David Cummings on Startups

Category: Entrepreneurship

  • Leadership Development Questions from The Secret

    Continuing with yesterday’s post on the book The Secret by Ken Blanchard and Mark Miller, there were a number of good discussion questions as part of leadership development. While there were too many to list here I wanted to capture some of the key ones.

    Here are some leadership development questions from The Secret:

    • What is the purpose of your team?
    • How can you communicate your vision of the future to your team?
    • What are ten specific things you could do to engage individuals more effectively in the work of the team and the organization?
    • How are you encouraging the development of your people?
    • What systems or processes in your area of responsibility need to be changed to enhance performance?
    • How could the areas under your leadership be structured differently to enhance performance?
    • How many of your people would say that you have made a significant investment in their lives?
    • What are the ways you have expressed appreciation for work well done in the last thirty days?
    • What do I want to be true in the future that is not true today?

    These are great discussion questions for peer-to-peer learning as well as mentoring sessions.

    What else? What are some other good leadership development questions?

  • Startup Leadership Book Review: The Secret

    This weekend I finished reading the short book titled The Secret: What Great Leaders Know and Do by Ken Blanchard (of The One Minute Manager fame) and Mark Miller (a VP at Chick-fil-A). Much like the Patrick Lencioni books, it’s told as a fable with the main character going through a leadership mentoring program with an executive at her company. The main takeaway from the book is that leadership is about serving others (servant leadership) combined with the following SERVE acronym:

    • See the Future (vision)
    • Engage and Develop Others (mentoring and training)
    • Reinvent Continuously (try new ideas)
    • Value Results and Relationships (metrics and people)
    • Embody the Values (culture starts with you)

    Forcing each of the items into the SERVE acronym was a bit of a stretch but the core concepts are sound. Leadership, just like any other skill, needs constant work, practice, and development.

    What else? What did you think of the leadership book The Secret?

  • V2MOM Planning Process for Startups

    In Marc Benioff’s book Behind the Cloud he talks about the V2MOM planning process he used at Salesforce.com to grow it into the largest SaaS company in the world. The goal with V2MOM is to create alignment from the CEO through to every front-line employee. V2MOM represents vision, values, methods, obstacles, and metrics.

    A key aspect of V2MOM is that it is done at the corporate level, each department, and each individual. Here are more details of each:

    • Vision – big picture idea for the next 12 months
    • Values – the main 3-5 values for the company
    • Methods – specific tactics to achieve desired goals
    • Obstacles – openly talk about things that are working against success
    • Metrics – key performance indicators

    Again, these five items are addressed by every level and every individual in the organization. Building alignment in a startup, especially as it achieves significant economies of scale is difficult. The amount of communication required grows faster than headcount. V2MOM is a great approach to addressing alignment.

    What else? What are your thoughts on the V2MOM planning process for startups?

  • Notes from the Splunk S1 IPO Filing

    Splunk, a distributed machine data indexing and monitoring application for IT departments, just filed their S-1 IPO paperwork to go public. The IPO process is fascinating, especially the detail with which companies explain their last three years in the S-1 filing. S-1 filings are some of the most detailed, factual information you can read about startups that have achieved strong economies of scale.

    For Splunk’s business model, you can think of it as traditional enterprise middleware software for storing, searching, and monitoring all the log files generated by applications. Software applications, especially web-apps in the cloud, are increasingly distributed across multiple servers making log file analysis very difficult. Splunk solves this problem and many others. It’s a Paul Graham Schlep Blindness business.

    Here are notes from Splunk’s S-1 IPO filing:

    • 3,300 customers as of October 31, 2011 (pg 2)
    • Revenues (pg 2)
      2009 – $18.2M
      2010 – $35.0M
      2011 – $66.2M
    • Key Benefits (pg 4)
      Real-time operational intelligence and visibility
      Compelling return on investment and lower total cost of ownership
      Fast time to value
      Ease of use
      Highly scalable and flexible data engine
      Open, extensible platform
    • Growth Strategy (p4)
      R&D investment
      Sales investment
      Up-sell existing customers
      Build related products
      Grow user and developer community
      Become platform for machine data
    • Perpetual license agreements most common (pg 12)
    • More than 70% of revenues recognized each quarter in 2011 were deals sold that same quarter (pg 12)
    • As of October 31, 2011, nearly half the employees have been with the company less than one year (pg 13)
    • Net Losses (pg 14)
      2009 – $14.8M
      2010 – $7.5M
      2011 –  $3.8M
    • Accumulated deficit of $52.7M as of October 31, 2011 (pg 14)
    • 21% of revenues are from outside the United States in 2011 (pg 17)
    • Splunk is a NetSuite and Salesforce.com customer (pg 21)
    • Sales and marketing offices in Hong Kong, Germany, Singapore, and United Kingdom (pg 47)
    • Splunk is a traditional enterprise software vendor and does not have a cloud/SaaS model (pg 47)
    • Professional services represent 6% of revenue (pg 47)
    • 188 orders of $100,000+ in first nine months of fiscal 2012 (pg 50)
    • $3M term loan from Silicon Valley Bank (pg 60)
    • Equity Ownership Stakes (pg 121)
      Venture capital firms owns 71.5%
      Hired CEO owns 8.1%
      Co-founders own 6.0% and 5.7%

    Overall there were no surprises and everything was representative of a fast-growing traditional enterprise software company. Traditional enterprise software companies are valued around 2-3x revenues, so I expect Splunk to trade at 4-6x revenues due to the high growth rate.

    What else? What are your thoughts on the Splunk S-1 IPO filing?

  • SaaS Leaky Bucket Number

    Software-as-a-Service (SaaS) has a number of important metrics for the business model with one of the most important being customer renewal rates / customer churn. Josh James, the co-founder of Omniture, which was bought by Adobe for $1.8 billion a couple years ago, sent this tweet out last week:

    http://twitter.com/#!/joshjames/status/154644835490463744

    The idea that they’d sign up 1,200 customers per month and have 800 customers leave per month drives home the need to closely watch customer renewals. The ratio of new customers to lost customers is critical and now has a formal name:

    Leaky Bucket Number = New Customers Per Month / Customers Lost Per Month

    Note that it doesn’t take into account the average revenue per new customer vs the average revenue per customer that leaves as well as customer upgrades or downgrades. Generally, it’s a good metric to monitor because it’s easier for people to understand we signed 29 customers and lost 11 customers because it continues to keep the number of lost customers top-of-mind. And, it’s especially important for this number to be greater than one otherwise the startup is losing more customers than it’s adding.

    What else? What do you think of the SaaS leaky bucket number?

  • #1 Failure of Idea-Stage B2B Startups

    Last week I was talking to an entrepreneur about an idea-stage B2B startup. After a few minutes of casual talk I asked for the pitch: tell me about the idea. Now this wasn’t a technology idea, so I didn’t have much experience, but it still didn’t sound right. I wasn’t clear why a business would pay for it and how it would be distributed. A few minutes into the idea I went for the hardest question that represents the #1 failure of idea-stage B2B startups:

    What did 10 potential prospects of this product say when you asked them about it?

    Crickets.

    The entrepreneur hadn’t talked to prospects yet. It’s much easier, and more fun, to get feedback from other entrepreneurs compared to talking to prospects. There’s a fear that the idea isn’t good enough and needs to be refined before talking to prospects. Unfounded. The number one failure of idea-stage B2B startups is not talking to prospects immediately and pursuing customer driven development.

    What else? What are some other mistakes idea-stage startups make?

  • Results Only Work Environments (ROWE) for Startups

    Today’s EO Accelerator quarterly education day was on people and more specifically accountability. As part of the material there was a lengthy discussion on results only work environments (www.goROWE.com). ROWE is the idea that results are what matter, not people being in the office from 8am – 5pm daily.

    Here are some tips when considering a results only work environment for startups:

    • Start with one telecommute day per week for everyone in the office and work through the kinks of everyone being able to work remotely (e.g. laptops, phones, etc)
    • Define the results for every position (the result for some positions is very simple like greet visitors at the front desk between certain hours whereas for others it can be more difficult)
    • Implement a no vacation tracking policy (e.g the policy is two words: be reasonable) as a baby step to ROWE
    • Make meetings optional and see who goes and doesn’t go as a proxy for the quality and value of the meetings
    • Work with one department to be ROWE before rolling it out to everyone else

    ROWE is continuing to grow and expand with startups being one of the best places for them.

    What else? What are your thoughts on results only work environments for startups?

  • Flashpoint Demo Day Startups January 2012

    Today I had a great time watching 15 startups in the Flashpoint cohort give six minute pitches at the Georgia Tech Research Institute. The teams have been working together since September 2011 and have made amazing progress.

    Here are notes from the 15 startups:

    Social Fortress
    Eliminate key risks associated with putting sensitive data into the cloud.
    Cloud isn’t as prevalent with financial services, healthcare, government, and IP rich industries
    How it works:
    1. Uniquely encrypt and tag all data.
    2. Provide global audit trail.
    3. Provide universal credentialing.
    Security and privacy are cloud adoption inhibitors
    Biz model: per seat monthly license
    Executed term sheet to raise up to $2M

    Lucena Research
    Bridges hedge fund technology to individual investors
    Quant in a box
    Like speed checkers, not chess
    People want to trade, and tools enable them
    Powered by artificial intelligence and machine learning
    Growing trend where people want to manage their own money
    Smaller hedge funds can’t afford full quant staff
    3 Questions investors want answered:
    Which way is a stock headed?
    How can I bound risk?
    How did it work in the past?
    Raising $1M for R&D, development, sales, and marketing

    CollectorDASH
    A social and mobile ecommerce platform
    Collectors are unique consumers – social and super-passionate
    Collectors: discover, manage, share, trade, buy, and sell
    Started as platform for repurposability
    Action figures first, then trains, then American Girls, etc
    Go to market via OEM or strategic partners e.g. dealers/retailers, manufacturers, brands/licensors, affinity groups/clubs
    www.Collector-ActionFigures.com is live today
    Going to market with Trainz.com
    Make money on premium subscriptions, transaction fees, and other sales
    Raising money

    Badgy
    Social “likes” are similar to SEO inbound links
    Marketers spent $20B last year on SEO and SEM
    What’s after the “like”? 88% of Facebook “likes” never return
    Quilted Northern is a customer
    Several paying customers
    Charge $5-$10k based on number of Fans
    Raising $800k
    Building self-service platform

    Sports Crunch
    Enables athletes, coaches, and fans to connect
    Reconnect, replay, relive
    Social networks have noise
    Derek Anderson is an advisor
    Sports is the universal unifier
    Ability for athletes and coaches to upload content for timeline
    Make money through advertising and premium services
    Raised money through ex-ISS CTO and Flashpoint
    Raising $750k seed round

    Trimensional
    3D scanner for iPhone
    Capture digital 3D models in seconds using an iPhone or iPad
    Replacing $20,000 piece of equipment with an app
    Used in entertainment, 3D printing, medicine, security, mechanical engineering, industrial design
    Entertainment: Actors are digitized via expensive 3D scanning
    Put fans in the background of films and video games
    Users upload their images into the Trimensional database
    50,000 paying customers in 2011…and they can’t do anything
    In discussions with film and media industry
    Applied for provisional patents
    Raising $500k

    eCommHub
    Put your store on autopilot
    Problem: no standard way of communicating with third-party vendors
    Vendors have own requirements / file formats
    eCommHub is a self-service middleware that automates inventory management and order processing through any third-party vendor
    Nearly $2M processed through product already
    Integrated with Shopify already (top 5 shopping cart vendor)
    Going to expand to top five shopping cart platforms
    SaaS business model based on # of vendors, products, and orders
    Raising $450k

    CodeGuard
    Time machine for websites
    Continuous site monitoring with alerts and backups
    $10/month/site on average for paid plan
    Targeting the shared hosting segment of the market
    95% of the market underserved (enterprise is served)
    Customer acquisition direct, through developers, and through hosting companies
    Raising $1.2M
    Taking prototype to commercial product
    Integrating technology with major resellers

    IdeaString
    SaaS social business solution
    Companies need a way to capture their collective brain-power for innovation
    Historically little innovation to drive innovation
    Helped Celanese realize $9 million in immediate cost reduction by generating 4-6 new ideas per day
    A top priority is to find ways to reduce costs through innovation
    Application: part idea exchange, social network, and event management all focused on innovation
    Raised money from angels

    Soket
    Companies need to manage their site, Facebook, Twitter, Foursquare, Yelp, OpenTable and more
    Social content management system for people managing content engagement for multiple local businesses
    Social LSM: Social “Local Store Marketing”
    Sell directly as well as through channel with marketing agencies
    Per month per store subscription fee
    Raising $1M series A funding

    N4MD
    Content aggregation publishing platform
    Help repurpose content into e-books
    Interest server: smart web crawling robot, human curating interface, publishing tool to popular mobile apps
    Home Depot – Spring time is their big season so interested in brining social, local content to customers conversation for hundreds of stores
    Raising $500k

    Simmer
    Easing conflicts at home
    Targeting parents of teens age 13-17
    Goal is to ease the fighting and help communicating with teens
    Resources, tools, and technologies to help
    Looking for investors who have a shared interest in solving this problem

    Billfold
    Awesome billing system for web hosting
    Web hosting is a $10B market with 35,000 companies
    10% of revenues are spent on billing
    Web hosting billing software is all installed, not in the cloud
    SaaS billing system with PCI compliance for hosting companies
    Take billing from 10% of revenue to 4% of revenue
    Adjacent telecom markets like VoIP, ISPs, and media
    Raising a round

    Saving Grace
    Fundraising service for churches and congregants using daily deals
    Use the church as a channel for deals
    John’s Creek United Methodist Church has 3600 members and has 150 businesses within a short drive, all with a vested interest in the community
    Stewardship is the responsible use of what’s given to us
    Help churches save money, help people save money, and help merchants find customers
    Raising $300k

    Pindrop Security
    Focused on stopping phone fraud
    Came out of PhD research from GA Tech
    Caller ID is broken
    Phone fraud is easy to do by calling consumer to get info then call bank and pretend to be the customer
    $37B in identity theft annually with 10% starting by phone
    Phone verification solution that shows every phone call has a unique fingerprint
    Determine type of phone, geo-location, fraud caller, caller identity
    Products:
    Reputation portal and intelligence feed
    Anti-fraud call analyzer
    Call authenticator
    Call protection apps
    Raised $255k
    Raising seed round of $1M

    The teams did a great job and I was very impressed. The next Flashpoint cohort starts June 4th, 2012.

  • Startups Should Default to Laptops for Employees

    Three years ago we started defaulting laptops for employees in place of desktops and we’ve never looked back. Laptops are so cheap, portable, and powerful that there are few reasons not to use them. When a laptop, especially a MacBook Air, is paired with a nice monitor (at least 24″) you have the ultimate modern workstation. Yes, some hard core CPU-intensive applications and games are better for high-end desktops but those are few and far between.

    Here are a few items to keep in mind when you go to a company-wide laptop plan:

    • Conference room laptops should be locked down because inevitably people will forget their laptops at home and borrow it without telling anyone
    • Extra laptops and laptop chargers should be ordered and managed by someone in the event an employee forgets theirs at home
    • Theft of laptops will occur when an employee forgets about it in their car, so be prepared with remote-wipe software and require a password upon machine start
    • Ensure that laptops during meetings are used for notes and not email (do the lunch check: if someone calls someone out for checking email during the meeting and they are right, the person checking email buys the other person lunch and vice versa if they’re wrong)

    Laptops for all employees has worked great for us and I highly recommend it.

    What else? What are your thoughts on startups defaulting to laptops for employees?

  • The Four Areas of Sales Rep Specialization in Startups

    Continuing with yesterday’s book review on Predictable Revenue, there’s one critical takeaway: specialization of sales functions is paramount. The idea is that sales reps are often juggling multiple tasks and even the best intentioned ones spend time where they can maximize their personal commission. Inevitably, when the near-term opportunities grow, the long-term prospecting fades. When the near-term opportunities grow, the farming and account maintenance of existing customers fades. Enter specialization.

    Here are the four areas of sales rep specialization in startups:

    • Market Response Rep – Qualifies and nurtures inbound leads that are handed off to an account executive once engaged in the sales cycle (one rep can handle approximately 400 inbound leads per month)
    • Outbound Sales Development Rep – Cold calls and emails potential prospects and nurtures them until they are ready for an account executive (one rep should generate 10-20 qualified leads per month)
    • Account Manager – Manages the relationship with existing customers and continually looks for ways to add more value
    • Account Executive / Sales Rep – Carries a quota and is responsible for taking leads engaged in the buying process through to close and hand-off

    When a person on a sales team spends 30% of their time on one of the above functions that isn’t their primary function, that’s a good sign there’s enough work available for a full-time person dedicated to it. After you hire a sales rep (before a VP of Sales!), the next hire should likely be a sales development rep.

    What else? What are your thoughts on the four areas of sales rep specialization in startups?