David Cummings on Startups

Category: Entrepreneurship

  • Some Lessons Learned from Shotput Ventures

    As we finish our last minute preparations for tomorrow’s Shotput Ventures Demo Day, I wanted to reflect on some of the lessons I’ve learned. This is not an exhaustive list, but rather a few quick thoughts based on my experiences over the past three months. Without further ado, here they are:

    • Offering a co-working space as part of the program is a better way to go than no office space in a spread-out city like Atlanta
    • I saw the most progress and excitement in the final 30 days of the program, correlated with having tangible products to test
    • Letting a team change product directions mid-course is a good idea if they still have time to build something solid for Demo Day
    • Community support is invaluable and Atlanta has been amazing at helping out
    • The teams didn’t interact with each other as much as I would have liked, and we could have done a better job promoting and facilitating them spending time together
    • Developing a timeline with general deliverables at the start of the program would have been beneficial (e.g. product user interfaces, roadmaps, potential beta testers, etc)

    After Demo Day, and having more time to reflect, I’ll work to come up with additional lessons learned. I’m excited about tomorrow!

  • Deciding to Build a New Product

    After today’s entrepreneurship talk for one of Emory’s MBA classes, several of the students lined up to ask me questions. One of the questions was essentially “Do you have a finance person that helps decide when to build a new product?” I quickly said that we didn’t have a finance person help us decide and that it was still based on a gut decision and customer driven input.

    This provided a good segue into describing what I think is necessary for new product development and what I think our core competency is as a company. As for a new software product, assuming you are already following Steve Blank’s advice, I think it is critical to have a domain expert product manager and a separate lead developer software engineer. With today’s awesome web app frameworks, a small, two person team can really put together a prototype of just about anything. In my company, I believe our core competency can be distilled down to three main areas:

    • Scalable web applications
    • Online lead generation and marketing
    • High quality customer service

    So, while I don’t have more specifics on deciding to build a new product, I look at what we do best generally, solicit feedback on the idea from internal and external stakeholders, and then make a decision one way or another. Also, don’t be afraid to kill a product if it isn’t going to be successful. We stopped development of a product over two years ago after working on it for several months, and we should have stopped even sooner.

  • Iterating in a Startup Slideshow for Emory

    I’m giving a lecture tomorrow for an Emory MBA class on entrepreneurship. As for the topic, I’m basing it on my previous blog post series titled Iterating in a Startup. The slides were my first attempt at using the Beyond Bullet Points style of presentation. I hope you enjoy the embedded slideshow below:

  • Employee Continuing Education

    Each month I meet with a group of entrepreneurs to talk about how we can make our respective companies great places to work. We typically spend three hours in the meeting divided into two topics. One of our topics today was continuing education for employees, as defined as internal training and development as well as external programs and courses.

    At my company, we do the following continuing education and training programs:

    I picked up some new ideas at the meeting today that I’m looking forward to implementing. After we try some, I’ll report back here on their effectiveness. Continuing education is a critical part of a fast growing company and I’m a big proponent of it.

  • KPI Dashboards for High Growth Businesses

    One of the biggest challenges of a high growth business is managing communication. Paradoxically, communication within a company must increase exponentially as the number of employees grows. As more employees are hired, more layers of management are put in place, more planning must happen, and finally more communication must take place in a variety of forms. Dashboards with key performance indicators (KPIs) are a good communication mechanism to get team members on the same page.

    Our most recent project has been updating our internal KPI dashboard based on recommendations in the book Mastering the Rockefeller Habits. Currently, we’re tracking the following on our dashboard:

    • Current ratio
    • Recognized revenue
    • New bookings
    • New bugs
    • Percentage of productive engineering hours

    As you might have guessed, it is simple and not quite holistic enough to capture input from all of our different departments. We’re working on moving our dashboard to track the following categories, broken out by department:

    • Sales
      – Bookings
      – Weighted Pipeline
    • Marketing
      – Qualified Leads
      – Opportunity Value from Marketing Leads
    • Services
      – Billed Hours
      – Overrun Hours
    • Support
      – New Tickets
      – Closed Tickets
    • Engineering
      – Development Hours
      – New Bugs
    • Operations
      – Current Assets
      – Average Days Sales Outstanding

    In addition to expanding the number of metrics we track, the other major change we’re implementing is color coding the values based on percent of goal. The Google Spreadsheet cells are colored according to the following values:

    • Red: 0 – 74% of goal
    • Yellow: 75 – 89% of goal
    • Green: 90 – 109% of goal
    • Dark Green: 110%+ of goal

    I’m excited about the changes we’re implementing. Let me know about experiences in your company related to KPIs and dashboards and I’ll keep you posted as to how it works out for us.

  • Analysis of a Business Model

    A friend of mine from college emailed me today with an update on the business he started six years ago. The idea, which I’m not going to reveal because it is so easy to duplicate, is brilliant. This year he’ll generate $5 million in revenue with Google-like net margins, and he bootstrapped the whole thing. And, yes, he even worked a day job for the first four years of the business.

    Here are some general ideas behind his business:

    • Language-related service for people where English isn’t their first language
    • All work is done by highly educated native English speakers in the U.S.
    • Ordering is purely an e-commerce transaction on his site
    • Everything is done through contractors with a strong quality control focus
    • Contractors are on demand and don’t do work unless it has a corresponding contract associated with it

    I’ll be the first to admit that when I heard about the idea, I had no idea if there was a need in the market. Even better, I didn’t think the market was very big. Wow, was I wrong.

    This is another great example of how ideas look brilliant once they’ve been successfully executed. Most ideas are just that — ideas. The execution makes all the difference.

  • Mastering the Rockefeller Habits

    This morning I had the opportunity to attend the Mastering the Rockefeller Habits workshop facilitated by Verne Harnish at the new St. Regis hotel in Buckhead. Put on by EO Atlanta, the event was over-subscribed and well received. As for the content, Verne does a great job synthesizing ideas from a variety of other well known authors into a cohesive plan for high growth companies to follow.

    In the book, the general theme is centered around John D. Rockefeller’s focus on business rhythm, data, and priorities. My takeaway from the event is that when you implement this methodology, the business and corresponding team members have a process to follow that actually eliminates wasteful activities and focuses everything on what is needed to be successful.

    In my company, we don’t follow all the steps recommended by the book, but we do do the following:

    • One page strategic plan with our mission, vision, values, BHAG (big hairy audacious goal), three year goals, annual goals, quarterly goals, and several other pieces of information
    • Scoreboard which, for us, is a large LCD TV in our lobby that has a Google Spreadsheet with key performance indicators related to revenue recognition and new customer wins
    • Rhythm of meetings with daily check-ins, weekly tacticals, monthly strategics, monthly all-hands, and quarterly off-sites

    The book is well worth the time of any entrepreneur serious about building a high growth business.

  • Iterating in a Startup – Part Five

    With a few sales under our belt, we saw our first sign of a trend with higher education. It was the one vertical where we were able to generate several leads using PPC ads. Additionally, the types of challenges higher ed was looking to solve was uniquely suited to our application.

    Our product’s special sauce is the ability to manage multiple websites, that live on multiple servers and use different operating systems, from one single product instance. It’s a hard problem. In addition, we had a simple per-CPU pricing model with unlimited sites, users, groups, and content combined with a focus on XML — before XML really hit the mainstream.

    Colleges and universities typically have a collection of independent websites with little or no consistency. As you might imagine, the development of these sites happened organically and in piecemeal fashion. Different technologies like PHP, Classic ASP, ASP.NET, and ColdFusion were used to power the dynamic portions while plain HTML was used for more static section. Our software can handle each of those situations and publish files as well as to remote databases. Our product flexibility was a key differentiator.

    I wish I could say we planned it that way, but we didn’t. The reason we could publish to different servers and support all the major programming languages was because of the goal we had set out with in our first, failed SaaS CMS: support all small business shared hosting accounts. With our SaaS CMS focused on small businesses, the only way to get content to their server was through FTP or SFTP. There weren’t any other options.

    With our new mid-market CMS, we set out to provide all the benefits of a dynamic, database driven website with the performance and flexibility of publishing flat files. It turned out, unbeknownst to us for a couple years, that that was perfect for higher education. We now had a robust product with reference customers in a specific vertical and it was time to grow a serious business. I had now been running the business on my own for over four years, barely scraping by, but it was at that point where I knew we were onto something special. It was the start of 2005.

    The new strategy was pretty simple — cold call all 4,160 two year, four year, public, and private colleges and universities in the U.S. and Canada. We focused on calling people with the following job titles:

    • Webmaster
    • Director/VP of IT
    • Director of University Relations
    • Web Manager
    • Communications Director

    I had three full-time sales people at the time and they would call and set up web demos for me. My role on the call was to be both the sales engineer and the passionate product manager that gave the demo. It worked beautifully. Sales tripled in 2005 and more than doubled in 2006. We had finally hit our stride.

    Now, in 2009, we’re still growing and have over 120 colleges and universities as clients, making us one of the top higher education CMS vendors in the world. At the end of the day, it came down to the following:

    • Neverending determination to succeed
    • Making decisions quickly and figuring out what works and doesn’t work
    • Being passionate about the product and the market opportunity

    Building a company is an amazing journey and is worth every minute. In addition, being able to iterate and learn quickly is one of the most important traits of the management team. Good luck!

  • Iterating in a Startup – Part Four

    With a good product and several years of domain experience, we embarked on the next major iteration of the business: sales and marketing. I knew the technology aspects of the business inside and out, but my knowledge of B2B sales and marketing was severely lacking. Using Google, I identified three areas to focus on:

    • Cold calling
    • Partnerships
    • Pay-per-click ads

    Cold Calling

    The first idea for cold calling was to buy a list of all the CIOs in the Southeast with revenues between $100 million and $1 billion, which is often defined as mid-sized companies. We cold called 1,000 organizations and generated a measly four appointments. Our cold calling, while valiant, suffered from a lack of the following:

    • Compelling value proposition
    • Referenceable customers we could name drop
    • Product or company name recognition in the market

    Cold calling would eventually become one of our most effective strategies, but it took us 12 months to figure out where to focus our efforts.

    Partners

    Finding implementation partners and resellers was always viewed as a logical strategy for the business. It never worked. Potential partners, like interactive agencies and ISVs, would provide the services and we’d provide the product. Ideally it would be a win-win situation.

    We worked hard and over the course of several years we developed partnerships with 10 companies. Those 10 company relationships resulted in five total sales. That’s right, very few partners would sign on officially, and even fewer would result in actual revenue. It took me a long time to understand that introducing a mid-market CMS to a client would then reduce the amount of money the agency could bill for fees.

    Agencies operate in a time and materials model, and tens of thousands of dollars in CMS costs would come right out of the same client budget as hourly fees. As an agency, building a custom client solution, even if it was more expensive and did less than an off-the-shelf CMS, was the right thing to do for their business model. It was a hard lesson for us to learn.

    Pay-Per-Click Ads

    Pay-per-click (PPC) ads are the sponsored ads that show up alongside search results in Google and other search engines. When we did our first PPC campaign in late 2003, it was much more affordable and cost effective compared to today. Fortuitously, PPC ads, combined with landing pages, allowed us to generate leads in a variety of industries. We would then methodically follow-up and move the prospect through the sales process. By the end of 2004, we had signed at least one client representing each of the following verticals:

    • Management consulting (1, from cold call)
    • Healthcare (1, from cold call)
    • Utilities (1, from partner)
    • Hospitality (1, from partner)
    • Technology (1, from PPC)
    • Higher education (2, from PPC)

    Stay tuned for part five to learn how we took the one industry we’re we’d had slightly more success and became a market leader.

  • Iterating in a Startup – Part Three

    After initially building a small business SaaS product and subsequently licensing it to a larger company, we had finally settled into building the product that would ultimately be successful — a mid-market web content management system. Of course, at the time, we had no idea if it would be successful. What we did know was that robust website management applications were complex and there was no clear winner in the mid-market.

    We spent one year building the application in a vacuum — a luxury made possible by the pre-paid royalties we were receiving. Steve Blank and his book Four Steps to the Epiphany argue for customer-driven development whereby you build the product after you have customers telling you what they want. Not knowing any better, we didn’t operate according to his model.  However, we did have customers of our previous product and we knew some of the things they wanted. We also knew what functionality we wanted to manage our own site. I’m a big believer in eating your own dog food.

    We launched our new content management system on April 15, 2003 at the Internet World trade show in San Jose, CA and promptly won the Best of Show award. The outlook for the new product was bright. Unfortunately, a good product launch doesn’t always equal sales.

    After working non-stop trying to sell the new application, we only managed to sell one license by the end of 2003. Now, selling one server license for $30,000 (the price for our new product) sure felt much better than selling many of the previous, smaller product. But selling only one over the course of six months was discouraging.

    With version one of the product complete, an award under our belt, and our first full-price client (we had given several licenses away for free to get early users), the next major phase in the company was learning how to sell and market the product. Lead generation was the first area we focused on and continuously iterated. We tried these different tactics:

    • Cold calling
    • Channel development through partners
    • Pay-per-click ads

    Stay tuned for part four to learn what worked and what didn’t work.