David Cummings on Startups

Category: Entrepreneurship

  • The 60/40 Time Allocation Rule

    Lately I’ve seen the 60/40 time allocation rule appear in a few different books and blog posts. The general idea is as follows:

    Spend 60% of your time doing proactive works towards your goals and 40% of your time doing reactive work that you have do (e.g. paperwork, responding to emails, etc).

    This coming week I’m going to try and be more cognizant of where I spend my time. Last Fall I outlined how I get things done at a simple level but I haven’t done a good job of thinking about time allocation towards goals vs things I have to do.

    With news sites and communities like Facebook, Twitter, etc it has become so easy to spend time in the non-strategic 40% category. I don’t know where I stand with my strategic/non-strategic time allocation but I’m interested in finding out.

    What do you think? Do you subscribe to the 60/40 time allocation? What’s your time split?

  • More Domain Name Searching Tips

    Yesterday I had lunch with a friend and we got into the typical domain name searching discussion. My friend’s friend was starting a new company and having a hard time coming up with a name. In addition to my previous domain name searching tips, I had a few new ones to add:

    • Find a few technology companies that list their customers and take words from the customers’ names and plug them into BustAName.com.
    • Add colors or numbers to go with a word (remember to not have more than two words for a total length of 10 letters or less). As an example, the domain jetblack.com would be cool, but the asking price on sedo.com is $450,000. Only 20x overpriced, but I digress.
    • Use sedo.com to search the domain name marketplace and include the following in your search: only .com extension, exclude hyphens, numerals, and IDN, and finally sort by bids (important!).

    What else? What are some other tips for finding a good domain name?

  • #1 Startup Challenge: Lack of Market Awareness

    The number one challenge for startups is the lack of market awareness. Lack of market awareness is another way of saying no one knows about the startup or the product. This is especially challenging when the startup’s product is in a new market which doesn’t have much demand yet — it hasn’t crossed the chasm.

    When starting a new company, my recommendation is to spend more time than you expect on the following:

    • How will companies learn about your business?
    • How will you convince them you’re different in 30 seconds?
    • How will you explain what you do in 30 seconds?
    • How will you acquire new customers?

    What else? What do you think is the number one startup challenge?

  • Example Outsourced Website Advice

    Recently I was at the Caribou Coffee in Buckhead reading a business book and three people sat down at the table behind me. Naturally, I didn’t think anything of it until I heard them talking about building a website. They started getting into who would do what, what would go where, and how long it would take. At that point I had a hard time concentrating because I was curious about the conversation.

    It turns out that a married couple was meeting with the third person, a lady, who was a web developer so that she could build an ecommerce site for them to sell soccer jerseys online (think of “proper football” teams outside the U.S.). This is a great example of hiring a consultant that is happy to do what is asked without offering up best practices. Some of the choice quotes:

    • Client: Can we add music to the site?
      Developer: Yes, of course, and I won’t charge you for it!
    • Client: Are you a full-time web designer and developer?
      Developer: Yes, and I’m also a tattoo artist.
    • Client: How did you learn web development?
      Developer:  I bought a book five years ago and taught myself.
    • Client: What are your thoughts on social media?
      Developer: I’m not a fan of Tweeter but I like Facebook (yes, they both pronounced it Tweeter and not Twitter)

    There wasn’t a single minute spent on driving traffic to the site, measuring ROI, etc. Unfortunately, and in many cases, you don’t know what you don’t know. If you outsource the work without understanding it, you’ll get someone who is accustomed to saying “yes” over and over.

  • Offer Free Tools and Great Content for Lead Gen

    David Skok, a VC with Matrix Partners, has the best blog for B2B technology companies that care about sales and marketing (which ones don’t?). In fact, his Sales Funnel article is a must read for entrepreneurs generating leads online. Here are two great takeaways:

    • Offer free tools with as little friction as possible for people to try. As an example, Pardot offers the free VisitorID product so that you can learn what companies are on your website and what pages they are visiting.
    • Provide great, compelling content in the form of blogs, white papers, and other online content to build credibility and trust with your target audience. Education is the highest form of marketing.

    My recommendation is to read the Sales Funnel blog post and to start building a sales and marketing machine.

  • Focus on Sub $100 Million Dollar Competitors

    One area startups do a poor job with is answering the competitive question “how are you different?” In addition, there’s a tendency to talk about differences compared to mega products/companies (e.g. we’re like SharePoint, Facebook, eBay, etc but do x,y, and z differently). This is nice in that people are more likely to be familiar with these brands but bad for internal focus in that there are so many fundamental differences that it makes it hard to narrow down the meaningful ones.

    More often than not startups should focus on sub $100 million/year revenue competitors. Here’s why:

    • Sub $100 million competitors typically have a more specialized focus or a single product, making it easier for a startup to ride their coat-tails
    • Sub $100 million competitors are still large enough to have a meaningful customer base whereby you can reach and talk to their users, find out where they are advertising, etc
    • Sub $100 million competitors are more attainable size-wise and can be more easily emulated, making it more mentally palatable to say “we’re going to beat X”

    My recommendation is to focus on differentiating your startup against sub $100 million dollar competitors.

  • Stephen King on Startups

    Right now I’m in the middle of famous horror writer Stephen King’s memoir On Writing. He tells a funny and entertaining background of his life followed by thoughts on how to be a good writer. When asked the question “what does it take to be a great writer” he offers up the following advice:

    • Be a voracious reader and writer (he believes reading other books is incredibly important)
    • Specifically, he recommends reading and writing four to six hours each day
    • For the writing, he suggests writing 2,000 words per day, which is about 10 pages (he says to start with 1,000 words per day and then work up to 2,000)

    He’s blunt when it comes to those who balk at the time commitment: if you can’t do it, you won’t be successful.

    How does this pertain to startups? Easy, startups take a serious time commitment to be successful – both studying other best practices (reading) and devoting time to JFDI (writing).

  • Monthly CEO Letter

    A couple months ago we reached a point where we had too many employees to fit in our large conference room for the monthly all-hands meeting. Now, we do weekly team meetings with smaller teams and make sure the meetings have a good, quick pace. Yes, it is more meetings. The good part is that the meetings are faster, making them more enjoyable as people go around celebrating their accomplishments for the week.

    Because we’re no longer together once a month, I now do a simple monthly CEO letter. In the letter I talk about each product and hit on the major metrics for the month. Some of the metrics include:

    • New customers
    • Lost customers
    • Customer upgrades
    • Website traffic

    As a team, we still have our quarterly celebrations outside the office, which provides a rhythm for all employees to get together regularly and social. Communications and alignment are some of the most difficult tasks of scaling a company and we’ve found this works well for us.

  • Debt Financing as a VC-Backed Benefit

    One benefit of venture capital financing that isn’t talked about too often is the ability to raise a substantial additional amount of capital through debt financing. For example, Clearleap is a fast growing Atlanta technology company that raised $9 million in their Series A. Clearly raising that kind of money in their first round shows that the investors are making a big bet on the business.

    Because of the backing of the high quality investors, Clearleap was then able to raise $3.3 million in debt funding, presumably co-signed by their VCs. Debt financing is typically negligibly dilutive to shareholders as the bank will receive some warrants as part of the deal, but those would represent a tiny amount of the company.

    Remember that raising VC money makes no sense in most cases, but if you are going to, also remember that with debt after the VC financing, you can actually get access to a fair amount of additional capital without more dilution.

  • Richard Branson Entrepreneurial Iterations

    Late last week I finished the Richard Branson autobiography Losing My Virginity. The book is an entertaining read that provides a great number of stories around the personal and professional life of one of the world’s great entrepreneurs. The name Virgin, as most of Richard’s companies start with, came when they were working on the name for the first company and one of his friends suggested it since they didn’t have any business experience.

    One of the more interesting aspects of his story is the continual iterations of businesses he had early on. Here are some of those:

    • Magazine called Student targeted towards the college-age student, popular on many UK campuses, even though Richard never went to college
    • Mail order record business designed to undercut store prices after Student went under due to not being profitable
    • Record stores started after the UK postal service went on strike for many months and there was no other way for the mail order business to survive
    • Record label with a recording studio as a way to capture more from the value chain of the recording industry
    • Airline after a US lawyer sent him a letter saying that since British Airways had acquired the only other UK competitor that flew to the US there was a law that another company could come in and gain access to the routes

    Now the Virgin group has over 150 companies doing everything from rail services to vacations to cola. It is pretty amazing the scale and success he’s achieved by bringing a fun, irreverent brand to a variety of otherwise boring industries. I’d recommend this book to get a glimpse into the life of a fascinating entrepreneur.