David Cummings on Startups

Author: David Cummings

  • Working with Contractors in a Startup

    Contractors are an important part of the startup world. Some people really enjoy the variety and nomadic aspect of being a contractor. Some people seek the higher pay and time-frame driven approach to a project or company. Contractors also work well when there are specific skills that are needed for a short period of time, making the hiring of a full-time person not available or not affordable. Whatever the case, contractors should be considered part of the startup mix.

    Here are a few recommendations when working with contractors in a startup:

    • Set clear expectations if this is a temporary-to-permanent type opportunity or purely temporary as well as responsibilities, goals, and desired results
    • Ensure that the contractor is putting in enough hours per week over enough months to be worthwhile due to time necessary to ramp up and become productive (e.g. you might want at least 15 hours per week for three months)
    • Incorporate tools like Google+ Hangout or Meetings.io into the process, especially if the contractor is working remotely (which is often the case with contractors)
    • Recruit and interview contractors in the same manner as team members so that there’s continued corporate culture alignment

    Contractors are an important part of the startup world and entrepreneurs would do well to learn how to incorporate them into the mix.

    What else? What are some other recommendations when working with contractors in a startup?

  • Warren Buffet’s 3 Commands for CEOs

    Warren Buffet is one of the most celebrated and successful investors of all time. Many of his musing has been recorded in books, articles, and posts over the years, especially content taken from his annual shareholder letter. Several of his essays were compiled into the book The Essays of Warren Buffet: Lessons for Corporate America several years ago, providing tremendous content for entrepreneurs.

    Warren Buffet has three commands for CEOs at Berkshire’s operating companies, which are especially pertinent for all startup CEOs. The commands, according to the book, are for the CEO to run the business as if:

    1. They are its sole owner
    2. It is the only asset they hold
    3. They can never sell or merge it for a hundred years

    Vinod Khosla drove this home yesterday with his post in the NY Times — Vinod Khosla: Maintain the Silicon Valley Vision. The Silicon Vally Vision, according to Khosla, and Buffet’s three commands for CEOs go hand-in-hand with long-term, big picture thinking and actions.

    What else? What are your thoughts on Warren Buffett’s three commands for CEOs?

  • Google+ Hangout Link for Repeating Events

    Google+ Hangout is a big part of how we communicate internally, or at least it was up until a couple months ago when Google disabled the permanent link. After the feature was removed, we had to generate a new link every time we met (daily check-in, weekly executive meeting, weekly all hands meeting, etc) creating quite a bit of friction and frustration because of the extra work and the fact that the link of each Hangout was obfuscated due to the hidden browser URL bar.

    Thankfully, with the new Google+ Events feature, there’s a nice permalink workaround, first published by the team over at Singly.com. The idea is that you create a Google+ Event far into the future, make it an online event, and then take the Google+ Hangout URL that is produced and use it over and over again until that date is met.

    Here’s how to do it:

    • Create a new event on Google+ Events
    • Give the event a date far into the future, like the year 2020
    • Go to Event options -> Advanced and click on Google+ Hangout
    • Save the event
    • Share the link to the Google+ Hangout on your repeating Google Calendar event

    This method isn’t as effortless as the previous approach but it works well and makes recurring Google+ Hangouts easy and frictionless.

    What else? What are some other tips for Google+ Hangouts?

  • Opportunistic Hiring All The Time in a Startup

    A popular question I get on a regular basis is “what positions are you guys hiring for now?” Previously, I’d enumerate a small number of outstanding positions that were top of mind. Now, I say that we’re opportunistically hiring for all major positions all the time. Our most common positions are software engineer, support specialist, services coordinator, and sales rep — we’re literally trying to hire as many as we can that fit our culture with no limit, other than office space, on the number of people.

    Early stage startups do well having opportunistic hiring for a few key positions, like engineering and sales, so that they’re always welcoming resumes and building a pipeline of potential candidates. Plus, if you go to the careers section of a startup site and it says they aren’t hiring for any positions, it gives you pause as to how well the business is doing. Early stage startups usually don’t have the resources to hire as many people as fit their culture, but they should always be on the look out for the tough-to-fill positions.

    Product-based companies work differently compared to consulting companies in that for a handful of roles, there are much greater economies of scale, especially in small, fast-growing markets with great potential. With consulting, everyone needs to have billable hours and it’s often difficult to balance internal staffing so that everyone is billable as unbillable team members on the beach/bench significantly diminish profitability of the firm. Consulting firms can have some level of opportunistic hiring but rarely like a growth-stage software startup.

    What else? What are your thoughts on opportunistic hiring all the time in a startup?

  • Characteristics of an Anchor Technology Company

    Strong startup communities need to have anchor technology companies in town for a number of reasons. The idea is that anchor technology companies provide large-scale success stories for the area, import talent from outside the region, and directly support a number of functions in the community. In addition, anchor technology companies generate large amounts of press, get attention from outside the city, and have significant influence due to size and scale. So, we know that anchor technology companies are important, but what are some of their characteristics?

    Here are a few characteristics of anchor technology companies:

    • Significant number of high paying jobs in the city (greater than 500)
    • National or international recognition in the press
    • Support for the community through events, talks, donations (greater than $100,000/yr), etc
    • Willingness to buy from or work with smaller technology startups
    • Serious wealth creation (often monetized via an IPO)

    Putting hard metrics and definitions on the characteristics of an anchor technology company is difficult. You’ll know it when you see it and the value is immense.

    What else? What are some other characteristics of an anchor technology company?

  • Employee, Customer, and Investor Pyramids from Peak

    Continuing with yesterday’s post Self-Actualization as a Startup Outcome, I wanted to highlight a few more items from the book Peak: How Great Companies Get Their Mojo From Maslow by Chip Conley. The author does a great job adapting Maslow’s Hierarchy of Needs into a simplified form for employees, customers, and investors. I believe that employees come first, as he states as well, especially since everything starts there. Yes, you need cash from customers to pay the bills but long-term success is driven by putting employees first.

    Here are the three pyramids outlined by Chip Conley:

    Employee Pyramid

    •   – Meaning –
    •  — Recognition —
    • — Money —

    Customer Pyramid

    •   – Meets Unrecognized Needs –
    •  — Meets Desires —
    • — Meets Expectations —

    Investor Pyramid

    •   – Legacy –
    •  — Relationship Alignment —
    • — Transaction Alignment —

    As you can see, what people normally think of for each category is really just the basic foundation to be in the game, and everything else builds on top of that.

    What else? What are your thoughts on the employee, customer, and investor pyramids from Peak?

  • Self-Actualization as a Startup Outcome

    Recently I started reading Peak: How Great Companies Get Their Mojo From Maslow by Chip Conley after a friend of mine sent it to me in the mail unannounced. Chip Conley is the founder of Joie de Vivre Hospitality, which is one of the largest boutique hotel firms in the country. I had the opportunity to meet Chip in 2006 at a Baltimore conference on delivering great experiences where he talked about the importance of corporate culture and employee development. At the time, I didn’t believe in corporate culture as the guiding principle, as I do now, but I remember Chip as being thoughtful and engaging.

    In the book Peak, Chip articulates my shared belief that companies are one of the best vehicles possible to change the world for the better by helping employees achieve their full potential at work and in life. Wikipedia defines self-actualization from writer Abraham Maslow as the following:

    The desire for self-fulfillment, namely the tendency for him [the individual] to become actualized in what he is potentially.

    Much like startups are a vehicle to build community leaders, startups are also vehicles to help people maximize their potential and really push the limits of their capabilities, in a good way. Startups, unique from many other work environments, empower employees to wear different hats and work on a wider range of projects when compared to a traditional company. This exposure, and the corresponding challenges, increases the likelihood that the team member will find what they enjoy doing, stretch them to get better, and result in more self-fulfillment. It doesn’t always work out, but for people it does, the startup helps in their self-actualization journey.

    What else? What are some other ways self-actualization can be the outcome of a startup?

  • Pricing Options for SaaS Products

    Software-as-a-Service (SaaS) is an amazing way to deliver a product for many reasons, one of which is that there’s almost no marginal cost save for hosting bills and customer service. With high gross margins generally, there’s a fair amount of flexibility in how the service is priced.

    Here are some of the more common pricing options for SaaS products:

    • Per user that uses the system with pricing differentiation based on type of user (e.g. an administrator user would be more expensive than a report viewer user)
    • Per module used (e.g. based on functionality)
    • Per instance of a type of object used (e.g. based on how many of X are used, like projects managed or emails sent)
    • Per transaction (e.g. a percentage of a deal, like how eBay does)

    There’s no right or wrong answer, but in general, pricing should be kept as simple as possible while also representing the value delivered to the customer.

    What else? What are some other pricing options for SaaS products?

  • Strong Corporate Culture Must be Cared Deeply About by the Founders

    @melonakos tweeted a link earlier today to The Culture Myth where the author covers a number of importants points about corporate culture. Corporate culture is a part of life in all companies. Some companies embrace it, talk about it, care about it, and actively work to improve it. Most companies do little about corporate culture and let it manifest itself in an unintentional manner.

    The strongest corporate cultures are cared deeply about by the founders from the early days with formal and informal efforts to make the best culture possible infused throughout everything the startup does. A strong corporate culture doesn’t mean it’s the best culture for all companies, but that it’s the best culture for that one specific company — one that passionately believes in it and works to make it great.

    It’s extremely hard to retrofit an existing company that hasn’t had a strong, cohesive culture from the start. It can be done but plenty of people will have to be fired, incremental changes will need to be made to processes, and the reorienting to focus on culture needs extensive buy-in. If front-line team members care about culture and the executive doesn’t, the culture won’t be strong. The founders and executives need to care deeply about the culture for it to be strong.

    What else? What are some other reasons a strong corporate culture must be cared deeply about by the founders?

  • Trading One-Off Revenue for Scalable Revenue

    One of the challenges entrepreneurs have is finding the balance between one-off revenue, like consulting services, compared to scalable revenue, like recurring Software-as-a-Service (SaaS) revenue. When times are tight financially, or it’s a bootstrapped startup, one-off revenue can become a necessity and highly desirable to get cash in the door.

    Entrepreneurs need to continually ask the hard questions internally about what scalable revenue is being sacrificed for one-off revenue.

    There’s no simple formula for determining when to give up one-off revenue in lieu of harder, scalable revenue. As the business grows and gains momentum, more opportunities arise for one-off revenue. Customers will ask for more consulting services, potential partners will reach out about one-time opportunities, and so on. When revenue sources arise, stay opinionated about what does, and does not, fit with the long-term vision.

    What else? What are some more examples of trading one-off revenue for scalable revenue?