David Cummings on Startups

Author: David Cummings

  • Startup Riot 2010 – Another Success

    Today I had the opportunity to attend the third annual Startup Riot at the Fabulous Fox Theatre in Atlanta. Shotput Ventures partner Sanjay Parekh puts on the annual event which drew over 400 attendees and provided a platform for 50 startups (yes, 50 startups!) to give a three minute pitch with four slides.

    To learn more about the startups that presented, please take a look some of the blog posts:

    I’d highly recommend the event and I’m looking forward to attending again next year.

  • Competitive Differentiation

    One of the more exciting, and challenging, aspects of being an entrepreneur in a new, fast-growth market is the constant stream of changing competitors. New markets are very different from established markets in that they typically innovate faster and have lower barriers to entry (the technology doesn’t have to be as fully baked to be competitive). My advice is to pick a competitive strategy and don’t try to be all things to all people — a recipe for failure (trust me, I’ve tried it!). Of course, the strategy should be fluid and adaptable, but it is better to have a solidified one down on paper rather than none at all. Here are some competitive differentiation categories to consider:

    • Target company sizes
    • Target company verticals
    • Product price points
    • Product functionality (be opinionated!)
    • Geographic targets
    • Support policies (phone, email, 24/7, etc)
    • Sales tactics (aggressive, nice guy, etc)

    Again, I recommend putting a competitive differentiation plan together, aligning the team, and using it to make decisions quickly.

  • Doing vs Talking

    One of the most striking features of an entrepreneur is that he/she is the doer type instead of the talker type. You know what I mean — the person who is always getting things done and loves diving in and taking on projects. I think there’s a tendency, and this is partly driven by society, to build consensus and ask lots of questions before working on a project. For entrepreneurs, the strategy is more likely to be get something done, and then ask for forgiveness.

    Want some great examples? Take a look at Mark Suster’s post as part of his series on what makes an entrepreneur.

  • Part-Time Entrepreneurs

    I’ve heard the same question many times asking “can I start a venture part-time, on the side?” My advice is always the same: you can, but of the hundreds of entrepreneurs I’ve talked to, only one was successful (defined as built a multi-million dollar revenue company) doing the business part-time for the first few years. Now, this is different from a scenario like that of Marc Benioff, CEO of Salesforce.com, that started working on the business part-time while he was still at Oracle, but he also invested $6 million of his own money and had a full-time team working on the company.

    Here are some reasons why being a part-time entrepreneur might not result in success:

    • Challenge of making enough progress with the opportunity relative to how fast the market is moving
    • Lack of belief in the idea and/or market, resulting in a wait and see approach
    • Difficulty in juggling a day job and doing a startup on nights and weekends
    • Inability to get other team members or co-founders to join because of the perceived lack of seriousness

    My belief is that the first issue (not making enough progress) is the real killer of part-time startups because they are such roller coasters whereby you need high highs to balance the low lows. I do believe working on a startup part-time is worth the effort but I would stress that that is more of a learning experience and less of a recipe for success. Good luck!

  • Internal vs Outsourced Software Development

    One of the core challenges with building a web-based company is developing the software. Naturally, there are many debates between developing the software with an internal engineering team vs outsourcing the development to a firm, onshore or offshore. Let’s look at a few issues to consider:

    • Is the product central to the company’s success or is good enough OK?
    • Do the founders or CTO have experience managing an internal or outsourced development team? An outsourced team is generally considered more difficult to manage and management intensive.
    • What type of financial resources are available in the near term and longer term? One-time projects might be more cost effective when outsourced if scope is sufficiently defined and the platform is a known technology (e.g. writing a simple iPhone app).
    • How fast and iterative are the product changes? I’ve generally found internal teams faster at iterating when compared to an outsourced firm that is juggling multiple projects.
    • How accessible is local software development talent? The size of the city and quality of nearby engineering schools can be a factor in finding good internal software engineers.

    In my experience, I’ve had the most luck with internal software development teams as our product is our core competency. I have heard stories of software companies having success with completely outsourced software development, even offshore work, but the number of failures I’ve heard about significantly outweighs the wins. My advice is to seriously consider an internal team, even if on the surface it appears more expensive.

  • Market Opportunity or Management Team

    At lunch today I was talking with an entrepreneur who was lamenting that the company he was recently with has disjointed, inefficient technology powering their web services. He also talked about management turnover at the C-level as well as board of directors. I then casually asked how the company was doing financially and he said it was growing like crazy with substantial revenues and profitability.

    This conversation got me thinking about the old debate as to whether the market opportunity or the management team is more important in a startup. Some people, like Marc Andreessen, the Netscape and Ning co-founder, believe that market opportunity and size is more important. Others, like Mark Peter Davis (a classmate of mine at Duke), believe that the management team is critical.

    Personally, I’m starting to put more stock in the market opportunity and timing over the management team.

    Now, of course, there has to be a modicum of competency on the management. But, beyond that, I think the market, product, timing, and product to market fit are the real drivers for phenomenal success.

    What do you think?

  • Consider Lead Gen from the Beginning

    Today, I had the chance to meet with an entrepreneur working on a new business idea. After hearing the pitch and asking questions I realized he hadn’t spent much time on one of the most crucial aspects of a business: understanding how leads are going to be generated. That’s right, lead generation is one of the most important concepts that is paid little attention.

    Building a product, thinking through all the business plan questions, etc is so much more exciting and fun when compared to addressing how much it costs to acquire a customer, ramp the customer up, and the lifetime value of the customer. My advice to entrepreneurs is simple: consider lead generation to be one of the most important parts of the business.

  • 3 Year Life Plan

    One of the topics discussed at a recent EO University was centered around building a three year life plan incorporating the three main categories of professional, personal, and family. Generally, the idea is to identify where you want to be and what habits need to be employed to achieve it. Let’s look at some examples:

    Professional

    • Two annual speaking engagements — habit of writing one article per quarter for an industry publication
    • Selling a new deal each month — habit of meeting 100 new people every month

    Personal

    • Run a marathon — habit of running three miles every other day with a more specific plan before the race
    • Break 90 in golf — habit of hitting range balls two times per week

    Family

    • Healthy spouse relationship — habit of one dedicated date night per week
    • Engaged with children — habit of dinner with kids five nights per week

    I’d encourage you to think about your goals and get into habits immediately that will help you achieve them.

  • 5 Ways to Improve the Atlanta Startup Community

    Tonight I had the opportunity to attend a dinner, sponsored by a great VC firm in town, for the sole purpose of discussing the Atlanta technology startup community, including what’s working well and what can be improved. None of the solutions are effortless, nor are too many likely to happen soon, but the goal is to spread awareness of how we can improve things. Here are five ways to improve the Atlanta technology startup community:

    1. Allow the Georgia government pension funds to invest in the venture capital alternative asset class
    2. Convince Fortune 500 companies in the metro area to buy from local startups and acquire local startups
    3. Introduce several new local seed stage and early stage investment funds
    4. Encourage successful entrepreneurs to give back and reinvest in the community
    5. Increase the number of clusters and improve their recognition (e.g. online marketing, vertical e-commerce, lead generation, etc)

    There are many more but these were some of the main takeaways from the evening. The great news is that over the past five years the Atlanta startup community has really blossomed and has many different ways to get involved.

  • When to Help Entrepreneurs

    I’ve had a chance to work with entrepreneurs at all different stages of their idea and business. Whether it is an idea that popped into an entrepreneurs head the night before, or it’s already a million dollar company, I’ve found that there’s so much excitement and passion that makes it fun to help out. Recently I’ve decided that the most nascent stage of the pre-business idea formation is too early for me to add much value. Going forward, I’m interested in helping out once the Questions to Ask an Entrepreneur have already been established. Here are those questions again:

    • What problem are you trying to solve?
    • How are you different?
    • How many prospects have you talked to about it?
    • How far along are you with the concept?
    • Where do you need the most help?

    The general goal is to have the idea a bit more fleshed out before discussing it so as to be able to offer more value and input. Entrepreneurs that haven’t answered the questions yet will possibly view this as annoying but in the end will appreciate the purpose.