David Cummings on Startups

Category: Entrepreneurship

  • Spending 50% of a 7-Figure Marketing Budget in 3 Days

    With Dreamforce 2016 next week, it reminds me of the time we spent 50% of our million dollar marketing budget in three days at Pardot. In late 2010 we were exhibiting at Dreamforce with a silver booth (~$40k). On the last day of the show, the organizers come around with a form to sign up for the next year with the main incentive being that companies who sign up first get a better position on the show floor.

    Reading through the form, it listed out the standard booth types: Bronze, Silver, and Gold. Then, at the bottom, it said Platinum and in big letters said “Requires Salesforce.com executive approval.” Now, this booth was offered at a cost of $500,000 and you couldn’t just sign that you wanted it — Salesforce.com had to get a higher up in the company to grant permission to spend $500,000 for three days at Dreamforce.

    Well, Adam had received the form at the booth, read it, and said to me jokingly “Hey, let’s do the Platinum booth next year.” Remember, we did a little over $3 million in revenue that year and had no venture capital (Pardot revenues in the early years). I look at him and said, “you’re right, let’s do it”. He thought I was joking and an hour later he texted me saying, “Did you really want to do a Platinum booth?” I read the text, got anxious butterflies in my stomach around signing up for such a big expenditure, and texted back, “Yes, let’s do it.”

    In 2011, we had a marketing budget of $1 million and we spent $500,000 of it on three days at Dreamforce. Marketing automation as a market was growing incredibly fast, and we had to do whatever we could to stay in as one of the “big 3” vendors, even if that meant spending 50% of our marketing budget (and 7% of our entire revenue in 2011) on the most important show of the year.

    Dreamforce 2011 was a hit. At the show, we had the second best position on the show floor and talked to over 2,000 people, including a number of partners and analysts. Dreamforce 2011 put us on the map.

    What else? What are some more thoughts on spending 50% of a seven-figure marketing budget in three days?

  • Video of the Week: Google Ventures on Lean Analytics

    For our video of the week, watch Alistair Croll in this Google Ventures Workshop on Lean Analytics. Enjoy!

    From YouTube: The Lean Startup is all about a constant cycle of learning. By measuring and analyzing as you grow, you can validate whether a problem is real, find the right customers, decide what to build, and how to monetize it. In this workshop, Alistair Croll talks about finding the One Metric That Matters to your startup right now.

  • Pardot Revenue in the First Six Years

    Continuing with yesterday’s post on Compounding Growth, let’s look at a real-world example of revenue growth: Pardot’s revenue in the first six years. This example shows that the growth rate is strong, but not constant, and is also helpful for entrepreneurs that are putting together financial plans to see what a SaaS startup did almost 10 years ago (too often, entrepreneurs put together exaggerated revenue growth forecasts in their executive summaries).

    Here’s the approximate recognized revenue for Pardot in the first six years:

    • 2007 – $2,000
    • 2008 – $400,000
    • 2009 – $1.2 million
    • 2010 – $3.2 million
    • 2011 – $7.4 million
    • 2012 – $13 million

    Today, Pardot is significantly more than 10x larger than the 2012 revenue amount only four years post acquisition.

    Even for startup success stories, growth rates aren’t consistent. The key is to grow large enough and fast enough so that the business is both meaningful and sustainable.

    What else? What are some more thoughts on Pardot’s revenue in the first six years?

  • Compounding Growth

    One of the topics that’s critically important, but I don’t think is well understood, is that of compounding growth. It’s amazing to think that something starting so small — a few hundred dollars from the first sale — can grow to be many millions over time. And, assuming it’s recurring revenue with high renewal rates, the growth continues indefinitely.

    Just think about growing something from a base of $100,000 at a rate of 10% every year:

    • Year 1 – $110,000
    • Year 2 – $121,000
    • Year 3 – $133,100
    • Year 4 – $146,410
    • Year 5 – $161,051

    Now, grow at a much faster rate of 100% every year from the same base:

    • Year 1 – $200,000
    • Year 2 – $400,000
    • Year 3 – $800,000
    • Year 4 – $1,600,000
    • Year 5 – $3,200,000

    One growth rate of 100% per year results in a business that’s 43 times larger than the other with a 10% growth rate over the same time period. Incredible!

    Entrepreneurs would do well to understand the importance of compounding growth.

    What else? What are some more thoughts on compounding growth?

  • CEO and COO Roles in a Startup

    One of the questions I’ve heard several times over the years is how we divided responsibilities between CEO and COO at Pardot. We tried several different approaches over the years before settling into a routine that felt right for our size and stage. Here’s how we divided things:

    Some startups have an approach where the COO manages the functional areas and then reports to the CEO, but I’ve found this divide-and-conquer approach to be more common. Every startup is different, so it’s important to figure out what works best for your organization.

    What else? What are some more thoughts on the CEO and COO roles in a startup?

  • The Importance of Customer Success

    At Pardot, one of the areas where we really excelled was customer success. Back then, we referred to customer success as client advocacy, but the idea was the same: proactively help our customers have a great experience. Customer success is one of the most important functions, yet not as well understood as other functions.

    Here are a few thoughts on customer success:

    • Implement a customer success platform to ensure consistent and efficient customer interaction as well as customer analytics (Need a product? Check out Trustfuel)
    • Develop a cadence around on-boarding, regular outreach, and renewal period
    • Build a pipeline for the customer success team through sales development reps that are a great culture fit but choose not to go in sales as well as support reps that want to proactively help customers
    • Decide who’s going to handle up-selling and cross-selling as it’s not usually the same skill set as a customer success manager
    • Scale the customer success team as the number of customers grows (depending on the type of customer, one benchmark is one customer success manager (CSM) for every $1 million in annual recurring revenue)

    Remember that with Software-as-a-Service, the “service” is just as important as the “software.” Customer success is critically important.

    What else? What are some more thoughts on the importance of customer success?

  • 2016 TechStars Atlanta

    Last night I had the opportunity to hear the 10 2016 TechStars Atlanta startups give their mid-program pitches. With only 39 days left (90 days total), the program is going by fast and the teams are making great progress. Here’s the class of 10 startups:

    • Bark Technologies (Savannah, GA): Bark protects children by detecting messages that contain cyberbullying, sexting and signs of depression or suicidal thoughts using NLP and machine learning techniques to maintain a child’s privacy and preventing parents from having to spend hours reading their activity.
    • Drizzle (Los Angeles, CA): Drizzle gives website owners an incredibly easy way to let their visitors pay for premium content. You can choose to charge a-la-carte for your content, or offer your visitors a subscription to access all of your content.
    • Fitspot (Los Angeles, CA): Trying to cram a workout into your busy schedule? Fitspot lets you book one-on-one sessions with certified fitness trainers when and where you want. Plan ahead – or start in as little as 30 minutes.
    • Joonko (Tel Aviv, Israel): Identify and solve gender bias in your workplace, as it happens!
    • LaaSer (Atlanta, GA): Thousands of lives are lost each year due to incorrect location information being sent to 911 operators over existing mobile phone network technology. Calls are often routed to the wrong jurisdiction, address and latitude and longitude information are often wrong or not provided at all, and people lose their lives or suffer more than they had to as a result. Our company and our products were created for the sole purpose of solving this problem.
    • Preesale (Brussels, Belgium): Multiply your sales channels by increasing your tickets sales on Facebook. Easily connect your Facebook app to your Facebook page, create your tickets in less than 5 minutes and sell to targeted customers, and promote your events on Facebook – the best platform to target your attendees.
    • Real Meal Delivery (Atlanta, GA): Skip the stress of meal planning and grocery shopping! Fresh, made-from-scratch meals are prepared daily by our chef. Just order by 4PM and let your family enjoy the hot, fresh food delivered to your door.
    • Sequr (Atlanta, GA): Sequr provides modern access control and visitor management for commercial buildings and multi-family communities (use your phone as the access key; no more access cards).
    • Splitty (Tel Aviv, Israel): Split your way to a better hotel deal! Choose your destination and dates, and Splitty’s “split and match” technology combines different reservation types to find the cheapest hotel stays for the dates that you want to travel.
    • UCIC (Waterloo, Canada): Ask and see live photo or video from anywhere in the world, right now.

    Want to see the finale? Attend the free TechStars Demo Day November 1st from 5 – 7pm.

  • The Startup’s Arch Enemy

    Earlier today I was talking to an entrepreneur and we were debating the value of having an arch enemy in a startup (that is, another startup that’s the main competition and deeply disliked). In the college sports world, Duke and Carolina are arch enemies, resulting in both schools raising the quality of their game and level of competition (both schools have 5 national titles).

    Here are a few thoughts on having an arch enemy in a startup:

    • Having an arch enemy is a good thing as that means someone else believes strongly in the same market (competition is important as it helps validate the market)
    • Remember to stay close to the customer and don’t get caught up in a feature arms-race with the arch enemy
    • Build a program where you celebrate victories over the arch enemy in head-to-head deals (at Pardot, we gave out kill stickers, like football players have on their helmets, every time a sales rep won a head-to-head deal, to be displayed at their desk)
    • Don’t make an arch enemy just to say you have one (it should be your main competitor that you see in a meaningful percentage of competitive opportunities)
    • If you don’t have an arch enemy, that might mean you’re too early to the market, or aren’t getting in front of enough prospects

    Competition is healthy. An arch enemy can be healthy, but don’t lose sight of the most important thing: the customer.

    What else? What are some more thoughts on an arch enemy of a startup?

  • Agile vs. Burndown Software Development

    Matt Bilotti has a great post titled How We Build Products at Drift. The crux of the article is that there’s a new, and better, way to do software development: burndown. Today, in the startup world, agile is the most common software development methodology. Only, it’s centered around the two week sprint, and the reality is that the customer feedback loop is much faster than two weeks.

    Here’s the breakdown on agile vs. burndown from the post:

    • Measure of success
      • Agile – Thoroughness of story, agile points and velocity
      • Burndown – End user feature adoption & retention
    • Means of determining prioritization
      • Agile – Product backlogs and sprint planning
      • Burndown – End user validated design mockups and prototypes.
    • Speed
      • Agile – Story-based sprints (weeks)
      • Burndown – Micro-sprints (days)
    • Release focus
      • Agile – Multiple features grouped into a single release version
      • Burndown – A single version of a single feature per release
    • Flexibility
      • Agile – 2-week sprints are planned, executed & generally inflexible once agreed upon
      • Burndown – Every day priorities change and so do the current and upcoming sprints

    Feel like the agile software development methodology isn’t quite right for your team? Consider trying out some of these burndown concepts.

    What else? What are some more thoughts on agile vs. burndown methodologies?

  • Quarterly Employee Check-in Process

    With it being near the end of the quarter, it’s a good time to revisit the idea of a quarterly employee check-in or lightweight quarterly performance review. When the startup is small, this can be overkill, but as it grows, this is critical. At Pardot, we kept things simple and answered these four questions every quarter in a Google Doc:

    1. What did you accomplish this quarter? (List top 5-10 accomplishments)
    2. What 3-5 goals will you focus on next quarter?
    3. How can you improve?
    4. How are you embracing the company values? (Please provide specific examples.)

    Pretty easy, right? Once the doc was done, the manager and direct report met for 30 – 45 minutes to talk through it, and the manager provided any coaching or feedback.

    Entrepreneurs would do well to implement a quarterly employee check-in process as the startup grows.

    What else? What are some more thoughts on a quarterly employee check-in process?