David Cummings on Startups

Category: Entrepreneurship

  • Double Revenue With No Additional Employees

    For the first 10+ years of my entrepreneurial journey, I was too focused on the number of employees as a key measure of success. When meeting other entrepreneurs, one of the first questions I asked to gauge the size and scale of their business was, So, how many employees do you have now? While that question is still relevant today, it is much less so than in the past.

    Productivity per employee has increased tremendously. The ability to leverage software and other systems for scaling has improved dramatically. The nature of work has also evolved, with more remote and hybrid work arrangements and a greater reliance on contractors and freelancers. My previous belief that W-2 employees were a key proxy for success no longer holds. In fact, many predict that we will see more billion-dollar companies in the future with only a small handful of employees.

    Last week, I heard an entrepreneur say he wants to double the size of his business without increasing headcount. This doesn’t mean keeping the exact same team but rather using AI to boost productivity, outsourcing more functions, and recruiting higher-skilled employees when attrition occurs. The key idea is that as teams grow, management and leadership demands increase, and the organization tends to move more slowly. In this case, the entrepreneur operates at considerable scale, and there is also a focus on increasing annual recurring revenue per employee as a key metric for business health. The goal isn’t to build the largest team possible—it’s to build the most efficient and successful one.

    Entrepreneurs in the growth stage would benefit from considering how they could double their revenue without adding new headcount. What positions would remain? Which ones would be outsourced? Which roles would need to be filled by more experienced hires? What would be the advantages and drawbacks? Entrepreneurs should evaluate the relationship between in-house employees and scale earlier than they might have in the past.

  • Round-Two Entrepreneurs

    Last week, I was catching up with an entrepreneur who was working on his second serious startup. His previous startup started strong but ultimately wasn’t a success. After talking for a while, it got me thinking about round-two entrepreneurs.

    The typical term is “serial entrepreneur,” implying that you start one company after another. However, this term isn’t fully descriptive, as there is a significant amount of side-hustle entrepreneurship—important, but different from being a full-time, all-in entrepreneur for multiple years.

    Round-two entrepreneurs are those who have been full-time entrepreneurs, experienced a poor outcome, and then stepped up to do it all over again. Having that failure under their belt, along with a tremendous number of lessons learned, creates a different dynamic when starting anew.

    Here are a few thoughts on round-two entrepreneurs:

    1. Appreciation for the Game

    Entrepreneurship is incredibly difficult and filled with high highs and low lows. After going through the experience once—especially when it doesn’t work out—the challenges don’t necessarily become easier, but there is a deeper understanding and perspective that differ from the first time around.

    2. The Importance of Mentors

    Often, during round one, it’s easy to believe you can figure everything out on your own and that you have all the answers. Of course, this isn’t the case. At some point, most entrepreneurs realize they need help, and that’s where mentors and coaches come in. Round-two entrepreneurs are much more likely to seek out expert advice and bring in mentors from the start.

    3. Researching for the Best Idea

    In round one, entrepreneurs often chase the first good idea they come across. Sometimes, the idea is great, but often, it isn’t. Round-two entrepreneurs have a greater appreciation for the importance of the market they’re targeting and the idea within that specific market. This typically translates into spending more time finding the best idea possible—not just a good one. If you’re going to spend 10 years building an amazing business, why not spend an extra 6 to 12 months making sure you’ve found the best possible idea?

    4. Speed in Building a Team

    After working as a first-time entrepreneur for many years, you naturally come across a variety of people—employees, partners, vendors, investors, and others involved in the industry. Through this process, you develop a sense of the types of people you enjoy working with, the skill sets that complement yours, and relationships that can be beneficial down the road. 

    As a round-two entrepreneur, you get the advantage of tapping into these connections, which translates into building teams and forming partnerships more efficiently.

    5. Stronger Opinions on Financing

    After going through a startup that doesn’t work out, most entrepreneurs learn valuable lessons about angel investors, venture capital, and other types of financing. In many cases, this leads round-two entrepreneurs to be more resourceful, more efficient, and more focused on customer-funded growth. They also become more strategic about preserving ownership while maximizing opportunities to bring key team members or co-founders into the fold with appropriate equity.

    Round-two entrepreneurs tend to value people equity more appropriately than first-time entrepreneurs.

    6. Lower Ego and Greater Humility

    After the first round of entrepreneurship doesn’t work out—and after countless lessons learned—I typically see round-two entrepreneurs with a lower ego and a more humble approach.

    When a startup doesn’t work out, it’s incredibly painful. There’s a lot of soul-searching and reflection on what worked and what didn’t. This experience translates into round two in several ways: the entrepreneur is more open to feedback, more focused on customer discovery, and generally approaches the business with a more refined mindset.

    Final Thoughts

    Round-two entrepreneurs are some of my favorite types of entrepreneurs to work with. After years of effort that didn’t result in success, they still want to pursue the entrepreneurial journey again. That resilience separates casual entrepreneurs from those who are truly committed.

    Failure is normal and often the most common outcome. But just because you’ve been knocked down doesn’t mean you can’t get back up. Round-two entrepreneurs step back into the arena with a newfound perspective—and a little extra spring in their step.

  • The Entrepreneur’s Passion

    Last week, I was talking to an entrepreneur, and one of the things that stood out was the passion in his voice. You could tell he was fired up and committed to building a business with a strong sense of customer empathy.

    When talking to entrepreneurs, I always enjoy asking questions like: Why did you start this business? Why is now the right time to create this company? What makes you uniquely suited to succeed? While these are important questions, a key nuance is the passion exuded by the entrepreneur. Does he really care? Does he truly want to make this happen? What sacrifices is he willing to make?

    The challenge with discussing passion is that it can be subjective. Different personality styles express passion in different ways. Some people get excited, talking fast and with high energy. Others become serious, showing a deep conviction. While passion comes in different forms, it’s ultimately one of those things you recognize when you see it.

    One final note is about the intersection of entrepreneurs searching for a great idea versus being passionate about that idea. This can be a tough balance. Great ideas are hard to find, and while some entrepreneurs are passionate about anything and everything, others struggle to get excited even when they find a strong idea. For many, that lack of excitement is a dealbreaker.

    From my experience, most things that move society forward, help others, or solve meaningful problems provide a foundation for passion. Of course, it’s ideal to find a need in an area you’re already passionate about, but I wouldn’t limit the search for a great idea to things that are immediately exciting.

    The next time you talk to an entrepreneur, listen to his voice. Pay attention to the excitement around the idea. After the conversation, do a mental analysis of his level of passion. Some of the most successful entrepreneurs I know are also the most passionate about their mission.

  • Incredibly Narrow to Start

    Last week, I was catching up with some entrepreneurs who are off to a fast start. They’ve cobbled together a solution using a mix of off-the-shelf technology, proprietary technology, and human-in-the-loop services. However, the leads coming in have been for a variety of different use cases and ideas.

    It’s a high-class problem to have—clearly, the market wants what they’re offering. But as entrepreneurs with limited resources, it’s critical to focus on the most acute pain in the market. There’s an old adage in startup land: more startups die from indigestion than starvation. This means that startups often fail not from a lack of opportunity but from trying to do too many different things for too many different customers, ultimately taking on more than they can handle.

    So, how do you figure out where to focus when you’ve found an unmet need in the market? Here are a few ideas:

    • Quantify the value. How much are prospects willing to pay? Which ones have the most urgent need?
    • Timeline. Who can roll out the technology the fastest? This can also serve as a proxy for urgency and value.
    • Size of market segment. Looking beyond these initial leads, which market opportunity has the most long-term potential? Getting a wedge into a small but fast-growing market that will eventually be large is one of the best ways to build a business.
    • Customer-funded development. Is a potential customer willing to fund new features and solutions to address their needs? In an ideal scenario, customer pain aligns with the entrepreneur’s vision, and development is funded by the customer.
    • Willingness to partner. Is the prospect interested in joining a customer advisory board and influencing future development? Some people enjoy being influencers, even for B2B products. These individuals are incredibly valuable to startups as they provide testimonials and answer reference calls—don’t underestimate the importance of having a customer who cares.

    Ultimately, it benefits the entrepreneur to zoom in and focus on the use case that both fits their vision and has the potential to build the foundation of a business that matches their ambition. Entrepreneurs would do well to start unbelievably narrow, nail it, and then expand. Starting small is the way to go big.

  • 45 Pre-Interview Questions from Brad Jacobs

    One of my favorite hobbies is reading autobiographies of entrepreneurs. The most recent one I read is by Brad Jacobs, the founder of United Rentals, United Waste Systems, and XPO Logistics. Brad’s style and journey differ from the ones I’m accustomed to reading, where the entrepreneur invents a new product and shares the stories of building a huge business. In Brad’s case, his specialty lies in identifying large markets that need consolidation and technology. He focuses on building great teams, raising tremendous amounts of capital, and rolling up the market.

    His strategy and approach resemble a mega search fund, where the idea is to secure a pool of capital and then enter a market by acquiring existing businesses. One of my favorite takeaways from the book is where he talks about the importance of hiring executives. His process involves spending 8 to 10 hours with each candidate and gaining buy-in from the rest of the executive team through interviews and exercises. As part of this process, he has candidates fill out 45 questions before the interview.

    After reading these questions, I realized they are ones every entrepreneur should consider incorporating into their recruiting process. Here are the 45 pre-interview questions from Brad Jacobs.

    Strengths

    1. List some adjectives or phrases that sum you up, that get to your essence.
    2. When you look at your professional self in the mirror, what do you see?
    3. What motivates you? What are you trying to accomplish at this point in your career?
    4. What do you consider to be your biggest career accomplishment(s) so far?
    5. What are your biggest professional strengths?
    6. What’s been the high point of your career so far?
    7. What parts of your jobs have you liked the most?
    8. What’s your favorite professional activity?
    9. Name five reasons for your professional success.
    10. What do your subordinates think are your strengths?
    11. Who was your favorite boss and why?
    12. What positive things might your bosses and colleagues say about you?
    13. What’s the most significant praise you’ve received in a performance appraisal in the last five years?

    Areas for Improvement 

    1. What are some of your biggest professional weaknesses or areas for improvement?
    2. What’s been the low point of your career so far?
    3. What have been some of the biggest mistakes you’ve made, and what did you learn from them?
    4. What’s the most significant criticism you’ve received in a performance appraisal in the last five years?
    5. Who was your least favorite boss and why?
    6. What negative things might your bosses and colleagues say about you?
    7. What do your subordinates think are your weaknesses?
    8. What have been the biggest frustrations or failures in your career?
    9. If you could change on thing about yourself, what would it be?

    Miscellaneous

    1. Describe your character.
    2. What quality do you admire most in people?
    3. What parts of your jobs have you enjoyed the least?
    4. What was the toughest decision you’ve ever had to make in business? How did you handle it? What did you learn from it?
    5. What was your favorite job and why?
    6. What was your least favorite job and why?
    7. What defect should a professional never allow themself to have?
    8. How do you manage your personal/professional balance?
    9. Who in the business world do you admire and why?
    10. Explain the reason for your separation from each one of your jobs.
    11. In an ideal world, describe your perfect job.
    12. Name three of your biases.
    13. What your working habits (a typical day and week)? How many hours do you usually work? How much do you travel for work?
    14. What do you think it takes to be successful in the job you’re applying for?
    15. On a scale of 1-10, how well do you think your skill set matches what’s required to succeed in this job?
    16. What would it take to make your answer to the previous question a 10?
    17. On a scale of 1-10, subject to acceptable compensation, how much do you want this job?
    18. What would it take to make your answer to the previous question a 10?
    19. What are the top three reasons why you’re interested in this position?
    20. Would you accept this job if it were offered to you?
    21. What more do you need to know in order to decide if this role is right for you?
    22. What questions or comments do you have for us?
    23. Why should we hire you?

    Bonus ending question: What have been one or two of the happiest moments of your professional life so far?

    As an entrepreneur, the next time you’re hiring for a key position, consider using some or all of these questions as part of your process. Entrepreneurs are wired to move fast and get things done, but hiring is one area where it pays to slow down just a bit and get it right.

  • The Perlant Grand Opening

    Last week, we had the grand opening for our newest hospitality concept called The Perlant. The Perlant is a private social club rooted in food and wine, located at Peachtree and West Paces Ferry in the Buckhead neighborhood of Atlanta. Bringing people together around common interests is one of my favorite things to do, and this is another expression of that joy. But first, how did we come up with the concept, and how did we get to this point?

    The Perlant – Interior view of the social club rooted in wine

    Several years ago, I was introduced to Christian Ries when he was an entrepreneur at the Atlanta Tech Village. After meeting him briefly, we reconnected sometime later when he was trying to figure out what to do next in his career. We kicked around a bunch of ideas and worked on a home maintenance startup for over a year before deciding it wasn’t going to work out. In parallel, we had started Intown Golf Club, which was thriving as a golf-oriented social club in the heart of the financial district in Buckhead. The idea for Intown Golf Club was simple: bring a great group of people together around the love of golf and nurture the community through events, programs, tournaments, and trips.

    One day, Christian pinged me and said he had an idea he wanted to pitch. I said, “Great!” He kicked it off by sharing that he’s a Level One Sommelier and, growing up in South Africa, he always loved wine culture. With that shared, he explained his vision for a new social club rooted in wine and hospitality. Excellent, I thought. He went on to share ideas around an amazing community space with a living room for hanging out, a library for co-working, a dining room and patio, and great private dining rooms complete with a 10,000-bottle cellar.

    After months of research and customer discovery, we decided to move forward with the idea. We toured a number of old restaurant spaces in Buckhead, all the while knowing that the one we really wanted was immediately next door to Intown Golf Club. However, that space had a signed LOI with a different restaurant concept at the time and was likely to be taken. Thankfully, after months of scouting locations and not having any luck, the space we wanted all along became available once the LOI fell through.

    We were off to the races. With the lease in place and the architecture team on board—our friends at Ai3—Christian and the team set out to create a Napa Valley-inspired hospitality experience unlike any other. Now, after 25 months of work, we’re thrilled to share The Perlant with a great group of people who love wine culture in a setting with mid-century modern Napa vibes.

    Congrats to Christian and the team for the launch of The Perlant! The next time you’re in Buckhead, stop by for a quick tour.

  • ATV Sylvan Downtown Grand Opening

    This past week, we opened our new Atlanta Tech Village location downtown in the historic Sylvan Hotel on Hotel Row. It was incredible to see over 100 friends and community supporters in attendance, including the mayor, several members of City Council, local civic groups like Central Atlanta Progress and the Metro Atlanta Chamber, as well as numerous entrepreneurs and startup leaders from the community. It’s truly a special feeling to be so supported and encouraged in our efforts to revitalize downtown and help local Atlantans rediscover an important part of our city.

    Exactly one year ago, we were walking the neighborhood, brainstorming where to start and gathering as much information as we could to think through a master plan. One of the documents we found during due diligence was a test fit build-out of office space in the Sylvan building, created by Gensler, one of the most prominent architecture firms in the world. After reviewing this document and the proposed layout, combined with walking through the building many times and seeing the two office tenant spaces already in use, the proverbial lightbulb went off: this was the perfect spot to build out a flagship Atlanta Tech Village location downtown.

    As part of our collection of 56 buildings, the Sylvan building had already undergone some improvements by the previous owners. They had renovated six of the buildings, mostly core and shell, meaning the exteriors were restored, but the interiors were empty spaces. Among these buildings on Hotel Row were 10 retail spaces that had been white-boxed, creating a blank canvas for future retailers. A few weeks into starting work on the new Atlanta Tech Village flagship location, we were discussing the retail spaces and potential tenants. That’s when the lightbulb went off again—we realized that to make the building more inviting and accessible, one of the 10 retail spaces should serve as the lobby and reception area for Atlanta Tech Village.

    Initially, I suggested the retail space on the right side of the building because it was closer to the center of the block. However, I was quickly shown that the retail space on the left side of the building, directly across the hall from Spiller Park Coffee, was a more natural entrance for ATV. Now, we have a beautiful street-level entrance with a lobby, reception, and small event space. Upstairs, the building features 40+ private offices, several conference and board rooms, multiple kitchens, and another event space that can accommodate 50 to 75 people comfortably.

    One of my favorite moments is seeing people experience the new space for the first time. Walking the halls, they take in the textures on the walls, from the plaster to the exposed brick and heavy timber. Looking out the windows, they see a mix of Art Deco, mid-century modern, and glass-and-steel buildings surrounding them. The vibe and character of this space are unlike anything else in the city.

    Atlanta Tech Village Sylvan in downtown Atlanta is now open for business. The next time you’re in the neighborhood or want to experience an incredible piece of Atlanta’s history, please come by for a tour. We’re excited to celebrate this next milestone in building the largest startup and innovation district in the country. 55 more buildings to go!

    Photos Courtesy of Gensler

  • Entrepreneurs Should Look for the ‘Yes’ Face

    Throughout the entrepreneurial journey, the number of requests and times you ask for help is innumerable, from the product launch to recruiting team members, building teams, and scaling the business. Seeking help from others is an integral part of the experience. Only sometimes, it’s hard to know who’s willing to help and who isn’t. Traditional networking, going to alumni groups, participating in different meet-up organizations, and generally socializing are all great techniques.

    Last month, I heard the story of Thomas Jefferson and the ‘yes’ face for the first time:

    During Thomas Jefferson’s presidency he and a group of travelers were crossing a river that had overflowed its banks. Each man crossed on horseback fighting for his life. A lone traveler watched the group traverse the treacherous river and then asked President Jefferson to take him across. The president agreed without hesitation, the man climbed on, and the two made it safely to the other side of the river where somebody asked him: “Why did you select the President to ask this favor?” The man was shocked, admitting he had no idea it was the President of the United States who had carried him safely across. “All I know,” he said, “is that on some of your faces was written the answer ‘No’ and on some of them was the answer ‘Yes.’ His was a ‘Yes’ face.” (source)

    Now, after having heard it, it’s been rattling around in my mind ever since. Some people have a look about them where you can tell they want to help. You can tell that they’re interested in helping others. You can see something in their eyes that’s just a little bit different.

    Entrepreneurs would do well to pay more attention to who has a ‘yes’ face, to those who more frequently volunteer to help. Then, turn that understanding into a strategy to seek out more people with a bias towards saying yes. Entrepreneurs should look for the ‘yes’ face and get help on their mission.

  • 5 Best Practices for Effective Entrepreneur Updates

    At the end of the year, I’ve enjoyed reading different entrepreneur updates and communications. I always find it fascinating to learn what’s going on in a variety of businesses—what’s going well, what’s not going well, and especially where the entrepreneurs need help.

    There are a variety of styles. Some entrepreneurs are better storytellers and deliver great anecdotes, while others are more matter-of-fact and like sharing metrics and KPIs. There’s no right or wrong communication style as long as it’s productive and worthwhile. The only style that is destructive is no communication. Surprisingly, many entrepreneurs still don’t share regular updates with their advisors, partners, and investors. That’s a big no-no in my book.

    Now, for the entrepreneurs who do communicate regularly, which is most of them, there are a few best practices that I like to see:

    1. Connect the Reader with the Mission: Why are we here? Why are we on this mailing list? What are we trying to accomplish with this startup? While it might seem obvious from the entrepreneur’s perspective, it’s important to get in the reader’s shoes and think of it from their perspective.
    2. Provide Highs and Lows: Too often, entrepreneurs use their regular communication as a hype session, trying to make it sound like everything is going well across all aspects of the startup. We know from experience that that’s never the case. There are always challenges. It’s important to have the hype, excitement, and energy in the communication while also level-setting that it is hard, there are challenges, and here are some of the current challenges. Again, be real with the challenges—don’t sugarcoat them.
    3. Goals and Metrics: Every entrepreneur needs a simple one-page strategic plan at a bare minimum, and the regular communication should incorporate updates on the project goals as well as the quarterly and annual metric goals. Again, they should be succinct, understandable, and focused on the highest priority items. These goals and metrics should not be lower-level or department-specific. The most common ones are big, company-wide rocks that have to get moved, as well as metrics like revenue, profitability, cash in the bank, and burn rate. The metric goals should not be more fine-grained, low-level items unless they somehow tie in at a very strategic level.
    4. Consistency of Communication: Whether it’s weekly, monthly, or quarterly, the most important thing is that it’s done on a consistent basis. Too often, I see an entrepreneur get excited about providing updates, do it one or two times, and then fall off the wagon. If it’s something that the entrepreneur is excited about and committed to, great—do it weekly or monthly at a minimum. If it’s something that’s really painful for the entrepreneur to do, try to convince them of the value of regular communication and provide it at a minimum quarterly. Personally, if the entrepreneur really enjoys it, they should do it weekly, as it’s a great way to organize thoughts and priorities and reflect on what was learned the previous week. As a tool for the entrepreneur’s own development, writing and synthesizing everything that’s happened recently is a great exercise.
    5. Make It Reflect a Personality: Some entrepreneurs like to focus on the product and the innovation—great, reflect that in the communication. Some entrepreneurs like to focus on energy and momentum—great, reflect that in the communication. Some entrepreneurs love the people side and characters, both in and outside their business—great, reflect that in the communication. Entrepreneur updates and communication are more fun when they reflect the voice and style of the person behind them. Don’t be afraid to make it feel and sound authentic.

    Ultimately, regular entrepreneur communication helps everyone. It helps the entrepreneur get their thoughts, metrics, goals, and reflections down in one place. It helps partners, mentors, advisors, and investors stay up-to-date with both the good and the bad, as well as ways they can help and contribute to the mission. And when the journey has come to a close, it provides a diary of sorts, documenting all the craziness and effort required to build something from nothing. Every entrepreneur should write a regular communication, and the best time to start is now.

  • When It’s Time to Move on From a Successful Startup

    One of the harder conversations I have on an infrequent but recurring basis is meeting with entrepreneurs who are gung-ho, motivated, and excited about their stalled startup. Of course, they don’t want it to be a stalled startup. They want to keep growing and expanding, but for whatever reason, it’s not in the cards.

    Last month, I had one such conversation with an entrepreneur who had built a small business with many customers. Yet, no matter what he tried, the growth wasn’t there. Over the course of many years, he had willed the business to a sustainable size with a dozen employees, but the ceiling had been reached. Unfortunately for entrepreneurs, this is one of the most challenging situations. After years of blood, sweat, and tears to build a business with paying customers who love the product, and a strong desire to grow, it becomes clear that, at this moment in time, with this product and this team, further growth isn’t going to happen.

    For this particular entrepreneur, I asked a series of questions:

    • If you weren’t working on this business, what would you do?
    • If you stepped away from the company, what percentage of your growth plans for next year would be achieved?
    • If you found a buyer and sold the business, what would the acquirer do with it?
    • If you could wave a magic wand, what would you change about the business?

    Knowing I will never know as much about the startup as the entrepreneur does, my goal is to get them thinking from a first-principles perspective about where the company is headed, what’s best for the business, and what’s best for them at this stage of the journey.

    As expected, this is often a difficult and awkward conversation for the entrepreneur. Everyone—rightfully so—tries to be supportive, encouraging, and focused on helping them continue to grow the business. However, sometimes the entrepreneur has done everything in their power, and it no longer makes sense to continue down the same path.

    As an entrepreneur, operating in these gray areas, where there’s no perfect information and judgment calls must be made, is part of the journey. Sometimes, the call that needs to be made is to move on and find a home for the startup so the entrepreneur can make things right by the employees, partners, and investors. Then, the entrepreneur can start their next journey.

    When further growth and new milestones are no longer achievable, it may be time to evaluate all opportunities and consider whether it’s time to move on from a successful startup.