURGXFWBBBBBBBBBBBBBBBB 
 $QDO\VHRI0\64/$%DQGWKH0\64/SURGXFW BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
 &RQFOXVLRQRIWKHFRPSDQLHVBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
4.2 Alliances in the open source environment_____________________________________________ 36
4.3 Implementing standards in alliances_________________________________________________ 38
4.4 From the producers’ point of view __________________________________________________ 38
4.5 From the consumers’ point of view __________________________________________________ 38

5 CONCLUSIONS____________________________________________________________________ 39
6 REFERENCES _____________________________________________________________________ 41
6.1 The Open Source Initiative (OSI) References__________________________________________ 41
6.2 PERL References ________________________________________________________________ 41
6.3 Sendmail References______________________________________________________________ 41
6.4 Microsoft References _____________________________________________________________ 42
6.5 Apache References _______________________________________________________________ 42
6.6 Linux / RedHat References_________________________________________________________ 42
6.7 Books __________________________________________________________________________ 42
6.8 GNU References _________________________________________________________________ 43
6.9 Other References_________________________________________________________________ 43
6.10 MySQL References _______________________________________________________________ 44
6.11 Netscape / Mozilla References ______________________________________________________ 44
7 BIBLIOGRAPHY __________________________________________________________________ 44
3DJH RI
 ,QWURGXFWLRQ
 %DFNJURXQG
:KHQWKHYDOXHRIDSURGXFWWRRQHXVHUGHSHQGVRQKRZPDQ\RWKHUXVHUVWKHUHDUHHFRQRPLVWVVD\
WKDWWKLVSURGXFWH[KLELWVQHWZRUNH[WHUQDOLWLHVRUQHWZRUNHIIHFWVDFFRUGLQJWR&DUO6KDSLURDQG+DO
59DULDQ>@7HOHSKRQHVHPDLO,QWHUQHWDFFHVVDUHDOOH[DPSOHVWKDWH[KLELWVQHWZRUNH[WHUQDOLWLHV
7REHDEOHWRPDNHSURGXFWVWKDW H[KLELWQHWZRUNHIIHFWVRQHPXVWPDNHWKHSURGXFWVRDWWUDFWLYHWKDW
RQH FDQ JDLQ D FULWLFDO PDVV RI FXVWRPHUV IRU D VWDUW DQG WKHQ LW WHQG WR VHOO LW VHOI EHFDXVH QHZ
FXVWRPHUVZDQWWRKDYHWKHSURGXFW EHFDXVHWKHUHDUHDOUHDG\PDQ\ FXVWRPHUV XVLQJLW7KLVPHDQV
WKDWIRUHDFKSHUVRQWKDWJHWVWKHSURGXFWWKHYDOXHRIWKHSURGXFW L QFUHDVHV7KHTXHVWLRQLVWKHQKRZ
RQH FDQ DFKLHYH WKLV" 2I FRXUVH WKH SURGXFW KDV WR EH JRRG EXW WKDW LV QRW WKH RQO\ UHFLSH 0DQ\
FRPSDQLHV XVHV WKH HFRQRPLF ODZV RI RSHQ VWDQGDUGV WR JDLQ QHWZRUN HIIHFWV ORFNLQ WR NHHS WKH
SURGXFW¶VFXVWRPHUEDVHODUJHDQGPDQ\PRUHODZVWKDWLVGHVFULEHGLQERRNVOLNH,QIRUPDWLRQ5XOHV
>@
, DP LQ WKLV WKHVLV FRQFHQWUDWLQJ RQ D UDWKHU QHZ EXVLQHVV VWUDWHJ\ WKDW KDV VLPLODULWLHV ZLWK RSHQ
VWDQGDUGVDQGWKHEXVLQHVVVWUDWHJ\LVFDOOHGRSHQVRXUFH7RFODVVLI\VRIWZDUHDVRSHQVRXUFHVRIWZDUH

LWPXVWFRQIRUPWRDFRXSOHRIOLFHQVHUXOHV,ZLOOUHIHUWRWKHVHOLFHQVLQJVWUDWHJLHVDVRSHQVRXUFH
EXVLQHVVPRGHOVLQWKHUHVWRI WKLVWKHVLV
,QWKHODVW\HDUVZHKDYHVHHQDFRXSOHRIGLIIHUHQWEXVLQHVVPRGHOVRQWKH,7PDUNHW&RPSDQLHVKDYH
WRPDNH SURILWV RQWKHLUVRIWZDUHVHUYLFHVLQ RQHZD\ RUDQRWKHU 2QH EXVLQHVV PRGHOWKDWLV PRVW
OLNHO\WREHDPRQJ WKHEXVLQHVVPRGHOVLQWKHIXWXUHLVWKH2SHQ6RXUFH%XVLQHVV0RGHO26%0
26%0LVDUDWKHUQHZZD\RIWKLQNLQJZKHQGHYHORSLQJVRIWZDUHDQGWKHLGHDEHKLQGWKHPRGHOLVWR
JLYH DZD\ WKHVRIWZDUHLQFOXGLQJ WKH VRXUFHFRGHDQGVHOO VXUURXQGLQJ VHUYLFHVDQG VXSSRUW RQLW
2QHFDQGUDZSDUDOOHOVZLWKWKLVDQGRSHQVWDQGDUGVZKHUHFRPSDQLHVFDQJDLQQHWZRUNHIIHFWVRIWKH
SURGXFW ZKHQ FUHDWLQJ ODUJHU PDUNHWV WRJHWKHU LQ DOOLDQFHV 7KHQ FRPSDQLHV FRPSHWH DERXW WKH
UHYHQXHVZLWKLQWKLVPDUNHW7KLVLVFDOOHGFRRSHWLWLRQ>@ZKLFKLVDFRPELQHGZRUGRIFRRSHUDWLRQ
DQGFRPSHWLWLRQ
7KHRSHQVRXUFHOLFHQVLQJVWUDWHJ\PHDQVWKDW\RXDUHJL YLQJHYHU\ERG\WKHDELOLW\WRGRZQORDGWKH
ELQDULHVDQGWKHVRXUFHFRGHIURPWKH,QWHUQHWIRUIUHHWRLQVWDOOWHVWPRGLI\DQGWRSDUWLFLSDWHRQ WKH
IXUWKHUGHYHORSPHQWRIWKH SURGXFW7KLVPDNHVWKHVRIWZDUHDQ³LPSOHPHQWHGRSHQVWDQGDUG´WKDWLV
IUHHRIFKDUJH7KHUHDVRQVIRUFKRRVLQJDQRSHQVRXUFHOLFHQVLQJVWUDWHJ\FDQEHWKDWRQHFRPSDQ\
ZDQWVWKHLUVRIWZDUHSURGXFWWREHDVWDQGDUGWKDWZLOOEHZL GHO\XVHG+DY LQJWKHVRXUFHFRGHRSHQ
3DJH RI
PD\JLYHWKHFRPSDQLHVWKHDELOLW\WRHDVLHUIRUPDOO LDQFHVZLWKZKRPHYHUWKDWZDQWVWRSDUWLFLSDWHRQ
WKHGHYHORSPHQWRIWKHSURGXFW
7KLVVWDQGDUGVKDOODWWUDFWPRUHXVHUVDQGWKHUHIRUHFUHDWHDODUJHUPDUNHWDQGWKHQWKHFRPSDQLHVWKDW
DUH VSHQGLQJ PRQH\ RQ WKH GHYHORSPHQW VKDOO WU\ WR SURILW IURP VXSSRUW DQG VHUYLFHV DURXQG LW
,QWHJUDWLQJ WKH VRIWZDUH SURGXFW LQWR RWKHUFRPSDQLHV¶LQIUDVWUXFWXUHDQG VHOOLQJ ERRNVRQ KRZ WKH
VRIWZDUHSURGXFWZRUNVDUHSRVVLEOHUHYHQXHVWUHDPV
2QHHFRQRPLFUHDVRQEHKLQGLWLVWKDWRSHQVWDQGDUGVDQGKHQFHRSHQVRXUFHLPSOHPHQWDWLRQVHDVLHU
FUHDWHDODUJHPDUNHW7KHSRVVLELOLW\IRURWKHUFRPSDQLHVWRPDNHSURGXFWVWKDWPDNHVXVHRIWKHRSHQ
VRXUFHSURGXFWPDNHVWKHFKDQFHVRISURGXFLQJDSRSXODUSURGXFWLQFUHDVH$QRWKHUUHDVRQLVWKDWWKH
GHYHORSPHQWFRVWVRIWKHSURGXFWVKDOOEHORZHUZLWKWKHRSHQQHVVRIWKHVRXUFH FRGH EHFDXVHLWVKDOO
DWWUDFWRWKHUSHRSOHDQGFRPSDQLHVWRPDNHDQDOOLDQFHWRJHWKHUEXLOGLQJDSURGXFWWKDWFRPSDQLHVFDQ
PDNHUHYHQXHVIURP7KLVPHDQVWKDWLWPD\EHHDVLHUWRKDYHFRVWVKDULQJDQGULVNVSUHDGLQJRQRSHQ
VRXUFHVRIWZDUHWKDQRQSURSULHWDU\VRIWZDUH

,W DOO KDV LW URRWV LQ WKH KREE\LVW DQG WKH VFLHQWLILF FRPPXQLW\ DV DQ H[FKDQJH RI VRXUFH FRGH E\
GHYHORSHUV1RZPDQ\ IDPRXVSURGXFWVFDQEHFRQVLGHUHGDV2SHQ6RXUFH6RIWZDUH7KHVHLQFOXGH
%6' 81,; 6HQGPDLO $SDFKH %,1' '16 ,QWHU1HW1HZV *18/LQX[ DQG 1HWVFDSH
&RPPXQLFDWRU DOVR FDOOHG 0R]LOOD ,W ZDV ILUVW WKRXJKW RI DV WRR DGKRF DQG FKDRWLF IRU VHULRXV
SURMHFWVDFFRUGLQJWR'DYRU>@EXWLVQRZEHLQJUHFRQVLGHUHGDVDYLDEOHGHYHORSPHQWPRGHOHYHQIRU
FRPPHUFLDOVRIWZDUH
7KHUH KDYH EHHQ PDQ\ GLVFXVVLRQV FRQFHUQLQJ WKH 26%0 GXULQJ WKH ODVW FRXSOH RI \HDUV ERWK E\
SHRSOH DSSO\LQJ LW DQG SHRSOH DJDLQVW LW (VSHFLDOO\ WZROHDGLQJ FRPSDQLHV DUH GHEDWLQJ DERXW WKH
IXWXUHRI26%0DQGWKDWLV5HG+DWXVLQJWKHPRGHOZLWKLWVIUHHVRIWZDUHRSHUDWLQJV\VWHP/LQX[
DQG0LFURVRIWYHU\PXFKDJDLQVWWKHPRGHO
³,Q JHQHUDO D ORW PRUH WKRXJKWGLVFXVVLRQ QHHGV WR SXW LQWR 0LFURVRIW¶V UHVSRQVH WR WKH 266
SKHQRPHQD´ VD\VD 0LFURVRIWHPSOR\HHQDPHG 9DOORSSLOOLO LQ KLV LQWHUQDO UHSRUW >@ 7KH U HDVRQ
EHKLQGWKLVZDVREYLRXV/LQX[ZDVJURZLQJUDSLGO\IURPDQGVWLOO GRHVDQGWKLVLVFRQFHUQLQJ
0LFURVRIWEHFDXVHLWLVVWHDOLQJPDUNHWVKDUHVIURP:LQGRZV17:KRZHUHWKH\WKH2SHQ6RXUFH
&RPPXQLW\WRFRPSHWHZLWKWKHVRIWZDUHFRPSDQ\WKDWZDVVHOOLQJPRVW2SHUDWLQJ6\VWHPV":KDW
EXVLQHVV WDFWLFV VKRXOG 0LFURVRIW DSSO\ WR KDYH WKH QXPEHU RQH SRVLWLRQ RI WKH VHUYHU VLGH RQ WKH
,QWHUQHW"
3DJH RI
 $LPRIWKH7KHVLV
,Q WKLV WKHVLV , ZLOO VHH LI RSHQ VRXUFH VRIWZDUH FDQ EH FRQVLGHUHG DV D ZD\ WR GHYHORS SURILWDEOH
VRIWZDUHRU QRW$SURILWDEOH SURGXFW LVLQWKLVWKHVLVFRQVLGHUHG DV DSURGXFW WKDWKDVJRRGPDUNHW
V
KDUH3URILWDEOHSURGXFWV DUHFRQVLGHUHGSURGXFWVWKDWDUHRIYDOXHIRUWKHFRPSDQLHVWKDWLQYHVWLQWKH
SURGXFWVDQGKHQFHPDUNHWVKDUHFDQEHDYLDEOHLQGLFDWLRQRISURILWDELOLW\
 5HVHDUFK4XHVWLRQ
³&DQRSHQVRXUFHEHDSURILWDEOHZD\WRGHYHORSVRIWZDUHRUQRW"´
 0HWKRG
7R EHDEOH WR VHHWKHZKROHSLFWXUH RIWKH RSHQVRXUFHEXVLQHVVP RGHOV, ILUVW GHVFULEHZKDWRSHQ
VRXUFH VRIWZDUH LV ZLWK WKH KHOS RI WKH FXUUHQW UHV HDUFK LQ WKH ILHOG 7KLV PHDQV VWXG\LQJ DUWLFOHV
ERRNVDVZHOODVVWXG\LQJWKHOLFHQVHVDQGGLVFXVVLQJWKHWKHRU\EHKLQGRSHQVWDQGDUGVPDUNHWVDQG

QHWZRUNHII HFWV
, KDYH FRQGXFWHG FDVH VWXGLHV RQ D FRXSOH RI RSHQ VRXUFH VRIWZDUH SURMHFWV DQG KDYH GRQH D EULHI
H[SODQDWLRQRIWKHLPSRUWDQWWKLQJV LQWKHVHSURMHFWVWKDW LV ZKDWWKHSURGXFWVDUHWKHKLVWRU\EHKLQG
WKHPKRZWKH\KDYHRUJDQLVHGWKHPVHOYHVDQGZKDWOLFHQVHWKH\KDYHRQWKHSURGXFWVDVZHOODVKRZ
WKH\KDYHEHHQ FRPPHUFLDOLVHG, WU\ WRLGHQWLI\ DQGGLVFXVVLIWKH\DUHRUPD\ EH VXFFHVVIXOZKHQ
XVLQJRSHQVRXUFHVRIWZDUHDVDEXVLQHVVVWUDWHJ\LQWHUPVRIPDUNHW VKDUHV
$IWHUWKLV,LGHQWLI\ZKHWKHURSHQVRXUFH DVDEXVLQHVVVWUDWHJ\FDQLQFUHDVHWKHFKDQFHRIGHYHORSLQJ
VXFFHVVIXO VRIWZDUH RU QRW LQ WHUPV RI PDUNHW VKDUHV FRPSDUHG WR RWKHU OLFHQVHV , GR WKLV E\
LGHQWLI\LQJDFRXSOHRIIDFWRUVWKDWPD\PDNHWKHRSHQVRXUFHVRIWZDUHSURGXFWDVHULRXVFRPSHWLWRU
RQWKHPDUNHW
$Q DOWHUQDWLYH PHWKRG IRU DQVZHULQJ WKH UHVHDUFK TXHVWLRQ FRXOG EH WR FRPSDUH WKH RSHQ VRXUFH
OLFHQVHG SURGXFWV ZLWK FRPSHWLWLYH FRPP HUFLDO OLFHQVHG SURGXFWV DQG FRPSDUH WKH KLVWRU\ RI WKHLU
PDUNHWVKDUHVWRVHHLIWKHJURZWKRIWKHPDUNHWVKDUHVDUHIDVWHURQRQHSURGXFWWKDQWKHRWKHU
7KHYDOLGLW\RIWKHUHVXOWVLVEDVHGRQWKHWKHRU\WKDWRSHQVWDQGDUGVHDVLHUFUHDWHDODUJHUPDUNHWDQG,
GUDZSDUDOOHOVZLWKRSHQVWDQGDUGVDQGRSHQVRXUFHVRIWZDUH
 /LPLWDWLRQV
7KHWHUPSURILWDEOHLVLQWKLVWKHVLVEDVHGRQPDUNHWVKDUHVDQGWKLVFDQDIIHFW WKHUHSRUWL QDZD\WKDW
ZKDW , FRQVLGHU D SURILWDEOH SURGXFW EDVHG RQ P\ IDFWV FDQ LQ WKH UHDOLW\ EH D FRVWO\ SURGXFW IRU
3DJH RI
FRPSDQLHV LQ WHUPV RI PRQH\ 7KH SURMHFWV WKDW , KDYH FKRVHQ WR FRQGXFW FDVH VWXGLHV RQ DUH DOO
NQRZQRSHQVRXUFHVRIWZDUHSURMHFWVDQGKHQFHWKH\KDYHPDUNHWVKDUHV
7KHLQWHUHVWLQJWKLQJLQWKHWKHVLVLVWKRXJKLIDQGKRZWKHVHRSHQVRXUFHVRIWZDUHSURMHFWVKDVJDLQHG
WKHODUJHPDUNHWVKDUHWKDWWKH\ KDYH DQGLIWKLVFDQ EH DEXVLQHVVVWUDWHJ\WKDWFDQ FRPSHWHDERXW
PDUNHWVKDUHVZLWKWKHRWKHUOLFHQVLQJVWUDWHJLHVIRUH[DPSOHFRPPHUFLDOOLFHQVHV
7KH DFWXDO UHYHQXHV WKDWD FRPSDQ\ JDLQV IURP D SURGXFW DUH YHU\ KDUG WR ILQG DQG LQ PDQ\ FDVHV
H[WUHPHO\ KDUG WR PHDVXUH )RU H[DPSOH LQ WKLV UHSRUW , DP GHVFULELQJ VRIWZDUH SURMHFWV WKDW DUH
IXQGHGE\WZRRUPRUHKDUGZDUHFRPSDQLHVWKDWVHOOVPRUHKDUGZDUHLIWKHVRIWZDUHWKDWUXQVRQWRS
RIWKHKDUGZDUHKDVODUJHPDUNHWVKDUHV7KHVRIWZDUHLQWKLVFDVHKDVQRGLUHFWLQFRPHFRQQHFWHGWRLW
VRWKDWPDUNHWVKDUHLVWKHUHIRUHDYLDEOHPHDVXUH
7KLVFDQKDYHWKHHIIHFW WKDW ,DPGUDZLQJFRQFOXVLRQVWKDWDVRIWZDUHSURGXFWZLWKKLJKPDUNHWVKDUH

DOVRLVJRRGIRUWKHFRPSDQ\WKDWLQYHVWVLQLWZKLFKPD\EHIDOVH,ILWLVSURILWDEOHLQWHUPVRIDFWXDO
FRVW YHUVXV UHYHQXH LV GHSHQGLQJ RQ LI WKH FRPSDQ\ KDV JRRG UHYHQXH VWUHDPV FRQQHFWHG WR WKH
VRIWZDUHDQGWKLVLVQRWFRQVLGHUHG LQWKLVWKHVLV
 7KHRUHWLFDO6WXGLHVRI2SHQ6RXUFH6RIWZDUH
 ,QWURGXFWLRQ
7KH\HDUZDVZKHQWKHWHUP2SHQ6RXUFHZDVFRLQHGLQ3DOR$OWR&$E\&KULV3HWHUVRQ>@
7KH VDPH \HDU 6RIWZDUH LQ WKH 3XEOLF ,QWHUHVW 63, >@ DSSOLHG WR WKH 86 3DWHQW DQG 7UDGHPDUN
2IILFHWRUHJLVWHUWKHWHUP2SHQ6RXUFHDVDFHUWLILFDWLRQPDUNZKLFKLVDVSHFLDONLQGRIWUDGHPDUN
2SHQ6RXUFHLVQRZD5HJLVWHUHG&HUWLILFDWLRQ0DUNDW63,DQG0U(ULF5D\PRQGPDQDJHVWKH2SHQ
6RXUFH WUDGHPDUN RQ EHKDOI RI WKH IUHH VRIWZDUH FRPPXQLW\ 63, HQFRXUDJHV SHRSOH WR GHYHORS
VRIWZDUHXQGHUWKH*18*3//LFHQVHVHH/LFHQVHVHFWLRQIRUPRUHLQIRUPDWLRQ
7KH JURZWK RI WKH ,QWHUQHW PDGH RSHQVRXUFH VRIWZDUH PRUH SRSXODU EHFDXVH LW ZDV QRZ HDVLHU WR
FROODERUDWHIRUGHY HORSHUVRQDPXFKODUJHUVFDOH0DQ\RIWKHRSHQVRXUFHSURMHFWVDUHDSSOLFDWLRQVWR
LPSOHPHQW WKH ,QWHUQHW LQIUDVWUXFWXUH 7KLV LQFOXGHV ZHE VHUYHUV HPDLO VHUYHUV 'RPDLQ 1DPH
6HUYHUVDQGHYHQRSHUDWLQJV\VWHPVVXFK DV%6'81,;
7RVRUWRXWZKDW2SHQ6RXUFHLVZHZLOOVWDUWWRKDYHDORRNDWWKHGLIIHUHQWNLQGVRIVRIWZDUHWKHUHLV
3DJH RI
 'LIIHUHQWFDWHJRULHVRIVRIWZDUH
7KLVSLFWXUHLVDQH[SODQDWLRQRIWKHGLIIHUHQW
NLQGVRIVRIWZDUHWKHUHDUH>@,GHVFUL EH
WKHPWRJLYHDQXQGHUVWDQGLQJRIZKHUH2SHQ
6RXUFHVRIWZDUHFRPHVLQWRWKHSLFWXUH
)UHH6RIWZDUH
)UHHVRIWZDUHVKDOOEHPRUHFRPSDUHGWRWKH
WHUPIUHHGRPUDWKHUWKDQWKHLVVXHRISULFH
DFFRUGLQJWR5LFKDUG6WDOOPDQ>@WKHIRXQGHU
RIWKH*18SURMHFWV,Q SDUWLFXODUWKLVPHDQV
WKDWWKHVRXUFHFRGHVKDOOEHDYDLODEOHWRXVH
PRGLI\FRS\GLVWULEXWHDQGGRZKDWHYHURQH)LJXUH'LIIHUHQWFDWHJRULHVRIVRIWZDUH
ZDQWV WRGRZLWKLW

2SHQ6RXUFH6RIWZDUH
2SHQ6RXUFH6RIWZDUHLVPRUHRUOHVVWKHVDPHWKLQJDVIUHHVRIWZDUH7KHWHUPLVPRUHDFFHSWDEOHWR
EXVLQHVVWKRXJKEHFDXVHWKHWHUP µIUHHVRIWZDUH¶GRHVVFDUHDZD\LQYHVWRUVEHFDXVHWKH\WKLQNWKDW
WKH\FDQ¶WPDNHPRQH\RXWRILW
3XEOLF'RPDLQ6RIWZDUH
3XEOLF'RPDLQ6RIWZDUHLVVRIWZDUHWKDWLVQRWF RS\ULJKWHG,QIDFW³SXEOLFGRPDLQ´PHDQVSUHFLVHO\
³QRWFRS\ULJKWHG´>@7KLVPHDQVWKRXJKWKDWVRPHFRSLHVRUPRGLILHGYHUVLRQVPD\QRWEHIUHHDW
DOO

&RS\OHIWHG6RI W ZDUH
7KLV LV IUHH VRIWZDUH DQG DOO PRGLILFDWLRQV RI WKH FRS\OHIWHG VRIWZDUH DUH DOVR IUHH *18 3XEOLF
/LFHQVHLVRQHVHWRIGLVWULEXWLRQWHUPVIRUFRS\OHIWLQJDSURJUDP0LFURVRIWFDOOVWKLVµYLUXV¶VRIWZDUH
>@7KHSXUSRVHLVWKDWWKHVRIWZDUHLV I UHHDQGVKDOOEHIUHH IRUHYHU7KLVGRHVQRWKRZHYHUPHDQ
WKDWRQHFDQQRWPDNHPRQH\RQLW
3URSULHWDU\6RIWZDUH
3URSULHWDU\VRIWZDUHLVVRIWZDUHWKDWLVQRWIUHHRUVHPLIUHHIUHHIRUQRQSURILWSXUSRVHVDV3*3LV
,WV XVH UHGLVWULEXWLRQ RU PRGLILFDWLRQ LV SURKLELWHG RU UHTXLUHV \RX WR DVN IRU SHUPLVVLRQ RU LV
UHVWULFWHGVRPXFKWKDW\RXHIIHFWLYHO\FDQ¶W GRLWIUHHO\0RVWFRPPHUFLDOVRIWZDUHLVSURSULHWDU\EXW
WKHUHLVDOVRFRPPHUFLDOIUHHVRIWZDUHVXFKDV*18/LQX[DQGWKHUHLVDOVRQRQFRPPHUFLDOQRQ
IUHHVRIWZDUH
3DJH RI
6KDUHZDUH
6KDUHZDUHLVVRIWZDUHWKDWRIWHQLVDOORZHGWRUHGLVWULEXWHEXW\RXZLOORIWHQK DYHWRSD\IRULWLI\RX
XVHLWIRUDORQJHUSHULRG
 2SHQ6RXUFH6RIWZDUH
 7KHLGHDVEHKLQG2SHQ6RXUFH6RIWZDUH
7KHUH DUH PDQ\ LGHDV EHKLQG RSHQ VRXUFH VRIWZDUH GHYHORSPHQW 7KH URRWV SUREDEO\ FRPH IURP
5LFKDUG 6WDOOPDQ IRXQGHU RI *18 >@ 6WDOOPDQ KDV KLV RZQ GHILQLWLRQ RI WKH IRXU IUHHGRPV RI
VRIWZDUH>@
7KHVHDUH

N 7KHIUHHGRPWRXVHWKHVRIWZDUHKRZHYHU\RXZLVK
N 7KHIUHHGRP WRFKDQJHVRIWZDUHWRVXLW\RXUQHHGV± WKDWPHDQVWRFKDQJHWKHVRXUFHFRGHDQG
UHFRPSLOHLW
N 7KHIUHHGRPWRGLVWULEXWHWKHVRIWZDUHWRDQ\RQHHOVHWR³KHOS\RXUQHLJKERXU´
N 7KH I UHHGRP WR GLVWULEXWH DOWHUHG YHUVLRQV RI WKH VRIWZDUH $QDORJXH ZL WK WKLV LV WR VKDUH D
PRGLILHGYHUVLRQRIDIRRGUHFLSH
 7KH2SHQ6RXUFH'HILQLWLRQ
³7KH 2SHQ6RXUFH'HILQLWLRQ LVDELOORI U LJKWVIRUWKHFRPSXWHUXVHU´VD\V%UXFH 3HUHQV>@FUHDWRU
RI 63, DQG WRJHWKHU ZLWK (ULF 5D\PRQG DOVR FUHDWRU RI WKH 2SHQ 6RXUFH ,QLWLDWLYH 26, >@ 7KH
VRIWZDUHPXVWKDYHDOLFHQVHWKDWFRUUHVSRQGVWRFHUWDLQULJKWVWKDWWKHXVHUPXVWKDYHWREHDEOHWREH
FODVVLILHGDVRSHQVRXUFHVRIWZDUH$W\SLFDOSURJUDPPHUZLOOIHHOVWXSLGLIKHGHYHORSVVRPHWKLQJLQ
D SURJUDP DQG WKH RZQHU RI WKH SURJUDP VHOOV LW ZLWKRXW JLYLQJ DQ\WKLQJ EDFN 7KH RSHQ VRXUFH
GHILQLWLRQSURYLGHVWKHSDUWLFLSDWLQJGHYHORSHUVZLWKWKHVHULJKWV
N 7KHULJKWWRPDNHFRSLHVRIWKHVRIWZDUHDQGWRGLVWULEXWHWKHVHFRSLHV
N 7KHULJKWWRKDYHDFFHVVWRWKHVRIWZDUH¶VVRXUFHFRGH
N 7KHULJKWWRPDNHLPSURYHPHQWVWRWKHVRIWZDUH
7KHVH ULJKWV DUH QHFHVVDU\ IRU WKH GH YHORSHUV WR FRQWULEXWH WR WKH SURMHFWV DQG WKHVH ULJKWV DUH
GRFXPHQWHG E\ WKH 2SHQ 6RXUFH ,QLWLDWLYH 7KH 2SHQ 6RXUFH 'HILQLWLRQ LV PDGH IURP WKH 'HELDQ
*18/LQX[ 'LVWULEXWLRQ GRFXPHQWDWLRQ WKDW ZDV FDOOHG WKH 'HELDQ )UHH 6RIWZDUH *XLGHOLQHV 7KH
GHILQLWLRQLVPDGHXSRIWKHVHUXOHVWKDWPXVWFRPSO\ZLWKVRIWZDUHWKDWZDQWVWREH2SHQ6RXUFH>@
N )UHHUHGLVWULEXWLRQ± WKHOLFHQVHPXVW QRWUHVWULFWDQ\ERG\WRVHOORUJLYHDZD\
3DJH RI
N 6RXUFH&RGH± WKHSURJUDPPXVWLQFOXGHVRXUFHFRGHDQG PXVWDOORZUHGLVWULEXWLRQLQERWKVRXUFH
FRGHDQGLQFRPSLOHGIRUP
N 'HULYHGZRUNV 7KHOLFHQVHPXVWDOORZPRGLILFDWLRQVDQGGHULYHGZRUNVDQGDOORZWKHPWREH
GLVWULEXWHG XQGHU WKH VDPH WHUPV DV WKH OLFHQVH RI WKH RULJLQDO VRIWZDUH 1RWH KHUH WKDW LW LV
SRVVLEOHWRPDNHPRGLILFDWLRQVDQGNHHS WKHPSULYDWH7KH%6'OLFHQVHZRUNVWKLVZD\EXWWKH
*3/OLFHQVHGRHVQRWDOORZWKLV
N ,QWHJULW\ RI WKH DXWKRU¶V VRXUFH FRGH ± 7KH OLFHQVH PD\ UHVWULFW WKH VRXUFH FRGH IURP EHLQJ
GLVWULEXWHG LQ PRGLILHG IRUP RQO\ LI WKH OLFHQVH DOORZV WKH GLVWULEXWLRQ RI SDWFK ILOHV ZLWK WKH

VRXUFHFRGHIRUWKHSXUSRVHRIPRGLI\LQJWKHSURJUDPDWEXLOGWLPH7KHUHDVRQIRUWKLVZDVWKDW
VRPHDXWKRUVDUHDIUDLGRIWKHIDFWWKDWVRPHRQHPLJKWPRGLI\WKHVRIWZDUHSRRUO\DQGWKHUHIRUH
PD\SXWWKHVRIWZDUHLQDEDGPDQQHU
N 1RGLVFULPLQDWLRQRISHUVRQVRUJURXSVLQWKHOLFHQVH
N 1R GLVFULPLQDWLRQ DJDLQVW ILHOGV RI HQGHDYRXU ± WKH VRIWZDUH VKDOO EH DOORZHG WR EH XVHG LQ D
EXVLQHVVRUUHVHDUFKZKHWKHULWLVDQDERUWFOLQLFRUDQDQWLDERUWFOLQLFVKDOOQRWEHFRQVLGHUHG
N 'LVWULEXWLRQRIOLFHQVH 7KHOLFHQVHVKDOOEHDXWRPDWLFQRVLJQDWXUHUHTXLUHG
N /LFHQVHPXVWQRWEHVSHFLILFWRDSURGXFW± )RUH[DPSOHLI LWLVWLHGWRRQH/LQX[GLVWULEXWLRQWKHQ
LWVKDOOEHDEOHWREHVHSDUDWHGIURPWKDW/LQX[GLVWULEXWLRQWRDQRWKHU
N /LFHQVH PXVW QRW FRQWDPLQDWH RWKHU VRIWZDUH ± 7KH SXUSRVH KHUH LV WKDW WKH OLFHQVH VKDOO QRW
UHVWULFWWKHRWKHUVRIWZDUHRQD&'520GLVWULEXWLRQWREH2SHQ6RXUFH
 7KHOLFHQVLQJPRGHO
$VPHQWLRQHGDERYHWKHOLFHQVLQJPRGHOVDUHWKHPDLQFRQFHSWRIWKHRSHQVRXUFHVRIWZDUH/LFHQVHV
DQGFRS\ULJKWVDUHLQFOXGLQJ WKHULJKWVRIFRS\LQJGLVWULEXWLRQDQGSUHSDUDWLRQRIGHULYDWLYHZRUNV
)RUH[DPSOHLIRQHKDYHERXJKWWKHWUDGLWLRQDOVRIWZDUHER[FRQWDLQLQJDJDPHLQDVWRUHLWXVXDOO\KDV
D FRPPHUFLDO OLFHQVH RQ LW 7KLV PHDQV WKDW WKH FXVWRPHU KDV WKH ULJKWV WR SOD\ WKH JDPH RQ ZKDW
FRPSXWHUKHZD QWVEXWWKHFXVWRPHUPD\QRWFRS\DQGVHOO WKHJD PHRUVRPHWKLQJVLPLODU&RPSDUHG
WRWKLVDQRSHQVRXUFHSURGXFWPXVWKDYHDOLFHQVHWKDWREH\WRWKH 2SHQ6RXUFH'HILQLWLRQVSHFLILHG
E\WKH2SHQ6RXUFH,QLWLDWLYH7RJLYHDQXQGHUVWDQGLQJRIWKHOLFHQVHV WKDW REH\WRWKHWHUPVDQGWKH
RQH¶V WKDW GRQ¶W ZH ZLOO KDYH D ORRN DW WKH GLIIHUHQW NLQGV RI OLFHQVLQJ ZHUH , GHVFULEH WKDW RSHQ
VRXUFHOLFHQVHVPRUHLQGHWDLODQGSURYLGHDVXPPDU\RIWKHRWKHUV>@
3DJH RI
/LFHQVH)HDWXUH
6RIWZDUH7\SH
=HUR3ULFH
5HGLVWULEXWDEOH
8QOLPLWHG
XVDJH
6RXUFH
DYDLODEOH

6RXUFH
PRGLI\DEOH
$OOGHULYDWLYHV
PXVWEHIUHH
&RPPHUFLDO
7ULDOVRIWZDUH
;QRQIXOOIHDWXUHG
;
1RQFRPPHUFLDO
;XVDJHGHSHQGHQW
;
6KDUHZDUH
;8QHQIRUFHGOLFHQVLQJ
;
5R\DOW\IUHHELQDULHV
;
;
;
5R\DOW\IUHHOLEUDULHV
;
;
;
;
2SHQ6RXUFH%6'OLFHQVH
;
;
;
;
;
2SHQ6RXUFH*3/ OLFHQVH

;
;
;
;
;
;
)LJXUH'LIIHUHQWNLQGVRIOLFHQVHVRQVRIWZDUHDQGWKHLUIHDWXUHV
 2SHQ6RXUFH*18*HQHUDO3XEOLF/LFHQVH *3/
&RS\LQJ DQG GLVWULEXWLRQ KDYH WKH RQO\ UHVWULFWLRQ WKDW WKH VRXUFH FRGH PXVW EH SURYLGHG RU PDGH
HDVLO\ DYDLODEOH WR WKH XVHU 7H[W H[SODLQLQJ WKDW LW LV FRYHUHG E\ WKH *18 *3/ OLFHQVH PXVW EH
GLVWULEXWHG DORQJ ZLWK WKH VRIWZDUH DQG LQWHUDFWLYH SURJUDPV PXVW GLVSOD\ WKH QRWLFHV DW VWDUWXS
$Q\RQHPD\PRGLI\WKHVRIWZDUHDQGWKHPRGLILFDWLRQVPXVWEHGLVWULEXWHGXQGHUWKH*HQHUDO3XEOLF
/LFHQVH2QHVKDOOQRWLFHDOVRWKDWLI/LQX[RSHUDWLQJV\VWHPLVFRYHUHGXQGHUWKH*3 /DOOWKHRWKHU
DSSOLFDWLRQVUXQQLQJRQWRSRILWLVQRWDQGKDVQRWWREHEHFDXVHWKH\DUHQRWFRPSLOHG WRJHWKHUZLWK
WKH*3/¶GFRGH7KLVLV DOVRWKHFDVHZLWKDSSOLFDWLRQVWKDWSURGXFHVRPHNLQGRI RXWSXWIRU H[DPSOH
DFRPSLOHURUGDWDRUJDQL]HGE\D*3/OLFHQVHGGDWDEDVH7KHRXWSXWLVQRWFRYHUHGXQGHU*3/7KHUH
DUHFDVHVZKHQWKHOLFHQVHFDQEHFKDQJHGDQGWKDWLVLIWKHRZQHUWKHGHYHORSHURIWKHFRGHZDQWVWR
OLFHQVH LW XQGHU RWKHU WHUPV $ FRPSDQ\ FDQ EX\ WKH VRIWZDUH IURP WKHGHYHORSHU DQG SXW DQRWKHU
OLFHQVHRQLWDQGWKHVRIWZDUHFDQXQGHUWKHVDPHWLPHEHXQGHUWKH*3/OLFHQVH
*18/LEUDU\*HQHUDO3XEOLF/LFHQVH/*3/
$OWKRXJK 6WDOOPDQ QRZ DUH XUJLQJ SHRSOH QRW WR XVH WKLV OLFHQVH KH SURYLGHG D OLFHQVH VR WKRVH
SURSULHWDU\ SURGXFWV FDQ LQWHUDFW ZLWK )UHH 6RIWZDUH )RXQGDWLRQV¶ VRIWZDUH E\ PDNLQJ WKHP
G\QDPLFDOO\OLQNHGWRJHWKHUDWUXQWLPH,IDFRP SDQ\GHYHORSVDSURGXFWWKDWZDQWVWRFDOOVRPH$3,V
LQVRPH*18SURGXFWWKH\DUHDOORZHGWRGRWKDWDVORQJDVWKH\DUHQRWFRPSLOHGWRJHWKHU:LWKWKH
RULJLQDO*3/ WKLVZRXOGEHLPSRVVLEOHEHFDXVHLIRQHFRPSLOHVDQ\WKLQJWRJHWKHUZLWK*3/¶G FRGH
WKHQWKHQHZSURGXFWDOVREHFRPHV*3/¶G
/LQXV 7RUYDOGV WKH FUHDWRURIWKHRSHQ VRXUFH RSHUDWLQJ V\VWHP /LQX[ FODLPV>@WKDWWKHGHYLFH
GULYHUV NHUQHOORDGDEOH PRGXOHVDUH FRYHUHG E\ /*3/ OLFHQVHZKLFK KDV SUREDEO\ EHHQ JRRG IRU
/LQX[EHFDXVHWKHKDUGZDUHFRPSDQLHVFDQWKHUHIRUHSURYLGHKDUGZDUHGHYLFHGULYHUVLQELQDULHVRQO\
DQGWKHUHIRUHF RYHULQJWKHVHFUHWVRIKRZWKHLUKDUGZDUHLVZRUNLQJ

3DJH RI
 2SHQ6RXUFH%6'/LFHQFH
7KLVOLFHQVHLVDOVRDFFHSWHGDV2SHQ6RXUFHOLFHQVHDQGWKHOLFHQVHVD\VWKDWUHGLVWULEXWLRQDQGXVHLQ
VRXUFHDQGELQDU\IRUPVZLWKRUZLWKRXWPRGLILFDWLRQDUHSHUPLWWHGZK HQUHGLVWULEXWLRQVRIVRXUFH
FRGHUHWDLQVWKHFRS\ULJKWQRWLFHDVWKHRULJLQDO:KHQGLVWULEXWLQJLQELQDU\IRUPWKHFRS\ULJKWQRWLFH
PXVWEHVXSSOLHG7KLVPHDQVWKDWDQ\VRIWZDUHYHQGRUFDQWDNHWKHVRXUFHFRGHDQGP RGLI\LWDQGVHOO
LWLQELQDU\IRUP7KHUHVXOWKDVEHHQWKDW/LQX[:LQGRZV17DQG0DF26;FRQWDLQV%6'FRGH

1HWVFDSH3XEOLF/LFHQVH0R]LOOD3XEOLFOLFHQVHDQGWKH,%0SXEOLFOLFHQVH
,%0DQG1HWVFDSH>@KDYHDOVR2SHQ6RXUFHD SSURYHGOLFHQVHVDQGWKH\KDYHVHSDUDWHGWKHFRGH
OLFHQVHVLQWRWZRGLIIHUHQWFDWHJRULHV7KLVLVWKHFDVHEHFDXVHWKH\ZDQWVRPHRIWKHWKLQJVLQWKHLU
SURGXFWVIRUH[DPSOHLQWKH1HWVFDSHEURZVHUWREHSU RSULHWDU\DQGVRPHWREHVKLSSHGZLWKVRXUFH
FRGH7KHUHDVRQLVWKDWLWJLYHVRWKHUGHYHORSHUVWKHDELOLW\WRPDNHSURSULHWDU\FRQWULEXWLRQVWRWKH
FRGHLQIRUPRIVHSDUDWHG\QDPLFDOO\FDOOHGPRGXOHV7KLVFDQIRUH[DPSOHEHDFRPSDQ\WKDWZDQWV
WRLQWHJUDWHWKHLUSURGXFWZLWKWKHEURZVHUDQGVWLOO NHHSLQJLWSURSULHWDU\IRUH[DPSOHWKHLQWHJUDWLRQ
RI-DYDLQWRWKHZHEEURZVHUZKHUH6XQZDQWVWKHLURZQOLFHQVH
6R LI \RX IRU H[DPSOHFRQWULEXWH QHZ FRGH QRW PRGLILHV ROG FRGH WR WKH 0R]LOODSURMHFW \RX FDQ
FKRRVHDQ\OLFHQVHWKDW\RXZDQWWKDWLVFRPSDWLEOHZLWKWKH1HWVFDSH3XEOLF/LFHQVH13/OLFHQVH
ZKLFKLVPRVWRIWKHOLFHQVHVH[FOXGLQJWKH*3/OLFHQVH3XWWLQJ*3/OLFHQVHRQWKH1HWVFDSHEURZVHU
IRU H[DPSOH ZRXOG SUHYHQW WKH FRPSDQLHV IURP XVLQJ LPSURYHPHQWV WR WKH VRIWZDUH LQ RWKHU
SURSULHWDU\SURGXFWV
2WKHU FRPSDQLHVWKDQ1HWVFDSH KDVWKRXJKWWKDWWKH0R]LOOD3XEOLF /LFHQVH03/OLFHQVHLVJRRG
EHFDXVH 6XQ 0LFURV\VWHPV DUH RIIHULQJ WKHLU )RUWH IRU -DYDWRRO XQGHU WKH 03/ OLFHQVH > SDJH
@
7KH,%0DQG1HWVFDSHOLFHQVHVDOVRJLYHWKHLURZQFRPSDQLHVVRPHVSHFLDOULJKWVIRUKDQGOLQJWKH
FRGHWKDWRWKHUOLFHQVHVFDQ¶W7KLVLVLQ 1HWVFDSH¶VFDVHIRUH[DPSOHWRXVHFRGHXQGHUWKHOLFHQVH
13/KRZHYHUWKH\ZDQWIRUH[DPSOHWRLQFRUSRUDWHWKHPLQWRRWKHUSURGXFWV
 6XPPDU\RIRWKHUOLFHQVHV
N 5R\DOW\IUHHOLEUDULHVDUHVRIWZDUHWKDWLVGLVWULEXWHGIUHHO\ZLWKVRXUFHFRGHDQGELQDULHVEXWPD\
QRWEHPRGLILHG7\SLFDOVRIWZDUHLVFODVVOLEUDULHVKHDGHUILOHVDQGPRUH

3DJH RI
N 5R\DOW\IUHHELQDULHVLVGLVWULEXWHGLQELQDU\IRUPRQO\EXW FDQEHXVHGIUHHO\,QWHUQHW([SORUHU LV
RIWKLVW\SH
N 6KDUHZDUH KDV D OLFHQVH WKDW PDQGDWHV HYHQWXDO SXUFKDVH RI WKH SURGXFW 7KH SURGXFW FDQ EH
GLVWULEXWHGIUHHO\DQGLVIXOO\IXQFWLRQDO:LQ=LSLVRIWKLVW\SH
N 1RQFRPPHUFLDO VRIWZDUH LV VRIWZDUH WKDW LV IUHHO\ DYDLODEOH DQG UHGLVWULEXWDEOH E\ QRQSURILW
RUJDQL]DWLRQV
N /LPLWHG7ULDO6RIWZDUHLVDYDLODEOHIRUDOLPLWHGWLPHSHULRGXQGHUUHVWULFWHGIXQFWLRQDOLW\
N &RPPHUFLDOVRIWZDUHOLFHQVHVDUHWKHWUDGLWLRQDOVRIWZDUHZKHUH \RXPXVWSXUFKDVHWKHVRIWZDUH
DUHQRWDOORZHGGRUHGLVWULEXWHLWDQGLWRIWHQRQO\LQFOXGHWKHELQDULHVDQGQRVRXUFHFRGH
 7KH2SHQ6RXUFH'HYHORSPHQW0RGHO
³/LQX[DQGWKHZKROH2SHQ6RXUFHPRYHPHQWUHSUHVHQWDUHYROXWLRQLQVRIWZDUHGHYHORSPHQWWKDWZLOO
SURIRXQGO\LPSURYHWKHFRPSXWLQJV\VWHPVZHDUHEXLOGLQJQRZDQGLQWKHIXWXUH´
 %RE<RXQJIRXQGHURI5HG+DW>@
´:HZDQWWRGRZKDWZHFDQWRPDNHWKHRSHQVRXUFHGHYHORSPHQWPRGHOUHDOO\ZRUN´VD\V%ULDQ
%HKOHQGRUI3UHVLGHQWRI7KH$SDFKH6RIWZDUH)RXQGDWLRQ>@:KDWGRHVKHPHDQE\WKDWDQGZK\
LVKHVRHDJHUDERXWLW"
7KHGHYHORSPHQWRIWKH$SDFKHZHEVHUYHUVHHVHFWLRQKDVPDLQO\EHHQGRQHE\2SHQ6RXUFH
GHYHORSHUV ZKLFK RQ WKH ,QWHUQHW LV IRUPLQJ D FRPPXQLW\ RI YROXQWHHUV WKDW ZDQWV WR PDNH JRRG
VRIWZDUH IRU WKHPVHOYHV DQG IRU RWKHUV IRU IUHH 7KH PDLQ JRRG WKLQJ RI WKH FRPPXQLW\ LV WKDW LW
FRQVLVWVFRPSDUHGWRFRPPHUFLDOFRPSDQLHVRIH[WUHPHO\PDQ\GHYHORSHUVWKDWZDQWWRFRQWULEXWH
ZLWKWKHLUNQRZOHGJH
$W\SLFDOVFHQDULRLVWKDWVRPHRQHLVVFUDWFKLQJWKHLULWFKRYHUDSUREOHPZLWKWKHLUFRPSXWHU7KLVFDQ
IRUH[DPSOHEH WKDWVRPHRIWKHLUKDUGZDUHGRHVQ¶WZRUNDVWKH\ZDQWLWW R ,IWKHSHUVRQ ZLWK WKH
SUREOHPLVDGHYHORSHUDQGKHKDVDFFHVVWRWKHVRXUFHFRGHKHZLOOVRPHWLPHVIL[LW$IWHUWKDWKH
SRVWVWKHIL[RQWKH,QWHUQHWWRKHOSRWKHUSHRSOHZLWKWKHVDPHSUREOHPRUMXVWWRVKRZWKDWKHKDV
GRQHVRPHWKLQJJRRGOLNHDSDLQWHU
$FFRUGLQJ WR /LQXV 7RUYDOGV >@ DOVR WKH VXFFHVV EHKLQG /LQX[ LV KDYLQJ ³D JRRG GHYHORSPHQW
PRGHO´DVRQHRI LWVFRUQHUVWRQHV2IFRXUVHLWLVGLIILFXOWWRKDQGOHDOOWKHVHYROXQWHHUVDQGRQ/LQX[
WKHUHKDVEHHQPDQ\ SHRSOHLQYROYHGLQWKHSURMHFW8SWRSHRSOHKDYHEHHQSDUWLFLSDWLQJLQ

GHYHORSLQJWHVWLQJQHZVJURXSVDQGPRUH:HZLOO VHHWKDWWKHGLIIHUHQW2SHQ6RXUFHSURMHFWVKDYH
XVHG GLIIHUHQWNLQGV RI RUJDQL]DWLRQV WR EH DEOH WR KDQGOH WKHGHYHORSPHQWRQ WKHSURGXFWVDQGIRU
H[DPSOH7RUYDOGVKDVVWDWHG³RQFHDJDLQPDQDJLQJSHRSOHDQGPDQDJLQJFRGHOHGWRWKHVDPHGHVLJQ
3DJH RI
GHFLVLRQ´ >@ +H PDGH WKH /LQX[ NHUQHO DV PRGXODU DV SRVVLEOH EHFDXVH WKH RSHQVRXUFH
GHYHORSPHQWPRGHOUHTXLUHVWKLVHDVLO\OHWWLQJSHRSOHWRZRUNLQSDUDOOHO


7
KH6RIWZDUH(QJLQHHULQJSURFHVVLQWKH2SHQ6RXU
FH
0RGHO
$FRXSOHRIDFWLYLWLHVDUHTXLWHJHQHUDOIRUDOOVRIWZDUHHQJLQHHULQJSURFHVVHV
N 0DUNHWLQJ5HTXLUHPHQWV± DQDO\VLQJDQGZULWLQJZKDWWREXLOGDQGZKRWKHLQWHQGHGXVHULV
N 6\VWHPOHYHO'HVLJQ± $KLJKOHYHOGHVFULSWLRQRIWKHSURGXFWLQWHUPVRIPRGXOHV
N 'HWDLOHG'HVLJQ± (YHU\PRGXOHLVGHVFU LEHGLQGHWDLOLQWHUPVRILQWHUIDFHVDQGGHSHQGHQFLHVDV
ZHOODVDXQLWWHVWSODQ
N ,PSOHPHQWDWLRQ± 7KHDFWXDOFRGLQJRIWKHPRGXOHV
N ,QWHJUDWLRQ± LQWHJUDWHWKHPRGXOHVZLWKHDFKRWKHU
N )LHOG7HVWLQJ± LQWHUQDOZLWKLQWKHFRPSDQ\DQGH[WHUQDOWHVWLQJRQFXVWRPHUV
N 6XSSRUW± WUDFNLQJVRIWZDUHGHIHFWVDIWHUWKHVRIWZDUHLVGLVWULEXWHGDQGRWKHUFXVWRPHUVHUYLFHV
7KH FRPPHUFLDO YHUVLRQV RI %6' %,1' DQG 6 HQGPDLO DUH DOO H[DPSOHV RI WKH VWDQGDUG VRIWZDUH
HQJLQHHULQJSURFHVVWKRXJKWKH\GLGQ¶WVWDUWRXWWKDWZD\$IXOOEORZQVRIWZDUHHQJLQHHULQJSURFHVV
LVYHU\ UHVRXUFHKXQJU\DQGLQLWLDWLQJRQHXVXDOO\ UHTXLUHVLQYHVWPHQWZKLFKXVXDOO\ UHTXLUHVVRPH
NLQGRIUHYHQXHSODQ
7KHPRVW FRPPRQFDVHRIDVWDUWXSRIDQRSHQVRXUFHSURMHFWLVRQHZKHUHSHRSOHLQYROYHGDUHKDYLQJ
IXQDQGZDQWWKHLUZRUN WREHDVZLGHO\ XVHGDVSRVVLEOH$IWHUVHYHUDOLWHUDWLRQVLIWKHVRIWZDUHLV
JRRGWKHV\VWHPUHDFKHVFULWLFDOPDVVDQGWDNHVRQDOLIHRILWVRZQ
%HORZLVDVKRUWGHVFULSWLRQRIWKHPDLQVWHSVLQDVRIWZDUHSURMHFW DQGKRZWKHVHDUHSHUIRUPHGLQDQ
RSHQVRXUFHVRIWZDUHSURMHFW

 0DUNHWLQJ5HTXLUHPHQWV± XVXDOO\GRQHYLDPDLOLQJOLVWRUQHZ VJURXS
 6\VWHPOHYHOGHVLJQ± XVXDOO\GRHVQRWH[LVW
 'HWDLOHGGHVLJQ± XVXDOO\GRHVQRWH[LVWLQDVWUXFWXUHGPDQQHU
 ,PSOHPHQWDWLRQ± WKHSULPDU\PRWLYDWLRQIRUDOPRVWDOORSHQVRXUFHVRIWZDUHGHYHORSPHQWHIIRUW
 ,QWHJUDWLRQ± ZULWLQJVRPHPDQSDJHVFOHDQLQJXSWKH0DNHILOHZULWLQJD5($'0(PDNLQJ D
WDUEDOOSXWWLQJLWXSIRUDQRQ\PRXV)73VRPHZKHUHDQGSRVWLQJDQRWHWRVRPHPDLOLQJOLVWRU
QHZVJURXSZKHUHLQWHUHVWHGXVHUVFDQILQGWKHXSGDWHGVRIWZDUH
 )LHOGWHVWLQJ± 3HHUUHYLHZLQJRIGR]HQVRUKXQGUHGVRIRWKHUSURJUDPPHUVORRNLQJIRUEXJVE\
UHDGLQJWKHVRXUFHFRGHFDQPDNHWKHWHVWLQJRQHRIWKHEHVWLQWKHLQGXVWU\7KHUHTXLUHPHQWLV
WKDWWKHUHDUHPDQ\GHYHORSHUVSDUWLFLSDWLQJLQWKHVHWHVWLQJDFWLYLWLHV
3DJH RI
 6XSSRUW± FKDRWLFWKHODFNRIV XSSR UWFDQNHHSVRPHXVHUVIURPEH LQJZLOOLQJWRUXQQRWIXQGHG
2SHQ6RXUFHSURJUDPVEXWLWDOVRFUHDW HVRSSRUWXQLWLHVIRUFRQVXOWDQWVRUVRIWZDUHGLVWULEXWRUVWR
VHOOVXSSRUWFRQWUDFWVRUHQKDQFHGRUFRPPHUFLDOYHUVLRQV
3URMHFWPDQDJHPHQWDQGRUJDQL]DWLRQ
7KHUH LV QR VLQJOH SUHIHUUHG FRPPXQLFDWLRQ FKDQQHO LQ DQ RSHQVRXUFH SURMHFW 1HZVJURXSV DQG
PDLOLQJOLVWVGRPLQDWH>@&96LVGRPLQDWLQJIRUGLVWULEXWLQJFRGHDQGDOVRVQDSVKRWVRIWKHVRXUFH
WUHHSODFHGRQ )73VLWHV7KHRUJDQL]DWLRQGLIIHUVIURPSURMHFWWRSURMHFWLQWHUPVRIFHQWUDOL]DWLRQ
6RPHWLPHV WKHUHLVPXFK FHQWUDOL]DWLRQVXFKDV /LQX[ZKHUH/LQXV7RUYDOGVKDVWKHILQDOVD\DQG
VRPHWLPHVWKHUHDUHPRUHGHPRFUDWLFDSSURDFKHVVXFKDVZLWKWKH$SDFKHSURMHFW%XWWKHPDLQWKLQJ
DERXW2SHQ6RXUFHLVWKDWLWHQDEOHVUDSLGFRRSHUDWLRQRYHUJOREDOGLVWDQFHVE\DQXQOLPLWHGQXPEHU
RIFRQWULEXWRUV
 7KH%XVLQHVV6WUDWHJ\LQWKH2SHQ6RXUFH0RGHO
7KHJRDORIRSHQVRXUFHPD\QRWLQWKHILUVWFDVHEHSURILWDELOLW\EXWPDUNHWVKDUH7KHPDUNHWVKDUH
FDQLQDVHFRQGSKDVHJHQHUDWHSURILWDELOLW\E\KDYLQJFRPSOLPHQWDU\SURGXFWVDQGVHUYLFHV
+DYLQJ WKH VRXUFH FRGH RSHQ FDQ JLYH JUHDWHU PDUNHW VKDUHV EHFDXVH RI VHYHUDO IDFWRUV 2QH FDQ
FRPSDUHSURJUDPPLQJZLWKFRRNLQJLQWKLVFDVH3HRSOHRIWHQVKDUHFRRNLQJUHFLSHVZL WKHDFKRWKHU
DQGHYHQLPSURYHWKHFRRNLQJU HFLSHVWREHWWHUVXLW\RXUWDVWHE\DGGLQJVRPHLQJUHGLHQWV7KLVPDNHV
UHFHLSWVHYROYHIDVWZKHQ\RXDUHVKDULQJ LWZLWK RWKHUVWKDWOLNHGIRRGFUHDWHGZLWKWKHKHOSRIWKH
UHFLSH6RPHSHRSOHWKDWXVH/LQX[ZKLFKLVFRQVLGHUHGDV2SHQ6RXUFH6RIWZDUHUHDVRQWKLV ZD\,I

WKH\DUHQRWVDWLVILHGZLWKVRPHVRIWZDUHDQGWKH\ ZRXOGOLNHWRPRGLI\WKHVRIWZDUHWREHWWHUVXLWWKHLU
V\VWHPWKH\DUHYHU\ KDSS\ WRKDYHWKHVRXUFHFRGHWREHDEOHWRPDNH WKHV\VWHPEHWWHUVXLWWKHLU
QHHGV 7KLV PDNHV WKH XVHUV KDSS\ 6RPH XVHUV GR QRW ZDQW WR UHSRUW LQ WR D VRIWZDUH SURGXFLQJ
FRPSDQ\WKDWRQHRIWKHSURGXFWVWKDWWKH\KDYHERXJKWGRHVQ¶WZRUNDVLQWHQGHGDQGDIWHUWKDWZDLW
DQGZDLWIRUWKHXSJUDGHWRFRPHWKDWIL[HVWKLVSUREOHPRULPSOHPHQWWKHDGGLWLRQDOIHDWXUHWKDWZDV
PLVVLQJ
5LFKDUG6WDOOPDQKDVH[DPSOHVIURP0,7 ZKHUHWKH\KDGERXJKWDQHZSULQWHUIURP;HUR[%XWWKH
SULQWHU SDSHUMDPPHG VRPHWLPHV DQG WKH\ KDG WR JR WR WKH SULQWHU WR VHH LI LW KDG MDPPHG 7KH\
ZDQWHG WKDW WKH SULQWHU VKRXOG VHQG D PHVVDJHWHOOLQJ VRPHRQHWKDW LW KDG MDPPHG%XW WKH GHYLFH
GULYHUVZHUH LQELQDU\ IRUPDQGWKH\GLGQ¶WKDYHDFFHVVWRWKHVRXUFHFRGH7KH\FDOOHG;HUR[DQG
;HUR[GLGQ¶WZDQWWRJLYHWKHPWKHVRXUFHFRGH5LFKDUGWKRXJKWWKDWW KLVZDVIUXVWUDWLQJEHFDXVHLI
WKH\KDYHKDGWKHVRXUFHFRGHWKH\FRXOGKDYHZULWWHQVRPHDGGLWLRQDOFRGHLQWKHVRIWZDUHDQGWKXV
SURGXFHG WKH SURGXFW ZL WK WKH IHDWXUHV WKDW WKH\ ZDQWHG 7KH\ FRXOG WKHQ WHOO ;HUR[ DERXW WKHLU
LPSURYHPHQWVDQGLI;HUR[FRQVLGHUHGWKHPDVEHLQJJ RRG;HUR[FRXOGLQFOXGHWKHIHDWXUHVLQWKHLU
QRUPDOGLVWULEXWLRQ
3DJH RI
%HFDXVH WKHVWUDWHJ\RIKDYLQJRSHQVRXUFHOLFHQVHVRQWKHSURGXFWVDUHFRQQHFWHGWRWKHVWUDWHJLHVRI
KDYLQJRSHQVWDQGDUGV,ZLOOEULHIO\H[SODLQKRZRSHQVWDQGDUGVFDQLQFUHDVHWKHFKDQFHRIGHYHORSLQJ
DSURGXFWWKDW LVZLGHO\ XVHG DFFRUGLQJ WR6KDSLURDQG9DULDQ >@ZKLFK ZLOOEH GLVFXVVHGLQWKH
DQDO\VLV
 1HWZRUNV
5LFKDUG 0 6WDOOPDQFODLPV³WKH XVH RI IUHH VRIWZDUH SURPRWHVVWDQGDUGL]DWLRQDQG FRPSDWLELOLW\´
>@6WDOOPDQXVHVWKHWHUPµIUHH¶WRGHVFULEHWKDWWKHVRXUFHFRGHLVRSHQWRWKHSXEOLFDQGWKLVLQ
WXUQPHDQVWKDWWKHUHDUHQRµKLGGHQ¶SURWRFROVRU µVWDQGDUGV¶&RPSDQLHVDUHWKHUHIRUH DEOHWREXLOGD
SURGXFWDURXQGDQ\RSHQSURWRFRORURSHQ$3,WKDWH[LVWVWRFUHDWHDEXVLQHVVRSSRUWXQLW\IRUWKHP
&RQVLGHUIRUD PRPHQW WKDWWKH+773SURWRFROIRUWKHFRPPXQLFDWLRQEHWZHHQWKHZHEVHUYHUDQGWKH
ZHEEURZVHUZDVRZQHGE\DFRPSDQ\DQGFORVHGKLGGHQ7KLVZRXOGS HUKDSVKDYHEHHQUHVXOWLQJ
LQDFRXSOHRIGLIIHUHQWFRPPXQLFDWLRQPHWKRGVEHWZHHQEURZVHUVDQGZHEVHUYHUVDQGWKXVFU HDWHG
LQFRPSDWLELOLW\EHWZHHQGLIIHUHQWEURZVHUVDQGGLIIHUHQW ZHEVHUYHUV,I\RXKDGD1HWVFDSHEURZVHU
\RXFRXOGRQO\ EURZVHRQ 1HWVFDSHZHEVHUYHUV%XWQRZ WKH+773 SURWRFROLVRSHQ DQG\RXFDQ

EURZVH RQ DOO ZHE VHUYHUV WKDW DUH XVLQJ WKH +773 SURWRFRO ZKLFK LV D KXJH GLIIHUHQFH IRU WKH
FXVWRPHU DQG WKH VXSSOLHU 7KH FXVWRPHU JDLQV DFFHVV WR PRUH VHUYLFHV VHUYHUV DQG WKH FRPSDQ\
RIIHULQJWKHVHUYLFHV JHWVDFFHVVWRDODUJHUFXVWRPHUPDVV2IFRXUVHWKH\KDYHWRFRPSHWHZLWKRWKHU
VXSSOLHUVEXWLWLVVRPHWLPHVEHWWHUWREDWWOHRQDE LJJHUPDUNHWW KDQWRVWUXJJOHWRFUHDWH\RXURZQ
PDUNHW7REHDEOHWRXQGHUVWDQGVRPHEHQHILWVEHKLQGWKLV,ZLOOVXPPDULVHZKDWWKHFXVWRPHUDQG
WKHVXSSOLHUFDQJDLQIURPLW
 1HWZRUNHIIHFWV
:KHQWKHYDOXHRIRQHSURGXFWWRRQHXVHUGHSHQGV
RQKRZPDQ\RWKHUXVHUVWKHUHDUHHFRQRPLVWVVD\
WKDWWKHSURGXFWH[KLELWVQHWZRUNHIIHFWV$QH[DPSOH
LV0LFURVRIW:RUG,I0LFURVRIWKDVJDLQHGDODUJH
FXVWRPHUEDVHHQRXJKWRUHDFKFULWLFDOPDVVRIXVHUV
RWKHU SHRSOHZLOOEX\:RUGWREHDEOHWRUHDGWR
KDYHDFRPSDWLEOHDSSOLFDWLRQZLWKWKHRWKHU )LJXUH1HWZRUNHIIHFWV
XVHUV¶GRFXPHQWV:KHQWKLVFULWLFDOPDVVLVUHDFKHGWKH
SURGXFWWHQGVWRVHOOLWVHOI7KLVKDVKDSSHQHGWRWKH,QWHUQHWZKLFKLVEXLOWRQRSHQVWDQGDUGVDQG
SURWRFROV $OPRVW DOO SHRSOH ZDQW WR KDYH DFFHVV WR ,QWHUQHW DQG QRW DQ DOWHUQDWLYHQHWZRUN WKDWLV
VPDOOHU7KHFULWLFDOPDVVZDVJDLQHGVRPHZKHUHLQWKHEHJLQQLQJRIWKH¶VDQGWKHQH[SORGHGLQ
QXPEHURIXVHUV,WLVHDV\IRU DFXVWRPHUWRJHWDFFHVVWRPDQ\VHUYLFHVRQWKH,QWHUQHWEHFDXVHWKH
ZLGHFRPSDWLELOLW\DQGLWLVHDV\IRUDFRPSDQ\WRJDLQDFFHVVWRWKHXVHUVRIWKH,QWHUQHW7REHDEOH
3DJH RI
WRJHWDFULWLFDOPDVVLVGLIILFXOW IRUWKHPRVWWLPH0DQ\WHFKQRORJLHVKDYHIDL OHGVXFKDV'$7WDSH
IRU H[DPSOHEXW WKHUH DUH PDQ\ WKDW KDV EHHQ VXFFHVVI XO VXFK DV &' WHFKQRORJ\ DQG DOO RWKHU ELJ
WHFKQRORJLHVWKDWZHOLYHZLWKWRGD\)D[PDFKLQHV'9'
,QDFRPSHWLWLYHPDUNHWRILQFRPSDWLEOH
SURGXFWVLW¶VFULWLFDOWRJHWWKHELJJHVWPDUNHW
VKDUHWRJHWPRVWRIWKHFXVWRPHUV&RPSDQLHV
FDQWKRXJKKHOSHDFKRWKHUWRFUHDWHDELJJHU
PDUNHWE\HVWDEOLVKLQJFRRSHUDWLRQ2QHZD\WR
GRWKLVLVWRPDNHDQRSHQVWDQGDUGWKDWHYHU\ERG\

FDQDSSO\OLNH'9' )LJXUH%DWWOHRIPDUNHWVKDUHV
LQFRPSDWLEOHSURGXFWV
 2SHQVWDQGDUGV
0LFURVRIW HQJLQHHU 9DOORSSLOOLO FODLPV WKDW ³/LQX[ FDQ ZLQ DV ORQJ DV VHUYLFHV  SURWRFROV DUH
FRPPRGLWLHV´>@:KDWKHPHDQVLVWKDWWKH/LQX[RSHUDWLQJV\VWHP$SDFKHZHEVHUYHUDQGRWKHU
VXFFHVVIXO RSHQVRXUFHSURMHFWVFDQH[LVWDVORQJDVWKH,QWHUQHWSURWRFROVVXFKDV+773)73DPRQJ
RWKHUV DUHRSHQ,W LVHDVLHUIRU 0LFURVRIWDQGRWKHUFRPSDQLHVWRGRDORFNLQRQWKHFXVWRPHUVE\
H[WHQGLQJWKHSURWRFROV ZLWKDGYDQFHGIHDWXUHVWKDWFXVWRPHUVPD\ZDQWDQGWKHQWRNHHSWKHPFORVH
E\KLGLQJWKHVHFUHWVZLWKLQWKHFRPSDQ\%\NHHSLQJLWFORVHFRPSDQLHVDUHORRVLQJVRPHFRPSHWLWLRQ
IURP RWKHU FRPSDQLHV DQG WKH RSHQ VRXUFH FRPPXQLW\ WKDW GRQ¶W NQRZ KRZ WKH SURWRFRO RU $3,
ZRUNV%XWLIDFRPSDQ\NHHSVWKHWHFKQRORJ\FORVHGWKHFRPSDQ\DOVRULVNVWKDWWKHPDUNHWJHWVWR
VPDOO DQGHYHQWKDWWKHW HFKQRORJ\IORSVDQGQRPDUNHWLVFUHDWHGDWDOOEHFDXVHF XVWRPHUVDUHDZDUH
RIORFNLQVDQGDUHDWWUDFWHGWRVWDQGDUGVVXFKDV'9'DQG&'
7KLV LV ZK\ 'DQ )U\H DW ,%0 >@ LV VD\LQJ³/LQX[ FDQ GR IRU DSSOLFDWLRQV ZKDW ,QWHUQHW GLG IRU
QHWZRUNV´ :KDW KH PHDQV LV WKDW /LQX[ FDQ VHUYH DV D SODWIRUP IRU PDQ\ FRPSDQLHV WR EXLOG
DSSOLFDWLRQV RQ 7KH DSSOLFDWLRQV FDQ EH H[HFXWHG RQ GLIIHUHQW NLQGV RI KDUGZDUH LI WKH RSHUDWLQJ
V\VWHPLV/LQX[ 7KLVLV JRRGIRU,%0 EHFDXVHWKH\DUHLQWHUHVWHGLQVHOOLQJKDUGZDUHDQGVHUYLFHV
DURXQGWKDWDQGLVQRWVSHFLILFDOO\LQWRWKHRSHUDWLQJV\VWHPGHYHORSPHQWEXVLQHVV$V ORQJDVWKHUHLV
VRIWZDUHRQWRSRIWKHKDUGZDUHWKDWGRHVQRWORFNWKHFXVWRPHUWRWKHPDFKLQHWKH\FDQFRPSHWHZLWK
WKH RWKHU KDUGZDUH YHQGRUV VXFK DV 6XQ 0LFURV\VWHPV DQG 6LOLFRQ *UDSKLFV DERXW SURGXFLQJ
KDUGZDUHDQGQRWDERXWSURGXFLQJJRRGIHDWXUHVLQWKHRSHUDWLQJV\VWHP
3DJH RI
0DQ\RWKHUFRPSDQLHVOLNHVWKLVGXHWRWKHIDFWWKDWZKHQWKH8QL[ZDUVZDVJRLQJRQEDFNLQWKH¶V
WKHFXVWRPHUVVDZDVPDQ\YDULHWLHVRIWKH8QL[RSHUDWLYHV\VWHPDVWKHUHZHUHY HQGRUV>S@DQG
PDQ\ RIWKH8QL[IODYRUVEHFDPHLQFRPSDWLEOHZLWKHDFKRWKHU7KHRSHQVRXUFHVRIWZDUHSDUDGLVHV
RQ%HOO/DEVDQG0,7WKDWSURGXFHG8QL[EDFNLQWKHHLJKWLHVHQGHGEHFDXVHRIFRPPHUFLDOSUHVVXUHV
7KHKDUGZDUHYHQGRUVVDZWKHRSHUDWLQJV\VWHP8QL[DVVRPHWKLQJWKDWFRXOGWLHWKHFXVWRPHUWRWKH
PDFKLQHDQGWKH\EHJDQWRWZHDN8QL[WRGLIIHUHQWLDWHWKHPDQGDSSOLHGWKHEXVLQHVVWULFNVRIORFNLQ
7KHFXVWRPHUVXIIHUHGIURPWKLVEHFDXVHLIKHKDGERXJKW6XQPDFKLQHVIRUH[DPSOHDQGDGGLWLRQDO
DSSOLFDWLRQVIURP6XQWKHQKHZDVIRUFHGWRNHHSEX\LQJVRIW ZDUHWKDWZDV6XQFRPSDWLEOHDQGWKH

UHVXOWZDV ORFNLQRQ WKHFXVWRPHUMXVWWKHZD\WKHFRPSDQLHVZDQWHG WRFRPSHWH%XWWKLV KHOSHG
DQRWKHU FRPSDQ\ 0LFURVRIW WR FRPSHWH ZLWK WKH GLIIHUHQW 8QL[ IODYRUV DQG LW UHVXOWHG LQ D KXJH
PDUNHWVKDUHIRU0LFURVRIW DVZHFDQVHHRQWKHSLFWXUHLQ DERXW RSHUDWLQJV\VWHPVUXQQLQJLQ
WKH ZHE VHUYHU PDUNHW 7KH OHVVRQ IRU WKH KDUGZDUH YHQGRUV WKDW ZDV VKLSSLQJ 8QL[ ZLWK WKHLU
KDUGZDUH ZDV WKDW WKH\ ZHUH VSOLWWLQJ XS WKH ELJJHU 8QL[ FXVWRPHU EDVH LQWR VPDOOHU SLHFHV E\
DSSO\LQJWKHORFNLQWDFWLFVE\NHHSLQJWKHVHFUHWVIRUWKHPVHOYHV
 7KH&RPPHUFLDOLVDWLRQRI2SHQ6RXUFH6RIWZDUH
8QIRUWXQDWHO\LWLVYHU\KDUGIRU DSHUVRQWREHLQY ROYHGLQVRPHNLQGRISURMHFWRQKLVVSDUHWLPHLQ
WKHORQJUXQ7KLVKDVIRUH[DPSOH(ULF$OOPDQRQHRIWKHDXWKRU¶VRI6HQGPDLOH[SHULHQFHG>@DQG
KHZDQWHGWRZRUNRQLWDVPXFKDVKHFRXOGVRKHPDGHLWFRPPHUFLDOWREHDEOHWRZRUNRQLWIXOO
WLPHZKLOHHDUQLQJPRQH\7KDWLVRIWHQWKHFDVHEHKLQG2SHQ6RXUFH SURMHFWVWKH\VWDUWRXW LQVPDOO
VFDOHDQGWKHRQHVWKDWJHWVJRRGLVWKHQFRPPHUFLDOLVHGLQRQHZD\RUDQRWKHU7KHUHIRUHZHVKDOO
WDNHDFORVHUORRNDWWKHKLVWRU\RI&RPPHUFLDOLVHG2SHQ6RXUFH6RIWZDUHWRILQGRXWKRZRWKHUVKDYH
GRQH
 5HYHQXH6WUHDPVLQWKH2SHQ6RXUFH6RIWZDUH0RGHO
2EYLRXVO\ WKHUH DUH PDQ\ FRPSDQLHV LQWHUHVWHG LQ VRPH RI WKH RSHQ VRXUFH VRIWZDUH SURGXFWV
DYDLODEOHRQWKHPDUNHWDV,ZLOOGHVFUL EHODWHULQWKLVUHSRUW%XWKRZGRWKH\PDNHPRQH\RXWRILW"
7KH\PXVWSD\WKHLUHPSOR\HHVDQGWKHUHIRUHPXVWKDYHVRPHNLQGRIUHYHQXHVWUHDPV
7R XQGHUVWDQG WKDWRQHFDQPDNH PRQH\ RXW RI WKH RSHQ VRXUFH OLFHQVLQJ VWUDWHJLHV, ZLOO PHQWLRQ
VRPHH[DPSOHVRIUHYHQXHVWUHDPVWKDWDUHXVHGDWWKHPDUNHWWRGD\DUH
N
/RVV /HDGHU  PDUNHW SR VL W L RQHU
 1HWVFDSH &RPPXQLFDWLRQV VHH VHFWLRQ  UHOHDVHG WKH
VRXUFHFRGHWR WKHZHE EURZVHU0R]LOODIUHH WRSUHYHQW0LFURVRIWWRJHWPRQRSRO\RQ WKHZHE
EURZVHUPDUNHWDQGDWWKHVDPHWLPHWU\WRJD LQPRUHUHYHQXHVIURPWKH1HWVFDSHZHEVHUYHUE\
DSSO\LQJRSHQVRXUFHFOLHQWVDVDEXVLQHVVVWUDWHJ\
3DJH RI
N
:LGJHWI URVWLQJ
³:HPDNHPRQH\IU RP/LQX[E\VHOOLQJWKHKDUGZDUHXQGHUQHDWKLWE\VHOOLQJ

WKHVRIWZDUHRQWRSRILWDQGE\VHOOLQJWKHVHUYLFHVDOODURXQG³'DQ)U\HGLUHFWRURIWKH,%0
/LQX[ WHFKQRORJ\ FHQWHU -XQH   >@ 7KH PRGHO LV IRU KDUGZ DUH PDQXIDFWXUHUV 7KH
VRIWZDUHWKDWLVEXQGOHGWRJHWKHUZLWKWKHKDUGZDUHLVRIWHQQRWZKHUHWKHSURILWVFRPHIURPDQGLV
PRVW RIWKHWLPHMXVWRYHUORDGIRUWKH FRPSDQ\7KDWLVSUREDEO\ ZK\,%0DQGRWKHU KDUGZDUH
PDQXIDFWXUHUVDUHLQWHUHVWHGLQ/LQX[
N
*LYH DZD\ WKH UHFLSH DQG RSHQ D UHVWDXUDQW
 7KH SXUSRVH RI WKLV PRGHO LV WR HVWDEOLVK
VHUYLFHVXSSRUW UHYHQXHVWUHDPV OLNH WKH /LQX[ FRPSDQLHV VXFK DV 5HG +DW VHH VHFWLRQ 
DPRQJ RWKHUV PRVWO\ GR 7KH\ GR QRW VHOO WKH DFWXDO VRIWZDUH EXW WKH VHUYLFH RI ¶EXLOGLQJ¶ D
GLVWULEXWLRQFRQWDLQLQJGLIIHUHQWSURGXFWV
N
$FFHVVRUL]LQJ
7KLVLVZKDW2¶5HLOO\VHHVHFWLRQLVGRLQJ%\JLYLQJDZD\WKHVRIWZDUH
LQFOXGLQJ VRXUFH FRGH WKH\ DUH VHOOLQJ ERRNV RQ LW DQG WKHUHIRUH FROOHFWWKHUHYHQXHV IURP WKH
ERRNVLQVWHDGRIWKHDFWXDOVRIWZDUH
N
6WDQGDUGV SUHHPSWLRQ
 %\ VHHGLQJ WKH PDUNHW ZLWK WKH RZQFRGH EDVHLWZLOO EHGLIILFXOWIRU
FRPSHWLWRUVWRJDLQIRRWKROGLQWKHPDUNHWZLWKRWKHUFRGHEDVHV7KLVFDQEHIRUVHWWLQJDVWDQGDUG
RQWKHPDUNHWWKDWDFRPSDQ\FDQPDNHUHYHQXHVIURP
 &DVHVWXGLHVRIRSHQVRXUFHVRIWZDUHFRPSDQLHV
7KHWHUPRSHQVRXUFHLVUDWKHUQHZEXWWKHWKRXJKWEHKLQGNHHSLQJWKHVRXUFHVRSHQKDVDKLVWRU\EDFN
WRWKH¶V7REHDEOHWRXQGHUVWDQGZK\WKLVLVDELJWKLQJLQWKHEXVLQHVVZRUOGWRGD\ZHPXVWWDNHD
ORRNDWVRPHRIWKHRSHQVRXUFHVRIWZDUHFRPSDQLHVDQGWKHSURGXFWVWKDWKDVEHHQSURGXFHG
,KDYHFKRVHQVRPHRIWKHPRVWSRSXODURSHQVRXUFHSURMHFWVRQWKHPDUNHWWRVHHKRZWKH\KDYHEHHQ
GHYHORSHG DQG , ZLOO VHH LI WKHUH DUH VLPLODULWLHV EHWZHHQ WKHVH SURMHFWV WKDW DUH FRQQHFWHG WR WKH
OLFHQVHVRIRSHQVRXUFHWKDWPD\KDYHLQFUHDVHGWKHLUPDUNHWVKDUHV
 2SHQVRXUFHVRIWZDUHFRPSDQLHVDQGWKHLUSURGXFWV
, VWDUW RXW E\ GHVFULELQJ VRPH RI WKH RSHQ VRXUFH VRIWZDUH SURGXFWV WKDW H[L VWV WRGD\ WR JLYH XV D

WKRXJKWRIKRZSRSXODUVRPHRIWKHSURGXFWVZKLFKDUHFODVVLILHGDVRSHQVRXUFHVRIWZDUHUHDOO\DUH
:KDWLVLQWHUHVWLQJLVQRWMXVWWKHSURGXFWVDQGWKHLUPDLQSXUSRVHEXWDOVRWKHRUJDQLVDWLRQEHKLQG
WKHPDQGZKDWNLQGRIOLFHQVLQJWKH\DUHFRQQHFWHGWRDVZHOO DVWKHLUPDUNHWVKDUHV7KHSURGXFWVLQ
WKH FDVH VWXGLHV DUH FKRVHQ EHFDXVH WKH\ KDYH EHHQ VXFFHVVIXO :KDW , DP ORRNLQJ IRU LV LI WKHVH
SURGXFWVKDYHEHHQVXFFHVVIXOEHFDXVHRIWKHOLFHQVLQJVWUDWHJLHV
3DJH RI
  6HQGPDLO
3URGXFW
7RGD\ 6HQGPDLO LV WKH GRPLQDQW 0DLO 7UDQVSRUW $JHQW 07$ RQ WKH ,QWHUQHW ,W LV HVWLPDWHG WKDW
6HQGPDLOQRZ$XJKDQGOHVDERXWRI,QWHUQHW HPDLODFFRUGLQJWR'DYRU>@
+LVWRU\
6HQGPDLOZDVILUVWZULWWHQZKHQ(ULF$OOPDQWKHDXWKRUZDVDVWXGHQWDQG DVWDIIPHPEHUDWWKH
8QLYHUVLW\ RI &DOLIRUQLD>@ ,Q  WKHUH ZDV RQH FDPSXV PDFKLQH ,QJUHVDW WKH 8QLYHUVLW\ RI
&DOLIRUQLD FRQQHFWHG WR WKH $53$QHW SUHFXUVRU WR ,QWHUQHW $QRWKHU PDFKLQH (UQLH &R9D[ ZDV
KRPH WR WKH %HUNHOH\ 81,; SURMHFW DQG K DG UHFHQWO\ VWDUWHG XVLQJ 88&3 DQRWKHU QHWZRUN $
QHWZRUNFDOOHG%HUN1HWFRQQHFWHGWKHVHPDFKLQHVDVZHOODVVHYHUDORWKHUVRQWKHFDPSXV6RIWZDUH
H[LVWHG WR PRYH PDLO ZLWKLQ $53$QHW ZLWKLQ88&3 DQG ZLWKLQ%HUN1HW EXWQRQH\HW H[LVWHG WR
PRYHPDLOEHWZHHQWKHVHWKUHHQHWZRUNV
(ULF$OOPDQWKHUHIRUHZURWHGHOLYHUPDLOSUHFXUVRUWR6HQGPDLODQGVKLSSHGLWZL WK%6'81,;
DQGLQ $53$QHWEHJDQFRQYHUWLQJIURP1&3 WR7&3DQGWKLVLQFUHDVHGQXPEHU RI
KRVWVIURP WRRYHU RQHELOOLRQ+LHUDUFKLFDOQDPHVSDFHOLNH;;&203('8ZDVEHLQJXVHG
LQVWHDG RI IODW QDPH VSDFH &203;; DQG PDLO RULJLQDOO\ WUDQVIHUUHG YLD )73 )LOH 7UDQVIHU
3URWRFRO JRW DQRWKHU SURWRFRO FDOOHG 6073 6LPSOH 0DLO 7UDQVIHU 3URWRFRO 8QIRUWXQDWHO\
GHOLYHUPDLO FRXOGQ¶W KDQGOH DOO WKHVH FKDQJHV VR EHFDXVH WKHVH DQG RWKHU FKDQJHV $OOPDQ ZURWH
6HQGPDLODQGVKLSSHGLWZLWK%6'F6LQFHWKHQ$OOPDQLPSURYHG6HQGPDLORQKLVVSDUHWLPHDQG
KDVJDWKHUHGDFRPPXQLW\RISHRSOHDURXQG6HQGPDLODQGLQKHFRPPHUFLDOLVHGLWWRJHWKHUZLWK
KLVIULHQG*UHJ2OVRQ
2UJDQLVDWLRQ
)LUVWLWZDVMXVW(ULF$OOPDQZKRKDGZULWHDFFHVVWRWKHVRXUFHFRGHEXWDQ\RQHFRXOGGRZQORDGWKH
FRGHDQGVHQGSDWFKHVWRKLPVRWKDWKHFRXOGPRGLI\WKHSDWFKHVDQGXSGDWHWKHVRIWZDUH7KHQODWHU

RQKHDOORZHGVRPHSHRSOHKHWKRXJKWZHUHJRRGWRKDYHZULWH DFFHVVSHRSOH7KLVLVKRZLWKDV
EHHQDQGDOVRLVQRZ
/LFHQVH
6HQGPDLOKDYHRQH2SHQ6RXUFHOLFHQVHDQGRQH&RPPHUFLDO7KH\KDYHWKH2SHQ6RXUFHYHUVLRQDVD
EDVLV DW ZZZVHQGPDLORUJ DQG WKH\ GR YDOXH DGGLQJ IRUHQWHUSULVHV DWZZZVHQGPDLOFRP VXFKDV
JUDSKLFDOXVHULQWHUIDFHVDQGPRGLI\LQJWKHVRIWZDUH VRWKDWLW LV FRVWHIIHFWLYHWRXVH7KH\GRWKLVE\
WZHDNLQJ WKH VRIWZDUH VR WKDW LW LV PRUH XVDEOH IRU DQ HQWHUSULVH VXFK DV IXQFWLRQV IRU DGPLQLVWHU
FOXVWHUVRIFRPSXWHUVLQVWHDGRIMXVWLQGLYLGXDORQHVDQGPRUH
3DJH RI
 &RPPHUFLDOLVDWLRQE\6HQG0DLOLQF
³7KH\ODXJKDW\RXZKHQ\RXDVNIRUDQGWKH\WDNH\RXVHULRXVO\ZKHQ\RXDVNIRU
PLOOLRQ´
± (ULF$OOPDQ>@
(ULF$OOPDQG HVFULEHVWKDW6HQGPDLOZDVWXUQLQJLQWRD³VXFFHVVGLVDVWHU´LQWKHPLGGOHRIWKH¶V
:KDWLWPHDQVLVWKDW6HQGPDLOJRWVRVXFFHVVIXOWKDWWKHUHZK HUHWRRIHZSHUVRQVWRPDLQWDLQLWDQG
WKHSURGXFWZDVXVHGVRPXFKWKDW(ULF$OOPDQDQGDFRXSOHRIRWKHUVGLGQ¶WKDYHWLPHWRGHYHORSLW
EHFDXVHWKH\RQO\GLGVXSSRUWRQLW7KHUHDVRQIRUWKLVZDVWKDW6HQGPDLOZDVPRUHRUOHVVDQLJKWV
DQGZHHNHQGSURMHFWDQGWKDWZDVQRWHQRXJK WLPHWR NHHSXSZLWK6HQGPDLO¶VXVHUV
+HGHFLGHG WKDWKHKDGWRJHWHQRXJKPRQH\VR WKDWKHFRXOGZRUN IXOOWLPHRQLW+HKDGDIULHQG
FDOOHG*UHJ2OVRQZKRZDVPRUHRIDEXVLQHVVPDQWKDQ(ULFZDVWKDWKHOSHGKLPWRZULWHDEXVLQHVV
SODQ7KH\JRWPLOOLRQLQLQYHVWPHQW IURP%LOO-R\DW6XQ0LFURV\VWHPVWRIRUP6HQGPDLO,QF
LQDQGZDVWKHUHIRUHDEOHWRSURGXFHDFRPPHUFLDOYHUVLRQRI6HQGPDLODQGVXSSRUWWRLW>@
7KH\GLGDK\EULGFRPSDQ\:KDWZDV RSHQVRXUFHUHPDLQHGRSHQVRXUFH$QGWKH\HQKDQFHGLWDQG
JDYH DZD\ WKH HQKDQFHPHQWV 7KH\ GLG YDOXH DGGLQJ WR WKHLU FXVWRPHUV LQ IRUP RI VXSSRUW DQG D
JUDSKLFDOXVHULQWHUIDFHWRPDQDJH 6HQGPDLO7KHSXUSRVHEHKLQGWKLVLVWKDWWKH\ ZDQWWRGR JRRG
WKLQJV IRU FRPPHUFLDO FXVW RPHUV DQG SURYLGH YDOXH LH PDQDJLQJ FOXVWHUV RI PDFKLQHV LQVWHDG RI
LQGLYLGXDORQHV$WWKHVDPHWLPHWKH\ZDQWWRSURYLGHWKH2SHQ6RXUFHSHRSOHWRJHWZKDWWKH\QHHG
WRGRWKHNLQGRILQQRYDWLRQVDQGVRIRUWKWKDWDUHJUHDWLQ WKH2SHQ6RXUFHFRPPXQLW\ZKRRIWHQ
GRQ¶WZDQWJUDSKLFDOXVHULQWHUIDFHVDQGVRIRUWK
7KHFRPSDQ\ZLOOFRQWLQXHWRHQKDQFHDQGUHOHDVHWKHIUHHZDUH0DLO7UDQVIHU $JHQW07$SURGXFW

ZLWKVRXUFHFRGHDQGWKHULJKW WRPRGLI\DQGUHGLVWULEXWH>@7KHQHZFRPPHUFLDOSURGXFWOLQHZLOO
IRFXVRQFRVWHIIHFWLYHQHVVZLWKZHEEDVHGDGPLQLVWUDWLRQDQGPDQDJHPHQWWRROVDXWRPDWHGELQDU\
LQVWDOODWLRQDQGFRPPHUFLDOVXSSRUWDQGVHUYLFHV
6HQGPDLOLVXVHGE\PRVW,QWHUQHW6HUYLFH3URYLGHUVDQGVKLSSHGDVWKHVWDQGDUG07$VROXWLRQE\DOO
PDMRU81,;YHQGRUV LQFOXGLQJ 6XQ +3 ,%0 6*,6&2 DQG RWKHUV$ FRPSDQ\ FDOOHG 0HWD,QIR
VHOOVDYHUVLRQRI6HQGPDLO IRU:LQGRZV176HUYHU
+RZZHOOGRHVLWZRUN"
$FFRUGLQJWRWKHLULQYHVWRUVSDJH>@WKH\PDQDJHG WRIXQGPLOOLRQLQ0DUFK7KLVIXQG
VKDOOKHOSWKHPWRHVWDEOLVKWKHPVHOYHVZRUOGZLGHWREHDEOHWREHDJOREDOVXSSRUWFRPSDQ\RQWKH
6HQGPDLOSURGXFW 7KHPDUNHW VKDUH LVWKHLUELJDGYDQWDJHDQGLQYHVWRUVIRUH[DPSOH5HG+DW,QF
DQG1RYHOO,QF DUH LQWHUHVWHGLQSURGXFWVZLWK JUHDW PDUNHW VKDUHV WKDWKHOSWKHLUSURGXFWV WRJDLQ
ELJJHUPDUNHWVKDUHVDVZHOO
3DJH RI
 ± 3HUO
3URGXFW
3HUOVWDQGVIRU 3UDFWLFDO([WUDFWLRQDQG5HSRUW/DQJXDJH3HUOKRPHSDJH>@DQGLWLVDKLJKOHYHO
SURJUDPPLQJ ODQJXDJH ZULWWHQ E\ /DUU\ :DOO ZLWK WKH KHOS RI WKRXVDQGV RI RWKHU SHRSOH 7KH
SURJUDPPLQJODQJXDJHGHULYHVIURP&SURJUDPPLQJODQJXDJHDQGWRDOHVVHUH[WHQWIURPVHGDZN
WKH8QL[VKHOODQGDWOHDVWDGR]HQRWKHUWRROVDQGODQJXDJHV,WLVVSHFLILFDOO\SRSXODUZLWKV\VWHP
DGPLQLVWUDWRUVDQG&*,VFULSWDXWKRUV3(5/LVGLVWULEXWHGIRUIUHHEXW\RXFDQDOVREX\DFRPPHUFLDO
YHUVLRQRILW
+LVWRU\
3HUOZDVERUQLQZKHQ/DUU\:DOOPDGHWKHILUVWUHOHDVHRILW7KHYHUVLRQQXPEHUZDV
3(5/ZDVUHOHDVHGDQGILUVWLQ 3(5/LVUHOHDVHGXQGHU*3 /*18*HQHUDO
3XEOLF /LFHQVH  3(5/  ZDV UHOHDVHG  3(5/  ZDV UHOHDVHG  /DUU\ :DOO
MRLQVWKHVWDIIRI2¶5HLOO\$VVRFLDWHVLQLV3(5/UHOHDVHG
2UJDQLVDWLRQ± URWDWLQJGLFWDWRUVKLS
3HUO¶VXVHUV VXSSRUW3HUODQGDOO FRGHDUHZULWWHQE\YROXQWHHUVZKRZDQWHGWRSURGXFHEHWWHUVRIWZDUH
IRU IUHH WKDQ \RX FRXOG KRSH WR SXUFKDVH IRU PRQH\ 7KH\ KDYH GHYHORSHG LW XVLQJ URWDWLQJ
GLFWDWRUVKLSLQ ZKLFK FRQWUROLV RFFDVLRQDOO\ SDVVHGIURPRQHPHPEHUWRDQRWKHUZLWKLQDFLUFOHRI

VHQLRUFRGHYHORSHUV
/LFHQVH± *3/DQG$UWLVWLF/LFHQVH
3HUOLVQRZOLFHQVHGERWKRQ*3/DQGDQRZQRSHQVRXUFHOLFHQVH>@
 &RPPHUFLDOLVDWLRQE\2¶5HDOO\$VVRFLDWHV
7RGD\3HUOKDVEHHQKLJKO\FRPPHUFLDOLVHG2¶5HLOO\$VVRFLDWHV>@SXEOLVKHGLWVILUVWERRNQRW
DERXW 3HUO WKRXJK LQ   \HDUV ODWHU /DUU\ :DOO WKH LQYHQWRU RI 3HUO MRLQHG 2¶5HLOO\ 
$VVRFLDWHVLQ>@2¶5HLOO\$VVRFLDWHVKDVVLQFHWKHQSXEOLVKHGPDQ\ ERRNVIRU3HUO7LP
2¶5HLOO\WKH &(2RI2¶5HLOO\LVQRZKLJKO\SDUWLFLSDWLQJLQFRPPHUFLDOLVLQJ2SHQ6RXUFH6RIWZDUH
>@%ULDQ%HKOHQGRUIRIWKH $SDFKH3URMHFWZDV MRLQLQJWKH2¶5HLOO\WHDPLQWRIXUWKHUKLVZRUN
RQ$SDFKHDVZHOODVRWKHU2SHQVRXUFHSURMHFWV>@
7KHUHDUHDOVRRWKHUFRPSDQLHVWKDWWU\WRPDNHUHYHQXHVRXWRI3HUOIRUH[DPSOH$FWLYH6WDWH7RRO
&RUSRUDWLRQ>@ZKLFKZDVIRUPHGLQKDVSURGXFWVIRU3HUODQGVXSSRUWIRU 3HUO$FWLYH6WDWH
DQQRXQFHGLQIRUH[DPSOHDWKUHH\HDUDJUHHPHQWZLWK0LFURVRIWWRKHOSGHYHORSPHQWRI3HUORQ