David Cummings on Startups

Category: Entrepreneurship

  • The Importance of a Customer Onboarding Program

    Early on in the life of Pardot we realized that many customers would sign up for the product only to struggle implementing it. Seeing this, we started requiring a $2,500 quick start package so that we could ensure the client had a successful onboarding. Unfortunately, it added serious friction to the sales process since the up-front fee often required multiple signatures. The solution: raise the monthly fee from $500 to $1,000 and include a quick start package at no additional charge for all customers. Sales took off dramatically and we never looked back.

    Here are the categories of the Pardot Quick Start Onboarding Package:

    • Project Planning
    • CRM Integration
    • Technical Setup
    • Marketing Asset & Integration Setup
    • Training

    After 30 days, the Pardot client is up and running with their core sales and marketing tools integrated, prospects tracked, and emails blasting.

    Customer onboarding is critical to the success of many Software-as-a-Service products and should be treated as a key part of the customer experience.

    What else? What are some other thoughts on the importance of customer onboarding?

  • The Ratio of Business Development Reps to Account Executives

    With the Rise of the Inside Sales Rep and the Sales Development Team, one of the most common questions that comes up is about the ratio of appointment setters to closers. First, a quick primer. Sales Development Reps/Business Development Reps (BDRs) were popularized by the 2011 book Predictable Revenue. BDRs use email and phone to prospect, qualify leads, and set appointments for Account Executives (AEs), which close the deals.

    Overall, the main goals is to have much more specialized functions on the sales team. Too often, expensive sales people are used to cold call (prospect), respond to inbound leads, set appointments, deliver demos, write proposals, and close deals. The modern approach is to have one team dedicated to prospecting (Business Development Reps), one team dedicated to following up with inbound leads (Market Response Reps), and one team taking the qualified leads to close (Account Executives).

    Now, back to the original question regarding the ratio of BDRs to AEs. Of course, every business is different, but one constant stays the same when thinking through the ratio of BDRs to AEs: the Account Executives should have as many Business Development Reps as necessary such that the AEs are only working active, qualified opportunities. Everything that takes place before an engaged lead is ready to start the buying process should be handled by the BDRs. More often than not, sales teams have too many AEs and not enough leads. One strategy in this common scenario is to let go of the low performers and use the money saved to hire more BDRs until the successful AEs are well fed.

    The next time someone says they want to hire more sales people, ask the hard questions and figure out if they really need Business Development Reps and not more Account Executives.

    What else? What are some more thoughts on the ratio of Business Development Reps to Account Executives?

  • Revolving Door Transactions and Strange Coincidences

    Back in 2005 I was talking to a friend’s uncle who had previously worked in the technology industry for a number of years. He shared with me a story that during the 1990s he worked for a software company in Atlanta where the owners of the business bought a building that was 50% occupied, signed a lease so that their own company would use the remaining 50% of the building, and then sold the building to new investors, all in the same day. This is known as a revolving door transaction where entrepreneurs buy a building in the morning and sell it in the afternoon for a significant personal profit.

    After almost 10 years that story has stuck with me and represents an opportunity that many entrepreneurs don’t consider. Only, it gets more interesting. I bumped into my friend’s uncle last night at an event at the Atlanta Tech Village after not seeing him for several years. We caught up for a few minutes and then he tells me that the Atlanta Tech Village is the building he worked in 20 years ago for American Software (NASDAQ:AMSWA). Not only that, the Atlanta Tech Village is the building that the entrepreneurs did the revolving door transaction!

    Life is full of strange coincidences and this is another interesting one.

    What else? What are some more strange coincidences you’ve encountered?

  • 2014 Inc. 500 Atlanta Companies

    Inc. magazine just released the 2014 Inc. 500 and there are several Atlanta companies on the list. As covered in 2013 and 2012, it’s great to see so many fast-growing firms in the area.

    Here are the Atlanta companies on the 2014 Inc. 500 list:

    • 147 – Residential Capital Management, 2,626% growth, $30.2m revenue
    • 178 – Apex Controls, 2,360% growth, $7.8m revenue
    • 180 –  Futurewave Systems, 2,343% growth, $2.8m revenue
    • 239 –  Expert Technical Solutions, 1,908% growth, $3.5m revenue
    • 305 – Clearleap, 1,510% growth, $9.8m revenue
    • 310 – CoolMiniOrNot, 1,495% growth, $6.2m revenue
    • 334 – Caduceus Healthcare, 1,385% growth, $6.0m revenue
    • 396 – StandBy Talent Staffing Services, 1,179% growth, $3.7m revenue
    • 401 – National Tax Credit, 1,176% growth, $3.4m revenue
    • 405 – Patientco, 1,167% growth, $3.0m revenue
    • 458 – Cloud Sherpas, 1,036% growth, $113.1m revenue
    • 467 – Mashburn Outdoor, 1,010% growth, $5.7m revenue
    • 483 – Premier Logic, 983% growth, $8.5m revenue
    • 489 – CATMEDIA, 970% growth, $4.6m revenue
    • 490 – STONE Resource Group, 969% growth, $9.0m revenue

    With 15 companies on the list, it’s a solid showing. I’d like to see more product-based tech companies on the list and expect things to change over the next 3-5 years.

    What else? What are some other thoughts on the 2014 Inc. 500 Atlanta companies?

  • The 7 Figure Club

    One of the initiatives we’re working on at the Atlanta Tech Village is bringing together different groups within the community to build relationships and help each other. Today we launched our newest group, the 7 Figure Club, for entrepreneurs within the Village that have either a million in revenue or have raised a million from investors. While one million in revenue or investment might seem arbitrary, it’s a nice milestone that represents customer traction or investor confidence. One million in revenue is also the requirement for the Entrepreneurs’ Organization.

    Slightly more than 10% of the Village is in the 7 Figure Club (21 companies). The format is a monthly lunch with the following agenda:

    • What’s going well
    • What’s not going well
    • Topical discussion (one topic per month e.g. fundraising, hiring, growth strategies, etc.)
    • Needs and leads (anything anyone needs help with or has something to help others)

    Overall, the club isn’t designed to replace an EO or YPO forum. Rather, it’s goal is to keep the largest companies in the Village abreast of what’s going on with each other and act as a regular meeting to help each other.

    I’m looking forward to participating in the 7 Figure Club.

    What else? What are some other thoughts on this type of entrepreneur group?

  • Fine Balance Between Being Comprehensive and Doing Too Much

    Earlier today at Atlanta Rotary we had the opportunity to hear Jeff Arnold, founder of WebMD and Sharecare, share some of this entrepreneurial lessons learned over the past 25 years. Jeff did a great job taking us through several of his experiences as well as talking about the some of the opportunities that lie ahead.

    Halfway through the talk Jeff made a comment that really stuck with me:

    There’s a fine balance between being comprehensive and doing too much.

    Personally, I’ve seen this challenge many times. As an entrepreneur, there’s a desire to please every prospect and customer. Only, that’s a formula for a frankenstein product. Entrepreneurs would do well to have a strong opinion of what will, and won’t, go into the product. When requests come up, figure how well they align with the vision of the product, and continually ask internally if 80% of the desired customers need the feature. Find the balance and build a comprehensive product that doesn’t do too much.

    What else? What are some other thoughts on the balance between being comprehensive and doing too much?

  • Helping Entrepreneurs that Want Feedback on an Idea

    One of the more common requests I receive from entrepreneurs is for feedback on an idea. Idea-stage entrepreneurs are always looking for external validation of their idea, and it’s often easier to talk to other entrepreneurs as opposed to finding potential prospects. My response right now is that I’m happy to help answer questions once they have 10 paying customers as my focus is on helping entrepreneurs get from 10 to 100 paying customers and not from 0 to 10. Yes, getting from 0 to 10 is where most entrepreneurs fail, but it’s also a good way to filter down to those that are making early progress.

    Here are a few recommendations for entrepreneurs wanting feedback on an idea:

    The takeaway is that entrepreneurs need to talk to potential customers of their product and not other entrepreneurs. Customer Development is hard work and the value has been well documented. Entrepreneurs that want feedback on an idea need to talk to prospects.

    What else? What are some other ways to help entrepreneurs that want feedback on an idea?

  • How does it help reach the goal?

    Quick, what are the three most important things you’re working on right now? Why?

    That email you just sent — how does it help you achieve your goals?

    That meeting invite you just accepted — how does it fit in?

    That phone call you’re about to make — how does it move you closer to your dreams?

    That hanging out on social media last night — how does it improve your chances of success?

    Being intentional is hard, very hard. With a limited amount of time and resources, prioritizing what’s critical is of the utmost importance.

    The next time you start to do something, ask yourself how it helps reach the goal.

  • Rise of the Inside Sales Rep

    I’m fascinated by the growth of inside sales reps in organizations and the corresponding opportunities that are emerging in the market to support them. Inside sales growth is driven by a number of factors including:

    • Productivity gains from modern cloud-based tools (e.g. CRM, marketing automation, etc.)
    • Quality of video conferencing and screen sharing
    • Continual margin pressure for many products
    • Higher costs and hassles with travel
    • More quantifiable results and tracking for management

    At Pardot, we focused on selling into marketing departments but we had several great tools that sales people loved including Lead Deck, Chrome Extension for Gmail, and an Outlook Plugin. Adding value to the sales process, in addition to the marketing process, was a critical part of the Pardot value proposition.

    Newer tools like SalesLoft, Rivalry, Calendly, and Voxa as well as back-office integration systems like Kevy really complement popular applications like Salesforce.com and Pardot (disclosure: I’m an investor in these new apps). Sales rep productivity continues to improve enabling professionals to close more deals with a shorter sales cycle. It’s win-win for everyone involved.

    Inside sales is a fast-growing field and I’m excited to be a part of the industry.

    What else? What are some other thoughts on the rise of the inside sales rep?

  • Understanding a VC’s Desire for Investments to Raise More Money

    One of the little known aspects of venture capitalist investing in startups is around the desire for the entrepreneurs to continually raise more money. Now, the initial thinking around raising money is that a VC would primarily want an existing investment to raise more money when it’s doing well and the VC has the wherewithal to put more capital to work (e.g. double down on the winners).

    Even if the VC doesn’t have the capital to put more money into the startup, or it’s doing good but not great, there’s still a desire for the startup to raise more money as long as it’s at a higher valuation. Why the emphasis if the VC’s ownership stake will get diluted? VCs, like everyone else, have a hard time putting a value on existing investments. Most startups are losing money, so you can’t do a value based on a multiple of profits. Another common strategy is to look at comparable public market multiples (e.g. a similar software company in the same or related market) and then take a 50% hair cut for lack of liquidity. Again, it isn’t very exact.

    What’s exact is the valuation a subsequent investor paid for equity with the startup. So, VCs want their investments to raise money at higher valuations so that they can show paper returns to their own limited partners. VCs can’t raise another fund without good returns, and startups are often taking 7-10 years before an exit, so many VCs go out to raise their next fund based on the value of their illiquid investments according to the most recent funding round of each investment.

    The next time you hear an entrepreneur say their VCs want them to raise another round, figure out if part of the desire is to mark their investment to a higher market value.

    What else? What are some other thoughts on understanding a VC’s desire for an investment to raise more money?