David Cummings on Startups

Category: Entrepreneurship

  • Annual Recurring Revenue Greater than Cash Burned

    One of the metrics I like when thinking about SaaS company efficiency is annual recurring revenue (ARR) being greater than or equal to cash burned all time. Successful SaaS startups suffer from the J-curve where things start out with steep losses while revenue begins to ramp up and eventually revenue grows much faster than losses (hopefully!).

    Here are a few thoughts on ARR being greater that cash burned:

    When considering a SaaS startup’s capital efficiency, look and see if the annual recurring revenue is greater than cash burned. If so, and there’s a good growth rate, it’s likely a sign of a potential successful outcome.

    What else? What are some more thoughts on ARR being greater than cash burned for SaaS startups?

  • The Y Funnel for Sales and Marketing

    When talking about the sales and marketing process, the concept of a funnel often comes up:

    effective-online-lead-generation-with-pardot-5-728

    For marketing, here’s the typical funnel:

    • Visitors
    • Leads
    • Marketing Qualified Leads
    • <hand off to sales>

    For sales, here’s the typical funnel:

    • Sales Qualified Leads
    • Proposals / Opportunities
    • Closed Won / Deals

    Only, this funnel — a path from marketing through to sales — is actually a Y shape where there are two branches that feed the traditional sales component of the funnel. If marketing is one branch, what’s the other branch? Answer: sales development.

    Here’s the typical sales development funnel:

    • List of Target/Named Accounts
    • Conversations/Interest
    • Qualified Demo/Appointment
    • <hand off to sales>

    So, think of it this way: marketing casts a wide net to see what it catches, sales development goes spear fishing after specific targets, and both help each other as well as feed the sales team. Instead of thinking about all the functional as a linear funnel, think about it as a Y funnel where marketing and sales development are separate branches that feed into sales.

    What else? What are some more thoughts on the Y funnel for sales and marketing?

  • Counterpoint on OKRs as Bad for Small Teams in a Startup

    Rand Fishkin, founder of Moz, tweeted out an interesting counterpoint from Steve Olechowski  about OKRs being bad at the micro level in a startup:

    A few notes from the email:

    • OKRs were counterproductive to his small team at Google, felt bureaucratic, and killed productivity one week out of the quarter when people worried about them
    • Macro level OKRs were good for focus
    • When product cycles or iterations are shorter than a quarter, OKRs can incentivize the wrong things
    • Watch the Google Ventures video on OKRs to understand them
    • Overall, he feels small, nimble teams are less nimble with OKRs

    OKRs, wildly important goals, and SMART goals are all great methodologies that have their place. The key, as always, is to apply them intelligently.

    What else? What are some more thoughts on OKRs as potentially bad for small teams that have shorter time frames?

  • Video of the Week: Jack Ma, Alibaba Group

    With the Yahoo/Verizon deal imminent, it’s a good time to better understand the real value of Yahoo: a $28 billion stake in Alibaba. For our video of the week, hear from Jack Ma, the founder of Alibaba. Enjoy!

    From YouTube: At the 38th annual ENCORE Award event on September 24, 2015, the Stanford Graduate School of Business honored Alibaba Group. Jack Ma, Lead Founder and Executive Chairman, discussed entrepreneurship in a fireside chat with Yahoo! founder Jerry Yang, BS/MS ’90.

  • TechStars Mentor Manifesto

    Last night TechStars Atlanta announced their 2016 class. As part of the event, they invited all the mentors and passed out The Mentor Manifesto:

    1. Be socratic
    2. Expect nothing in return (you’ll be delighted with what you get).
    3. Be authentic and practice what you preach.
    4. Be direct. Tell the truth, however hard.
    5. Listen, too.
    6. The best mentor relationships eventually become two-way.
    7. Be responsive.
    8. Adopt at least one company every single year.
    9. Clearly separate opinion from fact.
    10. Hold information in confidence.
    11. Clearly commit to mentor or do not. Either is fine.
    12. “I don’t know” is preferable to bravado.
    13. Guide, don’t control. Teams must make their own decisions.
    14. Accept and communicate with other mentors.
    15. Be optimistic.
    16. Provide specific actionable advice, don’t be vague.
    17. Be challenging and robust but never destructive.
    18. Have empathy. Remember that startups are hard.

    Thanks to @lance for tweeting this out.

  • Develop Investor Relationships Before Raising Money

    Continuing with yesterday’s post Build the Executive Summary for Fundraising, there’s another critical point: entrepreneurs should develop relationships with investors before they raise money. You don’t propose marriage on the first date, and it’s the same with investors. Developing a relationship takes time, and it isn’t always easy.

    Here are a few thoughts on developing investor relationships before raising money:

    • Network with local entrepreneurs and ask for warm investor intros through them
    • Don’t be afraid to cold email investors and briefly share why you’d like to get together — many do take meetings without intros
    • Share short-term goals with investors and state that the next time you get together you’ll share the progress (investors want to see that you get things done and follow through)
    • If the meeting went well, ask to meet with the investor again in 4-6 weeks and work to create a meeting rhythm
    • Don’t be pushy and know that the best investor relationships are ones that have a human connection before a financial connection

    Investors invest in entrepreneurs they believe will make a great return and they have a good relationship with. Too often when raising money entrepreneurs think investors only care about making money. More often than not the human element is just as important.

    What else? What are some more thoughts on developing investor relationships before raising money?

     

  • Build the Executive Summary for Fundraising

    This week I’ve talked to two separate entrepreneurs that wanted introductions to local investors. In both cases, I asked for a shareable executive summary and neither one had it. For entrepreneurs that are raising money, or thinking about raising money, an executive summary is the typical starting point.

    Here are a few things to keep in mind with an executive summary:

    Entrepreneurs that are raising money should build an executive summary and use that when asking for intros to investors.

    What else? What are some more thoughts on executive summaries and fundraising?

  • Going Deep or Broad with the Product

    One of the product questions entrepreneurs need to ask themselves early on is if they’re going to go deep or broad with the application. In general, as customers ask for new features, they have a tendency to be broader requests (e.g. can you add adjacent feature XYZ?). Keep in mind the importance of product focus, especially the part about being opinionated.

    Here are a few questions to ask when considering going deep or broad:

    • Is this product a point solution or a platform (everyone wants to be a platform but point solutions are much more common)?
    • Does this feature request strengthen an existing feature or does it introduce a new concept?
    • Are customers asking for more product depth or more product breadth, generally?
    • Does the product roadmap reflect more depth or breadth? Is that direction intentional?
    • How does depth and breadth reflect reflect the current customer base vs the desired customer base (e.g. entrepreneurs often want to expand upmarket over time)?

    Entrepreneurs would do well to think through their product strategy when it comes to going deep or broad with the application. Deep is the more common successful route.

    What else? What are some more thoughts on going deep or broad with the product?

  • 27 SaaS Products for the Marketing Department

    After the post on 35 SaaS Marketing Products @ 1 Startup, a number of people asked me what products they used. While I don’t have the exact list of apps, here’s most of the free and paid apps the marketing department of the sub 100 person company uses:

    1. Salesforce.com – CRM
    2. Pardot – Marketing automation
    3. SalesLoft – Sales development (inbound response reps on the marketing team use SalesLoft to respond to leads)
    4. Google Analytics – Web analytics
    5. Google AdWords – Ad platform
    6. LinkedIn Ads – Ad platform
    7. Facebook Ads – Ad platform
    8. DataVibe – Marketing analytics + reports
    9. Terminus – Account-based marketing
    10. Calendly – Calendar scheduling
    11. Moz – SEO analytics
    12. Buffer – Social media scheduling
    13. MeetEdgar – Social media content recycling
    14. Captora – Bulk landing page generation
    15. Optimizely – A/B testing
    16. Zapier – Cloud integration
    17. Unbounce – Landing pages
    18. WPEngine – WordPress hosting
    19. Zopim – Live chat
    20. ON24 – Webinar management
    21. GoToMeeting – Screen sharing
    22. Sigstr – Employee email signatures
    23. Intercom – Customer communication
    24. Vidyard – Video management
    25. LeanData – Campaign attribution
    26. Bizable – Marketing attribution
    27. Everstring – Predictive account discovery

    Some later additions:

    A small business marketing department using 27 products is on the high side, but not unreasonable. Look for the number of marketing department apps to grow over time as more useful point solutions come on the market.

    What else? What are some more apps you’d add to this list for a marketing department?

  • 35 SaaS Marketing Products @ 1 Startup

    Yesterday I was talking to the head of marketing at a fast-growing, <100 person SaaS startup. We were talking about the modern marketing stack and he mentioned that they pay for 35 different SaaS products. Yes, 35 different marketing apps at one small business. Some of the app categories included marketing automation, social media management, A/B testing, SEO analytics, etc.

    Here are a few questions that come to mind:

    • Is there an upper limit to how many marketing apps a small business will use?
    • When does app fatigue set in?
    • How many are apps require daily work vs ones that are set it and forget it?
    • How is reporting done across so many apps?

    SaaS is unique in that once the business has $500,000 in recurring revenue, it’s hard to kill. Thus, there’s a huge cottage industry of SaaS marketing apps that provide value. It’ll be interesting to watch the industry over time and see how it plays out. My prediction: there’s no upper limit of marketing apps and we’ll keep seeing more and more.

    What else? What are some more thoughts on the idea that there are 35 SaaS marketing products at one small business?