David Cummings on Startups

Author: David Cummings

  • Control What You Can Control

    Andre Agassi Tennis
    Image via Wikipedia

    Entrepreneurs are a fickle bunch. Many, like myself, can be control freaks at times and drive people crazy. In the same light, the company, product, etc are a reflection of your vision and goals. In Andre Agassi’s autobiography one of the recurring themes is his coach reminding him control what you can control.

    Entrepreneurs need to control what can be controlled and move on otherwise.

    Here are some things that can’t be controlled by entrepreneurs:

    • Economic conditions
    • Competitive forces
    • Change
    • 24 hours in a day

    As you can see, most everything that entrepreneurs want to be controlled can be controlled. My recommendation is to control what you can control and stop worrying about the rest.

  • Weekly Tactical Meetings

    The first building (Korpus) of the National Te...
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    As part of our meeting rhythm, which is a hybrid of Patrick Lencioni and Rockefeller Habits, we have weekly tactical meetings. These are similar to staff meetings but are comprised of the management team and have a very defined process. The meetings typically last 30 – 45 minutes, but can be as short at 15 minutes. Here’s what we do in them:

    • Discussion of weekly dashboard KPIs, but only if the KPI is not on target (way below or above goal) so that we don’t waste time on things that are going according to plan
    • Top three priorities of the week for each person
    • Ad-hoc agenda of anything people want to talk about (meatier topics get tabled for monthly strategic meetings, which don’t happen as often)

    Now, this approach is overkill for a two person team but it works well once you have three or more people on your management team. This strategy works well for us and I’d recommend giving it a try.

  • The Angle of the Angel

    Fallen Angel
    Image by onkel_wart via Flickr

    One of the more underrated questions that entrepreneurs need to ask angel investors is “why do you do angel investing?” It seems like such a simple question but you’d be surprised at how rarely it comes up. Many people assume the answer is to make money. Based on my limited angel investing experience (nine companies), there are many better ways to make money if that’s the primary goal. Let’s look at some other angles common with angel investors:

    • Desire to help the local community
    • Want to “stay in the game” while retired
    • Joy of mentoring younger entrepreneurs
    • Ability to brag about it with their friends
    • Use domain expertise in new ways

    My recommendation is to clarify this with angel investors early on so that expectations are properly aligned.

    What else? What are some other angles for angel investors?

  • $1 Million in Revenue is Hard

    Posing is also hard work!
    Image by pangalactic gargleblaster via Flickr

    Did you know that 95% of startups never reach $1 million in revenue? That’s right, only 5% hit that major milestone. Entrepreneurs’ Organization (EO) requires a minimum of $1 million in revenue to apply, and has done so since inception almost 25 years ago. Of course, $1 million 25 years ago is more difficult than today, but achieving $1 million in revenue is hard regardless. Very hard.

    Let’s look at a few examples of what it takes to hit $1 million in revenue:

    • 50 services deals at $20,000 each (a little over four per month) delivered to completion
    • 83.3 customers paying $1,000 per month at the beginning of the year (assuming no churn and no new customers)
    • 1,666 customers paying $50 per month at the beginning of the year (assuming no churn and no new customers)
    • 100,000 products at $10 each ($10 each selling direct or to a distributor that then marks it up further)

    As you can see, it takes quite a few sales regardless of the type of business model to achieve $1 million in revenue. My recommendation is to think through what it will take for your startup to hit $1 million in revenue, and to have that as one of your goals.

  • The Challenging Employee Conversation

    hot air balloon
    Image by AP… via Flickr

    The most common mistakes startups make are pricing their product/service too low and not firing employees that don’t fit fast enough. I want to talk a bit about that second example: employees that don’t fit. The pattern that I’ve seen emerge over the past 10 years is when an employee with challenges has been brought up in a management meeting, the issues addressed, and then something else repeatedly comes up, it isn’t going to work out.

    We do a weekly tactical as part of our Rockefeller Habits rhythm. The goal is to do a very brief KPI review, priorities for the week, and any immediate agenda items. My experience has been that if a challenging employee has come up in conversation over and over again at these meetings then we as the leadership team are doing a poor job of setting expectations and building a great corporate culture. Employees want to know where they stand and to receive honest feedback, in addition to written warnings in many cases, as that is more desirable than tip toeing around issues and not letting on to the severity of the problem.

    My recommendation is to not sugar coat issues with employee challenges and know that one of the most common startup mistakes is not letting go of bad fits fast enough. It isn’t that the employee isn’t a good person, it’s that they aren’t a good fit for your startup and there are better places for them to shine.

  • Small, Fast Growing Markets

    Candies, Covered Market, Barcelona, Spain
    Image via Wikipedia

    As I mentioned yesterday, I believe the market is more important than the management team, assuming both are good at a minimum. For me, I focus on small, fast growing markets as opposed to large established ones. Why? Good question. Here are a few reasons:

    • These markets usually have leaders that aren’t so large as to suck all the oxygen out of the space (e.g. what Omniture did to the high end of the web analytics market once they achieved scale and Google Analytics when they consumed the small-to-medium segment).
    • These markets by their very nature don’t have incumbents that have to be replaced. Rather, you’re often the first vendor for a company making it easier to define the standards of the market.
    • The fast growing nature of the market makes it more likely for several startups to flourish at a small scale.
    • The functionality required rapidly changes making it even more fun to be part of the innovation.

    What else? Why types of markets do you like?

  • What VCs Look for in Startups

    My younger brother is in his final year at HBS and had as a guest speaker today a partner from one of the oldest and most prestigious venture capital firms. Here’s what the partner said they look for in startups:

    1. Does it create value for customer and will they pay for it
    2. What is required for strong execution of the idea
    3. Who comprises the team
    4. What’s the valuation and is there a big upside

    One key aspect is that he didn’t directly mention the market as one of the four items. I believe you need a good management team but that a great market is more important than a great management team. That’s right, I’d prefer a good management team with a great market over a great management team with a good market.

  • Quick Email Marketing Design Best Practices

    Gmail's logo
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    Email marketing continues to be an effective part of integrated marketing. Amazingly, companies still don’t follow some of the simplest design best practices when it comes to building email creative. Here are some quick tips to follow:

    • The majority of email clients have images turned off by default, so design for that lowest common denominator
    • Test the design in the most prevalent email clients (e.g. Outlook, Lotus Notes, Yahoo! Mail, Gmail, etc)
    • Seriously consider text-only emails, especially for B2B audiences
    • Remember to have calls to action throughout the email
    • Spend as much time on the subject line as on the email content
    • Invest in a good email marketing platform
    • Try using existing email templates as a foundation
    • Design for recipients to scan the message, with visual nuances like bold and bullet points
    • Know that the preview pane is only a few hundred pixels tall

    What else? What are some other email marketing design best practices?

  • Presentation Slides Should be Simple

    Jeanne Calment, the world's oldest ever person...
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    We try our best at our annual user’s conference every year but inevitable one issue always crops up: way too many words on presentation slides. It’s frustrating to sit in the middle of the room and have a hard time paying attention to the speaker because the current slide has 100 words on it in a small font.

    Here are some simple rules to follow:

    • Reduce the number of words per slide as much as possible, and then cut them in half
    • Follow Guy Kawasaki’s rule that the font size should be no smaller than half the age of the oldest person in the audience (e.g. a 60 year old person present would result in a font no smaller than 30 point)
    • Shoot for no more than 10 words per slide, if possible
    • Remember that presentation slides are different than slides that you email to people, which can be fancy and detailed
    • Include a photo or visual cue for each slide to add visual interest

    What else? What other tips do you have for presentation slides?

  • Publishing a Product Roadmap

    Cabbage Market
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    One aspect of our annual user’s conference is publishing our product roadmap. Now, we don’t publish our entire roadmap as the market is too dynamic and we’d rather under commit than over commit and have to remove functionality. The challenge is to balance the desires of customers, employees, prospects, and the general vision for the application. Most important, it is critical to be opinionated about the software.

    Here’s what we consider in building our product roadmap:

    • Internal vision and opinion for the software
    • Customer ideas and votes on our idea exchange
    • Services and support team member input on ways to make their lives easier
    • Marketplace input from prospects and analysts

    My recommendation is to make the roadmap development process a regular strategic action item.

    What else? What other aspects would you add to the product roadmap process?