David Cummings on Startups

Category: Strategy

  • Thinking About the Three Year Goal

    Today I had the opportunity to talk with two different potential EO Accelerator entrepreneurs. One of the questions I always ask is “What are your revenue and company size goals three years from now?” I don’t ask that question because I believe having a large company is the only way to go, in fact, here is info on my ideal company. Rather, I ask because the goal of EO Accelerator is help entrepreneurs with revenues under $1 million grow their business to the $1 million mark so that they can then join EO. If the entrepreneur doesn’t mention a three year goal of at least $1 million in revenue, then they aren’t a good fit for EO Accelerator.

    So, with that in mind, here are some things I’ve noticed:

    • Some entrepreneurs give the three year goal but then go into their grandiose plan for five or ten years from now, showing that they are ambitious
    • Some entrepreneurs say they haven’t thought it too much and just want to grow their business
    • Few entrepreneurs give concrete numbers, instead offering vague ranges of values, showing they haven’t mapped out where they want to be, and worked backwards from it to now what they need to do to get there

    My advice to entrepreneurs is to think hard about your three year goal and spend time working backwards from it to come up with a plan for what you need to accomplish in the interim. The best time to start is now.

  • Ecommerce Mystery Coupons

    Last month there was a good bit of dialogue around the lack of innovation in the ecommerce world. Over half of the top 15 internet sites didn’t exist 10 years ago, yet only one of the top 15 ecommerce sites didn’t exist 10 years ago. There are lots of theories why but I’m not going into those now. I want to talk about something related.

    My wife was doing some online shopping, and is passionate about saving money and finding the best deals — she truly gets excited about it. One of the retailers she shops at was running a promotional campaign I hadn’t seen before: put in your email address to have a mystery coupon, worth up to 50% off, sent to you. This is brilliant. As I mentioned before, email is a currency that’s worth more than people realize. People love getting deals and playing games — a mystery coupon combines the two. I believe we’ll see more of these types of campaigns in the future.

    What are some analogous ideas in the B2B world? Do you think these types of campaigns will become more commonplace?

  • Soft Drinks and Software

    Comparing soft drinks and software seems like a dead end road. For me, I like looking at analog analogies whereby something from the physical world is compared to something in the digital world in order to look for patterns or themes. The soft drink industry provides several examples that are relevant to the software industry:

    • Once established as the standard in a market, monopoly pricing and power emerge (e.g. Coke for soft drinks, Microsoft for OS, and Google for search)
    • Distribution (shelf space for soft drinks and customer acquisition costs for software) become one of the main drivers for success
    • The standard soft drink flavors at restaurants are like the standard apps that come with the operating system — the casual person takes whatever comes is already there
    • There are a handful of mainstream products but mostly niche offerings

    What am I missing? What are some other ways the soft drink market is like the software market?

  • EO Accelerator Strategy Day Tomorrow

    Tomorrow is Strategy day for the EO Accelerator program in Atlanta. Strategy day, in our context, is an eight hour education workshop talking about topics like:

    To many people, it might sound like fluff. To entrepreneurs that have been in the trenches building a company with employees, these items are extremely important.

    One of my colleagues in the program sent this great article for entrepreneurs working on mission statements, written by Dan Heath of Made to Stick fame: How to write a Mission Statement that doesn’t Suck.

  • Startups and the Masters Golf Tournament

    Today I had the opportunity to go to the Masters golf tournament in Augusta, GA with a friend and watch the best golfers in the world do a practice round at the famed course. The Master’s is like the Running of the Bulls in Spain in that it is an iconic Georgia institution with worldwide recognition. It really is an amazing event.

    An interesting aspect, coming from an entrepreneur and business perspective, is that the Masters has the least commercial influence of any major sporting event I’ve ever attended. Once you step in the gates, there are no billboards, logos, or ads of any sort littering the facility. Quite refreshing.

    The lack of sponsors on the grounds doesn’t mean there aren’t commercial interests every step of the way outside the gates. Here are a few we encountered during our half mile walk:

    • Parking options as far as the eye can see for $20 a spot
    • Street vendors selling badge holders, bottled water, umbrellas, Tiger Woods memorabilia, previous Master’s winner photos, John Daly stuff (not sure why!), and miscellaneous other items
    • Range Rover had a display area showing off their new Autobiography Edition
    • Several golf vendors like Adam’s and Titleist had semi-trailers configured as portable trade show facilities in a large parking lot to test out clubs

    While these weren’t technology startups, many were small businesses out hustling to earn a dollar. My biggest takeaway from the commercial setting to get to the gates: when you have a captive, targeted audience you should sell, sell, sell.

  • Physical Products in a Digital World

    Today I had the opportunity to have lunch with two entrepreneurs that have invented physical products, one related to adults and sleeping and the other related to kids and sleeping. The great thing about it was that both guys had the following in common:

    • They invented their respective products to solve their own problems
    • They operate their companies virtually, with everything outsourced
    • All manufacturing is done in China, at separate factories, and stored in Pennsylvania
    • Their companies are growing fast and are successful
    • Both companies primarily sell over the Internet with limited retail sales
    • Both companies are based in Atlanta (one in town and one in the northern suburbs)

    Being a technology entrepreneur myself, with a focus on software and the web, it is easy to forget that many entrepreneurs still invent physical products. Both guys said the Internet has helped make their businesses successful and allows them to operate without any employees. My recommendation for entrepreneurs is to evaluate what problems you can solve, both online and offline — the world needs innovation.

  • The Five Fs of Web Content

    For entrepreneurs looking to grow their business (who isn’t!), I think one of most under-appreciated marketing and lead generation tactic is to generate inbound leads through traffic from search engines. Of course, one of the biggest drivers for ranking well in search engines, along with links to your site from other sites, is to have high quality content. Web content is powerful.

    Let’s look at the five Fs for web content:

    • Frequent – New content should be published on a regular basis at least once a week if not several times per week. Getting into a good publishing rhythm, and sticking with it, is critical to building momentum as it takes a significant amount of time for the web traffic to build.
    • Fun – Web content, especially blog content, is better served in a fun and personal manner. Too often we read corporate speak with a variety of gobblegook words — don’t do it.
    • Facts – People like facts, figures, and statistic to make the content more interesting. Yes, I’m not good at this on my own blog, but do as I say and not as I do. Use hard data to make your point and provide compelling information.
    • Food for Thought – Make the content interesting and memorable. Take an unusual stand or position that is likely to make someone think twice about it. Good food for thought will give people a reason to subscribe or comeback to the site.
    • Fans and Followers – Look for ways to stay in touch with your fans and followers through RSS, Facebook, Twitter, and any other networks they use on a regular basis. Go to their networks, as opposed to limiting access to your own site.

    Don’t just sit there — start writing content. But, remember, pace yourself and do it on a regular basis. You won’t regret it.

  • Consider Talent Requirements for Businesses

    One area that entrepreneurs don’t pay enough attention to when evaluating business models is that of the talent required. By talent, I mean the type of people necessary to staff and grow the business. Here are talent examples to consider:

    • Programmers with domain expertise that are hard to come by
    • Difficult certifications or licenses required for operation
    • Specialized medical clinics where the type of doctors are in short supply

    I know of one business in Atlanta whereby the entrepreneur thought the main talent required would be easy to come by. Thankfully, the business is growing nicely, with volume ramping up quickly, but the additional work can’t be serviced properly due to a lack of people with the required government-regulated license. It is a predicament no one expected.

    My recommendation is to consider talent requirements when evaluating businesses, and look at ways to incorporate a staffing pipeline early on.

  • Fighting Complexity

    One of the challenges I didn’t expect to face as my company grew is how hard it is to fight complexity in a variety of areas. I try to follow the keep it simple mantra throughout everything we do, and find myself saying that on a regular basis. Here are some areas that I see continually see requests for complexity creep:

    • Metrics and KPIs
    • Product functionality
    • Policies and procedures

    My recommendation for entrepreneurs is to constantly ask the question will this add significant value and be applicable 80% of the time when confronted with adding more complexity. Most of the time, the value isn’t there.

  • Email as Currency

    I was talking with an entrepreneur earlier today and the conversation centered around strategies for monetizing highly specialized content. Her company provides niche business services and supporting collateral (books, white papers, worksheets, etc) to a valuable audience. The question was as follows: should I sell my content or give it away for free?

    In the end, my advice was to go the free route for the following reasons:

    • The conversion rate for unique visitors to buyers of digital content (e.g. a PDF for $20) is likely 1 in a 1,000, so it’ll take a ton of visitors to make much money
    • Most people don’t like to buy content online, and pulling out a credit card to purchase a PDF results in tons of friction
    • If instead of 1 in a 1,000 that spend $20, you give the content away for free in exchange for providing a valid email address that opts into an occasional newsletter (no more than 2x a month), the number of emails you earn is 20 in a 1,000
    • With opted in email addresses, and thus a targeted audience, new articles and content can be sent out with sponsored, context-relevant advertising, that will command a high quality rate (e.g. $5 – $10 per email of annually), resulting in significantly more revenue than the digital content route
    • The biggest value of focusing on email as currency is that not only is the revenue higher, but that it is recurring revenue, which is one of the best business models

    Selling digital content appears to be an easy way to make money online, but I believe that building a loyal, opted-in audience around the content is a superior strategy for value creation.