David Cummings on Startups

Category: Tech

  • Learning to Code

    Over the past 30 days I’ve had three different people ask me for advice on learning how to write code and build an app. Of course, that’s music to my ears as I think everyone that’s involved with a tech startup should learn to write code. Now, the goal with learning to code isn’t so that she can become a life-long professional software developer. Rather, the goal is to better understand how things work behind the scenes, to better communicate with members of the technical team, and to become more well rounded. Much like many colleges require taking a foreign language as a graduation requirement, learning to code provides many of the same benefits.

    With the new year just around the corner, learning to code, even if it’s something simple like building a small app, is a great New Year’s resolution. Here are a few ways to get started:

    Before, it was much more difficult to start due to having to install and configure a development environment on your laptop. Today, everything is available right inside a browser to learn the fundamentals without any friction. Building an app and deploying it to a web server is more involved and readily saved for a future assignment once it’s clear that more time will be devoted to learning.

    So, no more excuses – learn to code.

    What else? What are some more thoughts on learning to code?

  • Rise of the Browser Add-on Business

    Now that Google Chrome and Firefox have healthy, active extension / add-on marketplaces, we’re starting to see more companies build businesses that interact with data and services from other web apps with the browser add-on being a critical component. Here are three popular examples:

    • Rapportive – Adds a sidebar in Gmail that shows rich contact profiles and information (e.g. social profiles, LinkedIn data, etc). Rapportive was acquired by LinkedIn.
    • Boomerang for Gmail – Enables scheduling emails for delivery at a date / time in the future as well as generating reminders if an email doesn’t receive a response.
    • SalesLoft – Enables fast and efficient capture of data returned in Google search results for the purpose of building prospect lists as well as integrating the data into a CRM (Disclosure: I’m an investor).

    Over time, I expect more products will emerge as browser add-ons that take advantage of data and interactions with existing web apps to provide substantially more value.

    What else? What are some other examples of browser add-ons that you like?

  • Continuing the Internet of Things Examples

    Continuing with the internet of things experiments from July, I’ve come across several more that are intriguing. Internet of things refers to everyday items, like a camera or car, being connected via WiFi to the internet, enabling a variety of new functionality.

    Here are several more internet of things devices that are promising:

    • Netatmo Personal Weather Station – Track the temperature, humidity, and a variety of other data points from a mobile device, and be alerted when certain thresholds or values are met
    • NeatConnect Cloud Scanner – Scan documents and images straight to the cloud, including Google Drive, without connecting the scanner to a computer
    • Nest Smoke + Co Alarm – Smoke and carbon dioxide alarm connected to the cloud for remote management and monitoring as well as more sane audible alarm options (e.g. have a voice announce that smoke has been detected before sounding a shrill alarm)

    The internet of things is super exciting and I’m looking forward to trying out these new devices.

    What else? What are some other cool internet of things devices?

  • Can’t the Software Just be Knocked Off

    Last week I was talking to an ambitious young professional that wants to get into the startup world. We were discussing ways to evaluate the potential of a startup — how big and successful it might be. In terms of evaluating startups, he offered up a serious concern of his saying that it’s easy for a big company to just knock off the software once a startup proves the need. With a background in real estate, he had seen ideas and strategies knocked off repeatedly.

    Building a product that offers similar functionality to another product is straightforward. Building a successful startup or product line based on another successful startup is incredibly difficult. Here are a few reasons why software can’t just be knocked off to have a successful business:

    • Switching costs and the network effects of using a product are significantly more important than one can appreciate without being in the industry and seeing it play out (think of salesforce.com as an example with high switching costs and Snapchat as an example that benefits from massive network effects)
    • For each visible feature there are hundreds of behind-the-scenes features that can’t be seen or accounted for unless you have hundreds or thousands of customers (think of the iceberg example where only a small amount of the iceberg is above water and the majority of the iceberg is below water — unseen functionality)
    • The Mythical Man Month still holds true whereby adding new software engineers to a project to speed it up actually slows it down (e.g. if a big company threw a bunch of engineers at a new product to get it done quickly, it would be worse off than a smaller team working in conjunction with customers over a much longer period of time, which is what a startup does)

    So, it’s very difficult to copy a product and make it as successful as an already successful product with the same market and buyer.

    What else? What are some other reasons why it’s so difficult to just knock off a successful software product?

  • Thinking About the Intersection of Content Management and Marketing Automation

    Tomorrow I’m honored to speak at Drupalcamp Atlanta about the Pardot story. Drupal, best known as an open source content management system, is now used as a full blown platform for building dynamic websites. Before I co-founded Pardot, I founded Hannon Hill, a content management company and spent many years in the industry. So, then, where does the Pardot story and marketing automation fit in with content management?

    Here are a few thoughts on the intersection of content management and marketing automation:

    • More and more sites, especially sites that are brochureware, incorporate marketing functions like anonymous visitor tracking, contact us forms, trackable site search, and more
    • As sites collect additional data on visitors through custom or turn key modules (e.g. social sign-on systems), more information is available to do targeted lead nurturing
    • For a non-transactional site, it’s difficult to prove return on investment, but by adding marketing automation, it’s easy to show value

    In the near future, the majority of sites will have some form of marketing automation and it’ll be commonplace for content management systems and marketing automation systems to have a much tighter integration.

    What else? What are some other thoughts on the intersection of content management and marketing automation?

  • Notes from the Twitter S-1 IPO Filing

    The Twitterverse is buzzing about the upcoming Twitter IPO, and now we have all the intimate details courtesy of the S-1 IPO filing with the SEC. I’ve found Twitter to be an amazing medium that I use on a daily basis (@davidcummings), so I want the company to succeed in a way that grows both the value of the community and shareholder value.

    Here are a few notes from the Twitter S-1 IPO filing:

    • 215 million monthly active users (pg. 1)
    • 500 million tweets per day (pg. 1)
    • 75% of users accessed it from a mobile device (pg. 2)
    • 45% of Super Bowl ads used hashtags to engage users (pg. 5)
    • 300 billion Tweets created since origination (pg. 6)
    • Revenue (pg. 10)
      2010 – $28.3M
      2011 – $106.3M
      2012 – $316.9M
    • Losses (pg. 10)
      2010 – $67.3M
      2011 – $129.8M
      2012 – $79.4M
    • 87% of revenue from advertising Promoted Tweets, Promoted Accounts, and Promoted Trends (pg. 16)
    • Accumulated deficit of $418.6M (pg. 24)
    • 2,000 employees (pg. 26)
    • 2011 FTC settlement that requires biennial security assessments for 20 years (pg. 31)
    • February 2013 attackers accessed 250,000 user records (pg. 32)
    • 6 U.S. patents issued and 80 patents pending (pg. 33)
    • 25% of revenue is international (pg. 60)
    • Equity ownership (pg. 144)
      Dick Costolo – 1.6%
      Jack Dorsey – 5%
      Benchmark Capital – 6.7%
      Evan Williams – 12%

    Twitter’s IPO is going to do exceptionally well due to the large number of consumers that love the service and the fact that it’s an extremely fast growing technology business, which is in high demand.

    What else? What are your thoughts on the Twitter S-1 IPO filing?

  • Digital Display Disruption with Android Sticks / Beyond Google Chromecast

    Yesterday I tried out the new Google Chromecast for the first time. For a $35 device, it packs a ton of power and is really useful. AirPlay via AppleTV is still much more flexible since the whole desktop display is broadcast wirelessly to the screen, but transmitting a browser window inside Google Chrome meets most of the needs in the market (as well as the custom apps like Netflix).

    I think the bigger transformational shift will come when there’s a small Android computer that plugs into any standard HDMI port, like a TV, so that you have the full computer attached to the screen. Dell is working on this now with the Project Ophelia $100 Android stick. Connecting a computer to a TV is possible now with Mac Mini or a little PC, but it’s cumbersome to maintain and configure.

    With the advent of a $100 Android stick, we’ll see more digital displays. Think of some of the common scenarios:

    • Metrics / KPI dashboards
    • Competitive leaderboards
    • Digital billboards
    • Restaurant menus
    • News / events / alerts

    Better, faster, cheaper — the digital display market is ripe for change and tiny, self-contained computers will be the catalyst.

    What else? What are your thoughts on the coming digital display disruption with Android sticks?

  • Growth Drives Value for SaaS Companies

    Software-as-a-Service (SaaS) is hot. White hot. In fact, it’s been hot for several years now. Marketo, which IPO’d recently, now has a market capitalization of $1.23 billion (NASDAQ:MKTO), even after Salesforce.com bought ExactTarget / Pardot. With Marketo’s most recent quarterly revenue results of $22.5 million (extrapolated to $90 million annually), the stock is now trading at north of 13x revenue (not counting assets and liabilities). The big driver of SaaS value is growth and with a 62% growth rate, the market loves Marketo. Is the stock overvalued in the short-term? Absolutely. Long-term? No, as long as it can keep its growth rate up for several more years and withstand Salesforce.com’s entrance into the market.

    Now, let’s look at NetSuite. NetSuite is at its all-time high with a market capitalization of $7.35 billion (NYSE:N). Based on last quarter’s revenue of $101 million, extrapolated to $404 million annually, the stock is trading at north of 18x revenue (not counting assets and liabilities). Take out a few turns of the multiple for the Oracle premium on NetSuite, and you still have a massive multiple. What gives? NetSuite grew 35% year-over-year and shows no signs of slowing down. The markets love growth.

    As long as the leading SaaS companies continue to post impressive growth rates, look for a market premium unlike many other industries. SaaS entrepreneurs take note: growth rates drive valuation.

    What else? How long do you think the leading SaaS companies will continue to get a large premium for growth?

  • The Coming Wave of Marketing Automation Adoption

    Being in the marketing automation world for five-and-a-half years with Pardot, it’s easy to think that everyone knows about the technology and has adopted it. Not so. When I talk to non-tech CEOs and entrepreneurs, very few have heard of marketing automation, let alone begun using it. Technology companies are the main users of the technology and it’s starting to spread rapidly.

    Think about all the companies that use a modern, web-based CRM, based on approximate customer count:

    • Salesforce.com: ~140,000
    • SugarCRM: ~10,000
    • Microsoft Dynamics CRM: ~40,000
    • Netsuite: ~13,000
    • Total: ~200,000 companies

    Now, look at the major marketing automation vendors based on approximate customer count:

    • Marketo: ~2,400
    • Pardot: ~1,900
    • Eloqua: ~1,500
    • HubSpot: ~1,800 (this is a guess as many of their customers use the blogging and SEO tools, with the marketing automation piece growing quickly)
    • Act On: ~1,400
    • Total: 9,000

    Note: customer counts are all educated guesses based on published information and industry knowledge.

    So, with roughly 200,000 companies using a modern, web-based CRM and only 9,000 using a B2B marketing automation system, there’s unbelievable room for growth. Marketing agencies and lead generation experts would do well to develop a marketing automation practice and get out ahead of the curve. Per adoption, we’re just about to cross the chasm into the early majority and the number of companies that use that software will explode.

    What else? What are your thoughts on the coming wave of marketing automation adoption?

  • Experimenting with the Internet of Things

    As I sat down to write this post I noticed it was warm in the room. Not thinking twice, I loaded up my Nest iPhone app and promptly lowered the temperature for the area. That is, I took advantage of the Internet of Things — the idea that everyday objects become connected to the internet and can communicate in new ways.

    Here’s my current list of internet-enabled objects that were traditionally isolated:

    • Tesla Model S – From my iPhone I can control the car’s A/C, sunroof, charging, door locks, see how many miles of range is left on the battery, and see the GPS location overlaid on a map.
    • Nest – The thermostat is tracking our usage patterns to learn how we live so that it can optimize for our lifestyle while saving money on our energy bills. As a bonus, if we go on a trip and set the temperature to 80 while we’re gone, from my iPhone I can lower the temperature a few hours before we return so we get home to a cooler house.
    • Withings Scale – Every time I step on the scale it knows it’s me and records my weight, pulse, and other factors in the cloud so that I can see my progress on my iPhone anytime, anywhere.
    • Dropcam – With this internet-only video camera, I can have a two-way conversation with a person on my front porch via my iPhone anywhere in the world. If the baby is sleeping, I can go do yard work and keep an eye on him from anywhere around my house.

    The Internet of Things is going to have a profound impact on how we work and live. I’m excited to keep trying them out and experimenting.

    What else? What are your thoughts on the Internet of Things and what other objects do you have that are internet-enabled?