David Cummings on Startups

Category: Entrepreneurship

  • The Latent Market Demand Question

    One of the questions I like to ask entrepreneurs is “Are you unleashing latent demand for your product or are you taping into existing demand?” This question is another way of asking “Do most of your clients have an existing vendor that you replace or are you the first vendor they ever use?” Here are a few questions that come up with this important question:

    • Why isn’t there more demand already?
    • What can you do to help grow the market?
    • Can you solve the problem(s) that is/are holding back the growth of the market?
    • Is it a timing issue (e.g. the market is about to explode) or is it so early that you risk not getting to scale?

    The question also helps determine if it is an innovative or replicative business. My recommendation is to think through this topic as part of strategic positioning for the business.

    Do you agree? What other questions would you ask related to market demand?

  • The Owner Mentality

    A few days ago I was talking to an entrepreneur who was considering bringing on a business partner, who wanted significant equity. Now, this potential business partner had been a VP at several previous companies but hadn’t started a business and this entrepreneur was concerned if he had the entrepreneurial mentality — the owner mentality.

    Here are some questions to ask when determining if the owners mentality is present:

    • Are you prepared to personally guarantee the business line of credit and office space, using your house as collateral?
    • Are you comfortable with inconsistent cash flows potentially resulting in significantly reduced paychecks?
    • Are you prepared to roll up your sleeves and take on any and all tasks to ensure success, even if they take you out of your comfort zone?

    What else? What other attributes would you include with the owners mentality?

  • Challenges of First Starting a Product

    Today we kicked off our first investment for Shotput Ventures 2010. Now, like Shotput last year, we don’t talk about the specifics of our portfolio companies until they launch, but one of the things I want to do is capture more of the lessons learned as we go through the 12 week mentoring process.

    During our discussions about their product today, which comprised most of the few hours, several issues were brought up:

    • What’s the right balance between working on code and talking to prospects?
    • How simple should a minimum viable product actually be?
    • What functionality can standalone and what is dependent on other items?
    • How should the features be prioritized?

    While there is no right or wrong answer, one piece we did quickly realize is that the team was building a good bit of functionality that was overkill for getting something out the door that added real business value. This is especially true when there’s such a clean slate with a new product — new features are incredibly easy and fast to add. The hidden problem, which most entrepreneurs don’t appreciate until after they’ve felt the pain, is that these quick-to-add features add code debt and actually slow down development in the future — when it is even more important to move fast.

    My advice: ask yourself “Do we really need this?” for every little feature or option of a feature when building a product — you’ll appreciate it in the long run.

  • What’s in a name (for this blog)?

    My initial inspiration for doing a post every day on my blog came from Fred Wilson’s blog over at avc.com. Amazingly, he’s already done 5,000 posts. Yes, 5,000. This post is actually my 365th post, and I’m feeling pretty good about things. One area that I’m still working on is the name for this blog.

    Here are some names I’ve used:

    • Entrepreneur Musings — not sure it is specific enough
    • B2B Tech Entrepreneur — possibly too generic
    • Startup Stammer — not a positive connotation with stammer although I do like the alliteration
    • 10,000 Startup Hours — the current title, which comes from the Malcom Gladwell book Outliers and is the idea that it takes 10,000 hours to become good at something

    My goal with the name is to be unique and memorable but also pretty relevant, whenever possible.

    What do you think of the new name? What are some blog names you like?

  • Entrepreneur Personal Growth Path

    One aspect of entrepreneurship that isn’t talked about very often is the personal growth path. What I mean by this is the necessary progression management progression during the lifecycle of a startup that scales from nothing to tens, hundreds, or even thousands of employees.

    Here are some sample inflection points:

    • 0 – 10 employees – doer and manager
    • 11 – 20 employees – mostly manager and some manager of managers
    • 21 – 50 employees – mostly manager of managers and some manager of manager of managers
    • 50+ employees – manager of manager of managers (e.g. manager of an executive team)

    There’s a book just about this subject — Leading at the Speed of Growth. My advice is for entrepreneurs to be cognizant of this path and to prepare and understand it as best they can.

  • The Startup Process

    The startup process: there is none. Much like the debate around business plan competitions being bad (too much making up stuff) and a potential solution being business model competitions, startups shouldn’t be viewed as having a formula. Rather, they should be viewed as a multi-year marathon with a series of iterations (some people say pivots, but I prefer iterations).

    Generally, from my experience, here’s one way to look at the startup process:

    • First six months – Build the beta product and get it in the hands of the early adopters
    • Second six months – Refine the product and get ready for launch
    • Second year – Focus on optimizing the customer acquisition process
    • Third year  and beyond – Scale and grow the business

    What else? What would you include in a simple startup process?

  • The Perfect Product Challenge

    One of the major challenges with a web application is the allure of making it perfect. Who doesn’t want the perfect product? Perfect is the enemy of good. A good product gets out the door and is put in the hands of prospects. A perfect product doesn’t exist, and while it is being built, time, energy, and especially money is being consumed.

    My recommendation is to get the product into the hands of prospects as quickly as possible. And when I say prospects, I’m thinking about random ones, not just warm intros. Warm intros are definitely worthwhile and should be used, but also make things too easy that an objective buyer might not provide.

    I’ve seen too many startups never fully get a product out the door. Don’t join the crowd! Launch early and often.

  • Recommended Entrepreneur Books

    A lightening round topic came up at today’s EO Accelerator monthly accountability group meeting about good business/entrepreneur books to read. I named a few off hand and realized I needed to have a better list available. Here’s a list of books that I own and recommend, representing about 50% of the business books that I own:

    This is a pretty good list to start with. I recommend clicking through and reading about them on Amazon.com to learn more.

    What else? What other books would you recommend?

  • More Richard Branson Thoughts on Entrepreneurship

    I’m continuing to read the Richard Branson book Business Stripped Bare and am nearing the end. For me, I usually only read a few chapters (e.g. the first, last, and skim the middle) in a book before moving on to the next one (usually several books a month). Here are a few more pieces of information that caught my attention (text verbatim from the book):

    • Virgin’s normal rate of return in business around 30 per cent [what’s your target rate of return for your business?]
    • This is the point at which entrepreneurial functions become separated from management functions…Suddenly, innovating is seen as something extra, something special, something separated from the activities the company normally engages in.
    • Virgin’s management style is unique, designed to both empower employees and avoid a culture of fear.
    • …there is a fundamental difference between an entrepreneur and a manager…Although I’m sure there are entrepreneurs who could make good managers, my advice would be: don’t try to do both…Entrepreneurs have the dynamism to get something started…Yet an entrepreneur is not necessarily good at the nuts and bolts of running a business.

    Richard Branson ranks up there as one of the most influential entrepreneurs ever, and I enjoy reading his thoughts.

  • Trends in Entrepreneurship

    At a recent EO event the topic of trends in entrepreneurship came up. We spent a good bit of time discussing ideas and changes that were affecting entrepreneurship, in order to think bigger about where want EO to excel and provide the most value.

    Here are some of the trends we identified that will play an important role with entrepreneurs:

    • Globalization
    • Social media
    • Crowdsourcing
    • Mobile
    • Internet everywhere

    What else? What are some other trends that will affect entrepreneurs over the next decade?