David Cummings on Startups

Category: Entrepreneurship

  • SaaS Business Apps with a Paid Mobile Client

    Last week I was searching the App Store for an unrelated item and I came across the listing for the HotSchedules iOS app. Now, I normally wouldn’t pay any attention but HotSchedules, with their office in Austin, TX, is actually owned by Red Book Connect, which is based in Atlanta. More importantly, I saw a price tag of $2.99 to buy the app, which really surprised me. Why the surprise? HotSchedules is a B2B Software-as-a-Service app for scheduling hourly workers (e.g. restaurant employees, retail staff, etc) — I’ve never seen a SaaS business app with a paid mobile client.

    It got me thinking about why they chose to charge for it. Here are a few ideas:

    • With an extremely large number of end-users forced to use the software, HotSchedules sees it as an additional, meaningful revenue stream (web based access to the product is free)
    • HotSchedule’s end-users, which are hourly workers, change jobs frequently and are likely to only use their app briefly, making support costs higher, and thus this could be a way to offset some of those costs
    • HotSchedules is in a competitive industry with foes like PeopleMatter and SnagAJob.com, providing more pricing pressure on the core product, such that if they can offer the main application at a lower price, they can capture more market share and make up the revenue via end-users

    I don’t believe paid mobile clients for B2B SaaS app will ever be the norm, but it’s interesting to know that there are examples out there and that companies are trying it.

    What else? What are your thoughts on SaaS business apps with a paid mobile client?

  • Entrepreneurship and the Sense of Adventure

    Recently I was talking to a soon-to-be-entrepreneur about his idea. After hearing the idea, I tried to peel back some of the layers. I asked the standard question, “why do you want to be an entrepreneur?” He provided an answer I hadn’t heard before:

    I want to be an entrepreneur for the sense of adventure.

    Normally, the entrepreneur response is that they want to scratch an itch, control their own destiny, change the world, or make more money. But, being an entrepreneur for the sense of adventure? I like it. Just like the Kon-Tiki story (with the recent movie) inspired a generation to challenge long-held beliefs and seek out adventure, entrepreneurship accomplishes a similar goal. So, add sense of adventure as another reason to be an entrepreneur.

    What else? What are your thoughts on desiring a sense of adventure as a reason for being an entrepreneur?

  • Does Providing Entrepreneurs with Accelerators and Office Space Help or Hurt?

    One of the questions I’ve heard several times about the Atlanta Tech Village and the Atlanta Ventures Accelerator is “does coddling entrepreneurs with an accelerator program and office space make things too easy?” Part of the question stems from the historical rite of passage entrepreneurs had to go through spending dozens of hours on office space, furniture, and internet access combined with the effort to find a community of like-minded entrepreneurs, educational programs, and screened mentors.

    On the positive side, it’s clear that the instant community and physical infrastructure adds tremendous value. Entrepreneurs get to focus their time and energy on building their company with minimal administrative overhead, can walk down the hall to get expert feedback on an issue, and gain a serious edge when recruiting talent.

    On the negative side, there’s an increased chance that entrepreneurs who aren’t as motivated and resourceful will be able to coast in an environment that is fun and feels great without making any substantial progress. Yes, that can happen anywhere, but the support and community in a high density startup cluster softens the frustration of not having startup success as the human desire to be a part of tribe is being met.

    Overall, having a great startup center with a cohort of entrepreneurs significantly outweighs the downside of things being too cushy and some entrepreneurs just coasting.

    What else? What are your thoughts on whether or not providing entrepreneurs with accelerators and office space helps or hurts?

  • The Three Stages of Evolution for SaaS Markets

    After watching the email marketing world for over a decade now, I’ve come to identify three stages of market evolution. These stages are applicable to other Software-as-a-Service (SaaS) markets as well but email marketing is uniquely suited since the market grew up with the Internet and didn’t have an installed software background like others (e.g. accounting software).

    Here are the three stages of evolution for SaaS markets:

    1. Broad, enterprise-strength products. Think Responsys where you have a high-end, infinitely flexible product that’s a private Oracle database instance combined with a powerful front-end. The product does its job well and is very complex.
    2. Turn-key, fairly easy to use products. Think Mailchimp where you have an affordable, straightforward product that’s a magnitude less expensive than the incumbents while still meeting the needs of most businesses.
    3. Vertical-specific, specialized products. Think Sailthru where you have a product that is tailored for the publishing industry with a heavy emphasis on personalization and delivering content to users based on their previous engagement.

    This evolution makes sense as the early startups invent the market and thus go to the large companies, which are willing to pay the most money for the technology. After the market is more defined and well understood, new entrants emerge and take advantage of technological enhancements that have gone on in parallel (e.g. open source, processing power, cloud computing, etc) to deliver a similar service with a better experience at a lower price. Finally, with the generic technology mainstream, in this example email marketing, nuances and applications that are vertical specific get applied to add even more value in a more specialized segment of the market.

    SaaS markets for many applications beyond email marketing are maturing and I believe we’ll see more vertical-specific applications as a result.

    What else? What are your thoughts on the three stages of evolution for SaaS markets?

  • Startups are a Reflection of the Founders

    We like to think of startups as independent entities out to change the world. In reality, startups are a reflection of the founders and their personal styles, goals, and desires. As the founders go, so go the startups.

    Vision, mission, and values are three areas the founders most influence, as defined by Wikipedia in their strategic planning article:

    • Vision – Outlines what the organization wants to be, or how it wants the world in which it operates to be. It is a long-term view and concentrates on the future.
    • Mission – Defines the fundamental purpose of an organization or an enterprise, succinctly describing why it exists and what it does to achieve its vision.
    • Values – Beliefs that are shared among the stakeholders of an organization. Values drive an organization’s culture and priorities and provide a framework in which decisions are made.

    One of the most visible reflections of the founders is the office space and environment. As soon as you step into an office, you have a good feel for the type of people and organization — it’s a reflection of the founders. Startups are a collection of people and a reflection of the founders.

    What else? What are your thoughts that startups are a reflection of the founders?

  • Sugar High with One-Time Sales

    A few weeks ago I was talking to an entrepreneur that has a couple different product lines with one product being installed software and the other product being Software-as-a-Service (SaaS). Naturally, the strategic focus is on the SaaS product but the installed product is still doing well replacing more expensive incumbents. The entrepreneur then said something that really stuck with me:

    A one-time sale is a sugar high for the business.

    Think about it for a minute. Selling an installed product that has a one-time fee is great for short-term revenue but, like a sugar high, it’s only temporary. The following year you have to sell the same amount as the previous year just to get back to the same level of annual revenue. Now, with recurring revenue, each new customer adds more revenue that layers on to the existing revenue making it much easier to grow and making cash flow more predictable (assuming a sticky product with a high renewal rate).

    Businesses with one-time sales aren’t bad, but, if possible, recurring revenue is a much more desirable business model.

    What else? What are your thoughts on the saying that a one-time sale is a sugar high for the business?

  • Atlanta Tech Village as a Sales and Recruiting Tool

    Last week I was talking to a sales executive at the Atlanta Tech Village. He works for one of the startups in the Village and we were talking about how things are going. After hearing about a big deal he’s working on, he volunteered something I wasn’t expecting: the Village is a sales tool whereby if the prospect is local, he’ll invite them to a Startup Chowdown. Pretty sweet.

    Startups are always looking for an edge, especially when it comes to signing customers. With little brand recognition for the startup, sales reps seek to associate with other brands through social proof by referencing recognizable customers or mentioning something that might pique a prospect’s interest, in this case the Village if they are local.

    Later in the week I was talking to another startup that was in the process of hiring a couple new people. After catching up on progress, I heard again how bringing a potential new hire to the Startup Chowdown was a great recruiting tool as it gives the candidate a taste of the energy in the building and gets them excited about being part of the startup community. There’s a real war for talent going on and having an edge makes a big difference.

    Startups are closing more deals. Check. Startups are recruiting great talent. Check. These are great benefits of being in a startup campus that aren’t appreciated until you hear about the results.

    What else? What are your thoughts on the Atlanta Tech Village as a sales and recruiting tool?

  • Bessemer’s SaaS Pricing Strategies Notes

    Bessemer Venture Partners has a great new white paper up on Software-as-a-Service (SaaS) pricing strategies. Pricing is something that entrepreneurs labor over on a regular basis and there’s always multiple quality answers. Besides the standard advice that products should initially be priced higher than what you think it’s worth since it’s better to have push back and easier to lower prices, there’s a good bit of gray area on the different types of pricing options.

    Here are the four categories Bessemer identified:

    • Freemium (Dropbox, Asana, Skype) – Basic services at no charge and then fees for premium features. This is further sub-divided into capacity-based freemium, feature-based freemium, time-based freemium, and use-case freemium.
    • Consumption (Amazon Web Services, Twilio, ZipCar) – Pay-as-you-go pricing based on usage, similar to buying electricity.
    • Tiered (Salesforce.com, Pardot) – Pricing tied to value and usage (e.g. a combination of functionality and quantity) and is often found in enterprise software as well as SaaS.
    • Perpetual License (Oracle, Microsoft) – Initial payment followed by a smaller annual maintenance and support contract. Typically, annual subscription pricing is 3 – 5 years the cost of a perpetual license.

    As expected, some companies do a hybrid of the four categories listed above.

    The authors do a good job diving into the details and trade-offs of each of the approaches as well as case studies of SaaS companies employing each pricing strategy. If you’re interested in SaaS and pricing, go read the report.

    What else? What are your thoughts on SaaS pricing strategies and Bessemer’s white paper?

  • Takeaways from the First Kevy Connects Event / Impact of the Cloud

    Tonight we had our first Kevy Connects event at the Atlanta Tech Village with over 250 registered attendees and a panel of Atlanta cloud software leaders including Reggie Bradford of Oracle / Vitrue, Michael Cohn of Cloud Sherpas, Bill Nussey of Silverpop, and Ed Trimble of Kevy. For the event, our goal was to bring together some of the major Software-as-a-Service companies in town to learn from each other and explore how we can continue to expand Atlanta’s strength in the world of cloud-based applications.

    Here are a few takeaways from the first Kevy Connects event:

    • Cloud-based software, while it’s been around for well over a decade, is one of the fastest growing software segments and shows no signs of slowing down
    • Most companies that were originally averse to putting their information in the cloud due to security, availability, etc have come around and are now comfortable with it
    • Integration of cloud apps is a big challenge for the industry and an opportunity for new entrants
    • Atlanta’s extensive history of successful B2B software companies provides a strong foundation for the next generation of cloud-based software.

    Overall, tonight’s event was a big success and we look forward to bringing the local cloud community together on a regular basis.

    What else? What are some of your takeaways from the event and the impact of the cloud?

  • Atlanta’s Sales Community as Core for a Sales and Marketing Tech Hub

    Atlanta has one of the highest number of sales reps per capita in the world. Think about it: if you live in Atlanta or have friends in Atlanta, how many people do you know that are in sales? That’s right, there are a ton. Now, there are two main reasons why Atlanta has so many sales people:

    1. Capital of the South – Thousands of companies have regional sales offices in Atlanta to call on and service accounts all over the Southeast. Atlanta is the clear leader in the Southeast based on number of people and scale of infrastructure.
    2. World’s Busiest Airport – I know a sales-oriented CEO of a multi-national health IT company that just moved his family to Atlanta because he’s on the road all the time and would rather be based out of Atlanta instead of Boston, even though he grew up in the Midwest. The main reasons: climate and the airport. With the world’s busiest airport, it’s easy for sales reps to quickly visit customers anywhere in the world at a reasonable cost, and almost always with a direct flight.

    So, Atlanta has an unusually large number of sales people, which translates well into Atlanta being a hub for sales technologies, and the close relative of sales, a.k.a. marketing.

    The world’s largest software company in the late 70s was a firm called MSA, based in Atlanta. MSA had an amazing culture that was incredibly sales focused. From the sales reps and sales management at MSA, over 50 startups emerged in Atlanta. Several of Atlanta’s largest success stories, including the billion dollar exit of Internet Security Systems to IBM, were lead by MSA alumni.

    A strong cluster of sales and marketing technology startups and companies have already coalesced in Atlanta including SalesLoft, Rivalry, Insightpool, CallRail, Badgy, Pardot, Vitrue, BrightWhistle, and more not even counting the amazing pool of email marketing companies in town like WhatCounts, Silverpop, and MailChimp.

    Atlanta’s strong sales community is the core that’s helped spawn many tech companies. Over the next 10 years, I predict Atlanta will become even more well known as a sales and marketing technology capital, and I can’t wait to see it happen.

    What else? What are your thoughts on Atlanta’s sales community as core for a sales and marketing tech hub?