David Cummings on Startups

Category: Entrepreneurship

  • Pardot as the World’s Most Widely Used B2B Marketing Automation System

    In last night’s post Thoughts on Salesforce.com Acquiring ExactTarget/Pardot, I missed making the most important point: Pardot will shortly become the world’s most widely used B2B marketing automation system and be the defacto standard. Much like QuickBooks dominates the market for SMB accounting software, Pardot will dominate the SMB marketing automation market.

    As an entrepreneur, the goal is to change the world. With Pardot, it’s amazing to think that the product we helped birth is going to be the most popular product of its kind and will be used by millions of people around the world. Pretty awesome!

    Salesforce.com has 130,000 customers. Marketo has 2,100 customers. Pardot has 1,400 customers. Eloqua has 1,200 customers. What percentage of Salesforce.com’s customers, growing at a rate of 4,000 per quarter, will become Pardot customers over the next 1 – 2 years? How about in five years? The opportunity for Pardot to have tens of thousands of customers is readily apparent. What’s my guess as to the percentage of Salesforce.com customers that eventually become Pardot customers? Answer: 15%. And, as Salesforce.com grows its customer base, so too grows the Pardot customer base.

    Man, it feels good to have a product become the standard in the market.

    What else? What are your thoughts on Pardot becoming the world’s most widely used B2B marketing automation system?

  • Thoughts on Salesforce.com Acquiring ExactTarget/Pardot

    Wow! Earlier today Salesforce.com announced it was buying ExactTarget (which includes Pardot) for $2.5 billion in cash (yes, cash). This is a great acquisition for Salesforce.com as they have a strong sales and service cloud but a weak marketing cloud (Buddy Media and Radian6 are social media marketing but not core marketing). Way back in 2009, I was pitching VCs to invest in Pardot (we didn’t raise money) and one of the most common questions was “What’s the exit strategy for Pardot?” My immediate response was that Salesforce.com was the most logical acquirer and that every CRM customer should also be a marketing automation customer. Well, the idea will finally come true.

    Here are a few thoughts on Salesforce.com acquiring ExactTarget/Pardot:

    • ExactTarget has an amazing culture (called “Orange”) with strong mid-western values whereas as Salesforce.com is typical Silicon Valley
    • Email marketing has been the #1 most requested feature for Salesforce.com on their idea exchange for as long as I can remember (ExactTarget is more for the mid-market and enterprise, but will finally allow Salesforce.com to check off that feature)
    • Marketing automation vendors like Marketo and others have real challenges ahead of them since over 80% of their customers use Salesforce.com (Salesforce.com will keep integrating with all the marketing automation vendors but now Pardot becomes the default standard)
    • Cloud marketing software as a fast-growing opportunity has really been validated lately with all the large acquisitions
    • Pardot has an opportunity to be a billion dollar a year business for Salesforce.com within 5 – 7 years due to how complimentary it is to their core sales offering

    Overall, it’s been amazing to be part of the marketing automation industry and I’m excited that Pardot ended up with the cloud leader.

    What else? What are some other thoughts on Salesforce.com acquiring ExactTarget/Pardot?

  • Strong Employee Loyalty as an Atlanta Startup Strength

    When thinking about startup strengths for Atlanta, everyone knows the common ones like low cost of living, great Georgia Tech talent, abundant young professionals, and general excitement in the community. There’s another Atlanta startup strength that needs more coverage: strong employee loyalty.

    Here are a few thoughts on strong employee loyalty as an Atlanta startup strength:

    • Part of Atlanta’s Southern culture is a focus on people and relationships, which results in more emphasis on the team and less on jumping ship to the hotter startup down the road
    • Tech talent is at a premium and there’s a real shortage of software engineers, making strong employee loyalty more important than people realize
    • Training a new employee often costs 10 – 20% of first year’s salary, making it an expensive proposition that increases the value of employee retention
    • Referrals are the best source for new hires and loyal employees are more likely to recommend friends

    Of course, things like a great corporate culture, awesome mission, and competitive wages are a pre-requisite for strong employee loyalty regardless of location. Strong employee loyalty is an Atlanta startup strength compared to the top high tech centers in the country.

    What else? What are your thoughts on strong employee loyalty as an Atlanta startup strength?

  • 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?