David Cummings on Startups

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  • Objectives and Key Results – OKRs

    Creating, managing and aligning goals is always a challenge for entrepreneurs, especially ones that haven’t experienced it in other organizations. Two approaches I’m fond of are SMART Goals and Objectives and Key Results (OKRS). Today, let’s take a look at OKRS. One of the best resources out there is the Google Ventures video titled Startup Lab Workshop: How Google Sets Goals – OKRS. Think of OKRS as goals for every person in a company such that all priorities are aligned and measured.

    Here are the slides from the video courtesy of John Doerr when he first introduced them to Google’s founders:

    • Objective
      To develop a workable model for planning as measured by:

      • Key Results
        • Finishing the presentation on time
        • Completing a sample set of 3 months objectives and key results
        • Have management agree to institute a trial system for a 3 month period
    • Example pro football team
      • General Manager
        Makes $ for owners

        • Win Super Bowl
        • Fill stands to 88%
      • Head Coach
        Win Super Bowl

        • 200 yd passing attack
        • No. 3 in defensive stats
        • 25 yd punt return avg
      • Public Relations
        Fill stands to 88%

        • Hire 2 colorful players
        • Get media coverage
        • Highlight key players
      • Defense
        #3 Defense

        • Less than 100 yds passing
      • Offense
        200 yd passing attack

        • 75% completion
      • Special Teams
        25 yd punt return

        • Train blockers
      • News Staff
        Highlight key players

        • 3 Sunday feature articles
      • Scouts
        Hire colorful players

        • Visit to colleges
    • Benefits
      Why use objectives and key results

      • Disciplines thinking
        (The major goals will surface)
      • Communicates accurately
        (Let’s everyone know what is important)
      • Establishes indicators for measuring progress
        (Shows how far along we are)
      • Focuses effort
        (Keeps organizations in step with each other)
    • Typical Process
      • Staff Meetings and One-on-Ones
      • Corporate Objects
        ->
      • Department Objectives
        ->
      • Group Objectives
        ->
      • Individual Objectives
    • Communication
      • 1:1
        • Private
        • Develop/negotiate key results
        • Monitor progress
      • Staff Meeting
        • Group
        • Develop/negotiate objectives
        • Evaluate group performance
      • Typical Cycle
        • Q1
          • End
            • Develop Draft Q2 at Staff
            • Start Q2 KRs
        • Q2
          • Beginning
            • Grade Q1 KRs at staff
            • Final Q2 KRs
          • Late Beginning
            • Present graded Q1 and new Q2 KRs at company meeting
          • Middle
            • Monitor Q2 KRs at staff
          • Late
            • Establish Q3 KRs
        • Q3
          • Grade Q2 KRs
          • Final Q3 KRs
    • Some Basic Hygiene
      • Maximum 5 objectives with 4 key results
      • 60%+ objectives from bottom up
      • All must mutually agree – no dictating
      • One page best – 2 maximum
      • Not a performance evaluation weapon
      • 60 – 70% “Grade” = Good
        40% = Bad
      • Continue incomplete key results only if they are still important
    • End Product
      • Everyone is working towards the same result
        • Focuses effort
        • Fosters coordination
      • Keeps organization tuned in
      • All operations have linked objectives and key results that support the company
      • Are fun to do!

    More notes from Google Ventures on OKRs:

    • Keys to OKRs
      • OKRs are:
        • set quarterly and annually
        • measurable
        • set at personal, team, and company levels
        • publicly available to the entire company
        • graded each quarter
    • Elements of an OKR
      • The objective..
        • is ambitious
        • feels a tad uncomfortable
      • The key results..
        • clearly make the objective achievable
        • are quantifiable
        • lead to objective grading
    • Personal / Team / Company
      • Personal OKRs define what the person is working on
      • Team OKRs define priorities for the team, not just a collection of all individual OKRs
      • Company OKRs are big picture, top-level focus for the entire company
    • Sample Personal OKRs
      • Objective
        Accelerate Blogger revenue growth

        • Key Results
          • Launch “Monetize” tab to all users
          • Implement AdSense Targeting to increase RPMs by xx%
          • Launch 3 revenue-specific experiments to learn what drives revenue growth
          • Finalize PRD for Blogger Ad Network, secure eng allocation to build in Q1
    • Sample Personal OKRs
      • Objective
        Grow Blogger traffic by xx% over organic growth

        • Key Results
          • Launch 3 features that will have a measurable impact on Blogger traffic
          • Improve Blogger’s 404 handling, extend time on site, and pageviews per session on sessions that start with a 404 error by xx%
    • Sample Personal OKRs
      • Objective
        Improve Blogger’s Reputation

        • Key Results
          • Re-establish Blogger’s leadership by speaking at 3 industry events
          • Coordinate Blogger’s 10th birthday PR efforts
          • ID and personally reach out to top xx Blogger users
          • Fix DMCA process, eliminate music blog takedowns
          • Setup @blogger on Twitter, regularly participate in discussions re: Blogger product
    • Grading the OKRs
      • .6 – .7 is your target
      • Scores matter less than the process
      • Company-wide scoring reinforces commitment
      • Use low grades to reassess: worth doing? What will we do differently to achieve our objective?
    • Publicly Grading the Company OKRs
      • Company-wide quarterly meeting
        • grade last quarter’s OKRs
        • get OKR owner to explain grade, explain adjustments for upcoming quarter
        • set this quarter’s OKRs

    Entrepreneurs would do well to watch the objectives and key results video and implement them in their company.

    What else? What are some more thoughts on objectives and key results?

  • Video of the Week: Jack Welch on Creating Candor in the Workplace

    Stanford GSB has a great video up titled Jack Welch: Create Candor in the Workplace. One of my biggest challenges as an entrepreneur was going from being a product-focused inventor to growth-oriented CEO to overall company builder. In addition to reading a ton of entrepreneur books, I’ve read a number of leadership books and tried to incorporate relevant ideas. Jack Welch’s thoughts on the four types of employees has always stuck with me and here, in this week’s video, he talks about the importance of creating candor in the workplace. Enjoy!

    From YouTube: Former chairman of General Electric tells audience to foster honest feedback: “If you reward candor, you’ll get it.”

  • Office Rent as Sign of Startup Spendthrift

    Semil has a great transcript on his blog from StrictlyVC’s most recent event titled @Semil Fireside Chat w/ @Chamath StrictlyVC Insider Series. One of the topics of conversation was around quality of office space and rent as a percentage of burn rate, especially for the spendthrifts out there.

    Here are a few choice quotes from Chamath:

    Now it’s fine to fail, and in fact it’s great to fail, but if you fail because you didn’t have the courage to move to Oakland, and instead you burn 30% of your cash on Kind bars in the office and exposed brick walls?

    The company builders are just cheap, they’re just grimy, and just, sh**ty office space, and they’ve got to keep it under 8 or 9% of their total burn, and they find people who really really believe in the thing they’re making, and they decide to just live in Oakland and pay for Lyft, and it’s still cheaper.

    If we went and built one million square feet somewhere of mixed-use work and live, and we completely conceptualized what it means to have a modular living environment for a millennial cohort of like… We can do that in a way, and give that back to our CEOs, as a benefit of working with us.

    This is something I’ve spent a good bit of time thinking about in the context of Atlanta and the Atlanta Tech Village. Of course, Atlanta isn’t anywhere near as expensive as the Bay Area across all dimensions, but if everything is linearly cheaper, office space as a percentage of burn rate should be consistent across geographies.

    Let’s say you’re an 8-person startup that’s raised a seed round of $1 million and have low six figures revenue, here’s what the math might look like:

    • $100k/year or $8.3k/month average fully burdened cost for an employee (salary, benefits, etc.) for a seed-stage employee with good equity
    • $66.4k/month for eight employees
    • $2.7k/month for an 8-person office at the Tech Village
    • Assume modest revenue offsets basic expenses like legal, accounting, hosting, software tools, etc.
    • 2.7/(66.4 + 2.7) = 4% of burn rate towards office rent, internet access, Friday lunches, snacks, video games, and other startup-y perks

    Based on these simplistic calculations, office space as a percent of burn should be minimal in places like Atlanta. Also, by owning the office building, costs are potentially contained going forward (the goal was to increase entrepreneurial density and community, not contain costs).

    What else? What are some more thoughts on office rent as a sign of startup spendthrifts?

  • 4 Quick Takeaways from Dreamforce 2015

    As the last day of Dreamforce 2015 wraps up it’s a great time to reflect on the event and conversations. My first Dreamforce was way back in 2008 when we had a tiny booth for Pardot in the furthest corner of the exhibit hall. At the time, the show was said to have 20,000+ attendees and today it’s said to have 120,000+ attendees (I think these numbers are routinely inflated by 20%). Needless to say, the show is massive.

    Here are four quick takeaways from Dreamforce 2015:

    • Marketing Automation is No Longer the Center Stage Cage Fight
      Back in 2012, the last time I attended, I walked into the main expo hall only to see a sea of marketing automation vendors. Directly in front, on the left side, was Marketo, Pardot, and Silverpop, in that order. On the right side was Eloqua with Act-On on the next row and HubSpot around the corner. Today, in 2015, Pardot was the only vendor present. Going from an incredibly competitive market with six vendors slugging it out to a single vendor in three years is astounding.
    • Social Not Even Mentioned
      Three years ago you couldn’t turn a corner at Dreamforce without seeing a message about how business is social and the need for engaging customers over social media. Now, social isn’t even on the radar. Terms like analytics, big data, and Internet of Things are the hot topics. Times change quickly.
    • Standing Out from the Crowd is Incredibly Hard
      With so many people, sponsors, and exhibitors, it’s incredibly hard to stand out from the crowd. SalesLoft put on a great guerilla marketing campaign around Benioff 2020 handing out buttons, shirts, flags, and even $2 bills with the message stamped on it. Only the show is so big and noisy that it was hard for a well executed campaign to get much attention.
    • The Cloud is King
      Previously, the cloud was talked about the up-and-comer and a there was a constant reminder of how installed software is dead. Now, no one even talks about installed software. The cloud is mainstream. The cloud won. Salesforce.com owns the most important cloud ecosystem.

    Dreamforce never disappoints and is truly the Super Bowl for SaaS startups and companies. If you’ve never been to a big tech tradeshow, put this one on your list.

  • 10 Startup Sales Tips from Dreamforce 2015

    Jason Lemkin and Aaron Ross gave one of the best presentations today at Dreamforce in their talk titled Tales from the Front Lines: Building a Killer Sales Team. Jason is the author of SaaStr and Aaron is the author of Predictable Revenue — both incredible resources for entrepreneurs that care about sales (which should be most!).

    Here are the 10 startup sales tips from their 10 slides:

    1. A/B Test is Key. Hire 2-3 AEs & SDRs. Not 1.
      – A/B Test Helps You Learn
      – Any Sales Rep That Performs is Cheap
      – 1 Rep Performing = Repeatable
      – 2+ Reps Performing = Repeating
    2. VPs Hire: Not Too Early – And Not Too Late
      – You have to sell it yourself first. And then hire 2+ reps. But once you have two that perform, get your VP!
    3. Don’t Hire Early Reps You Wouldn’t Buy From
      – Later, you’ll need many types of reps.
      – In the early days leads are so precious.
      – You’ll never be comfortable handing them off to someone you don’t trust.
    4. Make Sure You See the Customer Segmentation Pattern Early Enough
      – The Pattern is Set Early – $500k ARR
      – One it’s repeating, be confident.
      – You’ll have an “organic” type of core customer.
      – So from $1m – $10m ARR, just double down on what seems to be working.
      – Deal sizes will go up but pattern will stay the same.
    5. If You Can, Go Upmarket Faster
      – If you can get one enterprise customer, you can get 10
      – If you have one customer in an industry, you can get 10
      – The outliers aren’t anomalies. They are the future.
    6. Invest in Getting to a Mini-Brand
      – Brands are highly defensible, a proxy for whom to trust, and huge air cover.
    7. Never Allow Revenue Per Lead to Drop
      – PR. Marketing. Upgrade the team. More customer success.
      – Competition doesn’t really matter for revenue per lead.
      – Deal sizes should go up.
      – You should only get better at closing.
    8. How My 2nd VP of Sales Double Sales in 90 Days
      – Immediately upgraded the team to proven closers. The first week.
      – Got the most out of the team he inherited and got rid of the ones that weren’t working.
      – Didn’t attempt to do it alone.
      – End pipeline as a metric and any credit for it.
      – Embraced competition.
    9. It Gets So Much Better at Initial Scale
      – No matter how bad you are at X or inexperienced at Y you will learn in SaaS.
      – Great will get ever better.
      – You will get even better. Guaranteed.
      – You will become a great SaaS CEO.
    10. Not Doubling the Plan
      – Once the team was great, we exceed the plan. Every quarter, every year. Always.
      – I should have challenged us to do even better than 120% of plan.

    Want to learn more? Pre-order Jason and Aaron’s new book From Impossible to Inevitable: How Hyper-Growth Companies Create Predictable Revenue.

  • Accenture to Acquire Atlanta’s Cloud Sherpas

    Accenture announced earlier today that it’s acquiring Atlanta-based Cloud Sherpas and its 1,100 employees. Pardot was founded in March of 2007 and a few months later Michael Cohn was in our office giving me the pitch for his new startup, Cloud Sherpas. Michael saw the upcoming shift to the cloud and built one of the first cloud-only consulting firms.

    Cloud Sherpas initially focused on helping companies migrate from Microsoft Exchange to Google Apps. Over time, the company grew dramatically and eventually became one of the largest Salesforce.com consulting companies, hence Accenture’s announcement of the deal on the first day of Dreamforce 2015.

    According to Inc. magazine, here are the revenues for Cloud Sherpas over the past three years:

    • 2012 – $75 million
    • 2013 – $113 million
    • 2014 – $134 million

    Accenture is trading at roughly 2x revenue (NYSE:ACN), so I have to believe Cloud Sherpas was acquired for a much higher revenue multiple.

    Congrats to Michael and the entire team on building a great company and finding an excellent home for it!

  • 11 Great Ideas from Steve Blank

    Several people commented how much they liked the Steve Blank video on how to build a great company from last week. For existing Steve Blank acolytes, it was the same excellent material found in his books and blogs. If you haven’t had the chance to watch the video, here are 11 great ideas from Steve Blank’s talk:

    1. Startups are not smaller versions of larger companies (1:53)
    2. Startups are searching for a business model (2:45)
    3. A startup is a series of untested guesses (4:25)
    4. Turn passion and faith into facts as quickly as possible (4:56)
    5. There are no facts inside your building, so get the heck outside (9:40)
    6. Startups aren’t allowed to hire a VP of Sales until a proven model as founders should be out selling at least 20% of the time (18:03)
    7. Fire the plan instead of the executives as a startup goes from failure to failure in search of a business model (22:18)
    8. A startup is a temporary organization designed to search for a scalable and repeatable business model (23:13)
    9. The day the entrepreneur finds the repeatable business model, VCs perk up and start getting more involved because the chance of liquidity goes way up (27:35)
    10. Three phases to the company: search, build, and execute (28:58)
    11. It’s not about the technology. It’s about technology that has great customer fit. (40:37)

    Entrepreneurs would do well to follow Steve Blank’s blog and read The Startup Owner’s Manual.

    What else? What are some other great ideas from Steve Blank?

  • Scams Targeting Entrepreneurs

    Ten years ago I was sitting in my office and an email popped in my inbox: Seeking Entrepreneurs for TV Show. Excited, I promptly replied to the inquiry and said I’d love to be on the TV show and share all about our growing startup. The “producer” immediately called me and spent five minutes getting me all chummed up before dropping a classic line: oh, also, there’s a $10,000 fee for you to be on our show for our costs and the PR from the show will pay for itself immediately. Boom. I was blissfully ignorant as to what was going on and finally the “ask” made it abundantly clear that this was a scam. I promptly said “no”, hung up, and cringed as the same scummy phone calls and emails came my way over the years. As expected, entrepreneurs aren’t immune to other people preying on their passion and ignorance.

    Here are some of the more common scams targeting entrepreneurs:

    • Pay to be on a TV / Radio Show – Be on an obscure TV or radio show that no one has ever heard of for an exorbitant amount of money
    • Pay to Pitch Investors – Pay thousands of dollars for the opportunity to pitch an angel group (happens more often than people realize)
    • Offer of Help and then Get a Bill – Many people say they’ll help an entrepreneur, but make sure and clarify the type of relationship before moving forward otherwise you could end up like me paying a lawyer to edit my business plan
    • Service Providers or Advisors Seeking a Large Equity Stake – I’ve met entrepreneurs that have given up 10-20% of their company to a single service provider or advisor only to realize later that they were had. Only do large equity grants based on performance and not time (e.g. standard advisor shares of .25% is fine based on time but something more substantial should be based on results).

    Entrepreneurs are easy targets, especially if caught on a low part of the emotional roller coaster. Watch out for scams targeting entrepreneurs.

    What else? What are some other scams that target entrepreneurs?

  • Atlanta’s Latest Billion Dollar Exit is 24-Year-Old Premiere Global Services

    Last night Siris Capital Group announced they were going to acquire Atlanta-based Premiere Global Services, Inc. (PGI) for $1 billion. Now, that includes paying off $340 million of long-term debt, so it’s going to be a great billion dollar transaction but not a unicorn. PGI is a provider of web conferencing software and conference call solutions.

    Here’s what we know about PGI:

    Here’s a talk by Boland Jones:

    Congrats to Boland and the whole PGI team on a great run and being Atlanta’s next billion dollar exit.

    What else? What are some more thoughts and stories about PGI?

  • Video of the Week: Steve Blank – How to Build a Great Company, Step by Step

    For this week’s video, we’re watching Steve Blank talk about how to build a great company. Steve Blank is the father of modern startup thinking with his work on customer discovery and customer development. The next time an entrepreneur says they know what the market wants, tell them to get of out the building, and talk to customers. Here’s the video every entrepreneur needs to watch:

    From YouTube: Join Silicon Valley serial entrepreneur-turned-educator Blank in a lively discussion with Dan’l Lewin of Microsoft. This program will introduce best practices, lessons and tips that have swept the startup world, offering a wealth of proven advice and information for entrepreneurs of all stripes. Hear about a tested and proven Customer Development Process, helping get it right –and how to “get, keep, and grow” customers.