David Cummings on Startups

Category: Community

  • Board Decks Even Without Board Meetings 

    Over the last few years a dozen different entrepreneurs have asked me if they should put together a formal board for their startup. My response is that they don’t need a formal board but it’s still good to go through the exercise of putting together a board deck on a quarterly basis. Much like regular investor updates, a board deck is even more comprehensive in summarizing key information and metrics. 

    Here’s what a board deck might contain for entrepreneurs without board meetings:

    • KPIs – Summary of all the key metrics year to date and for the quarter as well as percent of goal
    • Department Updates – Main accomplishments for sales, marketing, services, support, operations, and engineering 
    • Strategic Initiatives – Outline the big undertakings for the quarter including any challenges or potential roadblocks
    • Financials – Semi-detailed financial metrics for the most important parts of the business
    • Challenges – Where does the company need the most help

    Like a simplified one page strategic plan but much more detailed, a board deck for entrepreneurs without a board is a good way to organize thoughts, prepare a quarterly review, and outline new initiatives. 

    What else? What are some more thoughts on board decks even without a board?

  • Putting $1 Million to Work in the Startup Community

    WorldPay, in Atlanta, recently pledged $1 million to fund a financial technologies accelerator at Georgia Tech’s ATDC. It’s great to see a local company make a substantial investment in the community and it got me thinking about other ways $1 million could be put to work. Here are a few ideas:

    • Generic Startup Accelerator – Much like the financial technologies accelerator but for any type of tech startup. With $1 million, there’s enough funding for two 10-team cohorts that receive $25,000 each along with office space, legal, accounting, and a managing director to run it for one year.
    • Tech Entrepreneurship Center – $1 million is plenty of money to rent a nice office space for 4-5 years along with a great community manager to run the facility and coordinate programs (startups would still pay rent but the $1 million would go towards subsidizing everything).
    • Partially Endow an Entrepreneurship Education Chair – $1 million could be put into the local community foundation to pay a non-profit, school, or college in the area to partially fund a dedicated entrepreneurship teacher that runs programs like the Kauffman Foundation FastTrac program as well as other classes geared towards high potential new businesses (see the Ideal Entrepreneur Bootcamp Program).
    • 100 Programming Bootcamp Scholarships – $1 million would pay for 100 people to go through an intensive three month software engineering bootcamp program where they are trained to be a professional programmer (this is a way for people with college degrees to switch careers quickly). Take a look at Tech Talent South, Iron Yard, Digital Crafts, and General Assembly.

    $1 million still goes far, especially outside the expensive coastal cities. and can fund a major startup community initiative. As tech innovation and entrepreneurship continues to be a hot area, look for more tech startup community initiatives.

    What else? What are some other ways $1 million can be put to work in a startup community?

  • Quantifying Startup Quantity for More Ecosystem Success

    One area I spend a good bit of time thinking about is how to get more tech startups to a modestly sustainable level of success (e.g. $250k in run rate) as well as to a more sustainable level of success (e.g. $1 million in gross margin). As a community, we need more entrepreneurs taking more at-bats to get more hits, and more homeruns. Let’s assume we have a community goal of one new sustainably successful tech startup ($1 million in gross margin) per month (12 per year), how many companies need to be started? Here’s a guess:

    • 100 tech startups start
    • 10 achieve $250,000 in revenue within three years
    • 2 achieve $1 million in gross margin within five years

    According to this survey, only 4% of all business have $1 million or more in revenue, so it feels directionally correct that getting a tech startup to $1 million in gross margin (thus higher than $1 million in revenue) would be an even smaller percentage. To get 12 new sustainably successful tech startups per year, we need local entrepreneurs to start 600 new tech startups per year. My guess is that we’re halfway there in Atlanta and need to work harder to grow our ecosystem.

    What else? What are your thoughts on quantifying the number of startups to achieve a new sustainably successful company per month?

  • Video of the Week: Randy Pausch Last Lecture

    Hanging out with the family over a long July 4th weekend is always a good time to reflect. When thinking of a video for the week, one immediately came to mind – Randy Pausch Last Lecture: Achieving Your Childhood Dreams.

    From YouTube: Carnegie Mellon Professor Randy Pausch (Oct. 23, 1960 – July 25, 2008) gave his last lecture at the university Sept. 18, 2007, before a packed McConomy Auditorium. In his moving presentation, “Really Achieving Your Childhood Dreams,” Pausch talked about his lessons learned and gave advice to students on how to achieve their own career and personal goals.

     

  • Talent Recombination in a Startup Community

    One of the ideas with the Atlanta Tech Village is that is would help increase talent recombination in startups. Meaning, more people in startups, especially ones that fail, would join other startups that are succeeding, such that the ones that are doing well would do even better (finding great talent is always one of the biggest challenges). Over the past year at the Village, I’ve seen the talent recombination idea play out several times. Here are a few observations about it:

    • Programs and events, like the weekly Startup Chowdown, truly help people connect and develop stronger rapport, making for faster recombinations
    • Shared community spaces, kitchens, conference rooms, game rooms, and coffee shop facilitate serendipitous interactions, helping keep different people top-of-mind
    • Interconnectedness, as well as frequency of communication, provide for more chances to know about potential opportunities for recombination
    • Stories of recombination spread quickly giving more people peace-of-mind that great people find new gigs quickly if things don’t work out

    Talent recombination is a real benefit of high-density startup communities. Team members in startups that fail find new jobs faster and startups that are doing well hire proven people faster.

    What else? What are some more thoughts on talent recombination in a startup community?

  • Atlanta Tech Village Prioritizing Local Startups

    When we started the Atlanta Tech Village, the thinking was that 80% of the building would be for tech startups (defined as having a proprietary tech product) and no more than 20% for tech related service providers. Quickly, we realized there was more demand than expected from tech startups, thus we limited the number of tech related service providers even further (e.g. only one staffing agency, etc.). Then, we noticed another challenge: a number of startups headquartered in other cities were opening their Atlanta office at the Tech Village, which is great, but with so many of them, it was crowding out local startups.

    The Atlanta Tech Village now prioritizes startups headquartered in Atlanta. We’re still working out what that means, but here are some ideas:

    • CEO and core team based in metro Atlanta
    • Fewer than 50 employees (we want to focus on seed and early stage startups)
    • Company incorporated in Georgia or Delaware (common place of incorporation)
    • Credit given for amount of time already in the Village

    Prioritizing local startups means helping those that aren’t in the Village yet as well as helping those that are already in the Village expand (there’s a good bit of expansion and contraction of startups in the building). As with anything, we’re iterating and working hard to help grow the Atlanta startup ecosystem.

    What else? What are some more thoughts on the Atlanta Tech Village prioritizing local startups?

  • Atlanta Tech Village as an Accelerant

    Recently I was talking to an entrepreneur at the Atlanta Tech Village and he told me how they had just found a great designer through the Village community. Then, later that same day, another entrepreneur volunteered that he had made several key connections through the Village, including signing one of his first customers. With the community, connections, and collaboration, the Village acts as an accelerant for entrepreneurs.

    Entrepreneurs meet more people faster.

    Entrepreneurs sign their first customer faster.

    Entrepreneurs fail faster.

    Entrepreneurs find key employees faster.

    Entrepreneurs learn best practices faster.

    Entrepreneurs grow their business faster.

    Whether it’s the Atlanta Tech Village or another entrepreneurship community, my recommendation is for entrepreneurs to find a place and get involved. It’s hard to appreciate the value until it’s experienced first-hand.

    What else? What are some other thoughts on the Atlanta Tech Village as an accelerant for entrepreneurs?

  • Notes from the EndoChoice S-1 IPO Filing

    EndoChoice went public today on the New York Stock Exchange (NYSE:GI) raising $95 million. This is notable because it’s the first entrepreneur-lead company in Atlanta to go public in many years. Founded in 2008, EndoChoice is a medtech company focused on technologies and products for gastrointestinal conditions with their main innovation being an endoscopic imaging system.

    Here are a few notes from the EndoChoice S-1 IPO filing:

    • Serves over 2,500 GI departments (pg. 1)
    • Fuse® system enables GI specialists to see more than twice the anatomy at any one time compared to standard, forward-viewing colonoscopes and has been clinically demonstrated to detect 69% more pre-cancerous polyps than standard colonoscopes. (pg. 1)
    • 15 million colonoscopies per year in the United States (pg. 1)
    • Revenues (pg. 2)
      2012 – $34.2 million
      2013 – $50.9 million
      2014 – $61.4 million
    • Net losses (pg. 2)
      2012 – $1.2 million
      2013 – $23.9 million
      2014 – $53.6 million
    • Accumulated deficit of $112.4 million (pg. 2)
    • Sells over 50 different products (pg. 3) –  (Note: EndoChoice sells a number of basic products and then has a proprietary endoscopic imaging system that is the real growth opportunity)
    • Manufacturing facilities in the United States, Germany, and Israel (pg. 4)
    • Acquired Peer Medical, Ltd. in 2013 for $40 million, inventor of the endoscopic imaging system (pg. 70)
    • 35 employees in research and development (pg. 71)
    • 103 employees in sales and marketing (pg. 72)
    • 418 employees (pg. 126)

    I’m excited for EndoChoice and look forward to watching them grow. Congratulations to Mark Gilreath and team.

    What else? What are some other thoughts on the EndoChoice S-1 IPO filing?

  • 12 Month Startup Accelerator

    We’ve all heard about successful startup accelerators like Y Combinator and TechStars. The model is pretty straightforward: ~$100,000 investment for ~6% of the company, 90-day intensive program, and a Demo Day at the end to pitch investors. This model works well when a large number of the startups are able to raise money at the end of the program, often with little-to-no revenue. Many cities have accelerator clones of this popular model but run into the challenge that most of the participants can’t raise money and go out of business shortly after the program (failure is normal but it’d be great to see more success as well).

    For cities that don’t have copious amounts of seed stage, risk loving capital, I believe there’s an opportunity for a modified version of the standard accelerator program focused on producing revenue generating businesses that are self-sustainable at the end of the program (e.g. $250k in ARR) or at least $100,000 in annual recurring revenue so that their chance of building an enduring business is high. Let’s call it a 12 Month Startup Accelerator. Here’s how it might work:

    • Calendar year based cohorts (e.g. 10 startups that start on January 1st)
    • $100,000 for 10% of the startup
    • Shared office space (collaboration amongst the entrepreneurs is key)
    • Weekly dinners for the first two months and then bi-weekly dinners for the next 10 months
    • Weekly cohort-wide email of all the startups and their recurring revenue (peer pressure!)
    • Quarterly Demo Days exclusively for angel investors and potential customers (the best type of funding is cash from customers)
    • Overarching Goal: Be financially self-sustainable at the end of the program

    A few differences with this model: 4x longer program, multiple Demo Days, and an explicit goal of generating enough revenue to be sustainable at the end of the year. Overall, the big difference is the focus on generating revenue vs raising money. Startups that generate six figures of revenue have a much greater chance of success than ones that raise a seed round.

    What else? What are some more thoughts on the 12 Month Startup Accelerator?

  • Winning Startup Pitch Competitions

    Several years ago I was at a startup pitch event where over a dozen startups presented. Some were OK and some were good. At the end, when it was time to announce the winner, everyone knew exactly which one was going to win. Great idea? Check. Awesome pitch? Check. Believable team? Check. After winning the pitch competition, the startup shutdown a couple weeks later.

    Here are a few thoughts on winning startup pitch competitions:

    • Public praise from a random group of judges doesn’t equal success
    • Pitch competitions are great for networking, but winning one shouldn’t be construed as progress
    • Pay attention to startup theatre and ensure it’s a good use of time
    • Parlay the win into meetings, especially as another reason to get together (dear potential investor, we just won award x and would love to get back together to provide an update on the business)

    Too often, startup pitch competition winners think that an award is validation for their business. Validation comes from customers and growth. Awards are good for social proof, but shouldn’t be a substitute for real progress.

    What else? What are some other thoughts on winning startup pitch competitions?