David Cummings on Startups

Category: Entrepreneurship

  • Self-Actualization as a Startup Outcome

    Recently I started reading Peak: How Great Companies Get Their Mojo From Maslow by Chip Conley after a friend of mine sent it to me in the mail unannounced. Chip Conley is the founder of Joie de Vivre Hospitality, which is one of the largest boutique hotel firms in the country. I had the opportunity to meet Chip in 2006 at a Baltimore conference on delivering great experiences where he talked about the importance of corporate culture and employee development. At the time, I didn’t believe in corporate culture as the guiding principle, as I do now, but I remember Chip as being thoughtful and engaging.

    In the book Peak, Chip articulates my shared belief that companies are one of the best vehicles possible to change the world for the better by helping employees achieve their full potential at work and in life. Wikipedia defines self-actualization from writer Abraham Maslow as the following:

    The desire for self-fulfillment, namely the tendency for him [the individual] to become actualized in what he is potentially.

    Much like startups are a vehicle to build community leaders, startups are also vehicles to help people maximize their potential and really push the limits of their capabilities, in a good way. Startups, unique from many other work environments, empower employees to wear different hats and work on a wider range of projects when compared to a traditional company. This exposure, and the corresponding challenges, increases the likelihood that the team member will find what they enjoy doing, stretch them to get better, and result in more self-fulfillment. It doesn’t always work out, but for people it does, the startup helps in their self-actualization journey.

    What else? What are some other ways self-actualization can be the outcome of a startup?

  • Pricing Options for SaaS Products

    Software-as-a-Service (SaaS) is an amazing way to deliver a product for many reasons, one of which is that there’s almost no marginal cost save for hosting bills and customer service. With high gross margins generally, there’s a fair amount of flexibility in how the service is priced.

    Here are some of the more common pricing options for SaaS products:

    • Per user that uses the system with pricing differentiation based on type of user (e.g. an administrator user would be more expensive than a report viewer user)
    • Per module used (e.g. based on functionality)
    • Per instance of a type of object used (e.g. based on how many of X are used, like projects managed or emails sent)
    • Per transaction (e.g. a percentage of a deal, like how eBay does)

    There’s no right or wrong answer, but in general, pricing should be kept as simple as possible while also representing the value delivered to the customer.

    What else? What are some other pricing options for SaaS products?

  • Strong Corporate Culture Must be Cared Deeply About by the Founders

    @melonakos tweeted a link earlier today to The Culture Myth where the author covers a number of importants points about corporate culture. Corporate culture is a part of life in all companies. Some companies embrace it, talk about it, care about it, and actively work to improve it. Most companies do little about corporate culture and let it manifest itself in an unintentional manner.

    The strongest corporate cultures are cared deeply about by the founders from the early days with formal and informal efforts to make the best culture possible infused throughout everything the startup does. A strong corporate culture doesn’t mean it’s the best culture for all companies, but that it’s the best culture for that one specific company — one that passionately believes in it and works to make it great.

    It’s extremely hard to retrofit an existing company that hasn’t had a strong, cohesive culture from the start. It can be done but plenty of people will have to be fired, incremental changes will need to be made to processes, and the reorienting to focus on culture needs extensive buy-in. If front-line team members care about culture and the executive doesn’t, the culture won’t be strong. The founders and executives need to care deeply about the culture for it to be strong.

    What else? What are some other reasons a strong corporate culture must be cared deeply about by the founders?

  • Trading One-Off Revenue for Scalable Revenue

    One of the challenges entrepreneurs have is finding the balance between one-off revenue, like consulting services, compared to scalable revenue, like recurring Software-as-a-Service (SaaS) revenue. When times are tight financially, or it’s a bootstrapped startup, one-off revenue can become a necessity and highly desirable to get cash in the door.

    Entrepreneurs need to continually ask the hard questions internally about what scalable revenue is being sacrificed for one-off revenue.

    There’s no simple formula for determining when to give up one-off revenue in lieu of harder, scalable revenue. As the business grows and gains momentum, more opportunities arise for one-off revenue. Customers will ask for more consulting services, potential partners will reach out about one-time opportunities, and so on. When revenue sources arise, stay opinionated about what does, and does not, fit with the long-term vision.

    What else? What are some more examples of trading one-off revenue for scalable revenue?

  • Annual Think Big Question for Entrepreneurs

    Bootstrapping technology entrepreneurs are a special breed, especially once they cross the desert to profitability. There’s a real challenge that occurs when attempting to shift away some of the scrappiness inherit in a bootstrapped culture to being more aggressive with resources so as to maximize growth. Here’s one question I like bootstrapped startups to think about annually:

    Where would you direct your resources if you had an extra $1M/$10M/$100M that you had to spend in the next 18 months?

    Thinking bigger, especially when it comes to resources and money, isn’t done frequently enough with bootstrapped startups. With this question, the goal isn’t to encourage entrepreneurs to go about raise institutional money, rather, the goal is to stretch the mind and contemplate putting a significant amount of money to work in a short period of time  in new ways. Thought-provoking questions like this are good for entrepreneurs on a regular basis.

    What else? What are some other questions bootstrapped entrepreneurs should think about annually?

  • Balancing Product Expectations with Constituents

    Software-as-a-Service (SaaS) is great from an engineering perspective because of the economies of scale from a low-friction release process (release early and often!) as well as controlling all aspects of the datacenter/cloud servers (more time is spent on the product instead of issues outside of your control found with installed enterprise software). With great power comes great responsibility. One of the biggest challenges is balancing expectations from all the different constituents involved like customers, marketing, sales, prospects, analysts, etc.

    Here are a few tactics for balancing product expectations with constituents:

    • Find the right trade-off between committing to certain features with a timeline and maintaining the flexibility to quickly adjust the priorities
    • Consider using tools like an idea exchange (e.g. UserVoice) so that customers can submit and vote on features they want
    • Develop a customer advisory council and solicit feedback from them in-person or over the phone once per quarter
    • Share a product vision and high-level future features once per year at a user conference

    Balancing product expectations with constituents is difficult. With so many different demands and opinions it’s challenging to make everyone happy. The key isn’t that everyone needs to be happy, but rather that the product has a strong vision in general and everyone understands where things are headed and why it’s headed there. Clarity and direction is key.

    What else? What are some other tactics for balancing product expectations with constituents?

  • When Tuck-in Acquisitions Make Sense for Startups

    While we haven’t done any tuck-in acquisitions, I’ve talked to a number of entrepreneurs who’ve made small acquisitions for their startups with success. Tuck-in acquisitions, by their name, are smaller acquisitions that open up new opportunities or jump start a strategy change. The idea with these types of acquisitions isn’t to bet the farm, but rather to take advantage of an opportunity.

    Tuck-in acquisitions make sense for a variety of reasons:

    • Key employee talent is desired and the tuck-in acquisition brings it on board (e.g. an acqui-hire)
    • Cross-sell/up-sell of an existing customer base with little risk
    • Startup wants to introduce a new product without distracting the core engineering team working on the mothership
    • Time to market for an opportunity that is moving quickly
    • Geographic expansion, especially if an office is desired in a certain city

    Tuck-in acquisitions, even if it is acquiring assets, are a good way for startups to grow faster and do it in a way that is more of a known quantity. Time and money are always constraints making tuck-in acquisitions more desirable if the capital or equity is available.

    What else? What are some other reasons tuck-in acquisitions make sense for startups?

  • Ideas for Making Remote Employees Feel More a Part of the Startup

    As a startup grows, the demand for specialized skills grow as well. With significant talent shortages for key technology positions, more startups and companies are resorting to remote employees as a long-term solution. Working in a different geographic location from the majority of the team makes it difficult to feel the same as a team member that’s in headquarters. It’s important for entrepreneurs to recognize this and go out of their way to make it the best situation possible.

    Here are a few ideas for making remote employees feel more like they’re in the home office:

    • Fly the team member to headquarters for one week per quarter to reconnect and celebrate with the team
    • Incorporate Google Hangout or Skype Video into the weekly routine so that there’s a face-to-face connection (e.g. staff meetings, all hands meetings, etc)
    • Coordinate trade show opportunities so that remote employees have a chance to work the booth or meet customers with other team members

    Several or our employees work full-time from home and these techniques have worked well. With technology, effort, and the right personality types, remote employees are just as happy and effective as in-house team members.

    What else? What are some other ideas for making remote employees feel more a part of the startup?

  • Delineating and Segmenting Sales Teams

    In a small, fast-growing market, one of the best and easiest things to do with an inside sales team is to make it a free-for-all such that the sales reps can aggressively go after any business they want that isn’t already being called on by a co-worker. The idea is that there’s huge potential and the reps should have the autonomy to figure out what works best for them, especially in a situation with no cap on commission.

    As the market and the team grows, many times it becomes necessary to delineate the sales team based on one or more factors. Here are some of the more common examples to segment sales reps:

    • Geographic territories (e.g. regions, state, cities, zip codes, etc)
    • Industries (e.g. technology, healthcare, government, etc)
    • Company size (e.g. companies at or below 250 employees and companies above 250 employees)
    • Deal size (e.g. deals at or below $10,000 and deals above $10,000)

    One of the worst things a sales rep can hear is that their comp plan is changing and their territory is shrinking (often happens when a startup is growing fast and adding more reps). My recommendation is to keep things simple as long as possible and introduce more complexity and specialization as feedback and data make it painfully obvious that there’s a better way.

    What else? What are some more ways to delineate and segment sales teams?

  • Visually Representing a Corporate Culture

    Recently I had the opportunity to meet with a startup that is very focused on corporate culture. Now, this is a growth stage company that many would say have moved beyond startup phase but they still had a number of startup elements.

    One of the many things that impressed me is how they visually represented their corporate culture throughout their office. Here are some ways they present their culture in a more physical manner:

    • Creating a logo or graphic that represents the culture, as separate from the company logo
    • Incorporating the visual representation into standard office items that all employees use like pens, notebooks, cups, etc
    • Painting the walls and other physical building elements with the graphic

    Many companies put their values or mission statement on a wall for team members to read on a regular basis but miss the fact that for a culture to care about these things they need to be alive on a daily basis. By visually representing a corporate culture throughout the office with many different mediums, and walking the walk, the culture is reinforced and significantly strengthened.

    What else? What are some other ways to visually represent a corporate culture?