David Cummings on Startups

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Accountability Sayings
People are always looking for little sayings to make things more memorable and actionable. When thinking about accountability and expectation setting, I’ve come across several little sayings that are useful for entrepreneurs and leaders to remember. Here are three of my favorite accountability sayings:
1. Inspect what you expect
2. What gets measured, gets done
3. Trust, but verify
As an entrepreneur, I’m self-starting and goal-oriented. When defining our core values, I always prioritized other people that are self-starting as I want to be in the business of leading and not micromanaging, whenever possible. Even still, it’s important to define expectations and keep these three accountability sayings in mind.

What else? What are some more accountability sayings that you like?
December 23, 2015
Growth Benchmarks for SaaS Startups in the Early Days
For Software-as-a-Service (SaaS) entrepreneurs in the early days of the multi-year journey, one common question is “are we growing fast enough?” Fast enough is a relative term but there’s been enough success stories to know when something is doing well. At Pardot, year one was building the product (2007), year two we ended at ~$600,000 ARR, year three we ended at ~$2M ARR, year four we ended at ~$4M ARR, and year five we ended at ~$8.5M ARR growing super fast (more Pardot early years revenue info).

Here are a few growth benchmarks for SaaS startups early on:
- 0 to $1M in ARR in the first 12 months from launch (from Fundraise Like a Pro Using this Internal SaaS Metrics Playbook)
- $1M to $10M ARR in five quarters or less (from The Top 10 Mistakes First Time SaaS Founders Make)
- Another one I’ve heard:
  - 0 to $100,000 in ARR in six months from start of company (includes product launch)
  - $100,000 to $1M in ARR in 12 months
Looking at these, Pardot didn’t meet any of these (high) growth benchmarks. Two big differences: the SaaS markets are much bigger now and these growth benchmarks come from investors with the assumption that startups hitting these numbers will have raised outside capital. Regardless, to build a really big business, serious growth is needed, even in the early days.

What else? What are some other growth benchmarks for SaaS startups in the early days?
December 22, 2015
Critical Metrics for SaaS Companies
Ali Rahimtula has a great post up titled Fundraise Like a Pro Using this Internal SaaS Metrics Playbook. As expected, Software-as-a-Service (SaaS) startups have a number of common financial characteristics that make it fairly straightforward to analyze how well the business is doing. At their core, SaaS companies are desirable due to the recurring revenue, high gross margin, and general predictability of the model. Each of these components is reflected in the metrics.

Here are some of the critical metrics for SaaS companies from the article:
- MRR over time
  - Beginning of period MRR
  - + New customer MRR
  - + Existing customer expansion MRR
  - – Churned MRR
  - – Downgraded MRR
  - = End of period MRR
  - Growth
- Customer counts
  - Customers add
  - Customers lost
  - End of period customers
- Quick ratio
  - (new MRR + expansion MRR) / (cancelled MRR + downgraded MRR)
- Churn
  - Gross MRR churn (inc. downgrades) ($)
  - Gross MRR churn / previous period MRR (%)
  - Logo churn (#)
  - Logo churn / previous period logo count (%)
  - Net MRR expansion (%)
  - Net MRR churn (%)
  - MRR retention (%)
  - Customer renewal rate (%)
  - Dollar renewal rate (%)
- Cohort analysis
  - Average revenue per account
  - Price per seat
  - LTV
  - Conversion to paid rate
  - Average contract length
  - Months paid upfront
  - Engagement metrics
  - Customer conversion
  - Sales cycle time
SaaS entrepreneurs would do well to read Fundraise Like a Pro Using this Internal SaaS Metrics Playbook and get a more detailed understanding of their metrics.

What else? What are some other critical metrics for SaaS companies?
December 21, 2015
11 Takeaways from the Atlanta Tech Village 3 Year Anniversary
Today marks the three year anniversary of buying the Atlanta Tech Village, and wow, what an incredible journey it’s been. When buying the building, I thought we’d create a great space to help entrepreneurs increase their chance of success and do our own niche thing. I never thought the Tech Village would take on a life of its own and represent the entrepreneurial image of Atlanta and be supported by so many business and civic leaders in the metro region.

Here are 11 takeaways from the Atlanta Tech Village as we celebrate our three year anniversary (also, our elf likes to party):
Finally, I never expected to have so many opportunities emerge from the Tech Village notoriety, especially the chance to give the 2015 Mercer University Atlanta Commencement.

Here’s to many more years of helping entrepreneurs increase their chance of success at the Atlanta Tech Village (and, our elf likes to party).

What else? What are some more takeaways on the three year anniversary of the Atlanta Tech Village?
December 20, 2015
Must-Have vs Nice-to-Have SaaS Products
One of the biggest considerations in the early days of a new Software-as-a-Service (SaaS) product is the must-have vs nice-to-have question. A must-have product fundamentally alters the way work gets done — either changing existing processes to be 10x better or unlocking new value that wasn’t previously achievable — and once used, companies will never go back. A nice-to-have product provides some value — perhaps being twice as good as doing it by hand or with spreadsheets — yet isn’t valuable enough to compel a critical mass of adopters, and won’t be successful.

Here are a few thoughts on must-have vs nice-to-have SaaS products:
- Every spreadsheet is another SaaS app, but every SaaS app isn’t a must-have
- Apps that unequivocally help companies make more money, like marketing automation, are a must-have
- Apps that improve productivity must be 10x better than the manual process, not 2x, which results in a nice-to-have
- Note: this is for products in new categories and greenfield opportunities, not new products in existing categories
As an entrepreneur, the next time you evaluate an opportunity, consider the must-have vs nice-to-have question — it’s a big one.

What else? What are some more thoughts on must-have vs nice-to-have SaaS products?
December 19, 2015
Video of the Week: Product Marketing for Startups

For many entrepreneurs, marketing, especially product marketing, is one of the least well understood areas of the business. Our video of the week comes from Adam Gross and his great talk at Google Ventures on product positioning, public relations, and pricing. Enjoy!

From YouTube: Google Ventures Startup Lab | The words “marketing” and “startups” don’t always have an easy co-existence, but creating innovative and successful marketing efforts — and in particular positioning, PR, and pricing — are an essential part of creating growth. Early Salesforce.com and Dropbox employee Adam Gross shares a the basic tenants of product marketing he’s learned along the way.

December 18, 2015
Buying a Company Just for Lead Generation
Two years ago Vonage bought Vocalocity for $130 million to expand into VoIP for businesses. When talking to the founders of Vocalocity several years prior to the exit, I learned that their primary driver of growth in the early years was helping third-party VoIP lead generation sites get better at generating leads, which in turn resulted in more qualified leads for Vocalocity. Then, six months ago, I was talking to an entrepreneur that was about to complete the acquisition of a low single-digits millions of revenue lead generation site so that they could be the exclusive recipient of leads for his non-tech startup.

When’s the last time you heard of an entrepreneur buying another company — a lead generation service or marketing agency — purely to improve the lead generation/marketing side of things? Here are a few thoughts on the idea:
- Building a great lead generation machine is incredibly hard and time consuming, making an acquisition a potential quick solution to getting it done
- Many niche lead generation sites and marketing agencies don’t have enough scale or market size to be major acquisition targets, making them more favorable/affordable to ambitious entrepreneurs that are looking to grow faster
- Expertise and talent in online demand generation is tougher to find than many people expect, making the staffing element an enticing component
Buying another company just to help with lead generation doesn’t come up too often, but it happens, and entrepreneurs should consider all options.

What else? What are some more thoughts on the idea of buying a company just for lead generation?
December 17, 2015
Changing Goal Targets Midway Through the Quarter
Several years ago, in the early days, I remember us putting down a company-wide sales goal for the quarter that proved to be much too ambitious. With most of the quarter done, and it clear we weren’t going to hit our goal, I changed the goal target to one we would hit and explained we made a mistake when setting it. This was the wrong approach.

Here are some thoughts and questions about changing goal targets midway through the quarter:
- When setting goals, it’s important to be consistent around expectations. Are goals meant to be achieved? Are they stretch goals?
- If a goal is changed midway, how changeable are the other goals? What makes one changeable and another not changeable?
- When reviewing past quarterly goal performance (e.g. year in review), how do you account for how well you did with setting and meeting quarterly expectations? How is longer term analysis affected by changing goals after they were set?
While it might seem trivial in the early days, it’s important to set the tone and seriousness of company-wide goals. Changing goal targets midway through the quarter should be avoided. Rather, keep the goal target and be transparent about why it wasn’t hit and what will be done differently going forward.

What else? What are some more thoughts on changing goal targets midway through the quarter?
December 16, 2015
Traction and Traction
Last month an entrepreneur was asking me questions about building a marketing machine for his startup. Naturally, I pointed him to the book Traction: A Startup Guide to Getting Customers by Gabe Weinberg. Then, last week, an entrepreneur brought up some ideas around accountability and operational metrics from the book Traction: Get a Grip on Your Business. Clearly, traction is a hot-button item.

Here are a few reasons why traction is so important:
- Traction, especially early on, is the primary driver of determining product/market fit.
- Investors are in the business of making money, and minimizing risk. The best way to minimize risk? Show strong traction if you want to raise money.
- Traction provides oxygen for the product.
Looking for books to read over the upcoming holiday break, read Traction and Traction. Building a repeatable customer acquisition process and a scalable business are critical for successful startups.

What else? What are some more thoughts on traction?
December 15, 2015
Three Basic Questions to Answer for Every Employee
In Patrick Lencioni’s book The Three Signs of a Miserable Job, he talks about the following:
- Immeasurable – if nothing is measured, then nothing can be improved
- Irrelevant – it’s critical to know who the work affects
- Anonymity – knowing and caring about personal life is important
In a similar manner, there are three questions entrepreneurs should answer for every employee:
- Who’s my boss?
- What’s my job?
- How do I know if I’m doing it well?
It seems simple, but you’d be amazed how many employees can’t answer these three little questions. Why? Many leaders don’t spend the time to build a healthy organization. Great leaders know that everything depends on great team members, and the foundation is the culture of the organization.

What else? Can you answer these three questions for everyone in your company?
December 14, 2015