David Cummings on Startups

Author: David Cummings

  • New SalesLoft Prospector Product

    SalesLoft has a new Prospector product designed to make it easy to build high quality lists of prospects based on results from Google searches (Disclosure: I’m an investor in SalesLoft). As background, one of the biggest challenges for sales people is getting targeted lists of potential prospects that fit the ideal customer profile. There are many data sources out there but the information is often out of date.

    The SalesLoft Prospector idea is really straightforward. LinkedIn has the best, most up-to-date information on professionals, and Google caches the public LinkedIn profile pages. So, provide a tool that takes the data from the Google results, puts it in a spreadsheet or CSV for a CRM, and augment it with phone numbers and email addresses via a third-party data sources. The end result is the best semi-automated list building tool on the internet.

    SalesLoft Prospect Interface

    So, the next time you hear a sales rep complain about the quality of their lists, have them give the SalesLoft Prospector a try.

    What else? What are your thoughts on generating lists of potential prospects and the SalesLoft Prospector tool?

  • Start With What You Know – 7 Entrepreneur Lessons Learned

    Tomorrow I’m giving my Start With What You Know – 7 entrepreneur lessons (SlideShare slides) talk at the Industry Leadership Summit. I’ve given the talk 5 or 6 times now and each time I tweak it slightly to improve the flow and content. Overall, the idea is that success is all about continual learning based on what you know at the time and constantly looking for ways to improve. Pretty simple, right?

    Here are the seven entrepreneur lessons learned:

    • Even great products need marketing.
      Winning product awards and accolades doesn’t translate into sales. Building a repeatable customer acquisition process is a must.
    • Sell “pain killers.” Not vitamins.
      Solve hard, meaningful problems. Avoid vitamins and candy.
    • Embrace your constraints.
      All startups have constraints. Make them an advantage.
    • The startup with the most money doesn’t always win.
      Money matters to a certain point but heavily funded competitors aren’t as scary as expected.
    • Good timing is better than good luck.
      Pick a fast-growing market with a huge opportunity, and get the timing right.
    • Focus on one thing and do it well.
      More success results in more distractions. Stay true to the vision.
    • Culture matters.
      The only sustainable competitive advantage is a great culture.

    Take a look at the slides online and I’ll post a video of the talk in the future.

    What else? What are some of your other favorite entrepreneur lessons learned?

  • Being in the Hits Business

    With Dragon Army, our new mobile games studio at the Atlanta Tech Village, there have been a number of interesting conversations with entrepreneurs and business leaders in the community. Everyone is excited about building great, casual games and other consumer apps in Atlanta. One of the most common questions I personally receive is how are things different with a B2C startup, like Dragon Army, compared to my background in B2B startups. Well, there’s one main difference that stands out above all else:

    Video games, much like the movie industry, is a hits business where users have to truly love the product.

    Now, with business applications, the goal is find product / market fit such that the product solves a major issue that customers are dealing with on a regular basis. Even if the business product isn’t perfect and isn’t pretty, it can solve a meaningful problem and be successful. With video games, mediocre isn’t good enough to build a real, scalable company. And a great game doesn’t happen on the first try. Famously, Rovio, the company that makes Angry Birds, built dozens and dozens of games before making their break-out hit.

    So, the next time someone talks about B2B vs B2C, think about being in the hits business.

    What else? What are some other thoughts about being in the hits business?

  • Cohort Analysis for Analyzing SaaS Churn

    Andrew Chen has a guest post up from Christoph Janz regarding his spreadsheet for churn, MRR, and cohort analysis. Christoph is the author of the awesome SaaS metrics dashboard that I adapted to work with startups that have an inside sales team.

    Cohort analysis is looking at groups of customers over time as opposed to all customers at a given point in time. As an example, on any given month 3% of all customers might churn (they leave and no longer pay for the service). Upon further inspection, after grouping customers based on the month they signed up, one might find that customers within 90 days of signing up are churning at a rate of 10% per month, but once they get past 90 days, they churn at a rate of 2% per month. This cohort analysis would lead to a variety of recommendations.

    Here are a few thoughts on cohort analysis:

    • Consider sample size and timeframe when evaluating usefulness (e.g. a startup with a small number of customers doesn’t need to spend time on it)
    • Break customers into meaningful cohorts based on different factors (e.g. some startups should measure customer cohorts by the week whereas others should do it by the month)
    • Monitor multiple customer data points beyond churn including average revenue per user, engagement, logins, up-sells, etc
    • Look for anomalies that might influence the data including things like weather, seasonality, etc

    Cohort analysis is an important part of the recurring revenue business model and should be incorporated into the standard startup metrics.

    What else? What are your thoughts on Christoph’s spreadsheet for churn, MRR, and cohort analysis?

  • Spinning a Startup Out of a Consulting Firm

    Recently I was talking to an entrepreneur that has owned his own consulting firm for many years and is in the process of spinning out a startup based around a product they had built for a customer. After hearing the pitch, and seeing the product, I thought about it for a minute and offered up a few suggestions.

    Here are a few ideas around spinning a startup out of a consulting firm:

    • Ensure the startup is truly separate from the consulting firm including separate employees, payroll, financials, etc (shared office space makes sense but the startup needs to be a completely different business)
    • If the consulting firm is owned by one person, it’s important to unwind the use of “I” and to start using “we”, assuming the startup is going to have one or more co-founders and an employee stock option plan
    • With a handful of paying customers courtesy of existing consulting relationships, there’s a good chance there’s solid progress towards product/market fit, but it’s important to separate out the consulting value from the product value so that the majority of future clients buy the product without buying the consulting
    • Building a repeatable customer acquisition process will be one of the most difficult things as the sales and marketing process for a product company is often very different from a consulting company, and most consulting companies don’t have a repeatable customer acquisition process, so they don’t know what it looks like (most consulting companies generate customers via word-of-mouth)
    • Determining the startup’s core competency early on (e.g. product/engineering focused or sales focused) is important as well as it’s a different mindset from a consulting firm where the core competency is the domain expertise and specialty of the consultants

    All startups are hard regardless of origin. Spinning a startup out of a consulting firm is especially difficult as there’s a tendency to not fully separate the two and resources eventually get pulled back into the larger entity as it’s the one paying the bills. Figuring out how to get the startup self sustainable as quickly as possible through sales or investors is key.

    What else? What are some other thoughts on spinning a startup out of a consulting firm?

  • Entrepreneurs Owning Office Space

    Recently I was talking to entrepreneur that had just purchased an office building for his small but growing company. His business is doing well in a hot market that is set to explode over the next few years. Only, by purchasing a building, he’s set an artificial upper limit of employees for the firm. Several years ago, when I was talking to another entrepreneur about buying a building, he described it this way:

    A goldfish will grow to the size of the fishbowl, and no more. An entrepreneur’s company won’t grow larger than the building.

    The company will over optimize the number of employees for the size of the building, and not for the needs of the business. Yes, space can be rented in nearby buildings and adjustments can be made, but owning a building results in unnatural acts to not expand beyond it. If an entrepreneur has ambitions for major growth, and major growth requires a significant increase in employees, buying a building is a bad idea.

    What else? What are your thoughts on entrepreneurs owning office space?

  • Notes from Jeff Haynie’s Talk at the Village

    Jeff Haynie gave a passionate talk today at the Atlanta Tech Village about lessons learned growing his 170+ person company Appcelerator. Over the past six years, Jeff has raised over $75 million dollars, fought off a near-shutdown of his startup, and built one of the fastest growing mobile app development platforms in the world.

    Here are a few notes from the talk:

    • Investment capital is portable, so it doesn’t matter where the entrepreneur is located
    • Entrepreneurs should raise as much money possible from anyone available and not worry about control
    • Future growth in technology will come from wearable computing and mobile devices (Dell went private so that they could kill their PC business faster and reinvent themselves)
    • Shift away from Nokia and Blackberry as the dominant platforms to Apple and Android were faster and more dramatic than people expected, making Appcelerator’s timing even better
    • Almost went out a business when Apple changed their terms of service disallowing programs like Appcelerator to produce iOS apps, but two months later Apple reversed the change

    A big thanks to Jeff for spending time with us today and sharing some of his lessons learned.

    What else? What are some other takeaways from today’s talk with Jeff?

  • Every SaaS Company Should Have an App Store Strategy

    Salesforce.com set the standard several years ago with the introduction of their AppExchange app store providing a central repository of third-party applications that work with their platform. Apple took the idea and made it mainstream for consumers with their App Store for iPhone and iPad programs. Now, every Software-as-a-Service (SaaS) company should have an app store strategy.

    Here are a few items to keep in mind:

    • Curating the app store is critical; too many SaaS companies claim to have an app store only to have many apps that aren’t functional or are “pretend apps” that are really lead generation to sell custom consulting engagements
    • An app store should be implemented once the startup reaches scale (e.g. 500 – 1,000+ customers) so that there’s sufficient demand from users to warrant the building and maintaining of the store
    • Some vendors charge a tax (e.g. 15% of revenue from apps that connect to the platform), which should be avoided as it’s better to encourage as many integrated products as possible and not alienate potential partners

    While not an app store directly, companies like Kevy will emerge as data synchronization app connectors for hundreds of cloud-based products. Regardless, every SaaS company should have an app store strategy.

    What else? What are your thoughts on SaaS companies needing an app store strategy?

  • Telling an Entrepreneur You Don’t Like Their Idea

    Unfortunately, it happens. You know the story: an excited entrepreneur comes in full of passion and enthusiasm to share with you their game changing idea. Only, the idea falls flat. It isn’t good. In fact, the idea is down-right horrible. But, as a thoughtful, nice person what do you do? How do you tell an entrepreneur that their idea is bad, really bad.

    The answer: you don’t tell them what you believe. Instead, you tell them to go validate the idea in the market. Go get 10 businesses to commit to paying for the product in advance of building anything. Don’t have a B2B product? No problem, put together an awesome video and do a Kickstarter campaign. It isn’t your responsibility to guess whether a business idea is good or bad on behalf of an entrepreneur. It is your responsibility to put the entrepreneur on the path to validate if their target audience will pay for it before the entrepreneur spends any money on it.

    Friends don’t let friends spend money on unvalidated ideas. When an entrepreneur has a bad idea, tell them to go validate it without wasting valuable money on it.

    What else? What are your thoughts on telling an entrepreneur you don’t like their idea?

  • Atlanta Tech Village as Being Expensive

    The most common negative comment about the Atlanta Tech Village is that it is too expensive. As someone who enjoys thinking about marketing, positioning, and branding, I try to stay away from merely comparing costs between per desk pricing vs per square foot pricing. As an organization working hard to help Atlanta, we fully embrace that we want to provide the absolute best high tech entrepreneurship center in region, and that also means that we’re going to be the most expensive when compared to other options.

    One way we focus on being the best is in terms of infrastructure. From a furniture perspective, we have high-end Knoll desks and chairs, which everyone raves about. From a wireless perspective, we have a $200,000 Meraki Cisco network that delivers amazing WiFi throughout the building. From a bandwidth perspective, we have 1.4 gigabits per second of redundant fiber internet access that costs over $100,000 per year.

    A second way we focus on being the best is employing an amazing staff of people that help make the community great. With awesome events, networking sessions, educational programs, and more, it takes a solid team to coordinate all the moving parts and continually improve as we go. Regular programs include the weekly Startup Chowdown, monthly Show & Tell, and more. Our team is amazing.

    Knowing that there are some people that want to be in the Village community, but can’t afford it, we created a scholarship program. To date, we’ve given away over 30 scholarships and anticipate giving away hundreds more over the coming years. Our mission is to support and inspire entrepreneurs, which includes all types of members.

    Much like Rackspace is the most expensive and best option for managed server hosting with their amazing Fanatical Support, so too the Atlanta Tech Village is the most expensive option with amazing infrastructure and staff. Regardless of infrastructure and staff, the ultimate measure of success is the quality of the community and the number of successful startups that emerge.

    What else? What are your thoughts on the Atlanta Tech Village as being expensive?