David Cummings on Startups

Category: Entrepreneurship

  • Common Complaints in Atlanta’s Startup Community

    Yesterday I was talking with a visitor at the Atlanta Tech Village who moved to Atlanta recently. After covering a number of subjects, he brought up several common complaints he’d heard about Atlanta’s startup community. We spent 10 minutes talking through them and I offered up an insider’s perspective.

    Here are some common complaints about Atlanta’s startup community and ideas about them:

    • Lack of Talent – With Georgia Tech (one of the largest engineering schools in the country and top five academically), there’s a tremendous amount of technical talent in town. When large companies complain about a lack of talent, it’s a function of culture and desirability of work environment (large companies find it easier to open an innovation office in a different city as opposed to making the harder changes at their headquarters).
    • Dearth of Capital – Capital is still scarce but the cost of building a product and signing the first 10 customers has gone down by 90% over the past 10 years, making limited capital a non issue to get started (see Assembling a Minimum Viable Product for Market Validation). Scaling a startup is still capital intensive, but once revenue is growing nicely, even at a modest scale, it’s easy to raise money as capital is much more mobile (see AngelList).
    • Disconnected Community – Community cohesiveness is stronger than ever with a number of regular events, entrepreneurship centers, and leaders committed to strengthening the community (check out the open-to-the-public Atlanta Startup Village with 350+ attendees every month).
    • Limited Number of Exits – Every year Atlanta has 3-5 $100M+ exits (see AirWatch and Silverpop already this year). Atlanta startups do have a higher bar for an exit, but there’s a steady flow of success stories.

    I’m sure these complaints aren’t unique to Atlanta and are applicable to most regions of the country. So while there’s plenty of room for improvement and growth in Atlanta’s startup community, many of the common complaints are outdated and not as relevant.

    What else? What are your thoughts on these common complaints in Atlanta’s startup community?

  • Notes from Brad Feld’s Atlanta Tech Village Talk

    Today Brad Feld did a great video chat with 50 entrepreneurs at the Atlanta Tech Village. Kyle Porter ran the event asking a number of questions directly as well as coordinating audience questions. Here are a few notes from Brad Feld’s talk:

    • Corporate culture should simply be called culture and the word “corporate” should be dropped
    • Culture is paramount to everything and is one of the reasons Gnip was able to execute so well and get acquired by Twitter for a large sum
    • Culture isn’t one size fits all — it’s critical that’s it’s defined and consistent in a company (some companies have a strong culture of nice people and other companies have a strong culture of people who routinely yell at each other)
    • Startup communities must be lead by entrepreneurs and not government or universities
    • Startup communities need to be inclusive of everyone and let all types of events and groups form (plant a thousand seeds and some will take root while others don’t)
    • Foundary Group takes a thematic approach to investing and will invest anywhere geographically
    • Brad has published a number of books including Ventures Deals, Startup Communities, and Do More Faster

    A big thanks to Brad for doing the event and to the Metro Atlanta Chamber for providing lunch to all the attendees.

    What else? What are some other thoughts on Brad Feld’s talk at the Atlanta Tech Village?

  • Culture Drives How You Feel

    Tonight we had a Technology Executive Roundtable event in the new Atlanta Tech Village conference center. Tom Noonan, one of the panelists, made several excellent remarks (as well as memorable ones — ask about the purple shoe). One of his comments really stood out to me: corporate culture drives how you feel.

    Think about the following:

    • Culture drives how employees feel about the business
    • Culture drives how customers feel about the business
    • Culture drives how partners feel about the business

    Culture is representative of the values and social contracts within the company. Ultimately, culture is about people, and people drive how you feel. As much as business is about numbers and metrics, it’s also about experiences and emotions. The next time you interact with a company, ask yourself how the company’s culture affected how you feel about the business.

    What else? What are some other thoughts on culture and how it drives how you feel?

  • Entrepreneurs Should Tell a Compelling Story

    Recently I was talking to an entrepreneur and he was giving me his elevator pitch. After hearing it, and asking a few clarifying questions, I didn’t feel moved. I wanted more. I wanted a compelling story. I wanted a raison d’être. Thinking about it further, I realized that entrepreneurs are trained to provide short, simple talking points.

    Yes, entrepreneurs should be able to deliver an elevator pitch, but entrepreneurs should also tell a compelling story. Think about the following questions:

    • Why are you doing what you’re doing?
    • Why are you passionate about it?
    • Why are you going to change the world?
    • What compelled you to action?
    • What gets you excited in the morning?
    • What unfinished business do you have?

    Find a storyteller to help with the message. Craft a narrative. Get people excited. And, most of all, tell a compelling story.

    What else? What are your thoughts on entrepreneurs needing to tell a compelling story?

  • Think About The Market As Much As The Product

    Entrepreneurs spend a tremendous amount of time focused on specific product ideas and not enough time evaluating the overall market and trends. Most successful startups pivot at least once before finding the idea that turns out to be the one, so picking a good market increases the likelihood of developing knowledge in an area that has multiple opportunities.

    Back in March of 2007, Pardot started out as a Pay Per Click (PPC) bid arbitrage platform whereby we would generate leads and sell them to companies. Much like LendingTree.com where you fill out a form one time for a mortgage and get several responses, we wanted to do the same thing for B2B technology leads. Add in some industry analysis like Gartner or Forrester and you have a pretty good idea of Pardot 1.0.

    After 45 days of Pardot 1.0 we realized that we’d picked a good market (helping tech companies with lead gen) but didn’t pick the best product offering. At that point we pivoted and decided to offer the tools we’d built to help generate, track, and disseminate leads as a standalone marketing product instead of selling leads. We then spent the next four months fleshing out the product and did a soft launch in September 2007. After six more months of finding product/market fit, the business took off and the rest is history.

    In the end, our original idea wasn’t successful but we picked a great market and had impeccable timing. Entrepreneurs would do well to spend time thinking about the market in addition to the product.

    What else? What are your thoughts on the importance of picking a good market?

  • Atlanta Tech Village Accelerates Early User Acquisition

    Yesterday I was walking through the Atlanta Tech Village introducing an entrepreneur to other entrepreneurs that could use his cloud-based product. As an entrepreneur, one of the most challenging and time consuming tasks is getting companies to actually use and provide feedback on a new product. Yes, with customer discovery companies should be engaged before building the product but often times more companies are needed to evaluate the product once it’s under construction.

    Enter a community of like-minded entrepreneurs.

    Actively paying it forward and helping each other out by using a new product and making introductions to potential users, there’s an accelerated timeline to achieving product/market fit (stage 1). And, all too often, it’s an accelerated process to realize that there’s not enough pain or demand in the market, so it’s time to pivot and go a new direction.

    The next time users and introductions are needed, consider getting involved in a community to help accelerate the process.

    What else? What are some other thoughts on entrepreneurial communities to help with early user acquisition?

  • Notes from the Zendesk S-1 IPO Filing

    Zendesk, one of the hottest and fastest growing Software-as-a-Service (SaaS) companies just filed their S-1 to go public. Zendesk makes help desk software for support teams to interface with customers in an efficient manner. Zendesk started at the same time as Pardot back in 2007, so I have a sense of nostalgia watching our respective companies grow up at the same time as a class of second-generation SaaS companies providing broad-based solutions for a specific market.

    Here are a few notes from the Zendesk S-1 IPO filing:

    • Over 40,000 customer accounts (pg. 1)
    • Zendesk approach (pg. 3)
      Beautifully Simple
      Omni-Channel and Contextual
      Affordable
      Natively Mobile
      Cloud-Based Architecture
      Open Platform
      Proactive Engagement
      Strategic Analytics
    • Revenue (pg. 9)
      2011 – $15.6M
      2012 – $38.2M
      2013 – $72M
    • Losses (pg. 9)
      2011 – $7.2M
      2012 – $24.4M
      2013 – $22.6M
    • 473 employees (pg. 13)
    • Has experienced several security breaches including one in February 2013 where three accounts were compromised and personal information was stolen (pg. 15)
    • Owes $23.8M on their line of credit (pg. 34)
    • Three things that successful businesses do well (pg. 42)
      – Have great products
      – Care for your customers
      – Attract a great team
    • Acquired Zopim, a live chat company, for the purchase price of approximately $15.9 million (pg. 69)
    • Equity ownership (pg. 119)
      Co-founder/CEO – 7.1%
      Co-founder/CPO – 7.2%
      Charles River Ventures – 24.5%
      Benchmark Capital – 18.7%
      Matrix Partners – 8.8%

    Zendesk, with over $100 million in annual recurring revenue and an amazing growth rate, will do extremely well in the public markets. Ultimately, I expect Zendesk and HubSpot to merge in the future and take Salesforce.com head-on as the second-generation cloud platform of record for businesses.

    What else? What are some other thoughts on the Zendesk IPO filing?

  • Dragon Army Launches Robots Love Ice Cream on iOS

    Last summer Jeff Hilimire and I were talking at a Junior Achievement fundraiser about what was next on the horizon for him. After going back and forth on a few ideas, we decided on building a mobile game studio and tapping into the awesome game talent in Atlanta. We both loved mobile games and had a history of playing video games as kids. Well, I’m excited to announce that the first game from Dragon Army is live on the App Store: Robots Love Ice Cream.

    Robots Love Ice Cream

    The game is a modern take on Space Invaders and Defender with great graphics, gameplay, and fun. Check out Robots Love Ice Cream on the App Store now and look for an Android version here in a few weeks.

    What else? What are your thoughts on mobile games and the first title from Dragon Army?

  • Make the ‘Ask’ at the End of a Presentation

    Earlier today we had a great “Show and Tell” event at the Atlanta Tech Village where four entrepreneurs gave a five minute update on their startup followed by five minutes of Q&A:

    The five minute updates ranged from personal stories to sales videos to product demos. With an audience of fellow Villagers, there was an opportunity to make an ‘ask’ — that is, to get help from the community. Whether it’s names of relevant mentors, introductions to potential prospects, or something else, a group of people always can help. Only, most people don’t make an ‘ask’ when presented with an opportunity.

    My advice: make the ‘ask’ at the end of a presentation.

    What else? What are some other thoughts on making the ‘ask’ at the end of a presentation?

  • Lack of Liquidity With Angel Investing

    A common adage in angel investing is “invest an amount that you don’t care about losing.” Now, it isn’t that you want to lose any money as cash is cash, whether it’s $10,000 or $100,000. Yes, angel investing is risky, but there’s also no liquidity for an extended period of time, if ever. So, if you’re going to invest $25,000 into a startup, it isn’t like putting $25,000 into the stock market where if you change your mind you can take the money out at the prevailing price.

    No, once the money is invested, not only is there no timeline to be able to get it back, you also have to put in more money to maintain your ownership position, assuming pro-rata rights (I’ve always heard that you should save $3 in reserve for every $1 you invest). Once you’ve invested in the startup, it’s truly like the money is gone, and the lack of liquidity is the main culprit.

    While lack of liquidity is a big challenge, angel investing is much more interesting and rewarding than making traditional investments in places like the stock market. The opportunity to help entrepreneurs change the world, develop a mentor/mentee relationship, and invest in the next generation of leaders provides its own value. Access to cash matters but there are intangibles that are difficult to measure.

    The next time you think about making an angel investment, remember the lack of liquidity challenge and make sure that the money isn’t needed for a long, long period of time.

    What else? What are some other thoughts on lack of liquidity with angel investing?