David Cummings on Startups

Category: Community

  • Where Do Entrepreneurs Need Help?

    Last week, I was asked if I knew of entrepreneurs in town that had already raised some money and were having difficultly raising a second round of financing. The idea was to try and focus on this subset of entrepreneurs since they had already been vetted by investors and should have something to show. My response: I don’t have anyone to recommend at this time. After thinking about it more, this is a good way to assess the progress funded entrepreneurs are making locally, specifically ones that are trying to raise more money. One idea was to work on introducing these entrepreneurs to local businesses that might have a need for their product or service with the hope of generating cash from customers, which is often the best form of funding.

    Entrepreneurs need help in a number of areas. Here are a few ideas:

    Entrepreneurs always need help with something. More communication and collaboration in the community around these areas will make for a stronger and more vibrant ecosystem.

    What else? What are some other areas entrepreneurs need help?

  • More At-Bats for B2C Startups in the Community

    An entrepreneur recently asked me why we don’t have more B2C startups in town. Consumer startups, as opposed to business ones, have a lower success rate. Much like the movie business, even experts have a hard time telling what’s going to do well financially and what isn’t — it’s a “hits” business. With the continued success of Yik Yak here, there’s a renewed interest, and hope, in more B2C startups locally. What’s the solution? More at bats. More swings. More strikeouts. More hits.

    Here are a few thoughts on more at-bats for B2C startups:

    • Incubators like Switchyards are working on developing institutional knowledge around what does, and doesn’t work, while catalyzing the community
    • More local success will result in more local hires that get exposed to consumer startups, and in turn they’ll start their own companies (success breeds success but there’s a chicken and egg problem to get it going)
    • More meetups, experience sharing, and public startup funerals will help give people confidence to take more at-bats, and if it doesn’t work, closure to move on

    When someone asks about creating more B2C startups, tell them it’s a numbers game and that we need more at-bats.

    What else? What are some more thoughts on at-bats and B2C startups?

  • More Ideas to Help Entrepreneurs

    After giving a tour of the Atlanta Tech Village last week to a C-level executive of a local Fortune 500 company, he asked, enthusiastically, how he could help out. I cited the normal ways like mentoring, hearing curated pitches from startups (see One Way Government Can Help Startups), and spreading the word about the innovation taking place in their own backyard. Then, he asked something else that stuck with me: what are some other ideas you’re considering to help entrepreneurs?

    Here are a few more ideas to help entrepreneurs and startups:

    • Host a weekly/monthly AMA (ask me anything) in-person where a successful entrepreneur answers questions (straight Q&A)
    • Lead a regular webinar that’s open to anyone with a different entrepreneurship topic each week (e.g. product management, engineering, sales, marketing, fundraising, etc.)
    • Facilitate an entrepreneur bootcamp program
    • Run more programs to help founders meetup, internship fairs, and domain expert roundtables

    Ultimately, increasing the collaboration and flow of information will help more entrepreneurs succeed.

    What else? What are some more ideas to help entrepreneurs?

  • Atlanta Startup Village #27

    Atlanta Startup Village (ASV) #27 will be held this Monday night at the Atlanta Tech Village. The Startup Village is a monthly event where five entrepreneurs give five minute pitches followed by five minutes of audience Q&A. Overall, the goal is to bring the community together and share what’s going on with fellow entrepreneurs in the area.

    Here’s are ASV’s presenting companies for Monday:

    • MotoBrain – Hardware devices that make the smart phone more connected with cars, bikes, and boats
    • AnswerRocket – Natural language queries for business intelligence questions
    • TimeCue – Online employee time clock
    • SafelyStay – Guest screening for vacation properties
    • REscour – Automated market research for commercial real estate

    Please join the meetup and come out to the event. ASV is the largest monthly gathering of entrepreneurs in the Southeast and worthwhile for anyone interested in getting involved in the startup community.

  • Pooled Angel Investor Liquidity Fund Idea

    One of the biggest problems as an angel investor is the lack of liquidity due to long time horizons and so few exits outside of the San Francisco Bay Area. Meaning, if you invest $25k in a startup today, and follow on with another $50k or $75k over the years, there’s a good chance you won’t see a return for 7-10 years, if ever. Who wants to invest a large sum of money and have no way to access any of it for a decade? Seems like a tall order, and is one of the reasons it’s so hard to raise angel money outside of friends and family that just want to help.

    Here’s an idea for a pooled angel investor liquidity fund:

    • A group of angels, say 10-20, that invest at least $100k per year, ideally in non overlapping investments, agree to join a fund that holds 20% of the equity of their investments (e.g. invest $50k for 5% of a startup and 20% of that equity, which is 1% of the startup, goes into the liquidity fund)
    • Contributed equity is valued at the valuation of the most recent round with no modifications for preferred preferences, cumulative dividends, etc. so as to keep things simple
    • As exits occur, which is both more likely and more frequent due to having so many more deals, especially if there are 10-20 new investments per year, everyone in the liquidity fund will see more cash cycle through the community
    • Much like a mutual fund, there’s benefit in having a more diversified portfolio, but there’s still direct picking of startups and strong upside for the occasional homerun

    Why not just invest in a venture fund and get the benefit of pooled capital? Venture funds make a limited number of investments and still have no liquidity in the short run, just like angel investing.

    Unanswered questions about the pooled angel liquidity fund idea include who manages it, how are they compensated, and how long is the ramp up period until the fund starts seeing cash distributions on an annual basis. Regardless, there’s a desire for more liquidity as an angel investor and this is one idea to address it.

    What else? What are some more thoughts on the pooled angel investor liquidity fund idea?

  • When to Pitch at Startup Events

    With a number of startup pitch events scheduled over the next few weeks, it’s a good time to think through when it’s best to go on the pitching tour. Most events have an element of startup theatre, so the first thing to do is to evaluate the opportunity cost of attending another event vs. making more progress on internal goals and priorities. Assuming there’s an overall fit, here are a few items to think through when considering applying to pitch at a startup event:

    • Fundraising – Is there a desire to raise money and the corresponding metrics to warrant investment? Too often, entrepreneurs head to pitch events in an effort to raise money, but don’t have the corresponding business metrics. If the metrics are strong, pitch events are a good way to showcase them and tell a compelling story.
    • Lead Generation – With a broadly applicable product, pitch events can be a great way to generate leads. Similar to the idea of asking VCs for intros to portfolio companies, ask the audience for leads.
    • Recruiting – Finding great talent is always a challenge, especially during high growth stages. Pitch events can be a good way to spread the word and find new candidates.

    If you ask an entrepreneur why they do pitch events, outside of trying to raise money, the most common answer is networking. Entrepreneurs, generally, are pretty social and want to meet other people, especially other people that can help them achieve their dreams. Naturally, there are a number of other networking events beyond pitch competitions.

    For entrepreneurs considering pitch events, evaluate the current business goals, and make sure that the time commitment is worthwhile.

    What else? What are some other thoughts on when to pitch at startup events?

  • SalesLoft Badge Unlocked: $10M in Fresh Fuel

    Today, SalesLoft announced that they raised a $10 million Series A, lead by Jason Green of Emergence Capital, with participation from Jason Lemkin of Storm Ventures and Tom Noonan. Now, this is a huge milestone for the company, but only one of many required to build a great business. Let’s dig into how SalesLoft got here.

    Back in 2011, I was introduced to Kyle Porter, via a mutual friend, as someone who’s a young entrepreneurial sales executive with big aspirations. After meeting Kyle, I immediately tried to recruit him as a sales manager to help grow the Pardot team. Quickly, it became clear that running a sales team wasn’t his goal. Not having a position at Pardot that he was interested in, I invited him to the Ruby Tuesday’s next to the Pardot office with a different idea: let’s start a technology company together focused on making sales people more productive.

    Several weeks later, after many conversations and hours of brainstorming, SalesLoft was started around the idea of building a sales intelligence platform (working tag line: sales intelligence — no longer an oxymoron). The original product would scrape the web for compelling events sales people needed to know about. For example, if a company was expanding offices or merging with another company, those were potential opportunities sales people needed to know about, especially if the company is one that’s already a prospect.

    After struggling with adoption for the first product (it was a vitamin and not a painkiller), a new, simpler product was introduced called Job Change Alerts (JCA). JCA was easier and more actionable for a sales rep to reach out to a lead or contact with a congratulatory note in an effort to stay top-of-mind. The product grew nicely from a users perspective, but was difficult to monetize as it was still more of a nice-to-have rather than a must-have. Then, LinkedIn introduced a more enhanced version of their job change notification service at no charge, and it was clear JCA was doomed.

    All throughout this iterative process, whenever a sales manager or sales rep was asked what they really wanted, the overwhelming response was that they wanted fresh, high quality prospect data with which to do more outreach. As a side project, an intern was tasked with building a tool to scrape data online in an effort to build the most accurate list of prospects. After the list-building tool, called Prospector, was introduced to SalesLoft prospects, the immediate response was incredible. Finally, something that did the job quickly and helped sales reps generate more leads.

    JCA was put to rest and all the efforts were focused on Prospector. Immediately, Prospector took off, due in part to providing tremendous value with minimal effort and in part because of the large following SalesLoft earned via content marketing and Kyle’s evangelism. After multiple product reboots, and a full team reboot, SalesLoft was growing faster than any B2B SaaS product I’d ever seen.

    With Prospector providing great data, customers started asking for a way to more effectively manage the inside sales process. CRMs like Salesforce.com are excellent, but are primarily a contact and opportunity database. Instead, SalesLoft customers wanted a business process management application of record that worked in conjunction with a CRM (or can function standalone). Imagine an application that helps enforce business rules around number of phone calls per day, number of emails per day, etc. all tailored to the type of sales rep, combined with an execution engine whereby the software actually dials the phone and sends the emails. The result is a huge increase in productivity and sales. Another way to think about it: take the Predictable Revenue methodology and build a product to repeatably execute it. That, essentially, is the Cadence product, and it now represents the fastest-growing product line within SalesLoft, and the future of the company.

    Congratulations to Kyle, Rob, Tim, and the rest of the SalesLoft team for achieving this milestone!

    For entrepreneurs, this is a good case study of just how challenging it is to get a company going and what it takes to be in a position to build something special.

    What else? What are some other thoughts on the SalesLoft story?

  • Checklist of Startup Community Ingredients

    Recently I was meeting with a friend talking about our respective startup communities. We covered many of the usual topics and then got to one I hadn’t explicitly discussed before: a checklist of common startup community ingredients. Meaning, when you look at a city, what programs, events, facilities, etc. do you expect to find?

    Here’s the start of a checklist of startup community ingredients:

    • Critical mass of entrepreneurs – Entrepreneurs need to be out en masse building companies
    • Entrepreneur-lead initiatives – Entrepreneurs need to lead the community (see the Boulder Thesis)
    • Engineering schools – Both traditional technical universities and more modern code schools are necessary for a steady supply of technical talent
    • Meetup groups – Regular gatherings for sales, marketing, engineering, entrepreneurs, etc.
    • Co-working spaces – Shared desks and conference rooms
    • Furnished office spaces – Private rooms and suites fully furnished for startups
    • Event centers – Large conference centers that are great for all types of events
    • Accelerator programs – Cohorts of seed-stage startups that come together for heavy mentoring and a demo day
    • Mentors – People in the community that actively help and coach the next generation of leaders
    • Angel funds – Loosely connected groups of angel investors that meet on regular basis and look at deals

    Of course, all of this is predicated on having hungry, ambitious entrepreneurs that build successful companies. The strongest startup communities have the most density, experience-sharing, and recycling of talent and capital.

    What else? What are some more items you’d add to a checklist of startup community ingredients?

  • 5 Ideas for Atlanta to be a Top 5 Tech Startup City

    Continuing with yesterday’s post, Atlanta in the Top 10 for Startups Funded, one of the most talked about ideas is what it would take to be a top five tech startup city. With Washington DC in the number five spot with 69 fundings and Seattle at 67 fundings (source), it would require almost 80% more fundings than Atlanta had to earn the number five spot, assuming no other growth from these cities and others (unlikely). Let’s assume Atlanta would need 90 deals in 10 years to be a top five tech startup city since other metro regions would make progress as well.

    Here are five ideas for Atlanta to have 90 first-time fundings by the year 2025:

    1. Multi-Billion Anchor Tech Company – One massive success story, like Atlanta’s had with Home Depot and CNN, creates hundreds (thousands?) of millionaires, attracts thousands of employees from inside and outside the region, and helps spawn dozens of new companies (10 company first-time fundings increase per year).
    2. New Accelerator Programs – With only a couple accelerator programs in Atlanta, there’s a real opportunity to build several more, especially ones that are more industry or technology specific (e.g. SaaS, IoT, internet security, etc.). More accelerator programs will result in more first-time fundings (10 company increase).
    3. Increased Startup Density – As areas like Buckhead and Midtown continue to attract startups and increase in density, a number of benefits ensue and the chance of entrepreneurial success increases. With increased success comes increased first-time fundings (10 company increase).
    4. More Recycled Capital – As the current generation of success stories achieve strong exits, more entrepreneurs will have the opportunity to invest in the next generation of entrepreneurs, and recycle a greater percentage of the wealth created. Creating a culture where entrepreneurs are expected to recycle some of their winnings will generate a number of new first-time fundings (10 company increase).
    5. Startup Relocations – Some percentage of the existing 39 deals last year in Atlanta were startups that relocated to Atlanta, especially from surrounding states in the Southeast. Assuming it was 10% (4 companies), doing a more proactive job and highlighting the strengths of our existing community, that number could rise to 14 companies (10 company increase).

    With these five ideas turning into 50 additional first-time fundings per year, Atlanta has a real opportunity to be a top five tech startup city. Of course, it’ll take a tremendous amount of work, and a lot of luck, but with so many good things happening, momentum is strong and the opportunity is real.

    What else? What are some other ideas to help Atlanta become a top five tech startup city?

  • Atlanta in the Top 10 for Startups Funded

    Lance Weatherby’s post from earlier today titled Atlanta Cracks the Top Ten highlights the latest Brookings report on first round venture investments by region showing that Atlanta comes in at #10 (tied with Houston). Put another way, every company that raised venture money for the first time in 2014 was categorized by region and Atlanta came in the 10th spot with 39 deals. Just to put it in perspective, Silicon Valley had 630 first rounds of venture investment (not counting angel rounds, follow-on rounds, etc).

    Here are a few thoughts on Atlanta and the number of startups venture funded annually:

    • Cracking the top five is a long shot, but possible (the first four spots with Silicon Valley, NYC, Boston, and Los Angeles are locked down) as the regions in the top 10 are also working hard to grow their community (something miraculous like a Google-esque success story would be required to produce enough wealth to fund enough additional startups per year in Atlanta)
    • Per capita, Atlanta is on the lower side for number of investments, but being the 7th largest metro region in the country bodes well for future opportunities
    • Venture funded companies are only a piece of the startup region rankings — jobs created, success stories, IPOs, and exits are critical as well
    • Not all venture fundings are for tech startups (e.g. VCs look for high growth companies but they aren’t limited to technology companies)

    Doing well on national comparative rankings isn’t the ultimate goal for a startup community, but entrepreneurs love competing, and there’s strong community pride. With time and hard work, Atlanta will continually be a top 10 tech startup community.

    What else? What are some other thoughts on Atlanta being in the top 10 for first rounds of institutional financing in 2014?