Category: Entrepreneurship

Last week, we announced the groundbreaking for the new Atlanta Tech Village in South Downtown Atlanta. After starting the Atlanta Tech Village in late 2012, one of the most popular questions I heard was, “When are you going to open a second location?” Back then, we were learning the ins and outs of building community and running a co-working facility. After doing it for a few years and feeling like we understood more, we did peek around at other buildings only to find that the real estate market was white hot, and real estate prices had significantly outpaced the rents chargeable to startups. My answer to the question was simply that it was a one-and-done; no new locations because the math didn’t make sense. Fast forward over a decade, and we just broke ground on our second location in South Downtown Atlanta (Instagram, LinkedIn).

Anyone who’s been to downtown Atlanta knows that there are a variety of challenges and opportunities. Much like what has been covered in the news over the last year around doom loops in cities across the United States, downtown Atlanta has been hit particularly hard. Put simply, a doom loop is when office buildings start to empty out due to work-from-home and remote work. When office workers don’t come in, service businesses in the neighborhood, like restaurants and dry cleaners, go out of business as well. This then hurts property values, such that fewer property tax dollars are generated resulting in fewer city services, and this doom loop continues in a downward spiral.

In October of last year (2023), I was at a Metro Atlanta Chamber executive committee meeting. After the meeting, I was catching up with some friends, one of whom runs the largest commercial office space landlord in Atlanta. We were talking about what’s going to happen with all this empty commercial real estate and how it’s going to play out across the country, but especially in Atlanta. He then shared with me that the developer in South Downtown Atlanta, Newport, had just had all 53 buildings and 10 city blocks in their portfolio go into foreclosure. I had read about this project over the years and even been presented it back in 2018 as a potential location for a second Atlanta Tech Village location, but I had never visited it, nor had I studied it closely. After the meeting, I went back to my laptop and dove into learning as much as I could about anything and everything related to the South Downtown Atlanta redevelopment. The most eye-opening thing to me was how there is this incredible collection of historic buildings literally in the neighborhood where Atlanta was founded, and due to a variety of reasons, they were nearly untouched, like a beautiful time capsule.

After getting a better feel for it, I reached out to some friends to get feedback and ideas on what it would be like to build an entire tech startup innovation district, taking many of the concepts that we developed over 10+ years at Atlanta Tech Village and applying them to an entire neighborhood across 50+ buildings. It was not too dissimilar from having our own college campus, only the campus is adjacent to Mercedes-Benz Stadium, State Farm Arena, the newly announced Cosm concert venue, the State of Georgia Capitol, City of Atlanta City Hall, the largest university in the state in Georgia State University, and the busiest train station in Metro Atlanta, Five Points MARTA. As the idea started to crystallize, the obvious next step was to go down and see it in person, to walk the buildings, and to feel the history and the culture of the heart of Atlanta.

I reached out to a friend who knew the neighborhood well and the Newport team for a tour. Seven or eight of us showed up, not knowing what to expect, and proceeded to spend the next six hours walking through amazing buildings, going up on rooftop patios, looking out over the city, rummaging around old department stores, and imagining what could be in the most walkable city blocks in the region nestled between multiple train stations and three interstates. After going through building after building, it became apparent that this truly was a once-in-a-lifetime opportunity to build an entire neighborhood dedicated to helping entrepreneurs succeed. From the living quarters in great historic buildings to all the transit opportunities, beautiful loft office spaces, and one of the biggest entertainment districts in the country, it was clear there was something unbelievably special in South Downtown Atlanta.

After buying the properties, mostly through foreclosure and deed in lieu of foreclosure, in December of last year and January of this year, we immediately set to work on a grand plan for the neighborhood, with the Atlanta Tech Village as the center of it (fun Atlanta Magazine story). Now, six months later, we’ve broken ground on the new Atlanta Tech Village downtown location set in a beautiful historic hotel from 1909 called the Sylvan Hotel, atop an incredible retail space that was the Imperial Fruit Co (a postcard company!) for many years on historic Hotel Row adjacent to Mercedes-Benz Stadium, host of the 2026 World Cup.

The vision for the neighborhood is to be the number one place for entrepreneurs to go to succeed. Through a combination of living laboratory, where entrepreneurs help each other, and the greater community through mentors, business leaders, and civic leaders work together to grow our startup community. We will open the new Atlanta Tech Village location early next year (2025) while renovating the majority of the neighborhood for our grand opening on a larger scale during the 2026 World Cup, complete with multiple ATV-themed locations spread throughout.

Of course, we need help. We need pioneers who want to see a thriving downtown Atlanta, full of entrepreneurs and startups inventing the future. We need mentors and coaches helping these entrepreneurs put their stamp on the city. We need investors funding the next generation of innovation. We need restaurateurs and retailers to fill up the historic store fronts. We need business leaders supporting downtown.

Sign up for an ATV tour, join our South Downtown newsletter, buy a cup of coffee at Spiller Park, and come experience the culture and history of South Downtown Atlanta today. With your help, we’re going to put downtown Atlanta on the map as the home of startups.

In the most recent episode of Acquired, Ben Gilbert and David Rosenthal interview Howard Schultz, the founder of Starbucks. It’s an excellent, wide-ranging show with many incredible takeaways. One anecdote that stood out occurs at the 57-minute mark when Ben and David ask Howard about his two key leaders. Howard shares that every single Monday night for ten straight years, the three of them had dinner together. 

There’s so much power in the value of long conversations about what’s going on, what’s working well, and what’s not. This allows for alignment, the ability to disagree and commit, and a general mind meld among founders. Much of this happens organically, especially in the earliest days when everyone is in the same office together, checking in daily through stand-ups and regular meetings. However, as the business grows, it becomes harder and harder due to more requests for your time, more travel, more issues, and more team members. These increased demands on the founding team make it even more valuable to have a regular, unscripted, long chunk of time to get together without the distractions of the office and day-to-day tasks.

At Pardot, we did this for many years as our monthly strategy dinner. On the first Wednesday of every month, the leadership team would get together for a 3+ hour dinner. During dinner, we would go over anything and everything, focusing primarily on the harder, more strategic topics that needed more time to flesh out. Regular tactical items were addressed in our daily and weekly meetings. Anytime we had an issue that was too large or strategic but not urgent, we would put it in a Google Doc and then address whatever was in the Google Doc at the monthly strategy dinner.

At SalesLoft, a few years in, as the business was scaling, we did the same thing—a monthly strategy dinner with the executive team where we hashed out the most important topics. I vividly remember sitting at Maggiano’s, debating substantial pricing and packaging changes to the software, and dealing with so much complexity, edge cases, and customer anecdotes. Having these intense conversations helped everyone be heard, but more importantly, it helped us arrive at the best decision. We were much better off as a company and organization with these monthly strategic dinners.

My recommendation to entrepreneurs is to establish a regular dinner or offsite with the exec team where parking lot items and big topics are debated. This isn’t an exercise in consensus building; it is an exercise in laying everything out, making sure everyone’s heard, and having a leader make a decision.

Last week, I was talking to an entrepreneur who was contemplating a major business change. The conversation reminded me of the early days of Pardot. Back then, the product was primarily forms and landing pages with CRM integration. Anything related to email marketing was done through API calls to other systems like MailChimp or Constant Contact. Products that we take for granted today, like Twilio, to abstract out the email component of a system, did not exist.

We had a large number of debates around whether or not we should become an email service provider. To be an email service provider would require a major business change, whereby we allocated our limited resources to things like managing email servers, working with different email infrastructure and inbox companies like Gmail and Outlook on deliverability, and adding more complexity to our onboarding program with customers as they now had more technical changes to make. It wasn’t a decision to be taken lightly.

After going back and forth and thinking about it from first principles around delivering the best solution to our customers, delivering a solution that was the most seamless, and delivering a solution that helped customers generate the best return on investment, we made the decision to become an email service provider. While it was painful in a few areas, especially around deliverability and reaching inboxes, overall, it was an incredibly important and valuable change to the business. We could now deliver a better solution, both triggering emails instantly as well as sending bulk emails like company newsletters natively within the software.

In terms of customers, they already had budgets for email marketing platforms, and so it also made it easier in the sales cycle because we could now replace their email marketing product with our marketing automation system. Business marketers wanted to run more advanced online marketing campaigns, and now they could do it in a more dynamic and productive way. 

Contemplating a major business model change that involves more staffing, more technology, and more unknowns can be unnerving. For us, while it added more complexity to become a full email service provider, it was one of the best decisions we ever made. We made it through the learning curve and ultimately delivered a much better solution to customers.

Last week, I was listening to an entrepreneur who shared that he likes processes much more than goals. This concept rings true with me as well. Goals are important because they help us focus on where we’re going and how we’re measured (especially SMART goals). However, it is much more important to spend time on the process, especially the processes within your control, that will ultimately help you achieve those goals.

Let’s take a simple example: sales. Suppose you have a startup, and your goal is to generate $1 million in new revenue this year. Typically, you would divide this into quarters, potentially incorporating seasonality, and set a goal to sell $250,000 each quarter. At the end of the year, you would add up the quarterly sales and compare them to the annual goal of $1 million to assess performance. This approach has value and is necessary, but it is much more important to focus on the process and ensure it results in the desired goal. 

For this sales example, the process would involve the number of cold calls made per day, the number of emails sent, the number of meetings scheduled, the number of meetings attended, the number of proposals sent, the number of proposals moved to the next stage, and the number of proposals closed as deals, and so on. It starts with the things that are within your control. If I need to make 50 cold calls a day to achieve a certain number of demos, proposals, and deals, it is 100% within my control to make those calls. If I need to attend two tradeshows a month and talk to 100 people at each tradeshow, that’s within my control. The process needs to be the focus, knowing that you have designed and organized a process that allows you to achieve your goals.

Over the years, I’ve seen many entrepreneurs set goals without having the underlying process. Even if they did, the process might not have been feasible to achieve those goals. Common examples include wanting to sign up 10,000 users for a product or wanting to raise $5 million in venture capital. These could be reasonable goals, but without a clear process leading to the outcome, it’s hard to know if these are worthwhile and achievable goals.

Two ways to approach this are top-down and bottom-up. The top-down approach involves setting a goal, such as signing up 10,000 users, and then working backward to develop a process to achieve it. You then assess whether that process is reasonable, feasible, and financially viable. The bottom-up approach starts with identifying a reasonable process at the current time and for a given duration. You then estimate how many users you can sign up per day, week, or month with this process. At the end of the year, you can achieve a certain number of users. This method involves starting with a process that works today, understanding the current outcome, extrapolating that over time, and then setting a goal based on that outcome. In the first example, we pick a goal and try to work backward with a process to achieve it. In the second example, we start with the process, evaluate the likely outcome, and then set a goal based on that outcome over a period of time. 

Entrepreneurs would do well think process first, goals second. Goals are important and part of achieving great things, but a process that is within your control is more important. Continually refine the processes and ensure the outcomes are aligned with the goals.

Recently, I was asked about my favorite general pieces of advice for founders. After thinking about it for a bit, I decided on five tips that have resonated with me over the years.

#1. Go big from day one. It takes a tremendous amount of work to build a business—from the sleepless nights to the regular rejection to the roller coaster ups and downs. Whether the goal is to build a small or large business, it requires the same amount of effort to get it going. So, entrepreneurs should work to create a large business when at the idea stage.

#2. 10x products win. All too often, I see entrepreneurs that invent a new product that’s only 10% better than what’s on the market rather than 10 times better. It’s really hard to get people to change and to get businesses to buy new, unproven products. The best chance of success is when the product is truly revolutionary and not merely incrementally better.

#3. Markets are more important than ideas. Picking the market is even more important than picking a great idea. More often than not, I see entrepreneurs fixate on the original idea and are not open-minded to finding an even better idea that’s adjacent or related to that first idea. I found that, in almost all cases, the idea that was successful wasn’t the idea that the entrepreneur started with. But starting somewhere is critical, as it leads to the idea that ultimately works.

#4. Small, fast-growing markets are best. Entrepreneurs often come up with ideas that fit into an existing large market because it’s human nature to want to create something that already has a big audience. The reality is that markets like that are much more competitive, with many more incumbents, making it much more difficult to break through. The best markets for entrepreneurs are ones that are very small and fast-growing. Small is important so that it’s not heavily competitive with a bunch of incumbents, and fast-growing is important because a market that’s small today is going to be large in the near future. The goal is to establish a position of strong market share today, and then as the market grows fast, to maintain or even grow faster than the market such that 5 to 10 years from now, you’ve built a big business.

#5. Culture wins. The only thing that the entrepreneur has control over is the values of the team. You can’t control the market, the government, the timing, or the competitors, but you can control the values, beliefs, and what you stand for as a business. The culture of the company is the defining trait for success. Startups that continually win have the strongest cultures.

Entrepreneurs learn a number of lessons and tips along their journey. Go big from day one, 10x products win, markets are more important than ideas, small, fast-growing markets are best, and culture wins are my favorite general tips for founders. There’s no one way to do it, but these have been instrumental to me.

Last week, I was reminded of an important lesson I learned many years ago when I heard an entrepreneur share his journey. In the story, he regularly referred to the accomplishments of his startup using the term “I,” as in “I did this,” “I achieved that,” and “I sold the business for X dollars.” As a founder, especially one who has made significant progress or built a thriving business, there is no example anywhere where it is truly just an “I.” It’s always a “we.” We accomplished goals. We built the business. We changed the industry.

When speaking both one-on-one and in groups, people pay attention to how the entrepreneur describes his or her ownership of the startup. People notice whether the entrepreneur gives or takes credit. Of course, the entrepreneur was instrumental; otherwise, the business wouldn’t exist. At the same time, the collective “we” actually made it happen.

I made this mistake for many years during my journey as a founder. When referencing the startup, I would say “I” in too many scenarios where it was actually a “we.” Thankfully, I was given some feedback that shared how I sounded selfish and it was actually a team effort—that everyone worked to achieve the things we achieve. Now, anytime I hear an entrepreneur say, “I did something,” that should be stated using “we”, I reflect on my own experiences and the appropriate feedback that led me to use the word “we.”

For entrepreneurs, my recommendation is to say “we” when referring to the work being done by your startup and avoid using “I.” “We” recognizes that it’s a team effort and shares credit where credit is due. Entrepreneurs would do well to remember this in their communication.

Continuing from last week’s post on the Rule of 50, I received several comments and questions. The biggest and most important question concerns whether a Rule of 50 score equates to viability for funding. From a funding perspective for seed-stage and early-stage companies, founders looking to raise venture capital need to understand that a score of 50 in the Rule of 50 is typically not enough to raise money.

Let’s look at three examples:

Example 1: The startup is growing super fast with a 100% year-over-year growth rate and has -50% free cash flow margins. If you take the 100% growth rate and multiply it by 2, you get 200. Add the -50% margin for a score of 150. A score of 150 will often be sufficient to raise venture capital, assuming other expected elements like margins, market size, team, etc.

Example 2: The startup has a 30% year-over-year growth rate and is breakeven. At a 30% year-over-year growth rate times two, you get 60. Subtract 0 because there is no burn, resulting in a score of 60. A 30% growth rate with no burn is enough to raise funding but likely not enough for a typical venture round. In this case, funding could come from growth equity, a family office, or venture debt.

Example 3: The startup has a 10% growth rate and a 10% free cash flow margin. In this example, the 10% growth rate times two equals 20, plus your 10% free cash margin gets you to 30. So, in the Rule of 50, your score is 30. In this case, the business likely isn’t fundable and won’t be able to raise another round.

In the context of raising money, it’s important to know that a score of 50 on the Rule of 50 is good, but you often need to be exceptional to raise venture capital. The big idea of the Rule of 50 score is that there are many startups still finding their way and need a target to achieve a healthy baseline of general viability for the business—not necessarily to raise a nice up round.

The Rule of 50 score of 50 is a solid target representing a variety of businesses like high growth with lots of losses, medium growth with modest profitability, or something with low growth and tremendous profitability. Most of the 2020 and 2021 heavily funded startups should aim for medium growth plus limited burn in the near term to achieve a level of viability. From there, the belief is that as spending on software and investment in tools increases, they will be in a good position to accelerate their growth rate.

The Rule of 50 and a score at or better than that number is a good target for entrepreneurs who want a sustainable, healthy business. However, a score of 50 is not high enough to raise venture capital. Entrepreneurs should think through their goals and aspirations and target their Rule of 50 score accordingly.

With the shift from growth at all costs to a heavier emphasis on profitability, the traditional Rule of 40 has become more popular over the last two and a half years. Put simply, the Rule of 40 is a combination of growth rate and profitability (free cash flow margin) with a target score of 40 or higher. Some hypergrowth startups achieve a score of 100 or more for an extended period, while many venture-backed startups struggle to reach 40 due to a high burn rate. For example, if a startup is growing 60% per year and has negative 20% free cash flow margins, adding 60 and -20 results in a score of 40, indicating a good position. Even during pre-boom times, the Rule of 40 was used to justify aggressive spending to achieve growth (e.g., growing 200% with negative 100% free cash flow margins).

Reflexively, this is a simple metric, but there’s one element that isn’t quite right: growth and profitability can’t be equal. While the focus on growth fluctuates based on market conditions and investors, adding an extra dollar of growth for high-margin recurring revenue SaaS startups is clearly better than adding a dollar of one-time profit. Thankfully, Bessemer conducted an analysis of publicly traded SaaS companies over an extended period and showed that a multiplier on the growth rate, combined with a free cash flow profitability measure, more accurately predicted valuations compared to the traditional Rule of 40 score. Their finding: 1% more growth is roughly twice as valuable as 1% more profitability (see The Rule of X). The growth multiplier fluctuates over time and reached as high as 9x during the early COVID years.

Intuitively, growth being twice as valuable as profitability makes sense. Investing in growth and reducing profitability can potentially make the company more valuable by buying a recurring revenue stream, with the expectation that the revenue will add to the current revenue, making the business larger indefinitely.

Now, with growth being twice as valuable as profitability, the Rule of 40 target of 40 needs to be adjusted upwards to reflect a new, higher target in line with historic public company data. Bessemer did this work as well, and the resulting target is 50. Let’s look at an example: a startup growing 10% due to the downturn combined with 20% free cash flow margins. Under the Rule of 50 scoring, that’s a score of 40 (10 * 2 plus 20), which is below the 50 target. Not good. Now, for a second example: a startup growing 100% with free cash flow margins of negative 100% gets a score of 100 (100 * 2 plus -100), which is excellent. Both examples pass the gut check, assuming they have millions in revenue (e.g., not seed stage).

My recommendation is to use the naming convention Rule of 40 when discussing the traditional growth plus profitability score, and use the naming convention Rule of 50 when discussing growth plus profitability where growth is doubled to represent its greater weighting. Startups should use the Rule of 50, representing growth rate multiplied by two plus free cash flow margins when assessing their performance. Growth is more valuable than profitability.

Last week, I was catching up with an entrepreneur, and his story was one I’ve heard many times before. He has always enjoyed technology. He started in the tech world, decided to go out on his own to do software consulting, and then one of his clients requested a solution that turned into a product.

I’ve heard this general consulting-to-specific-product story so many times that it strikes me as the ideal path for someone passionate about technology and software development but who doesn’t have a specific product idea yet. While software development might seem straightforward with the advent of low-code, no-code, AI copilot tools, and offshore development, it remains incredibly difficult for companies to build software products and get them to market.

My own journey took this path. I started consulting with small businesses as a web designer during the Dot Com days. That lead to more complex web apps followed by my first product company (web content management) and then my second (marketing automation). Consulting helped me develop my software engineering and sales skills.

For entrepreneurs, going the consulting route is one of the lowest-friction, least capital-intensive ways to start a new business and quickly get to market with customers directly telling you what they want. This approach doesn’t guarantee that a product idea will emerge, but I’ve seen many technologists become entrepreneurs and stumble into a product idea, eventually building an incredible product business.

For tech entrepreneurs who don’t have an idea but want to build software, my recommendation is to start a consulting company, build software for clients, and listen to feedback and market trends. Look for opportunities. One of the best ways to become a software entrepreneur is to start as a software consulting entrepreneur.

Last week, I caught up with an entrepreneur who has a great business. He’s built an incredibly compelling product, is targeting a huge market, and has raised a tremendous amount of money. Within our local startup community, his type of startup is in an underserved segment. We discussed how hard it was to find other like-minded entrepreneurs working in similar areas, how difficult it was to raise money (most of which had to come from outside the region), and how challenging it was to find team members with the specialized skills needed to build and innovate around the product.

Thinking back on the conversation with him, I was reminded of our B2B SaaS community 15+ years ago. At that time, we had a handful of entrepreneurs working on their ideas. It was clear that it was going to be a big opportunity, but it was still very small. Some of the things we tried to jumpstart the community included regular meetups facilitated by Twitter and casual email lists. We also tried a collaborative blog where people cross-posted ideas related to B2B SaaS. We organized different events in the community, including an annual get-together that doubled as a pitch competition. Additionally, we attended various regional and national events together to learn new ideas and bring them back to the community. We also informally got together once a quarter for dinner to share ideas, best practices, and updates on our respective businesses.

Looking back, we now have a strong B2B SaaS community in town after many years of working on it. My hope for this entrepreneur and his community is for a similar outcome: more startups, more success stories, and more people reinvesting in the community. Developing a nascent segment of the startup ecosystem takes many years and lots of trial and error, but the outcome, especially from our own experiences, can be incredible. Start now—it’s worth the effort.