David Cummings on Startups

Category: Entrepreneurship

  • Accused of Doing Too Much

    One year after we sold Pardot I was at an event with a venture capitalist that had passed on investing in Pardot at a $7 million valuation. We were catching up and I joked with him that he could have had a great return if they hadn’t passed on investing (we didn’t raise any money for the business). He stopped, looked up, and said, “You know, the reason we passed is because we felt you were doing too much having Shotput Ventures (an accelerator program), Hannon Hill (my first company), and Pardot.” Not having heard that before, I agreed that it seemed like a lot but that it was my style — I like to stay busy.

    Thinking about it some more, a few thoughts come to mind:

    • My ability to do multiple things is primarily driven by surrounding myself with great people who are self-starting
    • The CEO’s job is to set the vision, build a great team, and ensure there’s enough money in the bank to execute — sometimes that takes 60 hours in a week and sometimes that takes 20 hours in a week
    • As the startup grows and key people are hired for key positions, the amount of must-do day-to-day responsibilities lessen (there’s still plenty to do, only it’s easier to work on the business instead of in it)
    • Doing too much implies doing some things poorly, and that doesn’t have to be the case
    • The old adage “if you want something done, find a busy person” still holds true

    Today, I routinely get comments that I must be overloaded with all my activities and initiatives. My response: I’m not overloaded because of all the great people I work with and I don’t feel like I’m doing too much — the key is the people.

    What else? What are some more thoughts on being accused of doing too much?

  • Marketing Roadshows

    Last year I was talking to an entrepreneur that was in town doing a marketing roadshow luncheon at a nearby restaurant. This was his fifth stop on a tour of 10 cities with a goal of 25 prospects per city. After asking him about the roadshow, he said it was one of the most effective marketing programs they do and that it really made sense for his audience.

    Here are a few thoughts on marketing roadshows:

    • An in-person event is a great way to see a number of prospects at the same time and get more economies of scale compared to one-off meetings
    • Events are an excellent reason for sales reps to call prospects, or potential prospects, and invite them to learn about a relevant topic (the best form of marketing is education)
    • Existing customers, especially evangelists, are perfect to invite as well since it provides for more face time to build rapport and a chance for them to share their testimony with potential customers
    • Many products are sold completely over the internet now, meaning there’s no face-to-face aspect, making in-person events that much more powerful for team members to hear customer challenges directly
    • Customer economics like average deal size and lifetime value of the customer are important considerations when determining if a marketing roadshow makes financial sense (e.g. $50/person times 40 people equals $2,000 for the restaurant plus any travel and expenses)

    Once product/market fit is in place along with a repeatable customer acquisition model, a marketing roadshow is a worthy initiative for many tech companies.

    What else? What are some more thoughts on marketing roadshows?

  • Hire Sales Reps Ahead of Plan at Scale

    David Skok has another great post up titled A Common Way Sales Misses Plan. David has some of the best content out there for entrepreneurs, especially Software-as-a-Service entrepreneurs. The general idea is that when a startup has product/market fit and a repeatable sales process, the most common reason for missing a sales goal is not hiring and training sales reps fast enough. As much as entrepreneurs would like a simple self-service sales process, the reality is that almost all super successful tech companies employ hordes of great sales people.

    Here are a few notes from the article:

    • Bookings = Number of productive sales reps times average productivity per rep
    • 2 variables to increase bookings:
      • Number of productive sales reps
      • Sales volume for an average rep per month or quarter
    • 4 sales rep considerations:
      • Need leads to feed sales reps
      • Reps need time for training
      • Many new hires will fail
      • Staffing is needed for bringing on new customers and supporting them
    • Ultimate recommendation: bring on more sales reps earlier than plan

    Now, hiring a ton of sales people without product/market fit or a repeatable sales process isn’t the advice. Only when things are working well does it make sense to hire sales reps faster than planned. At scale, productive sales reps are the main revenue driver.

    What else? What are some more thoughts on hiring sales reps ahead of plan when at scale?

  • Entrepreneur Roundtables

    One of the most important accelerants for my entrepreneurial career was my Entrepreneurs’ Organization forum. Forum, in the EO and YPO parlance, is a small group of 8-10 entrepreneurs/CEOs that meet on a monthly basis and share all aspects of their business and life in a private and confidential setting. As an entrepreneur, there are so many topics that are difficult or inappropriate to talk about with friends and colleagues, yet it’s critical to get feedback, or at least get something off your chest. 

    Here are a few benefits of joining an entrepreneur roundtable:

    • Having a set day/time each month provides peace of mind to address any new issues that arise
    • Even with a board or advisors, peer groups act as another outlet for difficult topics
    • Many lessons are learned listening to opportunities and challenges other entrepreneurs face
    • Beyond just business, there’s a real personal and family benefit being a part of a tight group (many chapters have spousal forums as well)

    Entrepreneur roundtables are an invaluable resource for entrepreneurs of all types. Seek one out and you won’t be disappointed. 

    What else? What are some more thoughts on entrepreneur roundtables?

  • Video of the Week – Peter Thiel on Zero to One

    After reading Peter Thiel’s book Zero to One I was interested in hearing him talk and his presentation at UT Austin doesn’t disappoint. 

    From YouTube: Thiel is hailed as one of the most successful investors in the world. After co-founding PayPal, he went on to co-found Palantir Technologies and invest in Facebook, where he still serves on the board. He’s played major roles in dozens of successful companies and continually strives toward the next big thing. In “Zero to One,” he emphasizes the need for entrepreneurs to grasp for the ideas that nobody else has in order to truly innovate. This new way of thinking about innovation encourages burgeoning business leaders to carve their own lane in a heavily saturated race toward success.

    “Zero to One,” based on a course Thiel taught in 2012 at Stanford University, urges readers to see the broad picture and look past traditional boundaries between fields and industries in order to create a future full of innovation.

  • Start Small and Start Now

    Over the course of this summer, three different high school students reached out asking for help on their entrepreneurial venture. In each case, they had an idea laid out in a document and were trying to figure out the next step. With no prototype and no prospects, it was clear what to do next. 

    Entrepreneurs should start small and start now. Here are a few steps:

    • Customer Discovery – Meet with five new potential customers per day in person or over the phone and intimately learn what they do and don’t want in the product. Read about Customer Discovery and Lean Startups. 
    • Prototype a Product – Teach yourself how to build a prototype product using Codecademy and constantly refine it with potential customer input. 
    • Entrepreneur Books and Blogs – Start with three of my favorite books and read new entrepreneur blogs every day for five years. 
    • Executive Summary – Put everything down into a two-page executive summary. This document should be revised constantly and used as a communication tool for potential advisors, mentors, and investors. 
    • One Page Strategic Plan – Create a Simplified One Page Strategic Plan to outline both tactical and strategic imperatives as well as metrics. This should be updated quarterly, if not more frequently. 

    Anyone with a laptop and internet connection can follow this process and get started. Everything starts small — the difference is that entrepreneurs start now. 

    What else? What are some more thoughts on entrepreneurs starting small and starting now?

  • Financial Projections for Startups

    Recently I saw another one of the dreaded financial charts in a startup’s executive summary: $0 revenue today and $25 million in revenue in year three. Whenever I see this, I immediately know that the CEO either a) doesn’t have any startup experience or b) hasn’t done the appropriate homework. Can a company go from $0 to $25 million in three years from a cold start? Yes. Does it make the startup look credible in an executive summary? No.

    Here are a few thoughts on financial projections for startups:

    • Study the Inc. 500, especially technology companies. What does the revenue ramp look like there? These are some of the fastest growing companies in the country, and annual revenues like $1M to $4M to $10M are more the norm (and incredibly high growth).
    • Build a bottom-up forecast based on number of leads generated, conversion from lead to opportunity, number of trained sales reps, average sales cycle, average sales price, and conversion from opportunity to close.
    • Find a simple financial model online (e.g. here’s a SaaS metrics one) and adapt it (don’t build or use a super complicated financial model as it’s overkill without relevant operating history)

    Every startup should build financial projections. Even if there are many unknowns, it’s important to see how things might work, how gross margins make the model viable (or don’t! — see HomeJoy), and what the major drivers are for the business.

    What else? What are some more thoughts on financial projections for startups?

  • Developer Bootcamps

    One fairly new phenomenon in the startup community over the last few years is the rise of the developer bootcamp. While there are a variety of training programs, the general idea is that someone with a college degree wants to change careers, and instead of going back to college for two years, they go to a three month full-time program and come out with the skills to be a junior web developer. 

    Here are a few thoughts on developer bootcamps:

    • People that were already writing code on the side and building websites, yet want a more formal education and credentials, typically do the best
    • People that don’t have some minor programming exposure and prior coding initiative are often more challenged to be truly proficient after three months (this is feedback from entrepreneurs that have hired engineers from these programs)
    • Costs, ranging from $10,000 – $12,000, can be a challenge but are viewed as reasonable when the salaries of software engineers are compared to most fields (e.g. making $50,000/year then going to $75,000/year as an engineer is a much better financial decesion than doing a two year college degree and the corresponding loss of income)
    • As a business model, these developer bootcamps can be very profitable (imagine 15 students in a class paying $150,000 in tuition and the main expense being an instructor that costs $10,000/month for three months plus other staff and infrastructure overhead)
    • No major standards or credentials have emerged yet, but look for one or two to set the tone
    • Community colleges and technical schools are going to enter the market providing more competition that is government-sponsored 

    Developer bootcamps are a great addition to the startup community and much needed. Look for software engineering demand to continue to outpace supply even with additional training programs. 

    What else? What are some more thoughts on developer bootcamps?

  • 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?

  • Better Naming Delineation for Seed Stage Startups

    Continuing with yesterday’s post on Startup Stages by Revenue, one stage that can can use better naming delineation is the Seed Stage. The Seed Stage, while still early, represents a huge range, especially when considering the difference between a startup with $50,000 in annual recurring revenue (ARR) and one with $500,000 in annual recurring revenue. At $50,000 ARR, the startup might only have 10 customers paying $5,000/year whereas the $500,000 ARR startup might have 100 customers paying $5,000/year. 100 customers implies product/market fit, many elements of a repeatable customer acquisition process, and close to a sustainable level of success. So, what’s a better name for these Seed Stage startups that are much farther along, but still tiny? And what’s a good revenue cut-off? $100,000? $250,000? $500,000?

    Here are a few naming ideas for Seed Stage startups that have at least $250,000 in revenue (a big startup milestone):

    • Six Figure Seed Stage
    • Late Seed Stage
    • Product/Market Fit Seed Stage
    • Sustainable Seed Stage

    Seed Stage startups with hundreds of thousands of dollars of revenue are very different from Seed Stage startups with a working product and a couple customers. In startup communities, especially emerging communities outside the major startup centers, better naming delineation for Seed Stage startups will help identify high potential companies, engage more investors, and result in more success stories.

    What else? What’s a better naming convention to differentiate between Seed Stage startups?