David Cummings on Startups

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  • Scholarships at the Atlanta Tech Village

    One of the first things we did after opening up the doors of the Atlanta Tech Village is setup a scholarship program for startups that don’t have the means to pay yet, social enterprises, and student entrepreneurs. In fact, our most famous startup to start and graduate from the Tech Village, Yik Yak, came in on a scholarship and left after raising a $62 million round of funding. While that’s an exceptional case, we’ve made the scholarship program an integral part of our mission to make Atlanta one of the top 10 cities for entrepreneurs to succeed.

    Here are a few thoughts on the Tech Village scholarship program:

    • Much like entrepreneur roundtables, a community of like-minded entrepreneurs is an accelerant for startup success
    • Scholarship recipients are often at the beginning stage of a new venture, and thus the most fragile, making the opportunity to be in a strong community that much more valuable
    • Culture fit is the most important requirement, and we’ve found scholarship recipients to be even more grateful to be part of the community
    • Social enterprises and student entrepreneurs are an important part of a vibrant community, yet don’t typically have the same resources, so they might otherwise be excluded if not for scholarship programs

    Surprisingly, we don’t get as many applicants as expected for the scholarship program and feel that helping entrepreneurs when they’re at that most nascent stage is a real opportunity to grow our community. If you know an entrepreneur in the Atlanta area, encourage them to get involved at the Tech Village, and apply for a scholarship, if applicable.

    What else? What are some more thoughts on scholarships at the Atlanta Tech Village?

  • Entrepreneur Roundtables

    One of the most important accelerants for my entrepreneurial career was my Entrepreneurs’ Organization forum. Forum, in the EO and YPO parlance, is a small group of 8-10 entrepreneurs/CEOs that meet on a monthly basis and share all aspects of their business and life in a private and confidential setting. As an entrepreneur, there are so many topics that are difficult or inappropriate to talk about with friends and colleagues, yet it’s critical to get feedback, or at least get something off your chest. 

    Here are a few benefits of joining an entrepreneur roundtable:

    • Having a set day/time each month provides peace of mind to address any new issues that arise
    • Even with a board or advisors, peer groups act as another outlet for difficult topics
    • Many lessons are learned listening to opportunities and challenges other entrepreneurs face
    • Beyond just business, there’s a real personal and family benefit being a part of a tight group (many chapters have spousal forums as well)

    Entrepreneur roundtables are an invaluable resource for entrepreneurs of all types. Seek one out and you won’t be disappointed. 

    What else? What are some more thoughts on entrepreneur roundtables?

  • Video of the Week – Peter Thiel on Zero to One

    After reading Peter Thiel’s book Zero to One I was interested in hearing him talk and his presentation at UT Austin doesn’t disappoint. 

    From YouTube: Thiel is hailed as one of the most successful investors in the world. After co-founding PayPal, he went on to co-found Palantir Technologies and invest in Facebook, where he still serves on the board. He’s played major roles in dozens of successful companies and continually strives toward the next big thing. In “Zero to One,” he emphasizes the need for entrepreneurs to grasp for the ideas that nobody else has in order to truly innovate. This new way of thinking about innovation encourages burgeoning business leaders to carve their own lane in a heavily saturated race toward success.

    “Zero to One,” based on a course Thiel taught in 2012 at Stanford University, urges readers to see the broad picture and look past traditional boundaries between fields and industries in order to create a future full of innovation.

  • Start Small and Start Now

    Over the course of this summer, three different high school students reached out asking for help on their entrepreneurial venture. In each case, they had an idea laid out in a document and were trying to figure out the next step. With no prototype and no prospects, it was clear what to do next. 

    Entrepreneurs should start small and start now. Here are a few steps:

    • Customer Discovery – Meet with five new potential customers per day in person or over the phone and intimately learn what they do and don’t want in the product. Read about Customer Discovery and Lean Startups. 
    • Prototype a Product – Teach yourself how to build a prototype product using Codecademy and constantly refine it with potential customer input. 
    • Entrepreneur Books and Blogs – Start with three of my favorite books and read new entrepreneur blogs every day for five years. 
    • Executive Summary – Put everything down into a two-page executive summary. This document should be revised constantly and used as a communication tool for potential advisors, mentors, and investors. 
    • One Page Strategic Plan – Create a Simplified One Page Strategic Plan to outline both tactical and strategic imperatives as well as metrics. This should be updated quarterly, if not more frequently. 

    Anyone with a laptop and internet connection can follow this process and get started. Everything starts small — the difference is that entrepreneurs start now. 

    What else? What are some more thoughts on entrepreneurs starting small and starting now?

  • Financial Projections for Startups

    Recently I saw another one of the dreaded financial charts in a startup’s executive summary: $0 revenue today and $25 million in revenue in year three. Whenever I see this, I immediately know that the CEO either a) doesn’t have any startup experience or b) hasn’t done the appropriate homework. Can a company go from $0 to $25 million in three years from a cold start? Yes. Does it make the startup look credible in an executive summary? No.

    Here are a few thoughts on financial projections for startups:

    • Study the Inc. 500, especially technology companies. What does the revenue ramp look like there? These are some of the fastest growing companies in the country, and annual revenues like $1M to $4M to $10M are more the norm (and incredibly high growth).
    • Build a bottom-up forecast based on number of leads generated, conversion from lead to opportunity, number of trained sales reps, average sales cycle, average sales price, and conversion from opportunity to close.
    • Find a simple financial model online (e.g. here’s a SaaS metrics one) and adapt it (don’t build or use a super complicated financial model as it’s overkill without relevant operating history)

    Every startup should build financial projections. Even if there are many unknowns, it’s important to see how things might work, how gross margins make the model viable (or don’t! — see HomeJoy), and what the major drivers are for the business.

    What else? What are some more thoughts on financial projections for startups?

  • Board Decks Even Without Board Meetings 

    Over the last few years a dozen different entrepreneurs have asked me if they should put together a formal board for their startup. My response is that they don’t need a formal board but it’s still good to go through the exercise of putting together a board deck on a quarterly basis. Much like regular investor updates, a board deck is even more comprehensive in summarizing key information and metrics. 

    Here’s what a board deck might contain for entrepreneurs without board meetings:

    • KPIs – Summary of all the key metrics year to date and for the quarter as well as percent of goal
    • Department Updates – Main accomplishments for sales, marketing, services, support, operations, and engineering 
    • Strategic Initiatives – Outline the big undertakings for the quarter including any challenges or potential roadblocks
    • Financials – Semi-detailed financial metrics for the most important parts of the business
    • Challenges – Where does the company need the most help

    Like a simplified one page strategic plan but much more detailed, a board deck for entrepreneurs without a board is a good way to organize thoughts, prepare a quarterly review, and outline new initiatives. 

    What else? What are some more thoughts on board decks even without a board?

  • Developer Bootcamps

    One fairly new phenomenon in the startup community over the last few years is the rise of the developer bootcamp. While there are a variety of training programs, the general idea is that someone with a college degree wants to change careers, and instead of going back to college for two years, they go to a three month full-time program and come out with the skills to be a junior web developer. 

    Here are a few thoughts on developer bootcamps:

    • People that were already writing code on the side and building websites, yet want a more formal education and credentials, typically do the best
    • People that don’t have some minor programming exposure and prior coding initiative are often more challenged to be truly proficient after three months (this is feedback from entrepreneurs that have hired engineers from these programs)
    • Costs, ranging from $10,000 – $12,000, can be a challenge but are viewed as reasonable when the salaries of software engineers are compared to most fields (e.g. making $50,000/year then going to $75,000/year as an engineer is a much better financial decesion than doing a two year college degree and the corresponding loss of income)
    • As a business model, these developer bootcamps can be very profitable (imagine 15 students in a class paying $150,000 in tuition and the main expense being an instructor that costs $10,000/month for three months plus other staff and infrastructure overhead)
    • No major standards or credentials have emerged yet, but look for one or two to set the tone
    • Community colleges and technical schools are going to enter the market providing more competition that is government-sponsored 

    Developer bootcamps are a great addition to the startup community and much needed. Look for software engineering demand to continue to outpace supply even with additional training programs. 

    What else? What are some more thoughts on developer bootcamps?

  • Putting $1 Million to Work in the Startup Community

    WorldPay, in Atlanta, recently pledged $1 million to fund a financial technologies accelerator at Georgia Tech’s ATDC. It’s great to see a local company make a substantial investment in the community and it got me thinking about other ways $1 million could be put to work. Here are a few ideas:

    • Generic Startup Accelerator – Much like the financial technologies accelerator but for any type of tech startup. With $1 million, there’s enough funding for two 10-team cohorts that receive $25,000 each along with office space, legal, accounting, and a managing director to run it for one year.
    • Tech Entrepreneurship Center – $1 million is plenty of money to rent a nice office space for 4-5 years along with a great community manager to run the facility and coordinate programs (startups would still pay rent but the $1 million would go towards subsidizing everything).
    • Partially Endow an Entrepreneurship Education Chair – $1 million could be put into the local community foundation to pay a non-profit, school, or college in the area to partially fund a dedicated entrepreneurship teacher that runs programs like the Kauffman Foundation FastTrac program as well as other classes geared towards high potential new businesses (see the Ideal Entrepreneur Bootcamp Program).
    • 100 Programming Bootcamp Scholarships – $1 million would pay for 100 people to go through an intensive three month software engineering bootcamp program where they are trained to be a professional programmer (this is a way for people with college degrees to switch careers quickly). Take a look at Tech Talent South, Iron Yard, Digital Crafts, and General Assembly.

    $1 million still goes far, especially outside the expensive coastal cities. and can fund a major startup community initiative. As tech innovation and entrepreneurship continues to be a hot area, look for more tech startup community initiatives.

    What else? What are some other ways $1 million can be put to work in a startup community?

  • Better Naming Delineation for Seed Stage Startups

    Continuing with yesterday’s post on Startup Stages by Revenue, one stage that can can use better naming delineation is the Seed Stage. The Seed Stage, while still early, represents a huge range, especially when considering the difference between a startup with $50,000 in annual recurring revenue (ARR) and one with $500,000 in annual recurring revenue. At $50,000 ARR, the startup might only have 10 customers paying $5,000/year whereas the $500,000 ARR startup might have 100 customers paying $5,000/year. 100 customers implies product/market fit, many elements of a repeatable customer acquisition process, and close to a sustainable level of success. So, what’s a better name for these Seed Stage startups that are much farther along, but still tiny? And what’s a good revenue cut-off? $100,000? $250,000? $500,000?

    Here are a few naming ideas for Seed Stage startups that have at least $250,000 in revenue (a big startup milestone):

    • Six Figure Seed Stage
    • Late Seed Stage
    • Product/Market Fit Seed Stage
    • Sustainable Seed Stage

    Seed Stage startups with hundreds of thousands of dollars of revenue are very different from Seed Stage startups with a working product and a couple customers. In startup communities, especially emerging communities outside the major startup centers, better naming delineation for Seed Stage startups will help identify high potential companies, engage more investors, and result in more success stories.

    What else? What’s a better naming convention to differentiate between Seed Stage startups?

  • Startup Stages by Revenue

    In any given week I’ll receive 1-2 emails from venture capitalists asking for an intro to an Atlanta Ventures startup. Naturally, I ask what stage startup they target, especially if it isn’t explicitly stated on their website (this assumes it isn’t the proverbial associate call). Most of the time, the investor is looking for the startup to be at a later stage, and so the intro isn’t a good fit (most venture firms have moved up market and look for businesses that are further along).

    Here are some common startup stages by revenue (investors will also expect to see growth rates above 30% as well):

    • Idea Stage – No revenue or product, but lots of energy and enthusiasm.
    • Seed Stage – Under $1 million in revenue (often under $100,000), working product, and paying customers with some early metrics (seeking product/market fit).
    • Early Stage – Between $1 million and $5 million in revenue with solid metrics and a repeatable customer acquisition process.
    • Growth Stage – $5 million or more in revenue, strong team, and working on scaling all aspects of the business.

    The next time an investor reaches out, one of the easiest qualifying questions is to ask what stage company they look for, and to have them give a revenue range as part of the answer.

    What else? What are some more thoughts on startup stages by revenue?