Author: David Cummings

With the NCAA basketball tournament under way, and Butler pulling out the big upset over Syracuse tonight , it makes sense to talk about startups and basketball. Basketball, when compared to other sports like baseball or football, makes a great case that a team with more camaraderie and chemistry can out perform more talented teams. Let’s look at what startups can learn from the NCAA basketball tournament:

• The team with the most talent, as defined by the largest number of McDonald’s All Americans (UNC), didn’t even make the tournament, just like when a startup gets an all-star team together, and never even brings a product to market
• The success of mid-major teams this year, especially against much wealthier BCS schools, shows that schools with limited resources, much like startups, can take on the bigger challengers and win
• Finally, the NCAA tournament really demonstrates the importance of building momentum over a long season, and peaking at the right time, in a similar manner to startups seeking out the right product/market fit, and timing the market (very important!)

Basketball and startups have a good deal in common: competition, teamwork, and hard work. What have you learned from the tournament?

One of the questions I like to ask entrepreneurs is “How big do you want to make your startup” so that I can get a feel for their ambition. At this morning’s Shotput Ventures office hours at Emory, I asked the question several times and received vague, indeterminate answers, mostly centered around being large and dominating their industry. I think it is important to have a more concrete answer to this question and it should incorporate the following:

• How much do you want the company to be worth in enterprise value?
• What timeframe do you want to achieve this?
• How confident are you that you can do this?

My advice is to think through these questions and have a consistent, cohesive answer.

By now, we’ve probably all heard the eBay story that the founder started it because he wanted a way to help his girlfriend find Pez dispensers online. Well, did you know that was made up? That’s right, those PR folks were looking for a good, memorable story and delivered. Politicians do it all the time.

I do believe it is important to have a story for your startup. Why was it founded? Why are you doing what you’re doing? Here are some points to consider:

• Make it memorable
• Keep it short
• Practice it for consistency across co-founders
• Include emotion and feeling in it

What’s your startup story?

People constantly throw around the term “successful business” or “successful startup”, but I bet if you ask 10 entrepreneurs how they define success, you’ll get 10 different answers. I typically like to ask the following question: how do you define success? Here’s how I define a successful business:

• $1 million+ in annual gross margin (difference between the sales and the cost of goods)
• Sufficient redundancy and scale such that anyone in the business can go on vacation for two weeks and everything continues to run fine
• Reasonable revenue predictability (recurring revenue is best) such that sales can be predicted out on a quarterly basis with 75% confidence
• Profitable enough to make decisions on growth, lifestyle, etc

Notice that I didn’t say it had to be a technology business, or potential for 30% net margins (even though that would be nice), or 50% year-over-year growth. I think those are all nice, and important to me, but for most entrepreneurs I’ve talked to, they are looking for a level of scale, stability, predictability, and freedom (profits!).

How do you define success?

Back in late 2003, a few years after I’d started my company, I got down on myself questioning the amount of progress we’d made on the business. I had two full-time employees with a couple of interns and I just wasn’t satisfied with how fast things were growing. Revenues were increasing nicely on a percentage basis, but on an absolute basis they were still pretty meager. I didn’t know how to push the ship forward faster without outside capital, and after talking to many local angels and VCs, I knew I wasn’t going to be able to raise any money because I didn’t have a successful startup under my belt and we were competing in a crowded market.

Deep in frustration I heard the startup’s siren call: move to California and everything will be better.

In California, I’d be able to raise a ton of money, hire an army of great people, and build the next Salesforce.com. It was a standard playbook that has been implemented many times before. Mentioning California to my soon-to-be wife got her all riled up and upset as she’s pretty averse to change. I didn’t know what to do.

After thinking about it more, and continuing to plug away at my business, I began to realize I was already in the best place for me: Atlanta. Why? Here are a few reasons:

• With revenues continuing to grow, and lack of outside capital, we were able to continue bootstraping, and Atlanta is a phenomenal place to bootstrap a business due to a variety of reasons
• My friends and community (e.g. networking organizations, softball team, etc) were established and comfortable
• My family in North Florida, where I grew up, was less than five hours away
• Thinking more about the tech startup community, and potentially one day being a big fish in a small pond or a small fish in a big pond, I felt I was better suited for a small pond where I could have more of an impact

Incredibly, the startup’s siren call of California is as strong today as it’s ever been, based on comments and discussions all over social media. I’m glad I stayed in Atlanta as we were right on the cusp of explosive growth, and Atlanta proved to be a great place to build a multi-million dollar business.