David Cummings on Startups

Category: Entrepreneurship

  • Opportunities for More High Density Startup Buildings in Metro Atlanta

    One of the more common questions I get about the Atlanta Tech Village is regarding opening up other locations. My response is always that we’re focused on making our current building the flagship facility for technology entrepreneurs in the Southeast and the country, and aren’t currently looking at any other opportunities. Is there room for more high density startup buildings in Metro Atlanta? Absolutely!

    Here are a few thoughts on opportunities for more high density startup buildings in Metro Atlanta:

    • Buckhead – I believe ATV will satiate all the demand for open coworking, private rooms, and modular suites for tech companies and startups under 25 people while there is opportunity for another building for growth startups that have “graduated” from ATV
    • Midtown – There’s plenty of opportunity in Midtown, evidenced by the ATDC having a waiting list, Hypepotamus being full, and the success of the Biltmore
    • Old Fourth Ward / Inman Park – A tech co-working space with plenty of private rooms would do well in Ponce City Market or a place nearby due to all the creative professionals in the area
    • Downtown – 200 Peachtree Office is a co-working space in a great location downtown with many amenities
    • Perimeter – With a few MARTA stations, GA 400 and 285, as well as a number of tech companies like AirWatch, the necessary ingredients are in place to support a facility with coworking, private rooms, and some modular suites.
    • Suburbs – Tech heavy suburbs like Marietta, Alpharetta, and Norcross should be able to support a small-to-medium sized facility, especially if there’s a public/private partnership arrangement

    Overall, there’s an opportunity for a number high density startup buildings in the 5,000  – 20,000 sq ft range. One of the biggest challenges is that a large number of members is necessary to support having a dedicated staff, which is required for a successful community, and that makes smaller facilities often unworkable. I’m looking forward to more high density startup buildings in Atlanta.

    What else? What do you think of the opportunities for more high density startup buildings in Metro Atlanta?

  • Notes from the Textura S-1 IPO Filing

    Curiously, I recently saw a report of a Chicagoland Software-as-a-Service (SaaS) company called Textura filing their S-1 to go public with only $21.7 million in sales for fiscal 2012. ChannelAdvisor just had a successful IPO with only $53.6 million in trailing twelve months revenue, which is considered low by IPO standards, but it was well received nonetheless. Now, $21.7 million in sales in significantly lower than other SaaS IPO filings, so I had to dive and learn more.

    Here are notes from the Textura S-1 IPO filing:

    • Provides on-demand business collaboration software to the commercial construction industry (pg. 1)
    • Specific modules for payment management, document management, project bid management, contractor qualification, and environmental certification processes (pg. 1)
    • 12,000 commercial construction projects have been managed with the system (pg. 2)
    • Revenues (pg. 2)
      2010 – $6.0 million
      2011 – $10.5 million
      2012 – $21.7 million
    • Losses (pg. 2)
      2010 – $15.9 million
      2011 – $18.9 million
      2012 – $18.8 million
    • Accumulated deficit of $146.2 million (pg. 12) (Note: Take ~$40 million in losses from 2011 and 2012 out of the accumulated deficit and that leaves you with ~$100 million being burned to get to the point where the business generated $6 million in revenue in 2010)
    • Ten largest clients represented 41.5% of 2012 revenue (pg. 13)
    • Largest client represented 10.8% of 2012 revenue (pg. 13)
    • Sales cycle of a year or longer to secure a new client (pg. 15)
    • $8.1 million of the new proceeds will be used to repay debt (pg. 29)
    • Already built their own 63,000 sq ft corporate headquarters with a $11.9 million loan and tripped their mortgage covenant (pg. 67)
    • 287 employees (pg. 92)
    • CEO/co-founder 2012 cash compensation was $1,145,000 (pg. 100)
    • CEO/co-founder owns 9.1% of the company (pg. 120)

    Overall, this SaaS IPO filing is unusual due to the small amount of overall revenue and high revenue concentration among a small number of clients. Add in the fact that the company already built their own corporate headquarters and it doesn’t feel like the usual SaaS IPO. Textura has a big market opportunity and a great growth rate, so it’ll be interesting to see how it does in the public markets.

    What else? What are some more thoughts on the Textura S-1 IPO filing?

  • Atlanta’s Modesty When It Comes to Self-Promotion

    Quick, who’s the most famous entrepreneur ever from Atlanta? Hint: he’s been referred to as “the mouth of the South.” That’s right, it’s Ted Turner. Ted Turner understands self-promotion and is happy to speak his mind (see the book Call Me Ted). Now, beyond Ted Turner and his amazing run with TBS and CNN, who are some other famous entrepreneurs from Atlanta. It’s hard to name very many.

    Atlanta, with it’s Southern culture, has too much modesty. There are so many success stories, yet they are rarely talked about. Last year Atlanta had a half billion dollars in exits alone with marketing software companies, and people aren’t shouting the story from the rooftops. Atlanta has three more marketing software companies in Silverpop, Mailchimp, and WhatCounts that are easily worth over a half billion dollars combined — there’s no national press about the marketing software cluster in Atlanta.

    I don’t have the answer but I can see the problem: Atlanta has too much modesty and needs to get better at self-promotion.

    What else? What are some ideas to help with promoting the city and its successes?

  • 10 Awesome Startup Tweets from Box’s Aaron Levie

    If you haven’t been following Box’s Aaron Levie (@levie) on Twitter, you’ve been missing out. Levie has some of the most poignant and prescient startup quips anywhere. Here are 10 of my favorite startup tweets from @levie:

    1. The best disruptions reduce the cost of technology, expand its availability, and create more value for the ecosystem, not less. (link)
    2. The first era of enterprise software was won with sales, being closed, and complexity. This era: service, openness, and simplicity. (link)
    3. Sometimes things are the way they are and can’t be changed, other times it’s because no one ever tried. Your job is to find the latter. (link)
    4. The trick is to build a core competency narrow enough to be unique, yet broad enough to be compelling, and then constantly evolve it. (link)
    5. The only way to avoid disruption is to constantly do what you would do if you were just starting out. (link)
    6. Focus too much on the near-term and you won’t get tomorrow’s customers, focus too much on the long-term and you won’t get today’s. (link)
    7. Imagination > Resources = Disruptor.
      Resources > Imagination = Disrupted. (link)
    8. Spend only as much time thinking about the competition as it takes to beat them, and nothing more. (link)
    9. Your time horizon matters more than almost anything else as a startup. The longer you’re in the game, the more shots you can take. (link)
    10. Better to go after a bigger market without all the answers, than a smaller market without any questions. (link)

    @levie does an amazing job distilling startup strategy into 140 character sound bites. I’m looking forward to reading many more.

    What else? What are your thoughts on the startup tweets from Box’s Aaron Levie?

  • Privacy Ideas for an Open Office Layout

    It turns out that the open office layout I mentioned last week is more controversial than I expected. The main culprits are noise, privacy, and ability to focus for an extended period of time. Since the post, a number of people have suggested different ideas to help provide more options for team members, especially when the phone is involved.

    Here are a few privacy ideas for an open office layout:

    There are a number of privacy options to try out and we’ll be experimenting shortly.

    What else? What are some other privacy ideas for an open office layout?

  • Ideas to Increase the Number of Full-Time Entrepreneurs

    When communities talk about needing more local capital, without acknowledging that capital is mobile and full-time entrepreneurs the bottleneck, there’s a disservice to the community. When a community increases the number of full-time entrepreneurs, more viable startups will emerge, and more net new jobs will be created. It isn’t purely a numbers game, but it is heavily correlated.

    Here are a few ideas for increasing the number of full-time entrepreneurs by way of programs that require a nominal amount of capital:

    • Instead of an annual $100,000 business model competition do a quarterly one that’s for $25,000 (a business model competition is a much better route than a business plan)
    • Find a local foundation that’s interested in economic development for the community and start a program that gives a $5,000 grant each week to a local full-time entrepreneur picked by the community using an idea exchange
    • Solicit a large local company that is heavily invested in the community to offer small loans ($10,000 – $50,000) to local entrepreneurs that wouldn’t otherwise qualify for them (e.g. the company or it’s community foundation becomes the guarantor of the loan)
    • Run a relocation campaign and provide incentives to startups in surrounding cities to relocate their company to increase startup density and create more net new jobs

    Increasing the number of full-time entrepreneurs is hard, but with more startups comes more opportunities for success.

    What else? What are some other ideas to increase the number of full-time entrepreneurs?

  • Mentor Madness – Making a Mentor Relationship Work

    Over the years I’ve been asked several times to mentor an entrepreneur. Assuming there’s a good personality fit, I always start with a quick meeting at my office or over lunch. My goal is to get a better understanding of the entrepreneur’s past, present, and desired future. My tendency is to be a problem solver such that I gather as much information as possible and then start looking for solutions, which isn’t always the best course of action.

    Here are a few thoughts on making a mentor relationship work:

    • Design a rhythm of interaction (e.g. a bi-monthly lunch or quarterly phone call)
    • Outline the goals and metrics both parties care about
    • Consider overall commitment period (e.g. let’s try this for a year and re-evaluate)
    • Look for coordinated mentoring arrangements in a professional group (e.g. YPO has a program with mentors from WPO)

    The best mentor relationships happen when both parties are actively engaged and adding value. Mentor relationships take time and effort to be most valuable.

    What else? What are some other thoughts on making a mentor relationship work?

  • Startup Community Idea – Weekly Lunch

    Seven years ago we started doing a weekly Friday lunch for our employees as a way to break bread as a team and to get to know each other on a personal level. It worked so well as a small company, we thought to try it out for the entire startup community with the large event space at the Atlanta Tech Village. So, 10 weeks ago we kicked it off with a good turnout and it’s grown ever since. For the last five weeks, we’ve had well over 100 people per week attend and we’ve even branded it as the Startup Chowdown.

    Here are a few notes on the startup community weekly lunch idea:

    • Charge a nominal fee (Startup Chowdown is $10 for people that aren’t a member of ATV) so that people who sign up are more likely to attend as well as to defray some costs
    • Find a sponsor, whenever possible, to pay for the food and drink in exchange for getting to talk for five minutes in front of the group
    • Cater the food and drink to keep the quality high and effort low for the people coordinating the event
    • Provide name tags or badges with different color labels to promote interaction (e.g. random groupings of people based on their badge color to help people meet new people)
    • Make the event open and inclusive but include a strict no solicitation rule so that people aren’t trying to sell during the event

    The weekly Startup Chowdown event is a great low-key way to bring a startup community together and would be successful in many cities.

    What else? What are some other ideas on having a weekly lunch to bring the startup community together?

  • Startup Style – Open Floorplans with No Private Offices

    In two weeks we’re moving into a newly renovated suite in the Atlanta Tech Village with a number of cool features like 12 foot ceilings, exposed duct work, indirect lighting, iPads outside all meeting rooms/phone booth rooms, seven 70 inch LED TVs mounted on the walls, and an open floorplan with no private offices. I’ve been a part of a number of cool, interesting offices but this will be the first time I’ve tried the open floorplan with no private offices.

    Design wise, we’ll have 40 desks total split into two large rooms with 25 and 15 desks respectively. Then, on the interior perimeter of the suite, we have three phone booths (tiny rooms for personal calls, cold calling, web demos, etc), four team rooms that support up to four people per room, and one board room that supports 14+ people. So, seven shared rooms for 40 people. Assuming 12 people are gone on any given day working from home, on vacation, at a trade show, etc. that leaves a ratio of one shared private room per four people, which feels like plenty right now (we can squeeze in more desks in the open floor plan eventually).

    Naturally, there are concerns about noise, personal space, and interruptions. We’ll have high quality white noise machines, sound boards, rollable partitions, and plenty of furniture to help with some of the noise but a loud conversation will still carry throughout the space. Part of the process will be unwinding general tendencies to collaborate right on the spot in the open area and instead move to the one of the break out rooms (the different rooms will be equipped with white board paint and iMacs to enhance their usefulness).

    Open floorplans with no private offices are still rare but slowly growing in popularity, especially in the startup world. It’s a new change for me and I’m looking forward to it.

    What else? What are your thoughts on open floorplans with no private offices?

  • Public Company SaaS Valuations

    Periodically I like to take a quick snapshot of the public company SaaS valuations (see 2012 and 2010). With Marketo having a big IPO last week and ChannelAdvisor just pricing their IPO today, it’s a good time to see where things stand compared to my last SaaS valuations post 13 months ago.

    • salesforce.com (NYSE:CRM) – customer relationship management SaaS company.
      Market cap: $26.82 billion
      Last reported quarter’s revenues: $834.7 million
      Employees: 9,800
    • NetSuite (NYSE:N) – enterprise resource planning (accounting, inventory, etc) SaaS company.
      Market cap: $6.58 billion
      Last reported quarter’s revenues: $91.6 million
      Employees:  1,953
    • Constant Contact (NASDAQ:CTCT) – email marketing for small business SaaS company.
      Market cap: $456.9 million
      Last reported quarter’s revenues: $68.2 million
      Employees: 1,162
    • LogMeIn (NASDAQ:LOGM) – remote machine access SaaS company.
      Market cap: $601.3 million
      Last reported quarter’s revenues: $37.4 million
      Employees: 565
    • LivePerson (NASDAQ:LPSN) – live chat SaaS company.
      Market cap: $505.6 million
      Last reported quarter’s revenues: $42.5 million
      Employees: 748
    • Responsys (NASDAQ:MKTG) – email marketing SaaS company.
      Market cap: $478.8 million
      Last reported quarter’s revenues: $48.5 million
      Employees: 866
    • Demandware (NYSE:DWRE) – ecommerce SaaS company.
      Market cap: $887.5 million
      Last reported quarter’s revenues: $20.5 million
      Employees:  298
    • ExactTarget (NASDAQ:ET) – email marketing SaaS company.
      Market cap: $1.6 billion
      Last reported quarter’s revenues: $88.9 million
      Employees: 1,673
    • Marketo (NASDAQ:MKTO) – marketing automation SaaS company.
      Market cap: $882.8 million
      Last reported quarter’s revenues: $19.7 million
      Employees: 373
    • ServiceNow (NYSE:NOW) – IT asset management SaaS company.
      Market cap: $4.9 billion
      Last reported quarter’s revenues: $85.9 million
      Employees: 1,077
    • Workday (NYSE:WDAY) – HR and financial management SaaS company.
      Market cap: $10.9 billion
      Last reported quarter’s revenues: $81.5 million
      Employees: 1,750

    SaaS shows no signs of slowing down as a growth sector and the market valuations reflect it. Salesforce.com continues to dominate in terms of size and scale with two of the newer entrants, ServiceNow and Workday, having massive revenue multiples and expectations of amazing growth.

    What else? What are some other thoughts on public company SaaS valuations?