David Cummings on Startups

Category: Entrepreneurship

  • Community Engagement as an Entrepreneur

    As long as I can remember I’ve felt driven to get involved with the community and give back. My amount of civic involvement would ebb and flow based on the various stages of the startups. Over the past two years I’ve gotten even more involved in civic organizations as a representative of the Atlanta tech entrepreneurship community, working to build awareness around the importance of startups in new job creation for the region.

    On the business side, I’m involved at the board/committee level with the Metro Atlanta Chamber of Commerce, the Young Presidents’ Organization, and the Buckhead Coalition. On the civic side, I’m involved with Atlanta Rotary, Children’s Healthcare of Atlanta, Woodruff Arts Center, and Piedmont Park.

    Here are two events next month and one next year that I’m actively involved in:

    Civic engagement is a personal decision and one that I’ve found very rewarding. If you’re in Atlanta, please consider sponsoring or buying tickets to one of the above events.

    What else? What are some other thoughts on civic engagement for entrepreneurs?

  • Bootstrapping After Raising Money

    Typically, the term bootstrapping in the entrepreneurial world means that the founder(s) used their own money and sweat equity to get a new business off the ground. Only, more and more entrepreneurs are saying that they want to bootstrap the business, even after having raised an angel round (I’ve been guilty of this in the past as well). So, what is it? Bootstrapping or being capital-light?

    What the entrepreneurs are trying to say when they call it bootstrapping after raising an angel round is that they want to continue growing the business without any additional outside investment (e.g. be a customer-funded company going forward). Bootstrapping implies being lean and scrappy as resources are limited. An investor-funded company can be lean and scrappy as well, but once a startup raises money it’s often perceived as being flush with cash that will be readily spent.

    My proposal is that entrepreneurs that build their company without any outside capital are bootstrapping and ones that only raise angel money are capital-light. Results are what matters, not terminology, but it’s good to be on the same page when talking about financing strategies with entrepreneurs.

    What else? What are some more thoughts on bootstrapping after raising money?

  • Meaningful Metrics When Industry Metrics Don’t Make Sense

    Recently an entrepreneur was lamenting that his cost of customer acquisition (CAC) was significantly higher than the first year’s revenue for a customer (and even higher than the lifetime value for a customer). Naturally, I started asking more questions and digging into the situation. Turns out, it was a classic case of applying industry metrics to a business that was still in its infancy. Metrics like the cost of customer acquisition being less than the first year’s revenue is a great standard, but isn’t relevant when signing up the first 10-100 customers (unless the customers pay an unusually large sum).

    Imagine having two sales reps ($4,000/month each), a marketing manager ($4,000/month), modest pay-per-click spend ($1,000/month), and a tradeshow ($5,000 one-time) one quarter. Over the course of three months, that’s a sales spend of $24,000 (no commissions) and a marketing spend of $20,000. Now, say it was a good quarter and 20 new customers were signed paying an average of $1,000/year. $20,000 is new annual recurring revenue was added (no churn), yet $44,000 was spent on customer acquisition, resulting in a business with a poor magic number. Only, assuming this was early in the life of the product, say within the first 12 months, it’s too soon to definitively say that the customer acquisition model isn’t going to work.

    When industry metrics don’t make sense yet, the focus should be on growing 10% every week. Weekly metrics, especially as a percentage, work well because the absolute numbers are so small. Eventually, after things go well, the absolute numbers get bigger and industry metrics become applicable. Apply the right standard to the right situation.

    What else? What are some other examples when industry metrics don’t make sense?

  • 10 Community Learnings from the Atlanta Tech Village

    Over the past 21 months we’ve learned a tremendous amount building the Atlanta Tech Village. With 200+ startups and 650+ members, we have a critical mass of entrepreneurs, events, and energy. Of course, everything hasn’t gone according to plan, but it’s been a great experience nonetheless.

    Here are 10 community learnings from the Atlanta Tech Village:

    1. Startup stages are more varied than expected, so we had to come up with different ways to segment them (Village Verified, 7 Figure Club, etc.)
    2. Mentors are plentiful, only we haven’t figured out how to curate and engage them as well as we should
    3. Occupying the building while renovating it at the same time is terribly difficult (it was the right call but messaging and timing weren’t always well executed)
    4. Communicating changes, especially around pricing and parking, requires an ongoing dialogue and more proactive conversations
    5. Events are the best way to get large numbers of new people to experience the community and facility
    6. Entrepreneurs love helping other entrepreneurs and act as an accelerant to each other’s startup (we also had a few bad apples along the way that we had to remove)
    7. Coffee has a passionate following, and Octane is the best
    8. Social functions like yoga, running club, and Startup Chowdown are key to bringing people together on a more personal level
    9. Design and style of the physical space sets the tone and contributes to the positive energy
    10. Core values establish a standard for the entire community and provide a common foundation

    The Atlanta Tech Village has already exceeded expectations and we’re just getting started. I’m excited about many more learnings in the future as we work to fulfill our mission to be the #1 hub for startups in the Southeast.

    What else? What are some other community learnings from the Atlanta Tech Village?

  • Make Funding Last 18 Months

    A popular question in the entrepreneurial fundraising world is “How long should I make the money last before raising another round?” Of course, my advice is to raise as little money as possible until there’s a repeatable customer acquisition process (then, outside capital will have a dramatic ROI). Now, that’s not always possible, and fundraising is a part of life for many tech startups.

    After making a number of angel investments and working with entrepreneurs, my recommendation is to make funding last 18 months. Here are a few reasons why:

    • Fundraising, when it goes well, typically takes six months, so 18 months provides for 12 months of focusing on the business
    • Milestones often take twice as long and cost twice as much to achieve, so more time is ideal to figure things out
    • Hiring is a major effort once fundraising is done, and it takes serious time to find the right people and train them, so a sufficient timeline is needed for the startup to execute

    The next time an entrepreneur is building a budget for investors, push for making the money last 18 months. Fundraising requires a significant amount of time and takes away from growing the business.

    What else? What are some other thoughts on making funding last 18 months?

  • Inflection Points in a Startup

    Over the course of a successful startup adventure there are numerous highs and lows. As much as people like to talk about hockey stick growth, it’s often more volatile at a day-to-day level. During the startup rollercoaster, there are a number of inflection points where the business hits a new level.

    Here are a few thoughts on inflection points in a startup:

    • Revenue milestones are often major inflection points due to institutional investor appetite (e.g. once a startup hits $5 million in revenue, there’s an entire market of growth equity investors that become interested)
    • Major partnerships can be an inflection point, but the startup often won’t know for many months (or years!) due to how long it takes for things to kick in
    • Key hires often make a huge difference, and in some cases, result in an inflection point as the startup begins executing at a new level
    • New product releases, especially ones that address an area of significant pent-up demand, can propel the startup’s growth rate forward
    • Belief that the team can do so much more (this plays out when a team is trucking along, making good progress, only to realize that they just had the best month ever, by a large percentage, and that there’s no reason every month can’t be like the last one)

    Inflection points are critical for startups, and sometimes aren’t even recognized until well after the fact. Look for inflection points and recognize them for what they are — the next level of growth for the startup.

    What else? What are some other thoughts on inflection points in a startup?

  • Startups Need Traction to Succeed

    Last week I started reading the new book Traction: A Startup Guide to Getting Customers by Gabriel Weinberg. I had enjoyed reading Gabriel’s blog (read this post on money) and I’m always telling entrepreneurs that repeatedly acquiring customers is much more difficult than building a working product. Early on, the author sets the tone that entrepreneurs should spend 50% of their time on acquiring customers, which is foreign to most entrepreneurs as they want to focus the vast majority of their time on the product (a good product is required but revenue pays the bills).

    The book sets up a methodology for constantly trying different customer acquisition strategies (the Bullseye Framework) and covers 19 different channels, each with its own chapter (e.g. PR, SEM, SEO, email marketing, trade shows, etc). The Bullseye Framework, while simple, provides a process that’s easy for entrepreneurs to follow. Here are the five steps:

    1. Brainstorm
    2. Rank
    3. Prioritize
    4. Test
    5. Focusing

    The general idea is to come up with a bunch of ideas, rank the laundry list, prioritize a select few, test some campaigns, and double down on the winners. Over time, most winners have diminishing marginal returns and it’s time to run the process again.

    Entrepreneurs that need more customers would do well to read the book and spend more time figuring out how to acquire customers.

    What else? What are some other thoughts on the new Traction book?

  • Things Occupying Space in Your Mind

    Recently I kept thinking about this one difficult interaction I had with another person and that I couldn’t get it out of my mind. After talking to another entrepreneur, he offered up that he tries to be conscious of what things occupy space in his mind. I thought about it for a minute and he’s exactly right.

    The mind is an amazing tool to solve problems, innovate, and do great things. Only, there’s a limited amount of space to juggle high priority items. If there’s something that you constantly worry about, but can’t control, it’s occupying space. If there’s something on your mind that needs to get done, but you don’t do, it’s occupying space. As tough as it is, the key is getting the mind to focus on the right things.

    The next time your mind starts focusing on something, step back and ask yourself if it’s a worthwhile endeavor. While it can be difficult at times, especially keeping the thought of thinking top-of-mind, optimizing what’s occupying space in your mind will make a serious difference.

    What else? What are some other thoughts on things occupying space in your mind?

  • Entering New Markets Requires Different Tactics

    Recently an entrepreneur was telling me about his desire to enter an adjacent market, and that to do so, he needed a different skill set on his team. After thinking about it, I knew he was right. Several times in the past I’ve tried to push into different markets with the same sales team, same marketing message, and same product only to fail. Much like the sales rep that’s strong at selling into an established market is much less likely to succeed building a new market from scratch in startup — it’s a different skill set.

    Here are a few thoughts on entering a new market:

    • Find an advisor or mentor that’s already an expert in the new market in order to minimize some of the common mistakes
    • Treat the new market more like a startup and do customer discovery, seek out product-market fit, etc
    • Know that existing team members and skills will need to be adapted for the new market
    • Create additional messaging, collateral, etc. for the new market and treat it like a different product

    Entering a new market is difficult. Entrepreneurs would do well to recognize the challenges and plan accordingly.

    What else? What are some more thoughts on entering a new market?

  • Corporate Retreats in a Startup

    Early on in my startup career I thought corporate retreats were a waste of time. I just wanted to stay heads-down and crank away at the items on my to do list. Only after experiencing great retreats with EO and YPO did I come to understand the real value.

    Here are a few thoughts on corporate retreats in a startup:

    • Hire an outside facilitator (find one that is EO or YPO certified) as they are worth the cost (if money is available to do so)
    • Find the right balance between work time and fun activity time (depending on the group, I’ve found 60/40 works well with 60% work time)
    • Always get outside the building, and preferably outside the city, so that the usual distractions aren’t present
    • Come with an agenda and make sure that the goals are accomplished
    • Decide on a cell phone policy and enforce it (e.g. turn off all phones and leave them on the middle of the table)
    • Give homework in advance to set the tone and get the team thinking about the key topics

    Corporate retreats are a great way to bring the team together, strategize the future, and align everyone.

    What else? What are some other thoughts on corporate retreats and startups?