David Cummings on Startups

Author: David Cummings

  • Why No Universal API Middleware

    Recently I was talking to an entrepreneur about APIs (ways for apps to communicate with other apps automatically) as he was looking for a way to connect his app, and corresponding customers, with a number of other apps. Only, he couldn’t find anything on the market. Successful startups like MuleSoft and Zapier have numerous integrations but require going through their respective apps to make the connectors work — you can’t readily whitelabel them or use their APIs to connect to other APIs.

    Why hasn’t a universal API middleware emerged? Here are a few ideas:

    • APIs constantly change. Facebook was notorious about constantly breaking their API, yet their motto at the time (“move fast and break things”) made their priority clear. As a vendor connecting to another vendor’s API, it takes on-going resources and money to keep APIs working, which is more expensive than it looks.
    • APIs aren’t as strategic as expected for most cloud-based apps. While companies like Salesforce have amazing APIs, many cloud-based apps don’t prioritize their APIs and thus the API doesn’t have parity with the user interface and bugs don’t get fixed quickly.
    • The long tail is really long. While there are 25-50 apps in the mainstream category (> $100MM ARR), there are hundreds and hundreds more in the near-mainstream category (> $25MM ARR), not counting the thousands more that have at least some scale (> $10M ARR). Outside of the mainstream apps, the next tier of apps, while having a large number of customers, doesn’t have enough overlapping customers with any other non-mainstream apps, making for a limiting number of useful integrations.
    • APIs constantly have problems. Whether it’s an API going down, user authentication expiring, or invalid data with limited error codes, APIs constantly have challenges. This makes for a less-than-ideal end user experience and a challenge to support a large number of APIs at scale.

    Bottom line: APIs are much more complicated than they seem and only a handful are needed to make most customers happy, so vendors just write their own hand-crafted integrations. It doesn’t fulfill the ideals of a universal API middleware platform but it’s good enough for most apps.

    What else? What are some more thoughts on why a universal API middleware hasn’t emerged?

  • Magic Moments in Software

    When building a new app, Software-as-a-Service (SaaS) or otherwise, figure out how to trigger an emotional response or wow factor, as quickly as possible with as little effort as possible — a magic moment. In Facebook, there’s a magic moment the first time you sign in and see photos from old friends. In Pardot, there’s a magic moment the first time you click on a prospect and can see all their activities and digital interactions.

    Here are a few thoughts on magic moments in software:

    • When doing customer discovery or demoing the app, listen to the user’s voice and watch their reactions — magic moments will reveal themselves with emotional responses
    • Apps that are harder to quickly deliver a magic moment require more thoughtfulness around demo data or examples to show the user what they could get with enough effort (e.g. a blank spreadsheet would take time to deliver a magic moment)
    • Some magic moments are stronger than others, so figure out the most powerful one and help users achieve it quickly
    • When a great magic moment is found, count the number of clicks or steps required for it, and then cut the number of steps down as much as possible

    The next time you use an app, regardless of whether or not it’s one you made, look for magic moments — try to become more cognizant of them and think about how they work.

    What else? What are some more thoughts on magic moments in software?

  • Tech Village 12 Days of Elf

    For our video of the week, take a look at the 12 Days of Elf by Atlanta Tech Village — a great little series of Instagram videos. Enjoy!

    Merry Christmas and happy holidays!

  • 10 End of the Year To Do Items for Entrepreneurs

    Jim Collins, one of my favorite business writers, has a great list of to do items for leaders. With 2016 almost upon us, it’s a great time for entrepreneurs to do these:

    Here are the 10 to do items courtesy of Jim Collins:

    1. Change your next big ‘what’ question into a ‘who’ question
    2. Double your questions to statements ratio
    3. Try to embrace the Stockdale Paradox – going along in life and get knocked down, and it happens over and over again
    4. Discover your personal hedge hog and focus on it
    5. Set your vision on three components: 100 year core values, purpose that answers question who would miss you if you disappeared, 25 year BHAG
    6. Set your 20-mile march
    7. Start a stop doing list (and have no more than 3 priorities)
    8. Turn off electronic gadgets and create pockets of quietude for one day every two weeks
    9. Get a huge return on next luck event
    10. Change from striving to be successful to being useful

    What else? What are some more end of the year things you like to do?

  • Accountability Sayings

    People are always looking for little sayings to make things more memorable and actionable. When thinking about accountability and expectation setting, I’ve come across several little sayings that are useful for entrepreneurs and leaders to remember. Here are three of my favorite accountability sayings:

    1. Inspect what you expect
    2. What gets measured, gets done
    3. Trust, but verify

    As an entrepreneur, I’m self-starting and goal-oriented. When defining our core values, I always prioritized other people that are self-starting as I want to be in the business of leading and not micromanaging, whenever possible. Even still, it’s important to define expectations and keep these three accountability sayings in mind.

    What else? What are some more accountability sayings that you like?

  • Growth Benchmarks for SaaS Startups in the Early Days

    For Software-as-a-Service (SaaS) entrepreneurs in the early days of the multi-year journey, one common question is “are we growing fast enough?” Fast enough is a relative term but there’s been enough success stories to know when something is doing well. At Pardot, year one was building the product (2007), year two we ended at ~$600,000 ARR, year three we ended at ~$2M ARR, year four we ended at ~$4M ARR, and year five we ended at ~$8.5M ARR growing super fast (more Pardot early years revenue info).

    Here are a few growth benchmarks for SaaS startups early on:

    Looking at these, Pardot didn’t meet any of these (high) growth benchmarks. Two big differences: the SaaS markets are much bigger now and these growth benchmarks come from investors with the assumption that startups hitting these numbers will have raised outside capital. Regardless, to build a really big business, serious growth is needed, even in the early days.

    What else? What are some other growth benchmarks for SaaS startups in the early days?

  • Critical Metrics for SaaS Companies

    Ali Rahimtula has a great post up titled Fundraise Like a Pro Using this Internal SaaS Metrics Playbook. As expected, Software-as-a-Service (SaaS) startups have a number of common financial characteristics that make it fairly straightforward to analyze how well the business is doing. At their core, SaaS companies are desirable due to the recurring revenue, high gross margin, and general predictability of the model. Each of these components is reflected in the metrics.

    Here are some of the critical metrics for SaaS companies from the article:

    • MRR over time
      • Beginning of period MRR
      • + New customer MRR
      • + Existing customer expansion MRR
      • – Churned MRR
      • – Downgraded MRR
      • = End of period MRR
      • Growth
    • Customer counts
      • Customers add
      • Customers lost
      • End of period customers
    • Quick ratio
      • (new MRR + expansion MRR) / (cancelled MRR + downgraded MRR)
    • Churn
      • Gross MRR churn (inc. downgrades) ($)
      • Gross MRR churn / previous period MRR (%)
      • Logo churn (#)
      • Logo churn / previous period logo count (%)
      • Net MRR expansion (%)
      • Net MRR churn (%)
      • MRR retention (%)
      • Customer renewal rate (%)
      • Dollar renewal rate (%)
    • Cohort analysis
      • Average revenue per account
      • Price per seat
      • LTV
      • Conversion to paid rate
      • Average contract length
      • Months paid upfront
      • Engagement metrics
      • Customer conversion
      • Sales cycle time

    SaaS entrepreneurs would do well to read Fundraise Like a Pro Using this Internal SaaS Metrics Playbook and get a more detailed understanding of their metrics.

    What else? What are some other critical metrics for SaaS companies?

  • 11 Takeaways from the Atlanta Tech Village 3 Year Anniversary

    Today marks the three year anniversary of buying the Atlanta Tech Village, and wow, what an incredible journey it’s been. When buying the building, I thought we’d create a great space to help entrepreneurs increase their chance of success and do our own niche thing. I never thought the Tech Village would take on a life of its own and represent the entrepreneurial image of Atlanta and be supported by so many business and civic leaders in the metro region.

    Here are 11 takeaways from the Atlanta Tech Village as we celebrate our three year anniversary (also, our elf likes to party):

    1. Local startups needed to be prioritized over regional offices for startups
    2. Scholarships help the earliest of the startups
    3. Mission, vision, and values are always at the core
    4. Accelerating success is most important, but accelerating time to failure if the idea isn’t right is also important
    5. Recruiting great talent is the secret weapon of the Tech Village
    6. Equity isn’t a component of Tech Village membership, and that was the right decision
    7. Even with complete transparency on our site, there are a number of common questions (and misconceptions)
    8. Community is what differentiates the Tech Village from other office buildings
    9. Village Verified helps provide more specialized resources
    10. Scale matters, especially with co-working space and entrepreneurial centers
    11. Ambitious entrepreneurs get further, faster in a tighter community

    Finally, I never expected to have so many opportunities emerge from the Tech Village notoriety, especially the chance to give the 2015 Mercer University Atlanta Commencement.

    Here’s to many more years of helping entrepreneurs increase their chance of success at the Atlanta Tech Village (and, our elf likes to party).

    What else? What are some more takeaways on the three year anniversary of the Atlanta Tech Village?

  • Must-Have vs Nice-to-Have SaaS Products

    One of the biggest considerations in the early days of a new Software-as-a-Service (SaaS) product is the must-have vs nice-to-have question. A must-have product fundamentally alters the way work gets done — either changing existing processes to be 10x better or unlocking new value that wasn’t previously achievable — and once used, companies will never go back. A nice-to-have product provides some value — perhaps being twice as good as doing it by hand or with spreadsheets — yet isn’t valuable enough to compel a critical mass of adopters, and won’t be successful.

    Here are a few thoughts on must-have vs nice-to-have SaaS products:

    • Every spreadsheet is another SaaS app, but every SaaS app isn’t a must-have
    • Apps that unequivocally help companies make more money, like marketing automation, are a must-have
    • Apps that improve productivity must be 10x better than the manual process, not 2x, which results in a nice-to-have
    • Note: this is for products in new categories and greenfield opportunities, not new products in existing categories

    As an entrepreneur, the next time you evaluate an opportunity, consider the must-have vs nice-to-have question — it’s a big one.

    What else? What are some more thoughts on must-have vs nice-to-have SaaS products?

  • Video of the Week: Product Marketing for Startups

    For many entrepreneurs, marketing, especially product marketing, is one of the least well understood areas of the business. Our video of the week comes from Adam Gross and his great talk at Google Ventures on product positioning, public relations, and pricing. Enjoy!

    From YouTube: Google Ventures Startup Lab | The words “marketing” and “startups” don’t always have an easy co-existence, but creating innovative and successful marketing efforts — and in particular positioning, PR, and pricing — are an essential part of creating growth. Early Salesforce.com and Dropbox employee Adam Gross shares a the basic tenants of product marketing he’s learned along the way.