David Cummings on Startups

Author: David Cummings

  • Rating the Atlanta Startup Scene

    Two years ago I put together a few thoughts on the Atlanta startup scene and gave ratings for each of the major components. Well, it’s time for an update. We’ve made good progress in a few areas and moved backwards in others.

    Here’s my rating of the Atlanta startup scene:

    • Office Space (A)
      Unlike several years ago, there are a number of great options for startups to find their first office and even grow to 20 or 30 employees. Post 30 employees, there aren’t any turnkey office options and thus the growth stage startups are sprinkled all over the different submarkets.
    • Community (A-)
      Combined with the office space function, there are a number of great startup communities in Atlanta with different focuses like B2B SaaS, consumer apps, etc. One area that needs more attention is scale ups, and that’ll develop with time as more startups reach the growth stage.
    • Exits (C-)
      Things have been really quiet on the exit front for a while. With Cisco’s acquisition of Lancope for $452M and SecureWorks going public earlier this year there’s some minimal activity, but generally things have been much too quiet to be a healthy ecosystem.
    • Angel Capital (C)
      A steady number of angel investors write checks with most of the money coming from the usual sources (local non-tech professionals) and a small handful of successful tech entrepreneurs continue to write invest in 2-3 deals per year.
    • Institutional Capital (C-)
      Deals continue to get done (usually two Series A rounds per quarter and one Series B or later per quarter) and 95% of the institutional capital is from out of state. In the grand scheme, it’s a tiny number of deals but there’s a continual flow of activity.

    Overall, I’d give the community a B with a quality foundation and significant room to grow and improve. As a community, the most important thing is to increase the number of startup success stories. Results matter.

    What else? How would you rating the different components of the Atlanta startup scene?

  • Transitioning from Free Flowing to Structured Organization

    As a new startup is getting off the ground, and the team is focused on product/market fit, there’s often little organizational structure. Everyone is heads-down focused on building something people want to buy and, with a small team, everyone knows what everyone is working on. Only, as product/market fit is found, and the organization grows, the need for organizational structure grows. Yet, many entrepreneurs, especially first-time entrepreneurs, are so caught up in the whirlwind of the business (especially when it’s going well!) that they don’t step back and start to put in more process and structure. I’ve even seen an entrepreneur scale well beyond the $1M run-rate milestone and not even have regular leadership meetings.

    Here are a few thoughts on transitioning from free flowing to structured organization:

    • Implement a Simplified One Page Strategic Plan immediately (even while in the free flowing stage)
    • Don’t add too much structure too early, but do take time to ensure everyone is aligned with the organizational goals or OKRs
    • Consider the appropriate meeting rhythm, and if more frequent communication produces better team results, implement daily check-ins for everyone
    • When the team is the size that everyone doesn’t know what everyone else is working on, more structure is needed

    9/10 times when I ask someone in a startup what their company values and goals are, they can’t provide a consistent answer. While the free flowing style works at the beginning, over time more organizational structure and process is needed.

    What else? What are some more thoughts on transitioning from free flowing to structured organization?

  • Building the Talent Pipeline in Advance of a Raise

    One of the most common mistakes I see from entrepreneurs that are raising their first institutional round of financing is not building a talent pipeline in advance of the expected close. Meaning, the vast majority of planned new expenses after raising money is to hire more people. Only, if there isn’t a talent pipeline, once the money is raised, it’ll take six weeks to build up the recruiting functions and then another 2-3 months to find great people (hopefully!) such that it’s now 3-4 months from close before the new money is earnestly being put to use.

    The solution: build a talent pipeline in advance of a raise. Here are a few thoughts:

    Great people are the heart of every successful business. Entrepreneurs need to build a talent pipeline, especially in advance of raising money.

    What else? What are some more thoughts on building a talent pipeline in advance of raising money?

  • Video of the Week: David Skok on the 3 Stages of a Startup

    For our video of the week watch David Skok talk about the 3 Stages of a Startup. David is the author of the extremely popular forEntrepreneurs blog and one of the best startup thought leaders. Enjoy!

    From YouTube: At the Matrix Partners’ SaaS meetup , David Skok, a five-time entrepreneur turned General Partner at Matrix Partners, gave a few insights on SaaS economics. In his talk, David explained that SaaS businesses are fundamentally different from traditional businesses, and have their own model and metrics. His hour long presentation can be read in detail – the SaaS business model and metrics http://www.slideshare.net/DavidSkok/the-saas-business-model-and-metrics

  • Platforms and Microservices

    Steve Yegge has an epic rant on Amazon being a poor place to work but more brilliant than Google when it comes to innovation at platform scale from 2011. David Skok recently published a post on his blog titled Microservices Essentials for Executives: The Key to High Velocity Software Development. The idea is that tech companies start out building their product as one large, monolithic system because it’s simpler and faster. Then, as the startup achieves greater levels of success, innovation slows down considerably even though more and more people are added to the product team. What gives?

    The larger the product, the harder it is to make changes to it due to all the dependencies. Amazon was the first major technology company to realize that Internet scale, and it’s greater levels of complexity, requires a new way of building large-scale systems: microservices. Microservices are simply smaller, self-sufficient special purpose products that form a platform (e.g. tiny apps that are used to make a big app). Amazon went further and built Amazon Web Services (AWS) to make the backend of these microservices even easier to manage and scale, and now AWS is one of the fastest products to $10 billion in annual revenue, ever.

    Tech entrepreneurs need to understand the benefits of microservices and start planning them once they hit the growth stage, but not before. All major platforms going forward are going to have some form of microservices underpinning them.

    What else? What are some more thoughts on platforms and microservices?

  • Document the Organizational Process

    With the start of Q3 upon us, it’s a great time to reflect on last quarter and go through the exercise of what should we start doing, what should we stop doing, and what should we continue doing (start, stop, continue). As part of this exercise it’s important to have the organizational process documented in something simple like a Google Doc. Similar to how the Simplified One Page Strategic Plan is updated quarterly, this document should be updated on a regular basis as well.

    Here are some example items that would be included in an Organizational Process document:

    Entrepreneurs need to document the organization process and be intentional about how their organization runs.

    What else? What are some more thoughts on the idea of documenting the organizational process?

  • Build a Bottom-up Sales Forecast

    When talking to entrepreneurs about their sales forecast, they love to talk about the market and say “if we only get 1% of XYZ we’ll do great.” Of course, the real world doesn’t work that way. Instead, it’s best to build a bottom-up sales forecast that takes into account the current sales performance and extrapolates it out based on growth rates.

    Here are a few factors to keep in mind with a bottom-up sales forecast:

    • How does the corresponding volume of sales qualified leads need to grow? Do the current marketing campaigns have capacity for more volume (many campaigns get more expensive with more volume like pay per click ads)?
    • How many sales reps need to be hired for one to work out (it’s important to note when planning that all new hires don’t work out)?
    • How long does it take for a new sales rep to ramp up and be fully trained?
    • What’s the attrition rate of existing sales reps?

    Often, if a startup wants to triple sales next year (see Triple, Triple, Double, Double, Double), they need to expand the sales and marketing team well in advance of the new year.

    My recommendation: build a bottom-up sales forecast.

    What else? What are some more thoughts on a bottom-up sales forecast?

  • The Origin of Fireworks

    On Independence Day here in the United States, we love to watch fireworks and feel the boom of the explosion in the sky. For today’s post, watch a video titled What’s the origin of fireworks? from Mental Floss.

    Happy 4th of July!

  • User Experience to Get Small Committments Early

    Continuing with the Science of Persuasion video, at the 6:20 mark in the video the author talks about the importance of consistency. From the video:

    Look for, and ask for, commitments that can be made

    This is a valuable technique in the software world, especially during free trials or onboarding new users. Instead of saying “hey, we’re a great software product with 100 features, good luck” the idea is to direct the user to accomplish something small and simple, as quickly as possible (e.g. connect your Twitter account and we’ll show you three immediate insights). Then, once the small commitment is made (e.g. using a simple feature) the user is much more likely to take the next step and use the more complicated feature (e.g. now that we’ve given you these three insights, answer these 10 questions and we’ll suggest 100 new people to follow on Twitter).

    Start small. Get the user to do something. Show value. Build on the experience and get the user more involved. Much like micro apps for lead generation, give value as quickly as possible and ask for small commitments.

    What else? What are some more thoughts on the idea of getting small commitments early to help with persuasion in the user experience?

  • Monthly MEPS Reflection

    One of the exercises we learned at YPO forum training was the monthly MEPS reflection. MEPS — Mental, Emotional, Physical, and Spiritual — are four areas of life that are essential to well being. Here’s how the exercise works:

    • Mental – How am I feeling, 1-10 (10 is best), mentally? How would I describe my mental state?
    • Emotional – How am I doing emotionally, 1-10? How would I describe my emotional state?
    • Physical – How am I doing physically, 1-10? How would I describe my physical state?
    • Spiritual – How am I doing spiritually, 1-10? How would I describe my spirituality?

    Go through the MEPS reflection with a close friend or small group on a monthly basis and use it as a way to continuously reflect on life and work to focus more attention on areas that need help.

    What else? What are some more thoughts on the monthly MEPS reflection?