David Cummings on Startups

Author: David Cummings

  • College Loans to Finance Entrepreneurship

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    Earlier this week I was talking to an entrepreneur at the TiE VISTA conference and he made a statement that made me pause. He was telling me about his company and I asked one of the most telling questions: are you working full-time on the business? That’s a real litmus test to see how serious and committed the entrepreneur is to the startup. Quickly, he replied that he was working on it full-time but that he was in grad school. Grad school? How much harder is it to build a startup and be in grad school at the same time? Creating a startup is hard enough without extra work on top of it.

    After the full-time question I asked how he was financing the business. He told me of a shady angel investor in Florida that had offered $200k for 70% of the business, which they declined, but only after serious consideration and an attempt to increase the valuation (tech startups in the Southeast that raise more than $100k in financing typically have a $500k – $1M post money valuation). He then offered up that he was using college loans to finance his company. Not directly, of course, but rather he was getting a second master’s degree, with classes only at night, and his low-cost taxpayer subsidized loans were also covering his living expenses (grad school type living expenses without a mortgage, etc). Now, large college loans for degrees that don’t have the requisite earning potential might not make sense but this is an intriguing idea for a tiny percent of the population — something to think about.

    What else? What are you thoughts on college loans to finance entrepreneurship?

  • TiE VISTA Conference Day Two – Dharmesh Shah

    Image representing Dharmesh Shah as depicted i...
    Image by Dharmesh Shah via CrunchBase

    The TiE VISTA Conference wrapped up today with day two being as excellent as day one. Tim Draper of DFJ kicked off the morning but the real highlight for me was Dharmesh Shah’s keynote at the end of the day. Dharmesh covered many different topics in his keynote and it’s scary how much I agree with him and how I’ve written short blog posts about many of his points.

    Here are a few bullets from Dharmesh’s slides:

    • Starting is more important than the idea
    • Write a blog, not a business plan
    • Stealth mode is for fighter jets, not startups
    • A sub-optimal price today beats a perfect price tomorrow
    • Sales velocity, acquisition cost, lifetime value – improving one often degrades another (the only thing that improves all three is the customer experience)
    • Transparency trump secrecy
    • The path of truth and justice is often paved with profit

    If you don’t follow Dharmesh on Twitter, do so now @dharmesh.

    Again, congratulations to TiE for putting on a great event.
    What else? What did you enjoy about the TiE event?

  • TiE VISTA 2011 Conference Day One

    Midtown Atlanta, Piedmont Park
    Image via Wikipedia

    Today I had the opportunity to attend the TiE VISTA 2011 Conference in Atlanta. TiE, if you don’t know, is one of the best entrepreneurial groups originally focused on Indian entrepreneurs but since expanded to all entrepreneurs. Day one of the conference was a keynote speech followed by a collection of panel discussions culminating in a night Gala with awards. Everything was well executed.

    Pete Kight, founder of multi-billion dollar CheckFree corp, was the morning keynote. He shared several thoughts and insights:

    • The equivalent amount of information created in the world from the dawn of man to 2000 is now created every 48 hours.
    • The highest form of personalized service is where no human interaction is necessary (think self-service web and mobile apps).
    • Industries with idle equipment times and inferior logistics are ripe for technology-based middleman applications (think limo service that doesn’t own any limos but contracts on-demand with other limo companies).
    • Betamax was superior to VHS in every technical way but VHS won because the consortium of companies behind it gave away all the necessary recording equipment and rights to making the tapes for five years to a dozen porn companies. They did this knowing people would prefer watching porn from the comfort of their home as opposed to being seen at a theater.
    • When he started the first electronic check company in his grandmother’s basement in 1981 everyone thought he was crazy in that no one would trust electronic payments. Now it is the most pervasive form of payment.
    • Smart phones are going to be the new credit card.

    The TiE community did a great job putting on the conference and Gala and I’m looking forward to day two tomorrow.

  • Startup Project or Company

    Indy Startup Weekend
    Image by kmakice via Flickr

    Have you ever talked to an entrepreneur that said he or she was working on some startup projects? I have, way too many times. Startup projects and startup companies are two different things. Yes, one can lead to the other but the vast majority of the time it leads nowhere.

    Here are a few issues with doing a startup project instead of a startup company:

    • Projects are typically part-time, and while some people on the team can be part-time, to move fast enough and make progress the team needs to have full-time people
    • Project implies less commitment when you’re better off doing a startup company and pivoting if the original idea doesn’t work out
    • A project can be a way to see if you and some potential co-founders work well together, but the intensive full-time experience is a much better test (have buy/sell agreements, vesting schedules, and more)

    It’s extremely tough to do more than one thing at a time, let alone do a bunch of things part-time unless you have an amazing team staffed for each one. My recommendation is to focus on a startup company instead of multiple projects, and start your next one once you have the resources to hire a great team.

    What else? What other thoughts do you have on startup projects vs startup companies?

  • The Cult in Culture

    Who owns culture
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    Corporate culture is only the sustainable, controllable competitive advantage for startups. It really is. Think about it: what other factors in business can you control? The market? Nope. The economy? Nope. Tsunamis or civil war? Nope. Corporate culture? Yes.

    There’s a reason cult is the first part of culture. Many of the most famous corporate cultures are like cults, like Zappos. When I did a summer internship at IBM after my freshman year at Duke there was another intern there from Northwestern who kept saying she wanted to work at the SAS Institute. I asked why? She said people love it and never want to leave. I asked why again. She said it was a cult she wanted to join. True story.

    Here are some ideas to put the cult in culture:

    • Require unanimous consent for new hires so that everyone has a vested say in the hiring process
    • Measure your employee Net Promoter Score each quarter and score above 70
    • Create the best environment you can afford (great office space, snacks, equipment, etc)
    • Find the right balance between good work, good people, and good pay

    Creating a strong corporate culture is hard work. Do it, and the rewards and results will be profound.

    What else? What other ways can you put the cult in culture?

  • iPad 2 with Verizon 3G for a Week

    Steve Jobs while introducing the iPad in San F...
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    Last week I took my family to Florida for a trip near Rosemary Beach. We enjoyed the new Panama City airport and a quick 37 minute flight from Atlanta (yes, driving is only slightly longer counting airport interaction but our two little kids don’t like long car trips). Our beach house was supposed to include Internet access, but alas there was none. Thankfully, I had a new iPad 2 with Verizon 3G.

    Here are my thoughts on using the iPad 2 with Verizon 3G  for a week as my primary computing device:

    • The Verizon 3G bandwidth was much faster and more reliable than my iPhone 4 AT&T 3G bandwidth (at Santa Rosa Beach, FL) — Verizon 3G was surprisingly usable for most activities.
    • Writing these blog posts each night took longer than normal, but by the end of the week I didn’t think anything of it. I used the WordPress iPad app, had to code the HTML for the bullet points by hand, and didn’t put in many hyperlinks.
    • Web apps I use on a regular basis worked great (there were a few limitations like with Google Spreadsheets but nothing that slowed me down).
    • Flipboard became my primary means of using Google Reader and Twitter
    • Angry Birds Rio proved to be tons of fun and had nice UX enhancements over the original, but I would have liked to see a new type of bird or two introduced.
    • My total bandwidth was only 465MB, which is much lower than I expected and well within my 1GB/month plan.

    Will my iPad 2 replace my MacBook Air 13″? No. Is is a viable device on its own in lieu of a laptop if necessary. Absolutely. It was a great week and the iPad 2 did its job nicely.

    What else? What are your thoughts on the iPad?

  • Announcing New Product Features to Clients

    No Software: Getting Ready For the Dreamforce...
    Image by paul_houle via Flickr

    Communicating new product features to clients, especially in a fast moving SaaS application, is critical to help them maximize the value of the application and to appreciate that the monthly or annual fees are not only for the current product but also for enhancements. Many customers will be comfortable with the current functionality, or have a feature or two they really crave, but some customers, especially the raving fans, want to stay abreast of all the latest functionality. It’s important to have a multi-pronged communication approach to try and educate as many clients as possible without being overly intrusive.

    Here are a few communication strategies:

    • Write a short blog post introducing each new feature (save it mostly for features and not little tweaks)
    • Tweet the blog post and provide a Facebook Page Wall post
    • Include a link to it on the homepage of the product or on the sign-in screen (this is the most effective as you have a captive audience)
    • Include the content in a monthly newsletter
    • Recap the major new features of the past 12 months at the annual user conference

    The key is to communicate the information to users currently in the system, on Twitter/Facebook, and so and so forth. One size doesn’t fit all.

    What else? What are some other ways to announce new product features to clients?

  • Show App Value with Regular Results Emails

    One of the tactics we employed early on was taking a page out of salesforce.com’s playbook by sending an opt-in daily email to users of our app highlighting results. What I mean is users get spoon feed an email report detailing all the visitors and prospects that have been recently active. This type of feature has several benefits:

    • Removes friction with more passive users so that they see value from the product on a regular basis
    • Makes it easy for the stakeholder to forward the results to his or her boss
    • Helps keep the product top-of-mind with users while encouraging them to use the app more frequently by clicking through to see more details
    • Sets the tone for many of our users to be one of the first emails they look at each day because the data is so valuable

    My recommendation is for entrepreneurs to provide daily or weekly metrics to their customers to help drive product value and customer satisfaction.
    What else? What other benefits are there for showing app value with regular results emails?

  • Inbound VC Calls to Entrepreneurs

    On a weekly basis I receive 2-3 inbound calls and emails from VC firms asking to set up a meeting. The cold calls are typically from an Ivy League educated associate who’s taking his or her time until business school or fresh out of business school, and has never been a full-time entrepreneur. As an entrepreneur, the challenge is always time allocation as there are many more things to do than hours in the day.
    Here are a few tips for handling inbound VC calls:

    • If you are interested in talking with the firm insist on a partner on the first call to make it worth your time as associates are nice but often don’t have the required domain expertise for a quality call (I experienced this first hand when I got on a call with an associate who promptly asked what SaaS stood for).
    • Regardless if you’re not raising money, VCs have a wealth of information and can share relevant best practices and introductions (the best ones are always trying to provide value well in advance of investing).
    • Consider setting aside one afternoon a month to take these calls so that you can use the time more efficiently and build off the information gathered in each call.

    Inbound calls from VCs are flattering, especially if you’ve tried to reach out to VCs in the past and didn’t get your call returned. Take these calls with a grain of salt and use your time wisely knowing that the associates making the calls have much more time on their hands than you do on yours.
    What else? What other tips do you have for handling inbound VC calls?

  • Online Advertising Options for Startups

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    Image by dirkshaw via Flickr

    There are so many different online advertising options out that there that I wanted to enumerate over a few we’ve experimented with and provide some simple thoughts. Here we go:

    • Google AdWords – the most financially successful pay-per-click advertising medium in the world generates results but cost per lead has steadily gone up over the years
    • LinkedIn Ads – very targeted, successful when you get impressions but not much volume unless you bid high or pay on a CPM model
    • Social Networks – low cost-per-click but people are generally on them to socialize and not as much for business, though that’s rapidly changing
    • Niche Community Sites – much more manual process to place ads but can be extremely effective to get in from of the right audience with a variety of different campaigns (sponsored emails, banners, download offers, etc)
    • Retargeting – displaying ads to people if they’ve previously visited your site is powerful and cost effective (take a look at fetchback.com or the Google AdWords offering)

    These are just a few online advertising options. My recommendation is to try several different ones and see what does and doesn’t work for your startup.

    What else? What are some other online advertising options?