David Cummings on Startups

Category: Entrepreneurship

  • Helping Entrepreneurs at Scale

    I’ll be the first to admit that I feel bad turning down requests for help from entrepreneurs, students, people in the community, etc. It’s not that I don’t want to help them, rather I’ve prioritized a number of things I want to do well and have decided to allocate my time there. As Dharmesh likes to say, Dear Friend: Sorry. My heart says yes, but my schedule says no.

    So, if helping entrepreneurs is a personal goal, but there isn’t enough time for the requested one-on-ones, I need to figure out how to help entrepreneurs at scale. Much like the conversation changes internally in a startup when going from 10-20 employees vs going from 20-200, I need to be thinking scale as well with helping entrepreneurs.

    Here are three ways I try and help entrepreneurs at scale:

    • Blogging – An amazing way to reach tens of thousands of people on a daily basis
    • Atlanta Tech Village – Community, educational events, office space, and more that reaches thousands of people on a monthly basis
    • Public Speaking – Last year I gave 20 talks on entrepreneurship to groups ranging from 25-500 people

    Over time I hope to get better at helping entrepreneurs at scale with these three strategies while continuing to look for new ways to share ideas and thoughts.

    What else? What are some other ways to help entrepreneurs at scale?

  • Why Continue Working After a Nice Exit

    Recently I was asked why I continue to work and start companies when I don’t need the money. Many people I know don’t work because they enjoy it, rather they work because they need the money. For me, the simple answer is that I enjoy doing it, so I’m always going to do it. Thinking about it more, there are several reasons I continue to work and start companies:

    • Kids – I want my kids to grow up seeing their dad work hard while still having an abundance of time together
    • Innovation – I really enjoy being a part of the new product invention process and seeing an idea unfold in the marketplace
    • Jobs – I believe that helping create high quality, culture-first jobs adds tremendous value to our community
    • Personal Growth – I’m always learning new things, meeting new people, and having new experiences, all of which contribute to my personal growth
    • Entrepreneurial Forces – I believe that entrepreneurship is one of the most powerful forces for helping grow our economy and improve our standard of living

    Even after my second, third, or even fourth exit I’m going to keep working and starting companies as I enjoy it and want to give back and help others.

    What else? If you didn’t have to work any more, what would you do?

  • Benefits of Price Transparency

    Earlier this week I was asked about my thoughts on publishing product prices and general price transparency. Whenever I visit a website, especially for a Software-as-a-Service (SaaS) product, one of the first things I do is go to the pricing page and try and understand how the company positions themselves in the market. Overall, I’m a big fan of price transparency on a SaaS site for a number of reasons:

    • Provides potential customers more information in an effort to empower them as much as possible
    • Creates an anchor for sales people to work with, and is especially great when combined with a no/limited discount policy
    • Makes it clear how customers are segmented by way of product functionality
    • Sets expectations around freemium products, if applicable (e.g. if the product is free, then the provider makes money off the users)
    • Allows for custom pricing options so as to capture more value and provide a different level of service to high-end customers

    Personally, I’m a practical personal that wants to empower buyers, and I think price transparency is a critical component of that.

    What else? What are some other thoughts on price transparency?

  • Crowded Markets Aren’t Actually Crowded

    When you look around the Atlanta Tech Village, or any other group of startups, you’ll find that the startup ideas aren’t as revolutionary as you might expect. In fact, most of the ideas already have tons of competitors. So, why are the entrepreneurs playing the me-too game and battling it out in crowded markets?

    Markets aren’t what they appear on the outside. On the outside, it looks like there are 10 different competitors all doing the same thing, speaking the same language, and targeting the same group of businesses. In reality, each competitor has their own strengths and weaknesses and targets a slightly different segment of the market.

    During the marketing automation wars of 2011 and 2012, it looked like Pardot competed with Marketo, Eloqua, Act-On, and many more. A material percentage of Pardot’s deals weren’t competitive at all (meaning, a new customer would sign up without evaluating other products) and when there was competition, it was almost always with the same competitor. Inside the market was very different than what the outside saw.

    While markets are considered crowded in that there are a number of competitors, most markets aren’t winner-take-all or winner-take-most, resulting in a number of “winners” that carve out their respective niches and build successful companies. Crowded markets aren’t actually crowded when you get on the inside.

    What else? What are some other thoughts on the idea that markets that look crowded can actually have a number of successful businesses?

  • Goals and the Cadence of a Sale Per Day

    One of the milestones I really like as an entrepreneur is signing an average of one new customer per day. A new customer every day means that the the business is starting to take off, there’s product/market fit, and the basis of a repeatable customer acquisition process is in place — all critical ingredients of a successful company.

    Of course, the cadence of a sale per day can vary dramatically based on things like typical sales cycle, average deal value, and more. A small ticket sale business (e.g. under $500/year) will usually achieve the milestone much sooner than a larger ticket sale business, everything else being equal. There’s no set amount of time for this milestone, but it’s often within the first few years of a startup.

    Another benefit of signing a new deal per day is that there’s a volume of customer-generated information that really informs the business as to what to do next. Whether it’s information from customers as to why they chose the product (sales and marketing info), to feature requests (product management info), to bug reports (support and engineering info), primary data helps make for more informed decisions. Product usage is oxygen for software.

    The next time you’re making a series of goals, consider adding the cadence of a sale per day to the list.

    What else? What are some other thoughts on the cadence of a sale per day?

  • What’s Next After a Serious Competitor is Acquired

    Recently I was talking to an entrepreneur that was lamenting how worried they are now that one of their main competitors was acquired. After asking a number of questions and drilling into their situation as best I could, I told him not to worry. Yes, things will change, but no, it won’t be as game-changing as he thinks.

    Here are a few things that typically happen after a serious competitor is acquired:

    • Tons of PR comes out talking about how this is a major acquisition and the industry is going to change/consolidate/go mainstream
    • Quick changes to their branding and website saying they are part of a bigger company (product name changes usually don’t happen right away but the bigger company’s name is usually added to the logo of the acquired company)
    • Employees in overlapping positions are let go (back-office jobs like accounting and HR are usually the first to go)
    • Paralysis occurs on the engineering and innovation front as a tremendous amount of time is spent integrating things with the mothership and working on a long-term roadmap (this is a key opportunity for the other competitors to keep innovating and get out in front of the newly acquired competitor)
    • Prices often rise and more emphasis is put on cross-selling to justify the purchase
    • Life continues as normal (the noise will die down and things will continue on just like they always have)

    Competition is healthy and when a competitor is acquired things do change, but more often than people realize, a big company acquiring a startup results in a less competitive startup. Less competitive doesn’t mean the acquisition won’t be considered successful, rather priorities will change and the number of directly competitive deals will usually decrease (often a big company takes the startup’s product up market).

    What else? What are some other thoughts on what happens next after a competitor is acquired?

  • Caution with Big Team Rewards for Winning a Deal

    Last week I was talking to an entrepreneur who shared with me that they have a big goal they’re striving to hit by the end of the year, and if they achieve it, they’ll have an amazing company-wide reward. It reminded me of my failed experiment trying a similar thing. Back in 2006 we had this name-brand prospect that was going through a big RFP process. On the RFP it listed several required features that we didn’t have but were on our roadmap. You know where this is heading — I worked hard to rally the team to crank out these features and told the entire company that everyone would go on a cool cruise if we won this deal.

    After two months of furious work, and incremental clarification questions for the RFP, we were told that we didn’t make it to the final round of vendor selection. Ouch, not even a finalist. I had expended a ton of personal capital and now we had lost the deal (even earlier than expected). Without the deal we weren’t in the position to go on the cruise. Morale was down. I wasn’t going to make this mistake again.

    Going forward, we decided to implement quarterly celebrations so that we’d regularly celebrate our progress as a team, regardless of specific deals. There are still times when it’s important to push extra hard, but they should be relegated to things that are more controllable, like a new product release for the largest tradeshow of the year. Big team rewards make sense, but ensure there’s some level of control with achievability.

    What else? What are some other thoughts on big team rewards for winning a deal?

  • Build a 10x Revenue Plan

    Entrepreneurs love talking about how they’re going to build the next unicorn startup (billion dollar valuation) or how they’re on a quest to hit $1 million in revenue to join Entrepreneurs’ Organization. While having big goals is important, it’s also important to map out how you’re going to get there. A good, simple exercise is to build a 10x revenue plan. The idea is to build out a one page document that outlines how you’ll make the business 10x larger. Most planning and budgeting is time-oriented (e.g. a one or three year plan). The 10x revenue plan isn’t designed to be a large, complicated financial model, rather the goal is to paint a picture of what’s needed to become 10x larger than now.

    Here are a few bullet points to include in the 10x revenue plan:

    • Current revenue and 10x revenue
    • Current staffing and staffing needed to be 10x larger (most likely not 10x the people)
    • Timeframe (often depends on size and scale of the startup currently)
    • Fundamental changes required (e.g. big rocks or milestones)
    • Key assumptions (things that will happen in the market, competitor changes, etc)
    • Financing needed, if any

    So, grab your co-founders and build a 10x revenue plan over lunch. Just putting the ideas down into a Google Doc does wonders for aligning team members and painting a picture of what’s required.

    What else? What are some other thoughts on building a 10x revenue plan?

  • Think Quarterly Growth Numbers for Investors

    Investors love to talk about certain revenue minimums before they’ll consider investing (e.g. $1 million and $5 million are the most common thresholds). In reality, what they really want is a story that shows scalable growth. Let’s look at two examples:

    Company A

    • Startup has been in business for four years
    • Added $50,000 in new recurring revenue last quarter across 50 new customers
    • Just hit $1,000,000 in annual recurring revenue last quarter

    Company B

    • Startup has been in business for three years
    • Added $250,000 in new annual recurring revenue last quarter across 100 new customers
    • Just hit $500,000 in annual recurring revenue last quarter

    Which one is more valuable? Which one will attract more attention from investors? If you hear the message about requiring a million in revenue to garner investor interest, then it appears Company A will be most desirable. Actually, Company B is much more desirable, even with half the annual recurring revenue. Company B is adding more customers at a much higher average customer value in the same period of time. Investors want to see the customer acquisition machine working and Company B clearly has it humming.

    What else? What are some other thoughts on telling a story with quarterly growth numbers?

  • 3 Little-Used Interviewing Tips Entrepreneurs Need to Know

    After yesterday’s post on The Culture-Oriented 7 Step Hiring Process, Ron Hollis provided a great comment highlighting some his lesson’s learned starting, growing, and selling a successful tech company. Entrepreneurs have so many great tools and resources readily available that they don’t find some of the most powerful tactics.

    Here are three little-used interviewing tips entrepreneurs need to know:

    1. Chronological In-Depth Surveys – Follow the Topgrading interview process and really dig into how the person thinks and why they moved from position to position in their career.
    2. Threat of Reference Check and Get References Not on the Resume – Everyone is happy to provide a list of references. Get the list of references and then during the chronological in-depth survey ask for three more names and numbers of references beyond the standard list. Then, call these people and confirm that the candidate will be successful in your desired role. The key is to get people that aren’t on their standard list.
    3. Writing Skills – More than anything else I’ve encountered, the ability to write well and answer questions in a cohesive manner correlates with success. Always have a written assessment.

    Entrepreneurs would do well to incorporate these three little-used interviewing tips into their hiring process. Hiring well is so critical and entrepreneurs need to build a process that works well for their company.

    What else? What are some other little-used interviewing tips entrepreneurs need to know?