David Cummings on Startups

Category: Entrepreneurship

  • Too Much Money Chasing a Market

    A phenomenon in the technology startup community I hadn’t read about until recently is that of too much money chasing a market resulting in lower than expected investor returns. Bill Gurley reiterated this recently in his recent talk at the AlwaysOn conference. Of course, supply and demand in any market should work itself out over time.

    My advice to entrepreneurs is to evaluate this potential in their market as part of determining their growth prospects as well as evaluating raising money from investors.

  • Build a Web App on a Budget

    I had lunch with an entrepreneur today and we talked about the web app he’s building. He was interested in my thoughts on how to do it in a scrappy, but high quality manner. I told him to use these sites and services:

    As for the programming of the web app, I recommend hiring a good software engineer in-house, but that’s a much longer topic. Good luck!

  • Boutique vs Lifestyle Business

    There was a meme a few months ago where people were trying to come up with a better term than lifestyle business to describe a non Venture-backed startup company that could scale. Last week, I was reminded of this when I talked to an entrepreneur and she described her company as a boutique services provider, and said her aspirations were to work for herself and not get big. Boutique businesses often get overlooked in the technology world.

    Now that I think about it, I can name several entrepreneurs, in technology, that run boutique businesses and love it. They are some of the more successful and passionate people I know. My advice for entrepreneurs is to think hard about boutique businesses, generally with no employees, vs a lifestyle business, with employees and more visions of organically-grown grandeur when thinking through what they want to be as a company.

  • Accelerator Program Without the Capital

    A friend of my brother (who’s a Spanish Dictionary entrepreneur) reached out to me to talk about my experience running Shotput Ventures in Atlanta as he’s thinking about putting on a similar type of program in another major city in the Southeast. Only, he wants to do the program without providing any investment capital. I told him it wouldn’t work.

    He cited these benefits for joining his program:

    • Pre-negotiated deferred legal fees
    • Office space with conference rooms
    • In-house data center for co-location
    • Mentoring

    This, of course, is in exchange for a small amount of equity. I said that resourceful entrepreneurs can get the items he mentioned on their own, and that if they aren’t resourceful, they probably aren’t going to be successful.

    In addition, without capital, he’s going to have a hard time getting entrepreneurs to move to his city to participate in the program. For Shotput, the majority of our companies moved to Atlanta for the program. Entrepreneurship isn’t a geographic endeavor.

    My advice to him was to raise money to be able to invest in the companies as part of the program. Money talks.

  • The Importance of a Technical Co-Founder

    I was talking with a napkin stage (idea only) entrepreneur recently about his business and we got to the product portion of the conversation. He said he didn’t have a technical person on his two-person team but that they have talked to some programmers that will build the web app application. Immediately, a red flag came up in my mind. It is imperative to have a technical co-founder on the team. Why? Let’s dig into it.

    Here are several benefits of having a technical co-founder:

    • Ability to iterate faster on the product
    • The technical person can communicate directly with the potential customers or users (the company closest to the customer wins)
    • Alignment of incentives and long term interests to build a successful business

    Here are several negatives of not have a technical co-founder:

    • Shows that the entrepreneur hasn’t been able to sell the vision to a technical person to get on board and be a technical co-founder
    • Makes the project timeline and deliverables more suspect as getting a consultant’s help just isn’t the same
    • Results in more narrow-minded thinking of the technical possibilities due to not having someone on the founding team 24/7 to obsess over the future

    I recommend all teams have a technical co-founder. For Shotput Ventures, it is a requirement.

  • How Does Your Company Give Thanks

    With today being Thanksgiving in the United States, it makes sense to talk about giving thanks in your company. Giving thanks, and celebrating, go together and should be part of the company rhythm. Here’s what we do to give thanks and celebrate:

    • Whenever we close a deal with a new customer, we ring our gong at 5pm that same day and everyone claps
    • Every Friday we have a catered lunch for the entire office to spend time together and socialize
    • We use an eCrowds Idea Exchange to nominate a hero of the month, voted on by entire team, and then award the winner a $100 bill at our monthly all hands meeting

    I recommend every company give thanks and celebrate on a regular basis.

  • Much Ado About Nothing (re: Competitors)

    Too often, I find first-time entrepreneurs are extremely worried about competitors. Yes, every industry and market has tons of competitors (unless you didn’t do your homework) but the reality is that most markets are big enough to support lots of companies. In addition, competitors usually do one or two things well, at most, and leave other areas for your company to focus. Worrying about competitors is typically much ado about nothing.

    Another key to differentiation is to stay the closest to your customers in your market. This means that the entire company is truly geared towards successful customer relationships, service, and results. Successful clients will talk to other prospects, act as references, and provide invaluable feedback. Only once you’ve lost several competitive deals to a competitor should you dig in and start developing a strategy for that situation. Until then, focus on selling and staying close to your customer.

  • Hurry Up and Wait

    One of the more frustrating aspects of being an entrepreneur is that of moving faster than those around you. This is due to the entrepreneurial mentality of making decisions with limited information and trusting your gut. We’ve all seen it before: hurry up and wait. This phenomenon is present with many constituents including:

    • Partners
    • Investors
    • Customers
    • Employees

    My advice for entrepreneurs is to have several initiatives in motion such that while you’re moving so fast, and waiting, progress is bound to happen due to the law of averages.

  • Winner Take All Markets

    The famous software blogger Joel Spolsky has a post up Does Slow Growth Equal Slow Death? where he talks about their challenges in the market and the concern that the market they compete in is a winner take all type market. In that type of market, if they aren’t number one, they’ll be marginalize. I’m of the same belief as the 37signals guys in their response to his post Bug Tracking Isn’t a Network Effect Business where they argue there’s room for many successful bug tracking software companies that appeal to different segments of the market, and solve unique problems.

    For entrepreneurs, my advice is to think critically about your markets and whether or not they are winner take all type markets (e.g. eBay for auctions) or if there’s room for several winners. Most markets support many successful companies.

  • Duke Global Entrepreneurship Network

    Tonight I had the opportunity to attend my first Duke Global Entrepreneurship Network (DukeGEN) event at Pier 38 (Dogpatch Labs) in San Francisco. The event was well attended by over 50 Duke alumni and it was graciously sponsor by Duke alum Josh Felser, who previously founded Spinner (sold to AOL) and Grouper (sold to Sony).

    In addition, this is the annual Duke Entrepreneurship Week with many events and speakers on campus. It’s great to see the entrepreneurial spirit alive and well.

    I recommend entrepreneurs get involved in community and networking events.