David Cummings on Startups

Category: Entrepreneurship

  • Engineering Serendipity

    One topic that makes sense, but wasn’t talked about much previously in our community, is the role of serendipitous interactions. Recently, I wrote about The Power of Serendipitous Interactions and Startup Communities and how I was experiencing it first-hand at the Atlanta Tech Village. Now that we know it’s important, how can we engineer it to happen more frequently? Here are a few ideas:

    • Cool hangout areas with soft seating, games, kitchen amenities, and more
    • Regular events like happy hours, speaker series, show and tells, workshops, hackathons, etc
    • Startup launch parties and product demo sessions
    • Community clubs like running, sports, and shared interests
    • Great coffee in an awesome coffee shop
    • Free coworking times or areas
    • Mentors and catalysts that like to connect people and help solve problems

    Engineering serendipity is one of the most abstract topics we talk about regarding building community, and possibly one of the most important.

    What else? What are some other ways to engineer serendipity?

  • Thoughts on the AirWatch $200 Million Series A

    Atlanta-based AirWatch, LLC just announced that they raised a massive $200 million Series A round of financing from Insight Ventures Partners out of New York City. AirWatch makes mobile device management software for companies to manage all the different smart phones used by their employees. For many years, Blackberry by RIM was the main smart phone used in the corporate setting, and all the management software, along with the hardware, was provided by the same company. Now, with the explosive growth of iPhones and Android devices, the need for enterprise software to manage the deployment of these devices has grown tremendously — enter AirWatch.

    With this being one of the largest venture-type Series A rounds ever (not just in Atlanta but in the the entire country!), it deserves some further commentary. Here are a few thoughts on the AirWatch $200 million Series A:

    • Often when a growth equity firm puts in money they are looking to make a return of 3-5x their money in 3-5 years
    • AirWatch has been in business for 10 years and hasn’t raised any institutional capital. I’m guessing their chairman, who started and took Manhattan Associates public ($1.32B market cap), had put in money personally prior to the raise (just a guess)
    • AirWatch has 861 employees listed on LinkedIn (source), meaning they likely have 1,000 total employees when factoring in people that don’t have a LinkedIn profile
    • With 1,000 people on staff, at an estimate of $150,000 in revenue per employee per year (investing in growth and not worrying about profitability), they likely have a revenue run rate of $150 million/year (just a guess)
    • Based on a published growth rate of 40%, they likely got a pre-money valuation of 5-6 times revenue — let’s call it an $800 million pre-money and a $1 billion post-money, assuming all the money went to the balance sheet (just a guess)
    • Redemption of shares by existing shareholders is likely, although not mentioned, meaning that some of the $200 million probably went to shareholders selling their shares (I’d guess they took $25 – $75 million off the table)
    • Insight Venture Partners needs to generate a return, so the company will have to IPO or be sold in 3-5 years

    AirWatch is an amazing company and I’m excited they’re here in Atlanta. They’re building a large anchor technology company that will spawn many more companies over the years and be great for the city.

    What else? What are your thoughts on the AirWatch $200 million Series A round of financing?

  • The Best Business Relationships are the Easiest Ones

    In the past, whenever evaluating a business opportunity, I’d focus on the one that was the lowest price or provided the highest return on investment, regardless of relationship. Over time, I came to realize that that wasn’t the best way to approach things. Life’s too short to work with people that don’t have the same values and don’t enjoy what they do. Now, I look for the right balance of business value and personal value.

    In looking for a combination of business value and personal value, I’ve found that the best business relationships and deals are the easiest ones. Easy, in this case, means that they feel effortless. Both sides are working toward similar goals, have good chemistry, and trust each other. Whenever a relationship or deal feels forced, that’s often a sign that it should be further evaluated.

    The best business relationships are the easiest ones.

    What else? What are your thoughts on the best business relationships being the easiest ones?

  • Thoughts on the Content Sourcing Marketplace Space

    Almost two years ago I wrote a post on a Content Marketing as a Service idea where I talked about the need in the market for high quality custom content on a regular basis for companies. It’s been two years and I still haven’t seen anything breakthrough as a clear leader in the space.

    Here are three content marketing companies that are related to the idea but not the exact thing:

    • Contently – marketplace that facilitates high quality freelancers for companies
    • Compendium – content marketing platform that provides a set of tools for content planning, managing, and publishing
    • Kapost – content marketing platform with a marketing calendar, workflow, analytics, etc

    After thinking more about the idea and market for content marketing marketplaces, I believe there are some challenges in the space to build a $100 million business:

    • Content is too personal and custom to a business such that business owners and marketers are very reluctant to outsource it to a third party (this is anecdotal after asking several business owners about it)
    • Crowd sourcing areas in the creative space have been most successful with simple, visual items like logos where there are people that design logos for fun and it’s easy to decide which ones you do and don’t like. It’s exponentially more difficult on both sides of the equation to facilitate 1,000 word blog posts as the product.
    • Even if you outsourced the content development to a third party, it still takes a significant amount of effort to come up with content ideas and the subsequent editing of it to maintain a consistent voice and message aligned with your brand

    Content marketing continues to grow in importance but I think there’s too much friction relative to the return on investment for a content marketing production as a service company to emerge as a large vendor. As it is now, it will continue being serviced by agencies, PR firms, and more involved freelancers.

    What else? What are your thoughts on the content sourcing marketplace space?

  • Thrillist Co-Founder Adam Rich Keynote Notes at Startup Riot

    Yesterday, Startup Riot had two keynote speakers, one of which was Adam Rich. Adam is the co-founder and editor-in-chief of Thrillist. I had heard of Thillist before but didn’t realize it was a city-specific daily email site with something new of note in one of four categories: eat, drink, travel, own.

    Here are some notes from Adam Rich’s keynote at Startup Riot:

    • Original idea came from being in Philly trying to find the coolest stuff to do
    • Built a bar in dorm room for prohibition cocktails
    • National men’s magazines good for an airport layover but not tactical
    • Local city guides had relevance but weren’t focused on the young professional male
    • Built Thrillist to have filtered, targeted city information for his guy demographic
    • Idea is 10% and execution is 90%
    • Daily Candy was good but light on tech and guy stuff
    • Went to funders of Daily Candy and pitched it was that for guys
    • Don’t reinvent the wheel, use a successful plan when you can
    • Hire former athletes as they are coachable and roll up their sleeves
    • Tough to transition from doing to delegating
    • Manages remote teams because he has a local native for each market covered
    • Still views his 200 person company as a startup

    It’s always fun hearing the back story and lessons learned from a successful entrepreneur. Adam did a great job and I’m glad he came to the event.

  • 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?