David Cummings on Startups

Category: Entrepreneurship

  • High EQ, High IQ, and Strong Work Ethic

    A few days ago I got into a conversation about what makes for a great founding team. Of course, we hit the normal topics like passion, resourcefulness, and vision. Then, I heard it summarized in a way I hadn’t heard before: amazing founding teams have high EQ (emotional quotient), high IQ (intelligence quotient), and a strong work ethic. Now, if the founders have all three characteristics, that’s incredible, but founding teams typically have more variability around EQ, and, ideally, all have high IQs and a strong work ethic.

    Here are a few thoughts on each:

    • High EQ – Excellent soft skills are critically important, especially for founders that are in an executive role with direct reports. Leading other people isn’t easy, and there are many fuzzy, human elements that are difficult to master.
    • High IQ – Smarts. Understanding how to build things and being able to ask the right questions is hard. While it isn’t a requirement to be the smartest person in the room, it’s still important for founders, especially technical founders, to have a high IQ. In fact, it takes a level of intelligence to realize someone else is smarter, and to create an environment where each new hire raises the IQ of the whole company.
    • Strong Work Ethic – With high EQ and IQ, the final piece of the equation is a strong work ethic. I’ve seen teams out-execute much more heavily funded competitors because they worked harder and smarter. No matter how much talent a team has, a tremendous amount of effort is required for success.

    The next time you meet a team of entrepreneurs, evaluate where they fit on the EQ, IQ, and work ethic scale. If they have all three, the chance of success increases dramatically.

    What else? What are some more thoughts on high EQ, high IQ, and strong work ethic as key founding team characteristics?

  • The Gap Between Selling a Company and Telling the World

    At 11:05am on Tuesday, October 9th, my co-founder and I finished digitally signing all the legal documents. Pardot was officially acquired by ExactTarget. At lunch that day, with three other senior leaders from the team, I looked up, smiled, and commented that we were all unemployed.

    See, as part of the selling the company, each member of the executive team signed a legal agreement resigning from Pardot. Then, after the deal went through, everyone but myself signed an employment agreement to be a part of ExactTarget. For a period in the middle, technically, we were unemployed.

    More important than being unemployed, we had sold the company, but we couldn’t tell the staff until 3pm on Thursday, and couldn’t tell the world until the public markets closed at 4pm on Thursday. For 51 agonizing hours, we tried to continue on as usual, all the while knowing that we’d sold the business and huge changes were imminent. Life was never going to be the same.

    What would our team members say? Were we a sell out? Would we really be able to grow faster with more resources? How would the culture, the thing we valued the most, change? What’s next? We didn’t have all the answers, but we knew that there was a huge opportunity to lock in a “win”, and have a chance at becoming the most widely used B2B marketing automation platform in the world.

    Selling a company is an incredibly emotional experience, and, one of the most anxiety-ridden parts is the time between closing the deal and telling the world.

  • 9 Entrepreneurial Team Member Traits

    Sam Wheeler of PayRight Health Solutions posted a great comment yesterday about traits he finds in entrepreneurial team members at thriving startups. After seeing the list, I readily agree.

    Here are his nine entrepreneurial traits of successful team members:

    1. Flourish with ambiguity.
    2. Love constant change.
    3. Feel as if they are on a mission.
    4. Comfortable being misunderstood.
    5. Can make decisions and move quickly.
    6. Willing to discard prior beliefs when proven wrong.
    7. Always try to hire smarter and better employees.
    8. Don’t give up, but know when to move on.
    9. Think of themselves as builders.

    The next time you’re recruiting a candidate, or thinking through your core values, reference this solid list.

    What else? What are some other entrepreneurial team member traits you like?

  • More Confidence With Each Customer Count Milestone

    The early days of a startup are the hardest. So many ups and downs, incredible amounts of uncertainty, and the realization that startups are actually much less glamorous than they seem. And, every time a potential customer says “no”, a potential employee says “no”, and a potential investor says “no”, the entrepreneur’s confidence is slowly chipped away. Only, something special starts happening as customers sign on and revenue starts to grow. Suddenly, thoughts like “this thing is going to work” and “this market actually needs our solution” start entering the mind. Confidence and customer wins beget more confidence and more customer wins.

    Signing the first 10 customers is dramatically harder than signing the next 10. After signing 10 customers, especially 10 customers that didn’t come from existing relationships (e.g. non-friendlies), the product messaging improves, customer use cases become more compelling, and confidence grows.

    Signing the first 100 customers is dramatically harder than signing the next 100. With 100 customers, testimonials become more plentiful, reference accounts more abundant, edge cases ironed out, and a repeatable customer acquisition process clear. Confidence continues to grow.

    Signing the first 1,000 customers is dramatically harder than signing the next 1,000. With 1,000 customers, economies of scale start entering the financial equation, possibilities of dieing a quick death are no more (assuming recurring revenue with contracts), industry analysts are providing regular coverage, and the brand is becoming well known. The freight train has left the station and has tremendous momentum.

    While the beginning is the most challenging, entrepreneurs can take solace in the confidence that builds with each customer count milestone. Then, at some point, the momentum is so palpable that it becomes clear a level of success will be achieved.

    What else? What are some more thoughts on the idea that there’s more confidence with each major customer count milestone?

  • What did you do to prepare for this interview?

    As a continuation of last week’s posts on 360 Degree Review Improvements Question for Job Interviews and The ‘Why’ Around Job Changes in Interviews, there’s another interview question I really like: what did you do to prepare for this interview? Much like Louis Pasteur’s quote that “Fortune favors the prepared mind”, the goal is to better understand how the candidate thinks and acts. Here are a few questions to think through when asking candidates about their preparation:

    • How detailed and thoughtful is the candidate’s response?
    • How comprehensive was the interviewee’s preparation? How does it compare to other candidates?
    • How does the amount and type of preparation work compare to what’s necessary to be successful in the desired job?
    • What did they do that was new or different compared to other responses heard in the past?

    Just like a written assessment in the hiring process helps companies understand a candidate, so too does drilling into how a candidate prepared for an interview. Too often, candidates don’t prepare well enough for interviews and should do a better job. What else? What are some other thoughts on asking about meeting preparation as part of an interview?

  • Rise of the On-Demand Marketplace

    One of the fastest-growing, and most fascinating, type of tech business in the last five years is the on-demand marketplace. Services like Uber (taxis) and Instacart (groceries) take something that was inefficient in the past and make it frictionless. And, all the while, creating jobs and growing the economy.

    Here are a few trends contributing to the rise of on-demand marketplaces:

    • Smart phones – With a super computer in the pocket, the process is seamless to both pinpoint a location based on GPS and provide a rich experience for the end user
    • Health insurance – Now that individuals can more readily obtain health insurance, the desire for many people to have employer-sponsored health insurance has declined (workers for on-demand marketplaces are independent contractors)
    • Cloud computing – Getting to market quickly, and scaling processing power up and down, is 100x easier than 10 years ago, allowing more marketplace flexibility
    • Economy – While unemployment has come down substantially over the past five years, in reality the number of people that have left the workforce, but would traditionally be working, is much higher than normal, combined with a number of part-time workers that want full-time work, make for a larger number of people that are a good fit for these marketplaces

    Over the next five years, look for many more on-demand marketplaces to emerge, and many more to become mainstream. On-demand marketplaces are a huge growth opportunity.

    What else? What are some more thoughts on the rise of the on-demand marketplace?

  • One New Insight Per Day

    Reflecting on this past week, there were so many insights and takeaways from a number of different conversations. Overall, one theme kept coming back to me: how to get one great new insight per day. Whether it’s an idea on how to do something better, a way to think about a problem, or just how the world works, there’s tremendous value in learning one new insight per day.

    Here are a few ideas to find one new insight per day:

    Now, every night, when your head hits the pillow, reflect back on the day, and pick out one new insight. Do this daily, and after a couple months, you’ll find yourself being more cognizant and attentive when encountering great ideas, and your own insights will improve.

    What else? What are some other thoughts on one new insight per day?

  • Marketing Technology as Massive Growth Opportunity

    When people ask about fast-growing technology opportunities, I love pointing out the marketing industry and how much growth it’s experiencing. First, though, it starts with a simple quote from John Wanamaker: Half the money I spend on marketing is wasted; the trouble is, I don’t know what half. There’s a huge shift in marketing and advertising dollars from offline to online, and that, combined with newer technologies like the smart phone, present enormous new opportunities for growth.

    As a simple, tactical example, let’s look at revenue growth from a few publicly-traded marketing technology companies:

    • Constant Contact (NASDAQ:CTCT)
      2014 – $332 million
      2013 – $285 million
      2012 – $252 million
    • HubSpot (NYSE:HUBS)
      2014 – $116 million
      2013 – $78 million
      2012 – $52 million
    • Marketo (NASDAQ:MKTO)
      2014 – $150 million
      2013 – $96 million
      2012 – $58 million

    Just these three companies alone have added $236 million in new marketing technology revenue in the last three years. With huge growth rates, and scale, Wall Street is bullish as well about marketing technology.

    Famously, Gartner proclaimed that by 2017, the CMO will spend more on IT than the CIO. Think about that for a minute: more money will be spent by marketing on technology than general IT will spend on technology. The growing budgets and focus on marketing technology will open up many new opportunities for entrepreneurs.

    On the industry side, look for events like the MarTech conference to grow at a pace even faster than the budgets as people seek to gain a deeper understanding of the possibilities. Just like technology waves in the past, marketing is a huge one that’s gaining momentum.

    What else? What are some more thoughts on marketing technology as a massive growth opportunity?

  • 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?

  • Service Providers as Angel Investors

    Continuing with the recent post The Tourist (Investors) are in Town, there’s another element that I’ve seen more lately: service providers as angel investors. Now, lawyers can’t invest due to a conflict of interest, but PR, marketing, commercial real estate, and other types of service providers can, and do, invest. In fact, there’s an angle with a number of service providers to invest cash in a startup with the expectation that an equivalent or greater amount of money will be spent with them.

    Here are a few thoughts on service providers as angel investors:

    • Angel investors, depending on the rights, will have information access and other types of data that you might not want a service provider to have
    • If taking money from a service provider, it’s important to discuss long-term relationship expectations (e.g. if you take money from a commercial real estate broker, are you going to funnel all business to them indefinitely?)
    • Decide on the value the service provider will provide by paying them their standard rate vs getting in much deeper and having them as an investor

    The next time a service provider offers to invest, carefully separate out the value as an angel investor from that of a service provider, and try to keep the two items independent.

    What else? What are some more thoughts on service providers as angel investors?