David Cummings on Startups

Category: Entrepreneurship

  • Telling an Entrepreneur You Don’t Like Their Idea

    Unfortunately, it happens. You know the story: an excited entrepreneur comes in full of passion and enthusiasm to share with you their game changing idea. Only, the idea falls flat. It isn’t good. In fact, the idea is down-right horrible. But, as a thoughtful, nice person what do you do? How do you tell an entrepreneur that their idea is bad, really bad.

    The answer: you don’t tell them what you believe. Instead, you tell them to go validate the idea in the market. Go get 10 businesses to commit to paying for the product in advance of building anything. Don’t have a B2B product? No problem, put together an awesome video and do a Kickstarter campaign. It isn’t your responsibility to guess whether a business idea is good or bad on behalf of an entrepreneur. It is your responsibility to put the entrepreneur on the path to validate if their target audience will pay for it before the entrepreneur spends any money on it.

    Friends don’t let friends spend money on unvalidated ideas. When an entrepreneur has a bad idea, tell them to go validate it without wasting valuable money on it.

    What else? What are your thoughts on telling an entrepreneur you don’t like their idea?

  • Top 5 Most Common Sales Hiring Mistakes

    Over the past few weeks I’ve received an uptick in requests for advice on building out a sales team. More startups in the community are finding product / market fit or are past product / market fit and are in the process of building a repeatable customer acquisition machine. One of the first things I recommend is to hire a sales assistant to support one of the founders as he or she learns what works, and doesn’t work, first hand. Once the first 50 customers have been acquired, and things are looking good, it’s time to make that first sales hire.

    Here are the top five mistakes entrepreneurs make hiring sales people:

    • Culture Fit – Never settle on finding team members that fit the core values and culture of the startup. Too often, startups get desperate to fill a position and start relaxing standards. Don’t do it.
    • Lack of a Clear Plan – When a sales person starts it should be crystal clear as to what’s expected of them in terms of role, metrics, and quota. The best sales people are self-motivated and want to know expectations.
    • Commission Complexity – Whatever the system for compensation, human nature is to game it and optimize for what’s best personally. As an entrepreneur, the best solution is to keep the commission policy incredibly simple and straightforward. If it can’t fit on one sheet of paper in simple bullet point form, it’s too complicated.
    • Cap on Commissions – In the fastest growing startups, the top sales people should make more money than the CEO, and that’s a good thing. Never put a cap on commissions as sales people need to stay focused on what they do best — bringing in revenue.
    • Unrealistic Expectations – Top sales people shouldn’t be expected to hunt, farm, support, and exceed quota all at the same time. Sales people should be empowered to do one thing and do it exceptionally well. Limit the number of responsibilities and create realistic expectations.

    Building a great sales team is one of the most difficult challenges for an entrepreneur. Moving quickly, having a clear plan, and being very hands-on is one of the best ways to do it. Regardless, don’t make these five common sales hire mistakes.

    What else? What are your thoughts on the top five most common sales hire mistakes?

  • Driving an Emotional Reaction

    One of the things Pardot is really known for is amazing customer service. Over the years, we received hundreds of unsolicited compliments from customers praising how thorough, attentive, and friendly everyone was on the team. The services team is so good it drives an emotional reaction.

    Jason Cohen, founder of WPEngine, recently wrote a piece titled Imbalanced People where he talks about the difference in results between an average team member and an extraordinary team member. In the piece, Cohen writes, “A great customer support rep thrilling customers and causing love on Twitter versus 100 others…never invoking an emotional reaction.” The emotional reaction, while hard to measure, is one of the most powerful services of a great team member.

    Much like Dan Martell sent the tweet “Support is the new marketing” earlier this week, delivering an experience that results in an emotional reaction, whether via support, sales, or something else, creates an entirely different kind of relationship. When thinking about experiences, think about driving an emotional reaction.

    What else? What are your thoughts on experiences interacting with people that drive an emotional reaction?

  • Domain Experts Requested with No Technical Co-Founder

    One of the ongoing questions in the startup world is around the importance of having a technical co-founder. The idea is that by having a strong technical person on the founding team, the startup will be able to move faster, make more intelligent architectural decisions, and build a better product. Several days ago PandoDaily published an article about Quotidian Ventures and their focus on “founders who have domain expertise in large, opaque old school industries.”

    I agree that having a technical co-founder is great, but is no longer a requirement. Here are a few reasons why it isn’t as important as it used to be:

    • Cloud computing, and specifically Amazon Web Services, are much better understood and have more ready-to-use scripts and tools that remove many of the previous challenges
    • Languages and frameworks, like Ruby on Rails, have significantly reduced the learning curve to not only get up-and-running but to also be productive in a short amount of time
    • Pre-built libraries to build interfaces, like Bootstrap, enable the development of high quality front-ends, and new tools have emerged enabling non-technical people to build interfaces, like Divshot

    Now, if the founding team doesn’t include a technical person, the first hire should be an in-house lead engineer. Overall, a technical co-founder is no longer a requirement and domain expertise with an idea in a big market is much more important.

    What else? What are your thoughts on the idea that domain experts no longer require a technical co-founder?

  • Personal Financial Goals – An alternative to cash in the bank

    When asking entrepreneurs about personal financial goals, the most common response is “I want to have enough money in the bank to not have to worry about making money.” Drilling in a bit deeper, and asking for a specific dollar amount, it’s usually liquid assets between $5 million and $10 million. With $5 million liquid, and an expectation of earning 4% per year, that results in $200,000 per year in annual income before taxes.

    While having the cash in the bank earning passive investment income is awesome, I like to point out that it’s often more attainable to build a business with recurring revenue that pays out $200,000 in annual dividends. Meaning, a better goal is to build a company that is self sustainable without the entrepreneur that then helps the entrepreneur meet his or her financial goals without the requirement of a large liquidity event. Liquidity events are rare, incredibly rare. 99% of companies sell for less than $30 million and only a handful of companies sell for over $100 million each year. The odds of a large exit aren’t great, while the odds of building a business that can make money on an annual basis in a manner that provides individual freedom are 100x better.

    What else? What are your thoughts on personal financial goals and the idea of a sustainable business paying dividends as more achievable than a large exit?

  • Never Forget the Golden Data Rule

    Recently I was talking to an entrepreneur and we were discussing the importance of data control in business applications. Now, this is control in the sense of which application dictates who gets access to the data as opposed to which company owns the data (the customer always owns the data). During the conversation it occurred to me that there’s the Golden Data Rule just like there are the two common Golden Rules.

    Golden Rule A: do to others what you would have them do to you.

    Golden Rule B: he who owns the gold, makes the rules.

    Golden Data Rule: he who controls the data, makes the rules.

    This comes into play when considering business ideas and strategies that involve other application data (whether accessed through a plug-in, an API, or some other means). Big risks here include being a sharecropper on someone else’s land (they can take away access), “borrowing” the most successful features from your product and incorporating them into their product, or charging increasingly higher fees to access the data (taxes to access SaaS systems are more common than people realize).

    At the end of the day, never forget the Golden Data Rule when building your company.

    What else? What are your thoughts on the Golden Data Rule?

  • Atlanta Tech Village Accelerates Results for Ambitious Entrepreneurs

    Much has been written here about the Atlanta Tech Village and lessons learned over the past 10 months, including the benefits as a sales and recruiting tool, instant community, and more. There’s another observation that crystallized for me recently: the Village accelerates results for entrepreneurs that work hard and take advantage of what the community has to offer. Let me explain.

    With a large, active entrepreneurship center, there are always opportunities to move a startup forward. Here are a few examples:

    • Learning programs for continuing education (it’s important to pick the ones that are the most relevant and not waste time)
    • Guest speakers, panels, and VIP tours that also double as a prospect hunting ground (be tactful and pleasantly persistent — it’s very easy to cross the line and be annoying)
    • Media events where journalists come through to meet startups, and the more relevant and timely the entrepreneur story, the better

    So, the takeaway is that the entrepreneurship center provides a number of great resources but just being in the community doesn’t translate into results. Getting involved and being smart about it results in significantly more progress than working on an island.

    What else? What are your thoughts on the idea that the Atlanta Tech Village accelerates results for ambitious entrepreneurs?

  • Entrepreneurs Should Hire a Sales Assistant Sooner than Expected

    Early on in the B2B startup adventure, the majority on an entrepreneur’s time is tasked with finding product / market fit through customer discovery and sales. While cold calling and emailing (see Predictable Revenue) isn’t a high priority on most people’s to do list, it works for getting in front of prospects and gathering information. Because it’s so valuable, entrepreneurs should hire a sales assistant sooner than expected as it helps the entrepreneur make better use of his or her time.

    Here are a few reasons why hiring a sales assistant makes sense for an entrepreneur:

    • Building lists of companies, names, emails, and phone numbers is time consuming and easily delegated (see the SalesLoft Prospector tools)
    • Coordinating meetings, web demos, and conference calls takes more time than people expect (see Calendly)
    • Staying top-of-mind with personalized, relevant email is a key way to continue dialogue with leads, and a sales assistant can handle most of the heavy lifting

    Yes, a sales assistant will cost $15 – $20/hour, but it’s well worth it if the startup can afford it. When budgets and future hires are being discussed, consider a sales assistant.

    What else? What are your thoughts on the idea that entrepreneurs should hire a sales assistant sooner than expected?

  • Pulse of the People Person

    Recently I was talking with an entrepreneur about a key team member of his. This individual wasn’t on the executive team but he was referred to as “the best person in the company to gauge the pulse and morale of the company” and he would tell him when things were off. I thought about it for a second and said yes, I know exactly what he means. Having a pulse of the people person is critical, especially if it doesn’t come to you naturally (I don’t have that skill, personally).

    Here are a few reasons why it’s important to have a pulse of the people person on your team:

    • No matter how hard you try, certain issues and challenges aren’t going to be explicitly stated and must be inferred
    • Some people are inherently good at “feeling” how others are doing and can sense issues without trying
    • As a startup grows, it becomes more difficult to keep a pulse on the team, making a pulse of the people person even more important

    It’s hard to interview for a pulse of the people person but it’s easy to recognize when you have one on your team, and they’re a tremendous asset.

    What else? What are your thoughts on pulse of the people persons?

  • 5 Steps to Startup Success in 30 Words

    Earlier today I was talking to a student about entrepreneurship. Naturally, he was very focused on the traditional model of identifying a problem, writing a business plan, building a product, and finally talking to customers. I told him that everything he was doing was backwards except for identifying a problem. After the conversation, I thought to myself that there had to be a concise way to describe the necessary steps for startup success.

    Here are the five steps to startup success in 30 words:

    1. Find a problem in a big market.
    2. Line up customers willing to buy it.
    3. Build a great team and culture.
    4. Build a great product.
    5. Build a repeatable customer acquisition process.

    In 30 simple words we have five actionable steps in order of priority. While there are many more details, this provides a great outline for entrepreneurs to follow.

    What else? What are your thoughts on these five steps and 30 words for startup success?