David Cummings on Startups

Category: Entrepreneurship

  • Write Your Equivalent of The Secret Tesla Motors Master Plan

    Exactly 11 years ago from tomorrow Elon Musk famously published The Secret Tesla Motors Master Plan (just between you and me). Few people read it then and most that did didn’t take it seriously. Only, now, over a decade later, it’s come to fruition. And, from that, entrepreneurs should learn an important lesson.

    But first, from the post, the master plan is:

    1. Build sports car
    2. Use that money to build an affordable car
    3. Use that money to build an even more affordable car
    4. While doing above, also provide zero emission electric power generation options
    5. Don’t tell anyone.

    Entrepreneurs should take this concept — a simple long term master plan — and write one out for their startup. Make it clear, concise, and easily understood. Then, share it with everyone.

    The best way to see the future is to invent it.

    What else? What are some more thoughts on the Secret Tesla Motors Plan and entrepreneurs building their own plan?

  • Entrepreneurs that Can’t Sell

    Last month I was talking to an entrepreneur that lamented he can’t sell. No matter how hard he tries selling his prototype to prospects, his idea to investors, or his vision to potential employees, it’s just not clicking. After hearing this, I asked a few questions about his strategy and approach. It became clear that a little feedback was in order.

    Here are a few thoughts for entrepreneurs that are having a hard time selling:

    • Go with Passion – Emotion and passion are critical for entrepreneurial selling. Figure out what’s energizing and ensure it’s shared with the audience.
    • Know the Audience – Prospects, investors, and potential employees all warrant a different pitch. Think through what the audience wants to hear and map it out in a simple Google Doc. Ask a friend for feedback and constantly refine the message.
    • Read up on Sales – Start with the classic sales books like How to Win Friends and Influence People as well as many others. In addition, there are a number of excellent sales articles online.
    • Find a Co-Founder – Look for a co-founder that has a complementary skill set — plenty of people out there love to sell and are good at it. Take a look at The Co-Founder Complement.

    Entrepreneurs that can’t sell need to improve their skills to get them up to a modest level and find a partner that can help. Selling isn’t easy but with effort can always be improved.

    What else? What are some more thoughts for entrepreneurs that have a hard time selling?

  • Feature Death March

    Last week I talked to a pre-revenue startup that felt if they could just hire another developer and add one more important feature to their product, customers would start buying. In the book Angel by Jason Calacanis, he describes this as the “feature death march” where the entrepreneur has had limited success to date and feels if they just add one more major feature, customers will start buying.

    Prospects saying they’ll purchase the product when it has one more feature is often an excuse. If the prospect is serious, and the feature fits the entrepreneur’s vision, get the prospect to commit to buying the product now with a timeline for when the feature will be done. Ask for a signed contract. Once a contract is involved, and terms are negotiated, it gets serious. Too often, entrepreneurs go on a feature death march only to bring the new feature back to the prospect and have them still say “no” and ask for another, different feature or outright say they won’t buy it.

    Missing an important feature can be a legitimate reason for a prospect to say “no” but more often than not, it’s an excuse and they’ll never buy. Figure out the difference and don’t go on a blind feature death march.

    What else? What are some more thoughts on the idea of a feature death march?

  • Video of the Week – Zach King: The storyteller in all of us

    For our video of the week, watch Zach King: The storyteller in all of us. Enjoy!

    From YouTube: Zach is a filmmaker, born and raised in Portland. He started his film journey at age seven when his parents gave him a camera at a wedding. After being rejected from film school, he started the YouTube channel “FinalCutKing,” where he posted video editing tutorials. Zach has garnered more than 400,000 subscribers to his channel. In September 2013, he launched a Vine account based around his “magic” editing and has grown an audience of nearly 1 million fans.

  • Desired Proof Points to Raise a Seed Round

    Over the last few weeks several entrepreneurs have reached out asking for advice on what’s required to raise a seed round of several hundred thousand dollars. Now, most seed rounds are still a huge leap of faith, but with enough validation some of the risk can be reduced.

    Here are a few desired proof points to raise a seed round:

    • A Must-Have Product – In the nice-to-have vs must-have product debate, it needs to be a clear must-have product (see 5 Questions to Determine a Must-Have Product).
    • Modest Metrics + Revenue – The seed stage is all about proving product/market fit and the start of a repeatable customer acquisition process. Progress with simple weekly metrics is important combined with low six-figures of recurring revenue.
    • Strong Weekly Growth – With modest metrics and revenue, the key is showing that they’re moving in the right direction on a weekly basis. Weekly revenue growth of at least 5% is ideal (see Recurring Revenue and Week Over Week Growth).

    Raising a seed round is done based more on belief than hard facts, but having these three proof points greatly increases the chance of success.

    What else? What are some more proof points to raise a seed round?

  • Make Something People Want

    Almost 10 years ago Paul Graham wrote his famous Be Good essay. The premise is both simple and profound: the most important thing an entrepreneur needs to do is make something people want. That’s it. In only four simple words — make something people want — the key ingredient of all successful startups is defined.

    Make something people want.

    Thinking of starting your own company? Make something people want.

    Struggling as an entrepreneur? Make something people want.

    Deciding to join a startup? Make sure they’re making something people want.

    Evaluating an angel investment opportunity? Make sure they’re making something people want.

    While it sounds simple, it’s hard to make something new that people want.

    What else? What are some more thoughts on the importance of making something people want?

  • 8 Questions for a Product Entrepreneur

    Continuing with yesterday’s post 4 Questions to Ask Before Making an Angel Investment, and the theme of angel investing, when talking to entrepreneurs it becomes clear if they are product-oriented innovators. I call them “product entrepreneurs” and you’ll know it immediately because they’re in love with their product.

    When meeting with a product entrepreneur, ask these eight questions:

    1. How did you come up with the idea?
    2. Why did you decide on building this product?
    3. What’s the magic moment?
    4. What are the main product modules? What’s the most important module?
    5. What aspects of the product do you prioritize? Speed? User experience? Depth of functionality?
    6. What do the competitors do differently in their products?
    7. What’s the next major milestone for the product?
    8. If you could wave a magic wand, what would you instantly change in the product?

    Product entrepreneurs obsess over their product and spend most of the time working to make it better. Use these questions to get a better understanding of how they think about it, what’s working well today, and what they’d like to improve.

    What else? What are some more questions for product entrepreneurs?

  • Build a Competing Company, Internally

    Forbes has an excellent article titled Starting Over: How FreshBooks Reinvented Its Online Accounting Service On The Fly. FreshBooks is a popular online accounting app (think major competitor to QuickBooks and Xero, but more focused on micro and small businesses) that’s been around for over 15 years. After 10+ years with the original application, it was clear that the product architecture and user experience wasn’t going to scale for the next 10 years.

    We all know that the a full product rewrite is the kiss of death. What to do?

    FreshBooks created a separate company, with a separate team, in a separate office, to build a new competitor called BillSpring. BillSpring’s goal was to build a real business with it’s own customer base, that if successful, would replace the original FreshBooks product. After two years, BillSpring was working well and customers loved it. FreshBooks made the BillSpring product the new FreshBooks product while maintaining the legacy product and not forcing customers to switch. Now, FreshBooks has a platform for the future.

    Need to reinvent your company? Consider building a competing company, internally.

    What else? What are some more thoughts on building a competing company to reinvent the business?

  • Recessions and Expensive Software Incumbents

    Earlier this year I had the opportunity to sit down with the Salesforce.com executive that opened the Atlanta office a number of years ago. After hearing that the Atlanta office was one of the most successful ones, I wanted to know the secret. What was the special sauce? Easy, he said.

    The recession hit many years ago and all these mid-to-large companies in the Southeast were running Siebel Systems with annual license costs that were millions of dollars per year. Combine license costs with staff plus infrastructure and you get a serious line item in the budget. Now for the Salesforce.com pitch: cut your overall Siebel costs by 90% and move everything to the cloud. CFOs especially liked this message and Salesforce.com took off.

    It’s been a number of years since the last recession and SaaS has grown tremendously. When the next recession hits, look for a new wave of SaaS products to run the same playbook and replace the expensive incumbents with a system that’s more modern, and much cheaper.

    What else? What are some more thoughts on recessions and expensive software incumbents?

  • Top 10 Blog Posts

    Periodically, I like to review the top 10 most post popular blog posts over the last 12 months. I’m interested in what’s resonating and what’s popular from social media shares and search traffic.

    Here are the top 10 most popular blog posts:

    1. The 9 Building Blocks of a Business Model
    2. SaaS Cost of Goods Sold for Startups
    3. Costs to Furnish a Nice Startup Office
    4. Simplified One Page Strategic Plan from Rockefeller Habits
    5. How Much is Enough: A Story from Jimmy John’s
    6. Example Simplified One Page Strategic Plan
    7. Gross Margin and SaaS
    8. Hockey Stick Growth for Startups
    9. Quantifying the SaaS Valuation Growth Rate Multiplier
    10. SaaS Magic Number

    Have a topic you’d like to see on this blog? Please let me know in the comments.