David Cummings on Startups

Category: Entrepreneurship

  • Why Atlanta for Startup Investing

    Last week, I was asked to speak at a friend’s limited partner investor meeting. We covered all the usual topics, like what to look for in a founder and in a startup. Then, she asked me to share why investors should care about investing in Atlanta. Easy.

    Let’s look at what makes Atlanta a great place for startup investing:

    #1: Population Growth

    For decades, one of the best indicators of a region’s vitality is when people “vote with their feet” by moving there. Atlanta has been one of the fastest-growing metro areas in the country and is now the sixth-largest in the United States, recently surpassing Washington, D.C., Miami, and Philadelphia in size. Compared to these other regions, Atlanta is growing much faster and will continue to outpace them in population growth. People flock to areas with ample personal and professional opportunities, and Atlanta wins purely based on population growth.

    #2: College Town

    Atlanta is a college town with hundreds of thousands of students, led by Georgia Tech. Georgia Tech is one of the most highly regarded universities in the country, with every engineering discipline ranked in the top 10 nationally and more graduates per year than Stanford, MIT, and Carnegie Mellon combined. When it comes to a continuous pipeline of top-tier technical talent ready to invent the future, Georgia Tech is unmatched. Add to that the graduates from Emory, Georgia State, Spelman, Morehouse, and other esteemed schools in the great region like the University of Georgia, Clemson, and Auburn, and it’s easy to see why Forbes ranks Atlanta as the most educated city in the country. Demographics are destiny, and Atlanta’s are top-notch.

    #3: Development in the City Core

    Over the last 10+ years, two economic miracles have been taking place within Atlanta’s city limits. First is the urban revitalization of Midtown Atlanta, an area immediately adjacent to Georgia Tech and between downtown Atlanta and Buckhead. This several-mile stretch has seen $10 billion worth of new developments, creating a modern live-work-play urban core with dozens of new skyscrapers. The second economic miracle in the city has been the development of the Beltline and new construction around it. This project has also seen $10 billion in new developments, creating an urban trail that reconnects dozens of historic neighborhoods and has contributed to Atlanta being the fastest-growing large city in the country. The Beltline will remain a critical economic driver for the next 20 years and will play a major role in moving Atlanta residents beyond a car-centric lifestyle. Combine that with billions of dollars being invested in downtown Atlanta to revitalize it, and you have a playbook for continued growth while maintaining 50% tree canopy coverage.

    #4: The World’s Busiest Airport

    Last year, Atlanta’s Hartsfield-Jackson Airport had 105 million passengers, making it the busiest airport in the world. From a regional perspective, this translates into direct flights to every major and mid-sized market in the United States, as well as international routes to every major city worldwide. For both business and personal travel, frequent direct flights are a real advantage and continue to fuel the region’s growth.

    #5: Positive Can-Do Attitude

    Atlanta has been punching above its weight class for the ~180 years of its existence. Originally a point where railroad lines intersected to ship goods from the Northeast to the Mississippi River, Atlanta has grown into the sixth-largest metro in the United States. This growth is largely driven by a warm, inviting culture that embraces progress and ambition. The city’s “can-do” attitude is much like the little engine that could, continuously moving forward and defying the odds. The past is the best predictor of the future, and Atlanta’s continued growth is a great bet.

    From population growth to college students to recent developments and a major airport, Atlanta has everything needed for startups to thrive. Startup investors should invest both their time and money in Atlanta.

  • Event Attendance Yields and Quality Product Feedback

    Last week, I spoke with an entrepreneur who volunteers for a local tech nonprofit, helping with event planning and securing speakers. We discussed events in general and shared best practices we’ve learned over the years. He pointed out something I’ve also observed: events that require payment, even a nominal fee like $10, tend to have a significantly different attendance yield compared to free events.

    In some cases, an organization includes events as part of its annual dues, but many groups choose to charge for events individually. What I’ve noticed on the attendance side is that when you charge for an event, the attendance rate (the percentage of people who actually show up) is often over 90%. In contrast, for free events—especially larger ones or those without a special draw—the attendance rate is typically around 60%. So, while people sign up for events in both cases, charging even a small fee increases the commitment and effort to attend.

    In this unscientific example, the attendance yield for paid events is roughly 50% higher than for free ones. How does this relate to startups? In the startup world, entrepreneurs are eager to get new products into the hands of potential customers. The most common approach is to give products away for free in the early stages to encourage usage and gather feedback. While this might work for a small subset of premium products, in most cases, entrepreneurs are better off charging something, even if it’s less than the eventual market price.

    By charging for the product, the bar for customer commitment is raised. When customers pay, they are more likely to use the product, and the quality and quantity of feedback improve significantly. The relationship becomes a true vendor/customer. 

    Entrepreneurs should consider the example of event attendance yields when comparing free versus paid events. Paid events, as expected, have a higher yield, which implies a greater level of commitment—even if the amount paid is minimal. Similarly, when entrepreneurs charge for a product, the customer’s seriousness is much greater, resulting in higher-quality feedback. Feedback is the lifeblood of products, and the most valuable feedback comes from customers who are invested, even if minimally.

  • Highlight an Employee Failure at the Town Hall

    Last week, I attended an entrepreneur event where the speaker shared some of his best practices for growing a successful startup. One thing he said really stuck with me: if you want to promote a culture where failure is accepted and independent thinking is encouraged, you must work to share stories internally in a public context that reinforce this message. 

    In this context, it’s not failure for the sake of failure, but failure in the pursuit of thoughtful risk-taking. At this particular startup, during their regular all-hands town halls, they would feature a team member as one of the speakers. That team member would be interviewed about a specific failure. The conversation would cover what the goals were, what the expectations were, why the initiative was pursued, why it didn’t work, and most importantly, what was learned from the experience.

    At the end of the conversation, they would emphasize that this type of scenario—failure through thoughtful risk-taking—is encouraged at the company. The message was clear: failure for the sake of failure is not good, but failure in the context of thoughtful risk-taking is valuable. 

    Most companies and most people, by default, avoid admitting failure. As entrepreneurs and leaders, it’s important to acknowledge when things don’t work out and to set a standard that encourages thoughtful risk-taking, rather than discouraging it, as is common in many businesses.

    For entrepreneurs, I recommend incorporating a failure segment into your regular all-hands meetings. This way, employees consistently hear the message that thoughtful risk-taking is encouraged. Celebrate the fact that the more you experiment and learn, the faster you grow, both as an individual and as a business.

  • The Vision is Clear, but the Journey is Unknown

    Last week, I was catching up with an entrepreneur, and he was taking me through all of their progress and new direction. When I first met with him several years prior, he outlined a vision of where the market was going, why it was an important trend, and how they were going to capitalize on it. While all of that made sense and felt intuitively correct, it’s still hard to know whether things will play out the way a visionary suggests.

    What I’ve come to appreciate is that an initial vision is just that—a place to start. With that starting point, time in the market, talking to potential customers, talking to potential partners, and learning as much as possible as quickly as possible are always the most important places to begin. Over time, the vision will evolve, and the direction will evolve based on market feedback and trends in the space.

    The key is to stand for something: provide a vision and tell the world where things are headed. With that, it’s incredible to see how people will buy into the vision. People will volunteer to help. People will make introductions. This idea that if you’re on a path to make an impact, to build a company, or to do something important, the world does want to help.

    My recommendation is to articulate a clear vision, sell the future, and then continuously adapt, solicit feedback, and iterate. The vision is seen, but the journey to achieve it is unknown.

  • Conference Connections Via Personalized Post-It Notes

    Last week, I attended a conference to share the story of South Downtown Atlanta. This wasn’t the typical startup or tech conference I’ve been to hundreds of times over the years, so it was particularly interesting to meet new people and hear new stories in the retail and placemaking world of real estate.

    Upon arriving in the hotel lobby, I was given the traditional conference badge. However, there was something unusual about this one. On the back of the name badge was a handwritten Post-it note listing six or seven people I should seek out and meet at the conference. I hadn’t seen this before and immediately thought, “What a great idea.” The main goal of conferences is to learn, grow, and meet new people. Often, it’s a hit-or-miss process, trying to find people with relevant experiences, complementary offerings, or interesting projects.

    Conference curator Eric Weatherholtz used his extensive relationships and knowledge of who’s doing what, why, when, and where to play matchmaker by providing a personalized list of people for me to meet. Considering there were 200 to 300 attendees, a significant amount of time and effort went into this process. Eric and his team’s efforts paid off, and the conference was a huge success.

    Entrepreneurs would do well to organize their own conferences, industry events, or customer meet-ups. As part of hosting these events, take the time to formally play matchmaker ahead of the event. Think through the potential relationships and connections attendees should make, and use the event to ensure they maximize their time. Make personalized badge named intro Post-it notes part of the conference experience.

  • Align Interview Questions with Core Values

    Last week, I was talking to an entrepreneur, and the topic of corporate culture and core values came up. We spent some time diving deep into lessons learned, and I shared one of my favorite best practices around the interview component of the hiring process. Of course, there are numerous great books and blog posts on hiring well, including Geoff Smart’s book Who (more notes on Topgrading) and First Round Review’s post titled 6 Must Reads for Hiring Tactics that Break the Mold. 

    In a startup, it’s assumed you’ve already defined your core values, as outlined in books like Good to Great. Once you’ve defined these values, an important element is aligning interview questions with them. Naturally, if a core value is something general, you can’t simply ask, “Do you have integrity?” during an interview. Yes or no questions don’t work. The key is to create stories and scenarios that allow candidates to share their experiences, and then listen for how well those experiences align with your core values.

    For example, one core value I highly appreciate is positivity. Some call it being “glass half full,” others call it an optimistic outlook. Regardless, does the person have a positive attitude? Again, during the interview process, you can’t simply ask, “Are you a positive person?” Instead, take this core value and design a series of interview questions around it. Here’s how we do it:

    Question 1: For your current employer, what are two or three things they do well? What are two or three things they don’t do well and could improve upon?

    Question 2: For your current manager, what are two or three things they do well? What are two or three things you don’t like?

    In this example, we’re looking for thoughtful answers about the current employer and manager. The first question—”What do you like?”—is meant to warm up the conversation and gauge how the candidate presents positive qualities. The real test, however, comes from the second question. Everyone has issues or things they don’t like about their employer, especially with their manager. What we’re listening for here is how they present those issues. 

    Do they make statements like, “This is terrible, they’re not good at their job, and I really don’t like working for them”? Or do they say, “Here are some areas where we don’t see eye to eye” or “Here are some areas where I would appreciate more give-and-take”? The big idea is to assess how they present negative aspects—do they do it in a way that feels constructive or destructive?

    In this example of aligning interview questions with core values, we took one value I care about and organized a series of common questions around it to assess how the candidate responds and presents their answers. Entrepreneurs would do well to enumerate their core values and ensure that, during the interview process, they have a series of questions for each core value and a rubric to score responses accordingly.

  • Think Big and Launch Small

    One of the early entrepreneurial challenges is the need to think big and envision huge success, while also narrowing in on a small but critical wedge to enter the market. Investors want to believe it’ll be a home run, and customers want an immediate solution to an acute problem. Entrepreneurs need to thread that needle.

    Fynn Glover at Schematic just launched his new startup, focusing on managing pricing and packaging for B2B software companies. He discusses the development of the idea in his blog post, How to Operate Pricing & Packaging in B2B Software. Here’s how Schematic positions the new product: 

    With just a few lines of code, businesses can implement pricing and packaging into any application, end-to-end—from feature delivery through billing and customer experience.

    – Quickly roll out new features and tie them to your pricing plans.

    – Target specific plans to customers and adjust them without engineering support.

    – Experiment, scale, and manage pricing & packaging operations: trials, plans, limits, entitlements, metering usage, handling exceptions, provisioning customers, and embedding front-end purchasing components—all without code changes.

    I’ve really enjoyed watching the thinking evolve.  

    The initial thesis centered around pricing and packaging as a standalone module that needed to be managed separately from the codebase. After conducting customer discovery to refine and narrow the focus, and following a few iterations, the launch is now focused on B2B software companies that use Stripe for payments. These companies have made enough progress to value flexibility and extensibility in pricing and packaging but aren’t yet locked into massive amounts of custom code to manage it.

    The combination of extensive customer discovery and thoughtful iteration is key to the startup-building process. Start with the big idea, then narrow it down to a small but important wedge to enter the market. Go small before going big.

    Also, support a fellow entrepreneur and check out Schematic to manage pricing and packaging.

  • The Gift of Believing in Someone

    Last week, an entrepreneur reminded me that one of the greatest gifts you can give someone is to believe in them. I’ve been working with this entrepreneur for a long time, and they recently launched their new business. As part of the launch, he sent me a note expressing his gratitude that I believed in him. This reminded me of one of my earliest entrepreneurial endeavors.

    I was a junior in college, eager to become a full-time entrepreneur but needing help to start. I approached one of my professors, Frank Borchardt, whom I had met during my freshman year. We had hit it off and built a great relationship. He knew how passionate I was about starting my own venture, and at one point, he told me, “Whenever you’re ready to go out on your own, come see me, and I’ll be your angel investor.” At the time, I didn’t think much of it, but I tucked the idea away and continued with my studies.

    Now, I was ready to make the leap. Professor Borchardt was a full professor in the German department, and I had no connection to or studies in German languages. The intersection was that Professor Borchardt was world-renowned for using technology in foreign language learning, and he loved studying the history of technology. The class I had taken with him was all about technology through the centuries and how it impacted society and culture.

    When I walked into Professor Borchardt’s office, he greeted me with his big smile and boisterous laugh. He was the stereotypical eccentric college professor. In all the years I had known him, he had exclusively worn black and only shorts, never cut his hair or beard, and always filled the room with his big personality. I pitched him my idea: a product to make it easy to update and maintain websites. As a blissfully ignorant 20-year-old, I called this new product “SuperUpdate.”

    Without hesitation, Professor Borchardt said yes. He told me he would love to write a check for $20,000 and that it would be much more interesting to invest in me than to see his shares in Duke Power grow. His investment paid off in many ways, but the most important was the belief he had in me. Believing in someone is one of the most powerful gifts you can give. On that day, more than 20 years ago, Professor Borchardt believed in me and helped me get my first startup off the ground. Today, my goal is to continue paying it forward by sharing that gift of belief with others.

  • The New Conductor Capital

    Over the years, I’ve debated the pros and cons of venture debt with a number of people. Some entrepreneurs see venture debt as a safety net, with a big “Do Not Break Unless Emergency” sign in front of it. Other entrepreneurs view venture debt as a way to grow the business faster with minimal or no dilution.

    During the Pardot days, we had a scalable business model and used venture debt to grow faster as part of our capital-light strategy. Our first line of venture debt was $1.5 million, and as the business grew, we secured a new line of credit for $3 million. By the time of our sale, we had used almost all of our debt capital in an effort to keep up with the market. It was the right thing to do for the business.

    For Salesloft, the company raised several rounds of equity financing and increasingly larger venture debt lines of credit due to continual access to equity from institutional investors. Venture debt was primarily viewed as a safety net. When COVID hit in March 2021, we pulled down the line of credit, not knowing if it would be needed. In the end, it wasn’t, but it provided a cash cushion in case the COVID shock persisted.

    This backdrop provides context for the announcement of our new private credit fund for growth-stage startups called Conductor Capital. The founders, Zack Mansfield and Dhruv Patel, have been in the venture debt world for many years, working for bank departments that specialize in startups. Many years ago, one of Zack’s clients was, in fact, Salesloft. Personally, I’ve written about venture debt many times and have used it in several startups (here, here, here). With Silicon Valley Bank, First Republic, and others going under last year, it was clear a gap had emerged in the market to help startups through venture debt.

    Last year, after personally talking to several entrepreneurs about doing something on our own in the private credit space for startups, Zack reached out, saying he was working on a new firm. We began discussing the idea and decided to launch a new private credit fund focused on tech startups, called Conductor Capital. To support Zack and Dhruv, we recruited Kyle Porter from Salesloft, Tope Awotona from Calendly, and Nat Turner from Flatiron Health/Collectors. The big idea is: capital from entrepreneurs to support other entrepreneurs. 

    Today, we’re investing out of our first fund and have already closed our first loan.

    Congrats to Zack and Dhruv on the launch, and please consider Conductor Capital when evaluating venture debt options. Conductor Capital is open for business.

  • Negative Roadmaps for Startups

    Last week, I was catching up with an entrepreneur who shared a concept with me that I hadn’t heard before: negative roadmaps. In the startup world, a product roadmap outlines the features and functionality expected over the next few quarters or years. The idea with a traditional roadmap is to set a vision and direction for the product. By doing so, it helps sell to potential prospects what’s coming down the pipeline, share with existing customers where you’re going from a technology point of view, and align the internal team around priorities for engineering and product development.

    Of course, entrepreneurs are an optimistic bunch and often want to be helpful to as many people as possible, which can lead to broad roadmaps or products that are overly expansive. One of my early lessons, learned many years ago, was specifically around this issue. We had a successful product, and we were growing nicely, but I fell into the trap of trying to be all things to all customers, both current and future. After building out a bunch of features and seeing that they weren’t being used much, I still tried to continually enhance the product. However, this only slowed down development because more code, technical debt, documentation, and training were required.

    I realized that from a roadmap perspective and in feature development, it’s incredibly important to have an opinionated vision of where you’re headed. That opinionated vision from a product point of view doesn’t necessarily include all the existing customers you have today. The customers you want to have tomorrow may vary slightly or could be at the high or low end of the market. The idea is that the roadmap and the opinionated vision of the future should reflect what you want to have, not necessarily what you have today—although they could be one and the same.

    The idea I learned about last week is that a negative roadmap. A negative roadmap tells you what you’re not going to do in the future. For example, it might outline feature requests we’ve received over the years that we’re not going to implement, modules customers have asked for that we are not going to build, or types of functionality that competitors offer but don’t align with our ideal customer profile, so we won’t implement them.

    This idea of a negative roadmap is complementary to the normal roadmap. It’s a way to document things that are not going to happen in the product or things that are going to be removed from the product. Roadmaps are critically important, and as organizations grow, getting everyone on the same page becomes harder. Adding a negative roadmap to the mix is another exercise in aligning the team around what is not going to happen. Entrepreneurs should consider adding a negative roadmap to their collection of documents and best practices that they use to run their startup.