David Cummings on Startups

Category: Entrepreneurship

  • Bet on the Horse, Course, or Jockey

    Earlier today I was talking to a technology investor and I asked the question, “what types of startups and opportunities are you looking for in the area?” He stopped, looked up, and said he characterizes things in three buckets by betting on the horse, jockey, or course:

    • Horse – the specific business idea
    • Jockey – the entrepreneurs/co-founders/management team
    • Course – the market or vertical for the business idea

    Of course, I’d heard the horse and jockey concept many times before but this was the first time “course” came up and I really liked it. When evaluating a specific idea (horse), the market or vertical (course) is extremely important as most of the time the idea that becomes successful isn’t the idea that the team started out with. The horse and course need to be evaluated together as much as they are evaluated apart.

    What else? What are your thoughts on the terms horse, jockey, or course?

  • Sound Issues in a Large Coworking Space

    In a week the Atlanta Tech Village will open an expanded coworking area with reserved desks for 30+ people and unreserved bench seating for 15+ more people in a large 4,000+ square foot area. To date, the pre-renovation coworking area has been 20+ private offices with two to six desks per office, more like a shared Regus office and less like a coworking area. Next week’s new space will be a complete, traditional coworking space with a large open area, game room, and several shared conference rooms. Enter the sound question.

    A common question people ask when touring the space is “will it get loud in here?” Of course, we don’t want it loud so we need a plan for addressing sound issues. Here are a few ideas:

    • No phone calls in the large area such that people that need to get on the phone can use one of the three phone booths, five conference rooms, game room, hallway, or go outside
    • Require companies that have a heavy cold-calling component to their business model to have a private room or suite
    • Ask people with a loud or booming voice to be cognizant of those around them
    • Incorporate some small white noise machines / active noise reduction technology

    Sound is always going to be a concern in a large, open work area. With core value number one being “be nice”, I’m confident everything will work out great.

    What else? What are some other ideas to address sound issues in a large coworking space?

  • Culture Fit Challenges Revealed in a Non-Work Setting

    Corporate culture is the only controllable competitive advantage for entrepreneurs. All the focus for corporate culture is on recruiting to bring the right people in as well as things to do internally to institutionalize whatever it is that makes the culture successful. There’s another rarely discussed item that can become an issue: when someone blatantly violates the culture’s standards in a non-work setting.

    In the sports world you see it frequently when a player gets in trouble with the law. There’s clearly been a violation of team standards but it didn’t happen on the job. In the corporate world, it isn’t usually related to the law, but more so when people treat others in a way that’s clearly against the core values, and it comes back to the entrepreneur or team member via a friend of a friend.

    The immediate response is that what someone does on their own time is their own business, and that’s true, but if they act in an egregious manner, that reflects on their employer, as people expect them to act the same whether on company time or not. I don’t have a good solution for it other than confirming to the source of the news that it’s not inline with the company’s core values. I’ve only had it happen a couple times and haven’t ever brought it up with the employee.

    Sometimes culture fit challenges are revealed in a non-work setting and there isn’t much that can be done.

    What else? What would you do if culture fit challenges were revealed to you in a non-work setting via a third-party?

  • Video Games in the Office

    One of the first comments people make when coming in our office is about the 70″ LED TV with an Xbox and Kinect hooked up to it. Laying on the sofa is four Xbox controllers with Madden 13 prominently displayed below the TV. Video games, hanging out, and enjoying each other’s company are a regular part of our startup experience.

    After seeing and commenting on the TV with video games, followed by the ping pong table down the hall and the razor scooters strewn about, a common jest is “how does any work get done around here?” The answer, of course, is that work gets done whenever and wherever each person  chooses to do it — the office is merely a cool spot to collaborate. Work isn’t defined as sitting at a desk from nine to five and putting in the hours.

    Video games in the office provide a great outlet for unwinding, building relationships with colleagues, and having fun. In fact, we have actually have two 70″ TVs with Xboxes in the office — go figure.

    What else? What are your thoughts on video games in the office?

  • 5 Years and Out for an Entrepreneur

    Recently I was talking to a successful entrepreneur who’s started and sold a number of businesses. I asked about any common patterns or takeaways from the years of startups. One of the most interesting insights was around his thoughts on the lifecycle of a startup and the idea of five years and out.

    Generally, the idea is that by the fifth year of a startup, it’s often time to sell the business and move on unless it’s in breakout mode and growing fast. Rarely does a startup make it to the fifth year as most go out of business before then, but when it does, if it’s on a slow-and-steady growth path, it’s time to evaluate different options. Here are a few ideas around it:

    • Entrepreneur fatigue often starts to set in 5-7 years after starting a venture
    • Many startups by the fifth year still aren’t on the hockey stick growth curve
    • A successful, profitable startup with modest growth often takes the same amount of effort as working on getting a new idea off the ground
    • An alternative to selling the business is turning it over to a management team to run it with more of a focus on profitability and less on growth

    Now, the idea is pretty unusual but it has merit in that there’s so much talk on getting a startup off the ground that there’s little discussion on when to move on.

    What else? What are your thoughts on five years and out for an entrepreneur?

  • Importance of Idea vs Team

    Earlier today I got into a conversation with a colleague about the relative importance of a startup idea vs a startup team. Naturally, both the concept and the people are critically important, but if you had to pick one, which would be most important?

    My general feeling is that the idea is more important than the team. Some arguments for and against it are as follows:

    • Strong ideas, especially pain killers over vitamins, are harder to come by since most ideas are vitamins (or candy!)
    • If it’s a good idea, or at least a good sandbox to play in, the chance of zigging and zagging to achieve success is much greater
    • Strong teams are hard to find but are more easily upgraded as the startup makes progress as opposed to pivoting and trying a new idea
    • Talented teams are more likely to figure out how to make something work, even if it is only a modest success
    • Investors bet on the jockey more than the horse, but it my anecdotal experience, investors bet on the idea more than the team for first-time entrepreneurs and then the team more than the idea for successful serial entrepreneurs

    Startups ideas and startup teams are extremely important to the success of a new venture. In the end, I’d take a great idea with a good team over a good idea with a great team.

    What else? What are your thoughts on the importance of idea vs team?

  • WSJ Piece on Corporate Culture at Pardot

    A couple weeks ago I was asked by some fellow Atlantans if I wanted to write a piece on corporate culture for the Wall Street Journal’s series The Accelerators. The Accelerators is all about strategies and challenges of creating a new business. Of course, I jumped at the opportunity and wrote Perks Keep Turnover Low, Morale High. Now, the title makes it sound like perks are the story, which they aren’t, but that’s easier for people to grasp compared to the real message: corporate culture wins.

    Here are a few takeaways from the article:

    • Corporate culture is the most important thing
    • Big exits do occur outside Silicon Valley
    • Perks like four hours of housecleaning per month, a full-time masseuse, and health+dental make a difference
    • Vacation policies are best when they are two simple words: be reasonable

    Please read Perks Keep Turnover Low, Morale High. Perks don’t define a great culture but help reinforce that the company cares about the team — always start with core values.

  • Startup Funerals

    As a community of innovators, entrepreneurs are up-beat and pumped about changing the world. There’s always a new trend or initiative that people are excited about, which creates new opportunities for startups. One necessary component for a healthy startup community is embracing failure and recognizing that it’s a natural part of how things work. NYC has a startup funeral initiative. Other places need one as well.

    What’s the current ratio of startup launches to public startup funerals and acknowledged shut downs? 1,000 to 1? 10,000 to 1? It isn’t that the startups aren’t being shut down. They are. It’s that some are put on auto-pilot to die a slow death and others are quietly turned off.

    Here are a few benefits of startup funerals:

    • Provides closure to everyone involved — human nature desires it
    • Makes it more public when talented people are available to promote recycling talent
    • Helps make failure more acceptable

    We need more startup funerals.

    What else? What are your thoughts on startup funerals?

  • Yolo and Startups

    One of the popular acronyms right now for high schoolers is yolo, as in You Only Live Once. Not to be confused with the cool stand up paddle boards also known as yolo boards, yolo makes it easy to justify doing something you might not normally do, like cliff diving into a lake. How can we get a little yolo idealism into some of the talented people that don’t consider startups as part of their career options?

    Here are a few ideas:

    • Facilitate programs and initiatives that specifically target college juniors and seniors (e.g. host a regular startups career and internship fair)
    • Promote technology meetups to employees of larger companies via targeted ads on LinkedIn, Facebook, and Twitter
    • Organize more startup drinks-like happy hours in high density commercial areas such that it’s an easy walk for people in the surrounding area

    Bringing the idea of yolo to talented people that haven’t considered startups isn’t an easy task. But, in the end, the biggest challenges can be the most fun.

    What else? What are your thoughts on yolo and startups?

  • When All Paying Customers are Friendlies

    Recently I heard the story of an edge case from an angel investor commenting on the question How Much Traction Does a Startup Need to Raise Angel Money. Here’s the background: an angel investor is pitched by an entrepreneur that has recently cleared the $100,000 in annual recurring revenue mark. The idea sounds plausible but it isn’t completely clear if the product is candy, a pain killer, or a vitamin due to the lack of domain expertise by the angel investor. As the angel investor starts to dig in on due diligence it becomes clear that there’s an anomaly here in which the 10 customers each paying $12,000/year are all friends with the founder of the startup.

    All the paying customers were friendlies. That is, all the customers already had a prior relationship with the founder such that there wasn’t a clear picture regarding the true value of the product as well as how difficult it would be to build a repeatable customer acquisition process. Now, the fact that the founder had such strong relationships with a variety of people bodes well for success in general, but as an investor one of the biggest questions is how the sales and marketing process is going to scale.

    The next time you’re thinking of working for a company or investing in a company with 10 customers, research how the customers were acquired.

    What else? What are your thoughts on the situation when all paying customers are friendlies?