David Cummings on Startups

Category: Entrepreneurship

  • Explicitly Prioritizing What’s Important

    Near the end of the John Doerr video, one of the audience members asks about work/life balance. Doerr then goes on to talk about the partnership’s values. Initially, I thought the values were going to be the core values (e.g. positive, self-starting, and supportive — three of my favorite), but it quickly became clear that these values were how they prioritize life in context of their firm.

    Here are the Kleiner Perkins values as presented in the video:

    1. Family first
    2. Partners
    3. Portfolios
    4. New ventures
    5. Public/community service

    While a VC partnership is a different than a startup, explicitly prioritizing what’s important is a great exercise.

    What else? How do you prioritize what’s important?

  • 7 Things to Consider Before Raising Institutional Money

    Entrepreneurs love talking about raising money. Now, I say “talking” because the reality is that most won’t raise any money. Many will try but few will succeed, and that’s OK. Now, so much of the fundraising process is driven by traction — real customer data — and not by big ideas (every idea can already be found with a Google search).

    For entrepreneurs that are in a position to raise money (read: good metrics), here are seven things to consider before raising institutional money:

    1. Once the first round is raised, expect to be on the fundraising treadmill every 12-24 months forever
    2. Know that an exit of $300 million or greater is often needed for everyone to get a big helping
    3. Make the explicit decision to be rich or king
    4. Unlike a spouse, investors can never be divorced from the business
    5. Remember that for every 1,000 venture-backed startups, less than 20 sell for $100 million or more
    6. Do the math and prove to yourself that the company has to be 5x more valuable for it to make sense to raise money
    7. Ensure that it’s truly a 10x better business model

    Raising institutional money isn’t for most entrepreneurs but is absolutely right for the tiny percentage that can put it to work and build a huge company. The next time an entrepreneur says they want to raise institutional money, make sure they evaluate these seven things.

    What else? What are some more things to consider before raising institutional money?

  • Video of the Week: John Doerr on What It Takes to Be a Remarkable Leader

    John Doerr, partner at Kleiner Perkins, is one of the most successful venture capitalists of all time leading initial investments in Amazon.com and Google, among others. One of the more fascinating parts of the video is the belief that his partnership is a builder of companies, and not merely a financier. Watch the video and learn more about his approach to leadership and investing. Enjoy!

    From YouTube: Venture capitalist John Doerr discusses some of trends impacting the business and investing world, as well as what he thinks it takes to be a remarkable leader and entrepreneur today. He is joined by two other Kleiner partners and Stanford GSB alums, Trae Vassallo and Chi-Hua Chien. Trae leads many of Kleiner’s investments in the green technology, while Chi-Hua focuses on mobile technologies. Doerr is a partner at Kleiner Perkins Caulfield and Byers.

  • The Most Important Equation to Understand the Current Tech Boom

    Benedict Evans has a great post up titled Forget about the mobile internet where he argues that mobile is the real internet and the desktop is limited. In the article, he has a slide that outlines a simple equation that best represents why we’re in a tech boom:

    Here’s the formula from the slide spelled out:

    • 2-3x more smartphones than PCs by 2020
      x
      Personal
      Taken everywhere
      Frictionless access
      Sensors, cameras
      Location
      Payment
      Social platform
      Much easier to use
      =
      Vastly bigger opportunities

    Simply put, more people than ever before have super computers in their pocket with tremendous functionality and ease of use. Incredibly large markets with new functionality result in huge opportunities, and we have a tech boom as a result.

    What else? What are some more thoughts on this important equation to understand the current tech boom?

  • Build a Three Year Vision Plan

    While the Simplified One Page Strategic Plan is my favorite planning document for startups, it’s a worksheet for the core elements of the business and certain near-term projects and metrics. After revisiting it at least quarterly to align everyone in the company, there still exists a need to do long-term planning. That’s where a three year vision plan comes in. Too often, entrepreneurs work in the business more than they work on the business.

    Here’s an example three year vision plan outline.

    • S.W.O.T. Analysis – Strengths, weaknesses, opportunities, and threats as they exist three years from now (e.g. strengths will change over time — what will they look like in three years?)
    • Product – Core modules and functionality, much like a simple roadmap for the product
    • Team – Outline all the departments, job titles, reporting structure, etc. (e.g. going from 10 people to 100 people is a major undertaking, and this exercise of going through all 100 positions is well worth it — see What Your First 100 Hires Will Look Like)
    • Metrics – Include things like annual recurring revenue, customer count, renewal rates, cost of customer acquisition, marketing qualified leads, sales qualified leads, etc.
    • Funding – Detail how many rounds of funding are required, dollar amounts, and any other pertinent information
    • Miscellaneous – Anything else that’s relevant to the three year vision of the business

    A three year vision is a great way to get team members, investors, advisors, and other key constituents thinking about the long road ahead, and not just the next quarter. Spend time on the big vision at least once a year and make it part of the annual routine.

    What else? What are some more thoughts on building a three year vision?

  • Side Hustle

    Over the past few weeks I’ve heard two different entrepreneurs reference a “side hustle” as part of their entrepreneurial journey. After I heard it the first time, I didn’t think much of it but when it came up a second time, I realized it’s more of a thing than I thought. Naturally, the next step was to Google it and sure enough there’s even a Side Hustle Nation touting the ability to “build job-free income.” Thinking more about it, it makes sense to reference a side job that’s separate from the normal day-to-day activities as something new.

    Here are a few thoughts on entrepreneurs and a side hustle:

    The next you hear someone mention a side hustle, ask about their goals and see if you can help them become a full-time entrepreneur. A side hustle can be a good way to make money but it’s often better to figure out how to be a full-time entrepreneur sooner.

    What else? What are some other thoughts on side hustle?

  • 4 Quick Starting Points for New Angel Investors in Atlanta

    Earlier today I had the chance to meet a new angel investor that just moved to Atlanta. After doing 10+ deals in his previous city, he’s looking to get involved here. While the tech startup scene is small, it’s fast-growing with big ambitions and there are a number of ways to plug in.

    Here are four quick starting points for new angel investors in Atlanta:

    Angel investing, by and large, is a word-of-mouth endeavor. With these organized groups, networking events, and AngelList, there are plenty of opportunities to invest in startups.

    What else? What are some other ways for new angel investors to get connected in Atlanta?

  • The Power of Recurring Revenue

    Early in my entrepreneurial career I sat down with one of the most successful entrepreneurs in town and he said something I’ll never forget: figure out how to build a recurring revenue-based business as it’s the best model. Ever since then, I’ve kept that in mind and focused my efforts on Software-as-a-Service (SaaS) and other types of recurring revenue businesses.

    Here are a few benefits of recurring revenue:

    • Cash flow is predictable and timely
    • Critical metrics like cost of customer acquisition, lifetime value of the customer, and renewal rates are well understood
    • Every year starts with a base of recurring revenue making it much easier to grow indefinitely
    • Banks have credit lines specific to recurring revenue businesses that are much more favorable than standard business credit lines
    • Recurring revenue businesses are significantly more valuable than non-recurring revenue businesses, on average, when comparing ones with similar revenue amounts

    The next time you’re analyzing potential business models, consider the power of recurring revenue. While recurring revenue is harder to get started, it’s an amazing business model once running.

    What else? What are some more thoughts on the power of recurring revenue?

  • Entrepreneurs Need a Strong Locus of Control

    Continuing with the idea that entrepreneurs need a killer instinct to succeed, there’s also another critical element: a strong locus of control. From Wikipedia:

    In personality psychology, locus of control refers to the extent to which individuals believe they can control events affecting them.

    How many times have we heard excuses as to why an entrepreneur didn’t succeed? Yes, sometimes the market timing isn’t right or the technology isn’t feasible, but when that happens, the best entrepreneurs pivot into something new and keep at it until they succeed.

    Some of the more common gripes from entrepreneurs include “we couldn’t raise any money because local investors didn’t understand our idea” or “we couldn’t recruit any team members because we couldn’t pay market rate salaries.” Do those comments sound like they’re from someone with a strong locus of control? While they might be serious challenges, entrepreneurs with a strong locus of control figure out solutions.

    The next time you’re talking to an entrepreneur, figure out if they believe they can control events affecting them or if they feel that they’re at the mercy of whatever happens. Entrepreneurs need a strong locus of control.

    What else? What are some more thoughts on the idea that entrepreneurs need a strong locus of control?

  • Video of the Week: TED Conference Richard Branson

    One of the world’s most famous, and entertaining entrepreneurs, is Sir Richard Branson. After reading a number of his books including Losing My Virginity and Business Stripped Bare, I’ve become a big fan. For this week’s video, Richard Branson is interviewed by Chris Anderson as part of the TED conference. Enjoy!