David Cummings on Startups

Category: Entrepreneurship

  • The Post-10-Customers Startup Sales Strategy

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    Today I had the opportunity to spend 90 minutes with a startup in town and talk about their go to market strategy. They launched a couple months ago and have signed up 10 paying customers through a combination of referrals and general search marketing. The big problem: sales aren’t going as well as they would like, cash is running low, and they don’t have a sales strategy.

    The biggest challenge for technical co-founders is transitioning from being product builders to product sellers.

    Here’s the advice I gave:

    • Prepare to be the sales rep, sales engineer, and product manager
    • Charge significantly more than initially thought for the product and listen for people saying the product isn’t worth it (that happens more often than people saying you should charge more)
    • Manage the four main sales metrics: calls, demos, opportunities, and deals won
    • Understand they’ll be ratios like the following: to win one deal it takes three opportunities, to get one opportunity it takes three demos, and to get three demos it takes 150 calls
    • Pick the most promising vertical from the first 10 customers and use Jigsaw.com to generate a list of 500 applicable companies plus employees
    • Plan for four hours a day of calling on the companies, with the expectation that it’ll take 8-10 calls per company to get the right person on the phone

    Employing this strategy will quickly reveal if the right vertical has been selected, and if so, a path to success will be eminent.

    What else? What other recommendations do you have for startups working on their sales strategy?

  • Sales Reps Should be Pleasantly Persistent

    Earlier today I was having lunch with a successful entrepreneur in town and the topic of sales reps came up. He used a term to describe the most common attribute for productive inside sales reps that I really liked: pleasantly persistent. Continuing with yesterday’s post that customer service shouldn’t be hard, let’s look at why sales shouldn’t be hard with pleasantly persistent reps:

    • Make a plan of attack that involves multiple phone calls to the appropriate prospects/suspects until contact is made
    • When leaving voicemails, say when the next day/time call will take place
    • Follow-up at the previously announced time and reiterate that you said you were going to follow-up and did it
    • Do what you say you’re going to do and be pleasantly persistent

    Of course, all of this should sound like common sense, because it is so obvious. Sales is not easy but being pleasantly persistent increases the chances of success.

  • Customer Service Shouldn’t Be Hard

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    One of the simplest and best ways to differentiate your startup is through customer service. I know this sounds basic but it is amazing how low the bar is set when it comes to getting help. Lately, I’ve had to interact with sales reps from two different companies — yes, people who are making a commission off my business — only to have them take 48 hours to respond to my emails. 48 hours for a response!

    Here are a few customer service tips:

    • Build high quality customer service into the core of your corporate culture
    • Work to have customer service and sales questions answered within 15 minutes and no longer than two hours, if possible
    • Set the tone that employees on the front line should use out of office autoresponders when they won’t be able to get back to the inquiry within a reasonable amount of time
    • Celebrate and store customer praise for great service, put customer testimonials on the wall, and recognize employees who go beyond the call of duty

    My recommendation is to deliver great customer service and make it a core of the business.

    What else? What other customer service practices should be employed?

  • The Kiss of Death – A Full Product Rewrite

    There’s a prominent Atlanta technology company that launched a new, full rewrite of their product this year. It was a disaster. I’ve been there as well. In fact, I know of several other software company CEOs who have similar battle scars.

    A simple piece of advice: never rewrite a product from the ground up if you have a considerable customer base.

    Here’s what I learned when we did a full rewrite four years ago:

    • It literally will take twice as long as your worst case scenario
    • Morale will be significantly affected on the engineering team
    • Sales will suffer as reps continually think the new product is around the corner
    • There will be major bugs upon roll-out, even with significant product QA

    Now, we’ve all heard these issues happen to normal large IT projects, but not to software companies that specialize in this, right? Trust me, it doesn’t matter. People are overly optimistic that things get done in a shorter amount of time. My recommendation is to plan the big rewrite but to implement changes incrementally, instead of with a single release.

  • Why Groupon will Continue to be a Success

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    There have been so many discussions as of late about Groupon and clones, especially with regards to whether or not Groupon will continue to be a major success. Here are some of the common shots at it:

    • It’s only an email list
    • They only do one deal per day per city
    • Anyone can compete with them
    • Their 50% fee to businesses isn’t sustainable
    • People who use it aren’t repeat customers and therefore not profitable customers

    Here are reasons why it will continue to be a major success:

    • Building a critical mass of opt-in email addresses is terribly difficult and expensive, combined with fatigue from people getting emails from too many different competitors
    • Groupon already announced that they are going to offer multiple deals per city per day targeted against user preferences as well as hyper local deals based on zip codes
    • Creating a massive sales force to sell to local businesses takes a small fortune, and the only other companies suited to that are existing yellow pages and coupon companies, not low-cost startups
    • Businesses will always be opening new locations, remodeling existing locations, as well as other types of constant change that will make running a Groupon campaign beneficial to bringing people in the door

    What else? Do you think Groupon will continue to be a huge success?

  • Offline Analogy to Describe a Startup

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    One of the most powerful ways to describe a startup’s business is to think of an offline analogy. The idea is to create a hook in the listener’s mind so that they understand and remember the startup’s purpose. By using an offline analogy, you connect to a more known quantity.

    Here are a few examples:

    • We’re like the printing function of FedEx Kinko’s, but entirely web-based with next day delivery at 30% less
    • We’re like a manual financial audit by a CPA, but done automatically every night
    • We’re like the Manheim Wholesale Auto Auctions, but online for dealers only

    It can also be useful to try out a few different offline analogies to find the one that is most memorable. My recommendation is to come up with an offline analogy for your business and use that when describing your startup. The most important goal is to have the person you’re talking to be able to recall it in the future for potential customers, partners, investors, and employees.

  • Launch Fast, with Minimum Viable Product

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    As part of the lean startup movement and customer driven development, the concept of a minimum viable product is one of my favorite components. I’m a big proponent of launching fast: less than 90 days from starting, a web services company should go live with their product.

    Now, 90 days isn’t much time, and it isn’t alway possible to launch that fast, but having a constraint in place where the engineering effort is time boxed really forces you to strip off functionality and deliver a minimum viable product. All too often I see engineers so wrapped up in their product that they keep thinking they need to add one more feature, when in reality they don’t have enough market feedback, haven’t achieved product/market fit, and are building a product without a market. I’ve been there.

    My recommendation is to get the product out the door as quickly as possible, with the bare minimum functionality that still makes it useful. With that in place, work hard to acquire customers, preferably paying, and then learn what their needs are, and incorporate that into your opinionated software.

  • The Boat Analogy for Startups

    There’s a common line describing the lack of agility in big companies: they’re like a tanker ship that has immense force but little ability to change course. Well, let’s take the boat analogy a bit further and apply it to the many startup stages:

    • Concept stage – you’ve picked out the boat of your dreams, how you’ll operate it, and where you’ll take it, but it is still a dream.
    • Seed stage – you realize you can’t afford the boat of your dreams, but really want to get out on the water, so you start with a jet ski suitable for you and your co-founder. Wow, this thing goes fast and turns on a dime.
    • Early stage – OK, now you have a few people on board. It is time for a nice ski boat, like a MasterCraft with an in-board motor ready to go fast and turn hard.
    • Growth stage -Things are starting to get crowded, you need more room, people demand decent sleeping quarters: it is time for the used 40′ Hatteras yacht.
    • Late stage – With so much value now, the cruise ship has left the port and hit the open ocean. There’s ton of people and value on board, but little hope of changing course.

    What do you think? How applicable are these boat analogies to the different startup stages?

  • Atlanta Startup Community Challenge: Low Cost of Living

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    If you’ve read some of my previous posts you’ll know that I’m a big proponent of Atlanta, especially the low housing costs. At lunch today with two successful entrepreneurs I threw out an idea that I could tell neither one agreed with: one of Atlanta’s startup community challenges is that you can have a great lifestyle for common technology positions (e.g. programmer, sales rep, etc). Paul Graham wrote about similar idea a while back. The theory goes like this:

    • Smart programmer or sales rep gets a job out of college in technology making $60,000 per year.
    • He/she is good at what they do and progress quickly making $70k – $90k/year by their mid-to-late twenties.
    • Now, with minimal expenses (e.g. no spouse and kids), they live like a king in a great, low cost city by buying a new, fancy high-rise condo for $200k, a nice sports car for $30k, and doing whatever else they please.

    Why leave the nice lifestyle for more risk a low/no pay in a startup when you’re already doing something you love?

    In Silicon Valley, rent is 2x – 2.5x more expensive for a comparable place in Atlanta, but part of that is made up in the higher salaries. The major difference actually comes when you get married and want to buy a house. Right, that nice little three bedroom, three bath ranch house in Palo Alto in the good school district. Wait, that simple house costs $2 million. In Atlanta, in a good school district, you’re looking at $500k ITP and in the $350k range OTP. That’s quite the difference isn’t it? Combine the outrageous housing costs (to buy, not rent) with the technology eco-system (e.g. everyone else is doing it and tons of success stories) and you have strong reasons why they are so successful.

    Thinking through this, I don’t want Atlanta to be Silicon Valley. I do want a vibrant startup community in Atlanta and I want people to start thinking through how to get entrepreneurial people involved in startups when they already have such a great lifestyle, partly because Atlanta has such a low cost of living.

  • Anatomy of a Seed Stage Atlanta Startup

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    Recently I spent some time with a local seed stage Atlanta startup that has the makings of a successful business. The anatomy and DNA of this company are a great example of the type of team that can build a thiriving business. Let’s take a look at some of their characteristics:

    • Two passionate co-founders in their late 20s who met as grad students at Georgia Tech
    • Raised a low six figure angel round from local investors after building a working prototype
    • Built a B2B product using Python deployed on Google App Engine
    • Have a small number of paying customers and are slowing growing their client list
    • Seek advice from a good group of mentors and advisers that are actively helping the entrepreneurs
    • Members of ATDC
    • Participate in the local technology community by attending events

    Now, I believe this company will be successful but by no means are the above characteristics requirements. Atlanta is a great city to build a startup and this company is well on its way.

    What else? What are some of characteristics of seed stage companies that you believe will be successful?