David Cummings on Startups

Author: David Cummings

  • Innovation Scouts for Big Companies

    This past week the term “scout” came up in two different conversations in the context of big companies hiring other companies to help source innovative ideas and startups. Generally, the concept makes sense but I hadn’t ever heard of formal programs with retainers and performance-based fees. Big companies have a hard time innovating internally, which is one of the main reasons startups have such great opportunities.

    Here are a few thoughts on innovation scouts for big companies:

    • The bigger the business, the bigger the new opportunity needs to be so that it’s worthwhile unless it is a bolt-on to an existing business (e.g. if you’re Google and the new line of business won’t have a billion in revenue in a few years, it isn’t worth their time)
    • Many industries have exceptionally long lead times to bring an innovative idea in the fold, like automotive, making for an even larger need to cast a wide net and fill the top of the funnel
    • Innovation has a number of false-starts such that it’s even more beneficial for scouts to filter the signal from noise for big companies

    Innovation scouts make sense for big companies and I expect there’s more out there than most people realize.

    What else? What are your thoughts on innovation scouts for big companies?

  • Reasons for Building a Tech Community Center

    One common question people ask me about the Atlanta Tech Village is why I’m doing it. Is it to make money? Invest in startups? Give back? The answer, put simply, is that I had to do it. The idea was in my mind for a few years but I wasn’t ever at a good point to execute on it — it was an itch that I had to scratch.

    After visiting several coworking spaces and tech community centers over the past few months, I realized that the reason for being varies widely and is an important question.

    Here are a few reasons for building a tech community center:

    • Community — the desire to provide a place for entrepreneurs to start and grow a business so as to create more jobs and wealth for the area
    • Real Estate — to increase the value of the property as well as the rental rates
    • Startup Density — to bring like-minded people together to change the world

    There’s no right or wrong reason for building a tech community center but it’s important to understand the backstory.

    What else? What are some other reasons for building a tech community center?

  • Inside Sales Program and Compensation Model for SaaS/Cloud Businesses

    One of the best ways to scale a Software-as-a-Service/cloud-based enterprise application is through an inside sales team. Field reps work well when the price point is sufficiently high, but most SaaS products are focused on the SMB segment of the market, necessitating a more cost effective way to acquire customers.

    Here’s an example inside sales program and compensation model:

    Business Development Reps

    • Goal: Set quality appointments via cold calling and lead nurturing
    • Commission: $175 per completed appointment (completed is when the prospect shows up for the call) with no commission on the first 10 each month
    • Quota: 20 completed appointments per month (240 per year)
    • Salary: $30,000
    • On Target Earnings: $51,000 based on $30,000 salary plus $21,000 commission (commission is 10 appointments * $175 * 12 months)
    • Payout: Paid monthly for completed appointments
    • Promotion: Promoted to account executive after completing 240 appointments

    Account Executive

    • Goal: Take prospects from initial interest/demo through to close
    • Commission: 14% of first-year’s annual recurring revenue and 5% of services/consulting revenue at time of signing the deal (hunters and farmers are completely separate)
    • Quota: $25,000 in new annual recurring revenue per month ($300,000 per year) with no services/consulting allocation
    • Salary: $40,000
    • On Target Earnings: $82,000 based on $40,000 salary plus $42,000 commission (commission is 14% * $300,000)
    • Payout: Paid monthly after cash received (all at once for annual pre-pays and 50% per month for monthly payments up to the equivalent of 14% annually)
    • Promotion: Promoted from Junior Account Executive to Account Executive to Senior Account Executive for each $1,000,000 in new annual recurring revenue with a 30% salary raise and a 30% quota raise at each promotion

    This program provides a multi-year career path for sales people along with black and white metrics for each step in the process. A high quality inside sales team provides predictable revenue and is an integral part of a successful SaaS/cloud business.

    What else? What are some other thoughts on inside sales programs and compensation models? Here are 20+ more posts on sales reps.

  • Engineering Serendipity

    One topic that makes sense, but wasn’t talked about much previously in our community, is the role of serendipitous interactions. Recently, I wrote about The Power of Serendipitous Interactions and Startup Communities and how I was experiencing it first-hand at the Atlanta Tech Village. Now that we know it’s important, how can we engineer it to happen more frequently? Here are a few ideas:

    • Cool hangout areas with soft seating, games, kitchen amenities, and more
    • Regular events like happy hours, speaker series, show and tells, workshops, hackathons, etc
    • Startup launch parties and product demo sessions
    • Community clubs like running, sports, and shared interests
    • Great coffee in an awesome coffee shop
    • Free coworking times or areas
    • Mentors and catalysts that like to connect people and help solve problems

    Engineering serendipity is one of the most abstract topics we talk about regarding building community, and possibly one of the most important.

    What else? What are some other ways to engineer serendipity?

  • Takeaways from an NYC Coworking Expedition

    Today we went on a great six hour expedition of different coworking and high tech spaces in NYC. It was a quick trip and we saw General Assembly, TechSpace, Ace Hotel, and WeWork. Surprisingly, they were all very different and strong in their own ways.

    Here are a few of my takeaways from today’s trip:

    • Community is different from simply providing high tech office space and needs to be intentional
    • Interior glass walls do wonders for making a space feel open and maximizing the natural light
    • Hardwood floors bring a bit of nature into the space and are better than polished concrete floors
    • Phone booths (tiny conference rooms for one person) are more popular than expected
    • Integrating a coworking facility, private rooms, and modular suites is a unique concept (spaces today had one or two of those but not one had all three options)
    • Energy and excitement in the large open spaces is palpable

    Today’s trip was well worth it and provided several new ideas we’re going to incorporate into the Atlanta Tech Village.

    What else? What are some other cool things you’ve seen in coworking and high tech offices?

  • Thoughts on the AirWatch $200 Million Series A

    Atlanta-based AirWatch, LLC just announced that they raised a massive $200 million Series A round of financing from Insight Ventures Partners out of New York City. AirWatch makes mobile device management software for companies to manage all the different smart phones used by their employees. For many years, Blackberry by RIM was the main smart phone used in the corporate setting, and all the management software, along with the hardware, was provided by the same company. Now, with the explosive growth of iPhones and Android devices, the need for enterprise software to manage the deployment of these devices has grown tremendously — enter AirWatch.

    With this being one of the largest venture-type Series A rounds ever (not just in Atlanta but in the the entire country!), it deserves some further commentary. Here are a few thoughts on the AirWatch $200 million Series A:

    • Often when a growth equity firm puts in money they are looking to make a return of 3-5x their money in 3-5 years
    • AirWatch has been in business for 10 years and hasn’t raised any institutional capital. I’m guessing their chairman, who started and took Manhattan Associates public ($1.32B market cap), had put in money personally prior to the raise (just a guess)
    • AirWatch has 861 employees listed on LinkedIn (source), meaning they likely have 1,000 total employees when factoring in people that don’t have a LinkedIn profile
    • With 1,000 people on staff, at an estimate of $150,000 in revenue per employee per year (investing in growth and not worrying about profitability), they likely have a revenue run rate of $150 million/year (just a guess)
    • Based on a published growth rate of 40%, they likely got a pre-money valuation of 5-6 times revenue — let’s call it an $800 million pre-money and a $1 billion post-money, assuming all the money went to the balance sheet (just a guess)
    • Redemption of shares by existing shareholders is likely, although not mentioned, meaning that some of the $200 million probably went to shareholders selling their shares (I’d guess they took $25 – $75 million off the table)
    • Insight Venture Partners needs to generate a return, so the company will have to IPO or be sold in 3-5 years

    AirWatch is an amazing company and I’m excited they’re here in Atlanta. They’re building a large anchor technology company that will spawn many more companies over the years and be great for the city.

    What else? What are your thoughts on the AirWatch $200 million Series A round of financing?

  • The Best Business Relationships are the Easiest Ones

    In the past, whenever evaluating a business opportunity, I’d focus on the one that was the lowest price or provided the highest return on investment, regardless of relationship. Over time, I came to realize that that wasn’t the best way to approach things. Life’s too short to work with people that don’t have the same values and don’t enjoy what they do. Now, I look for the right balance of business value and personal value.

    In looking for a combination of business value and personal value, I’ve found that the best business relationships and deals are the easiest ones. Easy, in this case, means that they feel effortless. Both sides are working toward similar goals, have good chemistry, and trust each other. Whenever a relationship or deal feels forced, that’s often a sign that it should be further evaluated.

    The best business relationships are the easiest ones.

    What else? What are your thoughts on the best business relationships being the easiest ones?

  • Thoughts on the Content Sourcing Marketplace Space

    Almost two years ago I wrote a post on a Content Marketing as a Service idea where I talked about the need in the market for high quality custom content on a regular basis for companies. It’s been two years and I still haven’t seen anything breakthrough as a clear leader in the space.

    Here are three content marketing companies that are related to the idea but not the exact thing:

    • Contently – marketplace that facilitates high quality freelancers for companies
    • Compendium – content marketing platform that provides a set of tools for content planning, managing, and publishing
    • Kapost – content marketing platform with a marketing calendar, workflow, analytics, etc

    After thinking more about the idea and market for content marketing marketplaces, I believe there are some challenges in the space to build a $100 million business:

    • Content is too personal and custom to a business such that business owners and marketers are very reluctant to outsource it to a third party (this is anecdotal after asking several business owners about it)
    • Crowd sourcing areas in the creative space have been most successful with simple, visual items like logos where there are people that design logos for fun and it’s easy to decide which ones you do and don’t like. It’s exponentially more difficult on both sides of the equation to facilitate 1,000 word blog posts as the product.
    • Even if you outsourced the content development to a third party, it still takes a significant amount of effort to come up with content ideas and the subsequent editing of it to maintain a consistent voice and message aligned with your brand

    Content marketing continues to grow in importance but I think there’s too much friction relative to the return on investment for a content marketing production as a service company to emerge as a large vendor. As it is now, it will continue being serviced by agencies, PR firms, and more involved freelancers.

    What else? What are your thoughts on the content sourcing marketplace space?

  • Notes from T.A. McCann’s Startup Riot Keynote

    The first keynote at Startup Riot was by T.A. McCann, founder of Gist and head of social product strategy at Blackberry. T.A. did a great job going through his background, lessons learned, and the Gist experience from starting to selling a pre-revenue business in 2.5 years for a large sum of money to RIM/Blackberry.

    Here are notes from his keynote:

    • On 7th company currently
    • Gist was 6th startup
    • Professional sailor for 10 years
    • Gotta keep practicing
    • Practicing by helping others and paying it forward
    • On Vizify – TechStars co similar to Gist or About.me
    • On board of Startup Weekend
    • Involved in TechStars Seattle
    • Collegiate swimmer
    • In charge of everything social for BlackBerry
    • Been at BlackBerry for two years
    • Core message: How are you making people’s live better?
    • Find the confluence — people, investors, trends, customers
    • Why me and why now?
    • Sell the first version of the product with a PowerPoint before you’ve built it
    • Seemingly unachievable vision
    • Discover like-minded people
    • Gist acquired without monetization (pre-revenue)
    • Create moments of delight and amplify
    • 80% of success is about showing up
    • Make peoples lives better: Connect and solve; Listen, learn, share; Experiment; Iterate and persist
    • Look for work/life harmony instead of work/life balance

    T.A. did a great job and I’m glad he came to Atlanta.

  • Thrillist Co-Founder Adam Rich Keynote Notes at Startup Riot

    Yesterday, Startup Riot had two keynote speakers, one of which was Adam Rich. Adam is the co-founder and editor-in-chief of Thrillist. I had heard of Thillist before but didn’t realize it was a city-specific daily email site with something new of note in one of four categories: eat, drink, travel, own.

    Here are some notes from Adam Rich’s keynote at Startup Riot:

    • Original idea came from being in Philly trying to find the coolest stuff to do
    • Built a bar in dorm room for prohibition cocktails
    • National men’s magazines good for an airport layover but not tactical
    • Local city guides had relevance but weren’t focused on the young professional male
    • Built Thrillist to have filtered, targeted city information for his guy demographic
    • Idea is 10% and execution is 90%
    • Daily Candy was good but light on tech and guy stuff
    • Went to funders of Daily Candy and pitched it was that for guys
    • Don’t reinvent the wheel, use a successful plan when you can
    • Hire former athletes as they are coachable and roll up their sleeves
    • Tough to transition from doing to delegating
    • Manages remote teams because he has a local native for each market covered
    • Still views his 200 person company as a startup

    It’s always fun hearing the back story and lessons learned from a successful entrepreneur. Adam did a great job and I’m glad he came to the event.