David Cummings on Startups

Category: Community

  • 4 Recommendations for Building a Startup Community

    Last week I had the chance to spend time in Little Rock after a friend invited me out for the day. We started with a great tour of downtown, and then met with local leaders from the business, entrepreneurship, civic, and economic development community. There’s a real passion and desire to see a more vibrant startup community, so much so that the taxpayers voted in favor of an additional sales tax that provides $20+ million in funding to build and operate the Little Rock Tech Park. After a few hours of meetings, I had five recommendations:

    1. Make it Lead by Entrepreneurs – While there were a number of great people on the board, it was clear that the startup community wasn’t lead by entrepreneurs. Follow The Boulder Thesis, make it lead by entrepreneurs, and try to minimize the government feeling as much as possible.
    2. Find a Poster Child – I asked several people who’s considered the top up-and-coming entrepreneur in town to act as a poster child and represent the entrepreneurial potential for the region. Crickets. It was really surprising that I didn’t get a single person or company name.
    3. Bring the Community Together Weekly – Entrepreneurship is such a fast-paced journey that people need to get together on a weekly basis, not just monthly. Create an event like the Startup Chowdown and help entrepreneurs and other people in the startup community build relationships on a weekly basis.
    4. Incorporate Tech and Non-Tech Entrepreneurs – While there’s heavy emphasis on tech startups right now, a thriving startup community has both tech and non-tech entrepreneurial companies. And, in the context of a large building to house startups (their first building is 42,000 feet), it’s critical to have energy and excitement as soon as possible which will come from bringing all types of entrepreneurs together.

    Building a startup community is hard and requires input and collaboration from a variety of groups. At the core, it should be lead by entrepreneurs and supported by the business and civic leaders. With entrepreneurs at the forefront, other entrepreneurs will follow and good things will happen at a faster pace.

    What else? What are some more recommendations for building a startup community?

  • Differentiating Between Innovative and Replicative Businesses

    During a recent talk to a group of civic leaders about entrepreneurship and the Atlanta Tech Village, I mentioned that almost all successful entrepreneurs aren’t successful with their first idea. Meaning, success either came after a failed venture or after a pivot to a new idea. The common story of an entrepreneur coming up with an innovative idea and succeeding on the first try is a myth.

    After the talk, one of the civic leaders eagerly came up and told me that his son was a successful entrepreneur that started a distillery and made it work on the first try. Biting my tongue, I nodded, smiled, and thanked him for attending the talk. At that point, I realized I hadn’t emphasized enough that I was talking about innovative businesses that invent a new product or solution that’s never been done before. Replicative businesses are ones that entrepreneurs create in an existing market with an existing type of product or service that has a number of direct substitutes. A local distillery is a replicative business.

    One of my favorite quotes for civic leaders is “the majority of new jobs created over the next 10 years will come from businesses that aren’t even in existence today.” Yes, new replicative businesses will create a number of jobs but new innovative businesses will create many more. Creating a successful innovative business is 100x harder than creating a successful replicative business.

    When talking about entrepreneurship and job creation, make sure to distinguish between innovative and replicative businesses.

    What else? What are some more thoughts on the idea of distinguishing innovative businesses from replicative businesses?

  • 4 Thoughts on Venture Atlanta 2015

    I spent the last two days at Venture Atlanta in the most popular aquarium in the United States. Venture Atlanta continues to be one of the top venture events in the Southeast and this year was excellent. Here are four thoughts on Venture Atlanta 2015:

    • Quality of Early Stage Companies – This year’s early stage companies were much more investable this year in that most had six figures of revenue and operating businesses. A few fell into the “science experiment” bucket (they didn’t have any paying customers) but it was rare.
    • References to the Marketing Software Cluster – Quite a few presenting companies referenced local success stories like Silverpop, Vitrue, and Pardot. It’s clear that our local marketing software exits have spurred new investments in marketing startups and that we have a cluster’s critical mass.
    • Number of Attendees – The first day was standing room only for the presenting companies and attendance is at or near an all-time high. Investors, entrepreneurs, and service providers all turned out en masse for the event.
    • Presenting Companies that aren’t Raising Money – Several companies that presented clearly weren’t raising money. Now, this is a tough one. We want to showcase great multi-million dollar revenue tech companies in Atlanta, yet potential investors are here to find a new deals, not to see what’s interesting and not raising money. It makes sense to have them present if we don’t have another qualified company to present in that slot.

    The presenting companies were well coached and did a great job on stage. I’m looking forward to Venture Atlanta next year.

    What else? What are some more thoughts on Venture Atlanta 2015?

  • One Downside of Regional Office Recruitment

    As a community, we take great pride in recruiting regional offices for tech companies — startups and large firms alike. Benefits include high paying jobs, cachet from having name-brand employers in town, and general civic pride. Only, from an innovation perspective, there’s one real downside: regional offices don’t do the most important work.

    If you want to attract the absolute best people, you need the absolute most important work. And, in the tech world, the most important work almost always takes places at the headquarters (and for companies that were acquired, headquarters here means where ever the core product is developed). The best way to grow the base of the most important work is to develop the homegrown entrepreneurial success stories. In fact, this is also the best way possible to help startup communities.

    What else? What are your thoughts on the idea that the most important work is typically done at the corporate headquarters?

  • Rigor and Zoompf Unite

    Yesterday Rigor announced their acquisition of Zoompf combining a leading web performance monitoring system with a great performance improvement system (disclosure: I’m an investor in Rigor). Now, Alan Patricof says “never trade your cat for somebody else’s dog” (source), but there are times where combining two complementary startups makes sense, and this is one of those times.

    Here’s the quick explanation of each company:

    • Rigor – Cloud-based software the runs real web browsers from a variety of geographic locations to ensure that critical paths work correctly in SaaS products, verifies buyers can complete the checkout process on ecommerce sites, and continuously tests the speed of media sites.
    • Zoompf – Cloud-based software that analyzes web performance and provides prescriptions and solutions to improve performance bottlenecks (e.g. ways to tune the server, optimized images, etc.)

    So, Rigor is constantly monitoring critical web apps (including mobile app end-points) and Zoompf takes performance issues and provides solutions to fix them — a great combination.

    Read more about the acquisition on the Rigor blog.

  • The Best Thing Possible to Help Startup Communities

    One of the most common questions I get on a weekly basis is “what do we need to do to help our local startup community?” People expect me to talk about more local funding options, more national press, and more local talent. While all of those things are great, the best answer is also the hardest answer: produce more huge success stories. Now, small success stories are fine but they don’t move the needle. What’s needed is huge success stories, the kind that changes the trajectory of the region.

    Here are a few benefits of big success stories:

    • More success stories — whether exits, IPOs, or jobs created — creates more attention and reasons for the media to cover the community.
    • More wealth creation provides capital to fund the next generation of entrepreneurs and enables investors in the region to make riskier bets.
    • More people starting companies because they’ve seen it work and much of the process has been demystified.

    The next time someone asks what’s the biggest thing the startup communities needs to get better, tell them the best thing possible is big success stories.

    What else? What are some more reasons why big success stories are so important for startup communities?

  • Impact Builders

    Continuing with yesterday’s post on Empire Builder or Lifestyle Builder, Alok offered up a third type as a variation of the Empire Builder: the Impact Builder. Here’s how Alok describes it:

    The Impact Builder wants to impact a specific issue or group and believes building a business (for profit or non profit) is the most sustainable way to drive that change. They’re not really in it for the ‘sport’ or goal of building a company but, instead, look at that process as a means to an end. Impact Builders want scale, profitability, etc. — primarily because it enables them to impact more people.

    Alok is absolutely right that Impact Builders are incredibly important and make a huge difference in our society. Many entrepreneurs are Impact Builders and use their gifts and talents to help other people. The next time you think of Empire Builders and Lifestyle Builders, think of Impact Builders as well.

    What else? What are some more thoughts on Impact Builders?

  • 3 Reasons Local Investors Don’t Collaborate More

    Last week an angel investor asked me why local investors don’t collaborate more. We chatted about it for a few minutes and I didn’t have a good answer for him. After thinking about it for a week, I realized there are three reasons why local investors do their own thing:

    1. Unique Focus – With so few investors, there isn’t much overlap between interests. Focus areas like sales and marketing technologies, cybersecurity, media, and fin tech don’t usually intersect.
    2. Investing as Hobby – Most of the local investors are investing their own money as a hobby, and don’t treat it as a profession. Also, since it’s a hobby, the pace of activity ebbs and flows depending on other life activities.
    3. Lack of Collective Goals – Without common goals, like growing the entrepreneurial community, there’s little impetus to collaborate.

    Local investors don’t collaborate much, yet there’s a desire to build a stronger startup community, and a belief that more collaboration will help. Hopefully, with time, we’ll see more collaboration.

    What else? What are some more reasons local investors don’t collaborate more?

  • The Institutional Investor Challenge for Local Venture Funds

    Continuing with last week’s post on The Conundrum for Regional Venture Investors, there’s another element of the message that needs further clarification. First, there’s the concept of More Venture Capital vs More Local Venture Capital where many business leaders express the desire for more venture capital in the region and they’re really saying that they want more locally-based venture firms in the region. Second, and the topic for today’s post, is that to have large local venture funds, institutional investors like pension funds, university endowments, and foundations are required. Unfortunately, tapping into local high net worth individuals will only support small-to-medium-sized funds.

    Here’s the ideal lifecycle to raise a large venture fund:

    • Raise a $15M fund from local high net worth individuals and family offices
    • Deploy the capital over 3-4 years and show great paper returns (30%+ IRR)
    • Raise a $75M fund from local investors and some institutional investors and repeat the deployment timeframe and success
    • Raise a $150M fund from local investors and a number of institutional investors and repeat the deployment timeframe and success
    • Raise a $300M fund from mostly institutional investors and build an enduring top-tier partnership

    Starting from scratch, and executing perfectly, this is a 9-12 year journey to have the necessary success to then raise a large venture fund from institutional investors. Without a substantial track record, most institutional investors aren’t interested. Communities that want larger, local pools of venture capital have to understand how institutional investors play a major role. 

    What else? What are some more thoughts on the institutional investor challenge for venture funds?

  • 2015 Venture Atlanta Presenting Companies

    Venture Atlanta recently announced its 2015 presenting companies for the annual two day event on October 20th and 21st. Thirty-two companies are presenting – 17 early stage and 15 venture spotlight – to an audience of almost 700 people, making it one of the largest events of its kind in the Southeast.

    Here are the presenting companies:

    Early Stage Companies

    • LASSO – Workforce management for events and entertainment
    • FotoIN – Mobile app that streamlines visual inspection and verification of field work
    • Clean Hands Safe Hands – Hand hygiene monitoring technology for hospitals
    • ENGAGE.cx – B2C CRM focused on tying together personal interactions
    • In Command – Mobile-enabled physical supply chain components
    • HUX – Marketplace for finding housekeepers
    • CentralBOS – Central back office for ERP, CRM, and accounting
    • Gimme Vending – Connect vending machines wirelessly to mobile devices
    • Terminus – Account-based advertising using CRM and marketing automation data
    • FSLogix – Policy and provisioning of virtual images across the hybrid cloud
    • Convey – Micro-site software for managing resources for indirect channels
    • Florence Healthcare – Record management for clinical trials
    • GPA Learn – E-learning for math for grades K-5
    • GreenPrint – Gas station and fleet loyalty program based on carbon-neutral gasoline
    • Menguin – Online tuxedo rental
    • RootsRated – Network of the best outdoor experiences
    • SherpaDesk – Combination issue tracker, help desk, and invoicing software

    Venture Spotlight Companies

    • LogFire – Supply chain management software
    • Insightpool – Social media engagement platform
    • Salesfusion – Marketing automation software
    • HM Wallace – Building supplies online retailer
    • g11n – Globalization management software
    • Lumense – Biological and chemical sensor platform
    • Azalea Health – Electronic health records, practice management, and revenue cycle management
    • Roadie – On demand shipping via a marketplace of independent contractors
    • Lucena Research – Quant research software
    • Knapsack – Custom ad-unit alternative to banner ads
    • StrataCloud – Software-defined enterprise data centers
    • N2N Services – Integration platform for higher education
    • BuzzBoard – Sales prospecting and engagement platform for media companies
    • AchieveIt – Strategic plan management and execution software
    • Overgroup H2O – Recurring revenue billing management platform for communications and telcom companies

    I’m looking forward to Venture Atlanta next month and hearing the entrepreneurs share their story.