David Cummings on Startups

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  • The Most Important Equation to Understand the Current Tech Boom

    Benedict Evans has a great post up titled Forget about the mobile internet where he argues that mobile is the real internet and the desktop is limited. In the article, he has a slide that outlines a simple equation that best represents why we’re in a tech boom:

    Here’s the formula from the slide spelled out:

    • 2-3x more smartphones than PCs by 2020
      x
      Personal
      Taken everywhere
      Frictionless access
      Sensors, cameras
      Location
      Payment
      Social platform
      Much easier to use
      =
      Vastly bigger opportunities

    Simply put, more people than ever before have super computers in their pocket with tremendous functionality and ease of use. Incredibly large markets with new functionality result in huge opportunities, and we have a tech boom as a result.

    What else? What are some more thoughts on this important equation to understand the current tech boom?

  • Build a Three Year Vision Plan

    While the Simplified One Page Strategic Plan is my favorite planning document for startups, it’s a worksheet for the core elements of the business and certain near-term projects and metrics. After revisiting it at least quarterly to align everyone in the company, there still exists a need to do long-term planning. That’s where a three year vision plan comes in. Too often, entrepreneurs work in the business more than they work on the business.

    Here’s an example three year vision plan outline.

    • S.W.O.T. Analysis – Strengths, weaknesses, opportunities, and threats as they exist three years from now (e.g. strengths will change over time — what will they look like in three years?)
    • Product – Core modules and functionality, much like a simple roadmap for the product
    • Team – Outline all the departments, job titles, reporting structure, etc. (e.g. going from 10 people to 100 people is a major undertaking, and this exercise of going through all 100 positions is well worth it — see What Your First 100 Hires Will Look Like)
    • Metrics – Include things like annual recurring revenue, customer count, renewal rates, cost of customer acquisition, marketing qualified leads, sales qualified leads, etc.
    • Funding – Detail how many rounds of funding are required, dollar amounts, and any other pertinent information
    • Miscellaneous – Anything else that’s relevant to the three year vision of the business

    A three year vision is a great way to get team members, investors, advisors, and other key constituents thinking about the long road ahead, and not just the next quarter. Spend time on the big vision at least once a year and make it part of the annual routine.

    What else? What are some more thoughts on building a three year vision?

  • Side Hustle

    Over the past few weeks I’ve heard two different entrepreneurs reference a “side hustle” as part of their entrepreneurial journey. After I heard it the first time, I didn’t think much of it but when it came up a second time, I realized it’s more of a thing than I thought. Naturally, the next step was to Google it and sure enough there’s even a Side Hustle Nation touting the ability to “build job-free income.” Thinking more about it, it makes sense to reference a side job that’s separate from the normal day-to-day activities as something new.

    Here are a few thoughts on entrepreneurs and a side hustle:

    The next you hear someone mention a side hustle, ask about their goals and see if you can help them become a full-time entrepreneur. A side hustle can be a good way to make money but it’s often better to figure out how to be a full-time entrepreneur sooner.

    What else? What are some other thoughts on side hustle?

  • 4 Quick Starting Points for New Angel Investors in Atlanta

    Earlier today I had the chance to meet a new angel investor that just moved to Atlanta. After doing 10+ deals in his previous city, he’s looking to get involved here. While the tech startup scene is small, it’s fast-growing with big ambitions and there are a number of ways to plug in.

    Here are four quick starting points for new angel investors in Atlanta:

    Angel investing, by and large, is a word-of-mouth endeavor. With these organized groups, networking events, and AngelList, there are plenty of opportunities to invest in startups.

    What else? What are some other ways for new angel investors to get connected in Atlanta?

  • The Power of Recurring Revenue

    Early in my entrepreneurial career I sat down with one of the most successful entrepreneurs in town and he said something I’ll never forget: figure out how to build a recurring revenue-based business as it’s the best model. Ever since then, I’ve kept that in mind and focused my efforts on Software-as-a-Service (SaaS) and other types of recurring revenue businesses.

    Here are a few benefits of recurring revenue:

    • Cash flow is predictable and timely
    • Critical metrics like cost of customer acquisition, lifetime value of the customer, and renewal rates are well understood
    • Every year starts with a base of recurring revenue making it much easier to grow indefinitely
    • Banks have credit lines specific to recurring revenue businesses that are much more favorable than standard business credit lines
    • Recurring revenue businesses are significantly more valuable than non-recurring revenue businesses, on average, when comparing ones with similar revenue amounts

    The next time you’re analyzing potential business models, consider the power of recurring revenue. While recurring revenue is harder to get started, it’s an amazing business model once running.

    What else? What are some more thoughts on the power of recurring revenue?

  • Making Work Great

    I’ve always been a fan of Dan Pink and his book Drive where he talks about the importance of autonomy, mastery, and purpose in work. This weekend in the NY Times, there was a piece titled Rethinking Work by Barry Schwartz where the author espouses an extended set of beliefs that are similar to Dan Pink’s but broadened by adding a few more categories.

    Here’s a choice piece from the article:

    We want work that is challenging and engaging, that enables us to exercise some discretion and control over what we do, and that provides us opportunities to learn and grow. We want to work with colleagues we respect and with supervisors who respect us. Most of all, we want work that is meaningful — that makes a difference to other people and thus ennobles us in at least some small way.

    So, people want work that is challenging, engaging, some level of autonomy, opportunities to learn and grow, co-workers and bosses that care, and work that matters. Much like autonomy, mastery, and purpose, this expands the concept with challenging, engaging, and being surrounded by people who care. In the end, it’s about making work great, and when it meets these criteria, it’s an amazing thing.

    What else? What are some thoughts on making work great?

  • Entrepreneurs Need a Strong Locus of Control

    Continuing with the idea that entrepreneurs need a killer instinct to succeed, there’s also another critical element: a strong locus of control. From Wikipedia:

    In personality psychology, locus of control refers to the extent to which individuals believe they can control events affecting them.

    How many times have we heard excuses as to why an entrepreneur didn’t succeed? Yes, sometimes the market timing isn’t right or the technology isn’t feasible, but when that happens, the best entrepreneurs pivot into something new and keep at it until they succeed.

    Some of the more common gripes from entrepreneurs include “we couldn’t raise any money because local investors didn’t understand our idea” or “we couldn’t recruit any team members because we couldn’t pay market rate salaries.” Do those comments sound like they’re from someone with a strong locus of control? While they might be serious challenges, entrepreneurs with a strong locus of control figure out solutions.

    The next time you’re talking to an entrepreneur, figure out if they believe they can control events affecting them or if they feel that they’re at the mercy of whatever happens. Entrepreneurs need a strong locus of control.

    What else? What are some more thoughts on the idea that entrepreneurs need a strong locus of control?

  • Video of the Week: TED Conference Richard Branson

    One of the world’s most famous, and entertaining entrepreneurs, is Sir Richard Branson. After reading a number of his books including Losing My Virginity and Business Stripped Bare, I’ve become a big fan. For this week’s video, Richard Branson is interviewed by Chris Anderson as part of the TED conference. Enjoy!

     

  • Entrepreneurs with the Killer Instinct

    Whenever I talk to successful entrepreneurs, I like to hear the origination story. Why did you start the company? What lessons have you learned along the way? Any near death experiences or crazy things you had to do to make it succeed? That last question is especially interesting in that it almost always reveals incredibly difficult times entrepreneurs have to go through before achieving success. Part of it is grinding it out, part is making personal sacrifices, and part is doing whatever it takes to make things work.

    I like to call these collective traits the entrepreneurial killer instinct. Here are a few questions to potentially discern the killer instinct:

    • How many companies have you started that didn’t work out? What happened to them?
    • What personal sacrifices did you make to help the business succeed?
    • What are you willing to do to make this new startup successful?
    • Why are you the one that’s going to win?

    Building a successful company is incredibly hard. After talking to a number of entrepreneurs that have succeeded, the most common element among them is this killer instinct.

    What else? What are some more thoughts on this idea that successful entrepreneurs have a killer instinct?

  • People, Process, and Technology for New Products

    Entrepreneurs love building products. An idea comes to mind to solve a big problem and it’s off to the races to get it developed and in the hands of potential customers. Only, the hard reality sets in once prospects see it. There are actually three challenges that must be overcome: people, process, and technology.

    • People – As much as we like to think companies are rational actors doing their best to maximize profits, the reality is that humans make the decisions and aren’t nearly as rational as we like to believe. With people, there’s a tremendous amount of subjectivity and it’s difficult to get them to act.
    • Process – Even if the people are bought in, there’s almost always a process change that’s required for one or more employees in the company once they’ve bought the product. People are creatures of habit and changing the way they do things is hard. Many entrepreneurs underestimate the importance of change management and getting a new process implemented.
    • Technology – Building a simple, standalone application is easier than it’s ever been. Technology challenges really start to emerge when having to integrate with a number of disparate systems, supporting a variety of mobile devices (especially Android), and providing a great experience for all end-user skill levels. The technology is never done.

    The next time an entrepreneur makes it sound like a new venture is going to be easy, ask the hard questions, especially around people, process, and technology.

    What else? What are some more thoughts on people, process, and technology for new products?