David Cummings on Startups

Category: Entrepreneurship

  • SignUp4 – Event Management System

    One thing I want to start doing more of is highlighting successful Atlanta startups on a regular basis. The first one I want to talk about is SignUp4 event management systems. Now, you’re probably thinking EventBrite or 123Signup. Those event management tools are nice but are designed for more consumer type events or less customizable business events. SignUp4 is for businesses that need extremely customizable event management delivered as a SaaS product.

    Here are some SignUp4 fast facts:

    SignUp4 is a solid SaaS success story that pioneered event management software in the cloud.

    What else? What are some other successful Atlanta startups to cover?

  • Start Startup Lead Gen Efforts on Day One

    "Trees are the earth's endless effort to ...
    Image by turtlemom4bacon via Flickr

    Generating quality leads is the main barrier to growth for most B2B startups. As such, startups should start lead generation efforts on day one knowing it takes a significant amount of time to build a customer acquisition machine.

    Here are a few things to keep in mind with lead gen efforts on day one:

    • Talk with all team members about customer acquisition efforts and reiterate that quality leads are almost always the bottleneck to growth for startups — everyone should get involved
    • Plan on a combination of inbound and outbound marketing
    • For inbound marketing, publish at least two blog posts per week, one tweet per day, one white paper per month, participate in online community conversations, and plug in an inbound marketing tool
    • For outbound marketing, start building a newsletter email list, potential prospect calling list, available sponsorship opportunities (like a community of potential prospects), and plug in a marketing automation tool

    Building a customer acquisition machine is the difference between success and failure for many startups. Start focusing on lead on day one and incorporate in into all aspects of the startup.

    What else? What other ways do you incorporate lead gen efforts on day one?

  • Naming a Startup

    Domain Name Extensions

    Naming a startup should not be difficult. While the days of getting a good domain name for $8 are over, a decent startup name, and corresponding domain name can be had for $1k – $2k. Starting out with a strong name is important as it is a) a pain to change it later and b) powerful for making the startup idea more concrete when selling, recruiting, etc.

    Here are a few tips for naming a startup:

    • Keep the name short, preferably 10 characters or less
    • Look for one industry relevant word and a catchy word to go with it (e.g. PlacePunch) or a made up word that is pseudo relevant (e.g. Clickscape)
    • Require a .com domain name and plan to spend $1k – $2k to buy an existing domain (e.g. using sedo.com) if you can’t find an unregistered domain name (buying an existing name can help with SEO if it has been registered for an extended period of time)
    • Do a simple trademark search on USPTO.gov to make sure it or something similar (like a plural form) isn’t already registered
    • Check for the Twitter and Facebook name availability

    Naming a startup can be a long, drawn out effort. Don’t do it. Make it a simple process with a spreadsheet and quickly narrow down five viable options. Take the options to your friends for feedback (not consensus!), make a decision, and move on.

    What else? What other things do you like to do when naming a startup?

  • Economics of a Partner in a VC Fund

    Capital Crescent Trail
    Image by Kevin H. via Flickr

    Two weeks ago I started reading Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist. The book, which I’ll write about in a future post, has a section on the economics of a venture fund. Many entrepreneurs that haven’t been around the venture capital and venture-backed startups world don’t have a good understanding of how venture funds work.

    Here are a few generalities of the economics of a partner in a VC fund:

    • Funds are often setup in a 2/20 manner meaning 2% of the fund annually goes to the management fee and 20% of the profits (carry) go to the partners (after the principal and management fees are paid back)
    • Most partners in VC funds in the last decade haven’t received a carry check since funds have had a negative return on average
    • With a $100 million fund, and 2% management fee, the firm has $2 million per year to operate during the first seven years of the fund, and a lower amount in the later years as the fund (hopefully) wraps up
    • With a $2 million/year management fee, four partners (usually one partner for every $25 – $50 million in fund size), the partners might each take home $300k salaries and have $800k left for associates, admins, office space, legal, travel, etc
    • Funds that do well, put their money to work quickly, and raise another fund because of quality investments, can have their management fees and salaries stack up (imagine raising a $100 million fund, investing the majority in four years, raising a second $100 million fund, and now have $4 million/year management fees to work with, $600k in individual salaries, etc)
    • Carry (profit) from a fund might work as follows: invest a $100 million fund ($20 million went to management fees over 10 years and hopefully $20 million in exits occurred early enough to also be invested before the fund ended), generate $300 million in proceeds from successful investments (3x cash on cash), return the first $100 million back to the investors, earn 20% of the remaining $200 million ($40 million) as profit, and split it amongst the partners ($10 million each). Another bonus is that carry is taxed as long-term capital gains and not regular income.

    As you can see, the economics of being a successful venture capitalist are very desirable, hence the high demand for the limited number of positions. Most VCs come from a banking background and a decent percentage come from an entrepreneurial or operating experience background.

    What else? What do you think of the economics of a partner in a VC fund?

  • Atlanta’s Great for Idea Stage Startups

    75 5th Street, Midtown Atlanta
    Image by MikeSchinkel via Flickr

    Yesterday’s post Atlanta Great for Early Stage Startups but Not Idea Stage? prompted a flurry of comments and tweets. Today I’d like to take the other side of the argument and outline why Atlanta is great for idea stage startups. Startups in this context are capital light web businesses with little-to-no funding and little-to-no revenues.

    Here’s why Atlanta’s great for idea stage startups:

    • The low cost of living means the threshold for saving enough money to start your own business is lower than other parts of the county. In Atlanta, a person with no mortgage or kids can readily live on $1,000/mo (assuming no taxes). I know an entrepreneur that worked 60 hours a week on his startup and valeted cars at night to cover his living expenses — that shows serious determination.
    • While there aren’t a ton of potential co-founders in town that can go with no salary, there are a number of entrepreneurially minded business people and software developers that will freelance part-time in exchange for a reduced hourly rate and stock options (full-time co-founders are the way to go, but sometimes that isn’t always possible).
    • People in the Atlanta startup community are eager and willing to help entrepreneurs at no charge. The startup community in general is medium-sized compared to most cities, and the people in Atlanta are nicer on average, resulting in more opportunities to get help and guidance from people who enjoy giving back.
    • Startup groups, with ATDC being the heart of the community, readily provide peers and mentors to work with during the often challenging journey that is building a company (don’t get caught up in going to events so often that you aren’t making enough progress on your venture)

    In the end, an idea stage startup can be successful anywhere. Atlanta, like every other city, has its strengths and weaknesses. When it comes to startups, especially bootstrapped startups with some revenue traction, I believe it is the best place to be in the country.

    What else? Do you think Atlanta is or isn’t a great place for idea stage startups?

  • Atlanta Great for Early Stage Startups but Not Idea Stage?

    Montage of Atlanta images. From top to bottom ...
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    Recently I was talking to an entrepreneur about the Atlanta startup community and I was arguing that it’s a hidden gem for reasons I’ve mentioned before (here, here, and here). He brought up a different opinion that I hadn’t heard: Atlanta is great for early stage startups but not idea stage. One way to think about the stage of startups is that idea stage startups are pre-revenue to a few hundred thousand in revenues while early stage startups are a few hundred thousand to a few million in revenues.

    Here are a few reasons why idea stage startups struggle in Atlanta:

    • There aren’t anchor technology companies like Google and eBay that acquire startups and recruit talent to the region
    • The lore of local college drop outs building billion dollar companies doesn’t permeate the regional universities
    • Regional universities focus on job placement at Fortune 500 companies and continue the culture of big company = safe employment
    • The number of technical and business co-founders that can keep their lifestyle and not take a salary due to a previously successful exit is tiny
    • The access to extremely risky capital for idea stage startups is minimal

    So, the theory goes that even though Atlanta has the largest engineering school in the country with great technical graduates, a low cost of living, direct flights at an affordable cost to almost anywhere in the world, and a huge population of ambitious young professionals, if your startup can’t afford to pay market-rate salaries, you’re going to have a hard time taking the idea stage startup to early stage startup.

    What else? Do you think Atlanta is great for early stage startups but not idea stage ones?

  • CodeGuard – Backup Service for Websites

    Today I had the opportunity to talk with David Moeller, the CEO of CodeGuard – a backup service for websites. CodeGuard launched at TechCrunch Disrupt in NYC a few months ago, won the audience choice award at the event, and announced a $500k seed round the following month.

    Here are some details on the startup:

    • Idea: Websites, like a laptop, need to be regularly backed up, but many are not. CodeGuard is a SaaS product to backup and restore website files.
    • Business Model: Freemium with a free plan up to a certain amount of space and then a premium plan for more sites and storage
    • Technology: Git for the behind-the-scenes version control and FTP/SFTP to interface with the websites
    • Market: Small-to-mid-sized businesses that don’t have version control software in place
    • Distribution: Direct through PR and indirect through web hosting provider resellers

    CodeGuard is off to a quick start and I hope to see the Atlanta startup succeed. Building critical mass with SMB companies will be extremely challenging and strong web hosting company partnerships will be key.

    What else? What do you think of the CodeGuard startup idea?

  • Contently – Content as a Service

    Today I had the opportunity to talk with Joe Coleman, the CEO of Contently, via an introduction from the founder of the leader in managed Google Apps solutions. Contently is a content as a service company, similar to the idea of content marketing as a service I mentioned a couple months ago.

    Joe came up with the idea for Contently while working at his previous company. He understood the value of content marketing to drive traffic through SEO and social media but didn’t have the time to do it well. Contently, as different from TextBrokers/ContentNetwork.com, Demand Media, etc focuses on the higher end of the market with more experienced and more published professional writers. On the call, Joe kept referring to the writers he works with as the ones who make a living as a full-time writer as opposed to others that do it more as a hobby.

    Contently in a nut-shell:

    • A few blog posts per week for a couple thousand dollars per month
    • Highly screened writers combined with a proprietary SaaS app to maintain an editorial calendar, topic ideas, manage blog post workflow, and provide feedback on the writers
    • A couple areas of expertise around marketing and finance with more being added regularly

    Contently raised a seed round last month and is part of TechStars NYC. I’m looking forward to trying out the service and seeing if it is a good fit for our needs.

    What else? What do you think of the Contently idea?

  • Entrepreneurs Want Accountability Without a Board

    The United States Governmental Accountability ...
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    After talking with dozens of entrepreneurs in Entrepreneurs’ Organization and EO Accelerator, I’ve learned that most bootstrapped companies don’t have a formal board of directors. This makes sense as these are bootstrapped companies, and many would be described as lifestyle businesses. Here’s the interesting part: when I talk to these same entrepreneurs, they want more accountability and people to formally help them grow their business.

    Here are a few reasons entrepreneurs want more accountability without a board:

    • Many entrepreneurs get distracted easily (e.g. mild ADHD) and a board could hold their feet to the fire
    • Entrepreneurs often miss growth targets and shrug it off blaming it on something outside their control
    • Some entrepreneurs have a tendency to get complacent once their initial goals are met

    Fred Wilson mentioned previously on his blog that a board is most useful if they can fire the entrepreneur. If some of these entrepreneurs want more accountability, and had a board with the power to fire him/her, that sure would make things different. My belief is that these entrepreneurs don’t want more accountability but do want more success.

    What else? What do you think of entrepreneurs wanting more accountability without a board?

  • When Good People Work on Bad Startups

    Burj Khalifa aka Burj Dubai
    Image by Joi via Flickr

    Most startups aren’t bad and I’m not usually the best judge but I’ve seen some really good people work on bad startups. By bad startup I mean ones that languish for an extended period of time on an idea that isn’t working.

    Here are a few reasons why good people work on bad startups:

    • The desire to do a startup trumps the ability to see that things aren’t going well
    • The more time and energy put into the startup the harder it is to recognize it isn’t going to succeed
    • The camaraderie and bond with the team becomes so strong that you don’t want to let them down by moving on
    • The badge of failure is more like a scarlet letter in some communities

    Good people working on bad startups is never going to go away. The next time you see it happen ask them some hard questions related to the reasons above and see what’s driving them to continue doing what they are doing.

    What else? Have you seen good people work on bad startups?