David Cummings on Startups

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  • One New Insight Per Day

    Reflecting on this past week, there were so many insights and takeaways from a number of different conversations. Overall, one theme kept coming back to me: how to get one great new insight per day. Whether it’s an idea on how to do something better, a way to think about a problem, or just how the world works, there’s tremendous value in learning one new insight per day.

    Here are a few ideas to find one new insight per day:

    Now, every night, when your head hits the pillow, reflect back on the day, and pick out one new insight. Do this daily, and after a couple months, you’ll find yourself being more cognizant and attentive when encountering great ideas, and your own insights will improve.

    What else? What are some other thoughts on one new insight per day?

  • Marketing Technology as Massive Growth Opportunity

    When people ask about fast-growing technology opportunities, I love pointing out the marketing industry and how much growth it’s experiencing. First, though, it starts with a simple quote from John Wanamaker: Half the money I spend on marketing is wasted; the trouble is, I don’t know what half. There’s a huge shift in marketing and advertising dollars from offline to online, and that, combined with newer technologies like the smart phone, present enormous new opportunities for growth.

    As a simple, tactical example, let’s look at revenue growth from a few publicly-traded marketing technology companies:

    • Constant Contact (NASDAQ:CTCT)
      2014 – $332 million
      2013 – $285 million
      2012 – $252 million
    • HubSpot (NYSE:HUBS)
      2014 – $116 million
      2013 – $78 million
      2012 – $52 million
    • Marketo (NASDAQ:MKTO)
      2014 – $150 million
      2013 – $96 million
      2012 – $58 million

    Just these three companies alone have added $236 million in new marketing technology revenue in the last three years. With huge growth rates, and scale, Wall Street is bullish as well about marketing technology.

    Famously, Gartner proclaimed that by 2017, the CMO will spend more on IT than the CIO. Think about that for a minute: more money will be spent by marketing on technology than general IT will spend on technology. The growing budgets and focus on marketing technology will open up many new opportunities for entrepreneurs.

    On the industry side, look for events like the MarTech conference to grow at a pace even faster than the budgets as people seek to gain a deeper understanding of the possibilities. Just like technology waves in the past, marketing is a huge one that’s gaining momentum.

    What else? What are some more thoughts on marketing technology as a massive growth opportunity?

  • Checklist of Startup Community Ingredients

    Recently I was meeting with a friend talking about our respective startup communities. We covered many of the usual topics and then got to one I hadn’t explicitly discussed before: a checklist of common startup community ingredients. Meaning, when you look at a city, what programs, events, facilities, etc. do you expect to find?

    Here’s the start of a checklist of startup community ingredients:

    • Critical mass of entrepreneurs – Entrepreneurs need to be out en masse building companies
    • Entrepreneur-lead initiatives – Entrepreneurs need to lead the community (see the Boulder Thesis)
    • Engineering schools – Both traditional technical universities and more modern code schools are necessary for a steady supply of technical talent
    • Meetup groups – Regular gatherings for sales, marketing, engineering, entrepreneurs, etc.
    • Co-working spaces – Shared desks and conference rooms
    • Furnished office spaces – Private rooms and suites fully furnished for startups
    • Event centers – Large conference centers that are great for all types of events
    • Accelerator programs – Cohorts of seed-stage startups that come together for heavy mentoring and a demo day
    • Mentors – People in the community that actively help and coach the next generation of leaders
    • Angel funds – Loosely connected groups of angel investors that meet on regular basis and look at deals

    Of course, all of this is predicated on having hungry, ambitious entrepreneurs that build successful companies. The strongest startup communities have the most density, experience-sharing, and recycling of talent and capital.

    What else? What are some more items you’d add to a checklist of startup community ingredients?

  • Service Providers as Angel Investors

    Continuing with the recent post The Tourist (Investors) are in Town, there’s another element that I’ve seen more lately: service providers as angel investors. Now, lawyers can’t invest due to a conflict of interest, but PR, marketing, commercial real estate, and other types of service providers can, and do, invest. In fact, there’s an angle with a number of service providers to invest cash in a startup with the expectation that an equivalent or greater amount of money will be spent with them.

    Here are a few thoughts on service providers as angel investors:

    • Angel investors, depending on the rights, will have information access and other types of data that you might not want a service provider to have
    • If taking money from a service provider, it’s important to discuss long-term relationship expectations (e.g. if you take money from a commercial real estate broker, are you going to funnel all business to them indefinitely?)
    • Decide on the value the service provider will provide by paying them their standard rate vs getting in much deeper and having them as an investor

    The next time a service provider offers to invest, carefully separate out the value as an angel investor from that of a service provider, and try to keep the two items independent.

    What else? What are some more thoughts on service providers as angel investors?

  • 360 Degree Review Improvement Question for Job Interviews

    Continuing with last week’s post The ‘Why’ Around Job Changes in Interviews, another interview question I like is “What’s the most common area for improvement you hear in 360 degree reviews?” Yes, this is a variation on the standard question “What’s your greatest weakness” or “Where do you need to improve”, but it’s much more applicable in that it’s specifically referencing what another person has said about the candidate. It’s outside-in and more applicable than the standard introspective responses (e.g. my weakness is that I work too hard).

    Here are a few thoughts on asking a job candidate about 360 degree review improvement feedback:

    • Candidates shouldn’t sugar-coat their 360 feedback and should present it in a thoughtful, non-defensive manner
    • Context of the feedback is important, so the manager or direct report that provided the feedback should be included
    • How feedback has changed over time is also of note as different stages of a career result in different areas of improvement

    Asking candidates about their 360 degree review improvement feedback is an important question during job interviews. Finding out why candidates made the career decisions they did, and what their co-workers identified as areas of improvement, are critical in assessing the individual.

    What else? What are some more thoughts on the 360 degree review improvement question for job interviews?

  • The Tourist (Investors) are in Town

    Last week I was at a non-tech event where everyone at my table was talking about startups and angel investing. Every single person at the table had written a check, and that wasn’t even related to the purpose of the event. As another investor I know calls it, “the tourists are in town.” Tourists, as we all know, come in to a generally unfamiliar area, spend a small about time and money, and then move on. Tourists enjoy the newness and novelty, and then continue on with their normal way of life.

    Most angel investors are tourists.

    When the current boom times in the startup world end, many of the tourists will go home and we won’t see them again. This is normal. This happened before in the late 90s with the dot com bubble, and will happen again with the boom (much less dramatic this time around but still noticeable).

    Entrepreneurs would do well to note that the amount of angel money currently flowing through the system is unusually high, and to plan accordingly.

    What else? What are some more thoughts on tourist investors in town?

  • Want a Meeting? Bring Two Team Members.

    Managing inbound requests to meet up and help out fellow entrepreneurs is always an internal struggle for me. I want to help, but I’ve also found that the majority of the first-time meetings aren’t a good use of time. Personal referrals from trusted friends are always the best, especially when a Simplified One Page Strategic Plan is required prior to meeting (or paying it forward). Last week I heard a new idea: we can meet when you have two other people come with you that are committed to the startup.

    Here are a few thoughts on requiring an entrepreneur bring two other committed team members as part of meeting:

    • Convincing other people to join the startup requires leadership and passion — two critical traits of successful entrepreneurs
    • Many meeting requests are an effort to validate the quality of the idea (which is bad to do), so having two other team members on board means that many potential employees/co-founders were already pitched, thus increasing the chance of a refined idea
    • Involving two other people creates a greater level of seriousness and effort when compared to just kicking around an idea, thereby reducing some of the noise

    The next time an entrepreneur asks to meet, tell them you’ll meet once they have two other people committed to the startup that will also attend the meeting — you might be surprised how many can’t meet this requirement.

    What else? What are some more thoughts on the idea of requiring two additional team members come with an entrepreneur requesting to meet?

  • Startup Positioning Template

    April Dunford has an amazing post up titled A Startup Positioning Template. Effectively positioning a startup is incredibly difficult, and most entrepreneurs struggle with it. Over the years I’ve looked at dozens of Simplified One Page Strategic Plans, which has a number of positioning elements, and those are some of the most poorly-done sections.

    Here’s the Startup Positioning Template:

    • What is it?
      As short as possible statement that describes what you are
    • Target Segment
      The specific target market you are targeting in the short term
    • Market Category
      The market that you compete in
    • Competitive Alternatives
      If your customers don’t use you, what do they use
    • Primary Differentiation
      The one thing that sets you apart the most from the competitive alternatives
    • Key Benefit
      The biggest benefit that your target market derives from your offering

    Entrepreneurs would do well to use a methodology like the Startup Positioning Template and work through the different components. The next time the topic comes up, have everyone read A Startup Positioning Template.

    What else? What are some more thoughts on the Startup Positioning Template?

  • The Why Around Job Changes in Interviews

    One of the most common problems I see when team members interview job candidates is related to questions about jobs in the past. The typical interview goes like this:

    • Interviewer: I see you worked at IBM. Tell me what you did there?
    • Candidate: I was a software engineer on the web services team. My responsibility was around web performance management and ensuring that we met the service level agreements.
    • Interviewer: Great. Next you worked at Salesforce.com. What was that like and what did you do there?
    • Candidate: Definitely. Let me tell you about my experience…

    One of the most important questions to ask is “why did you change companies and what was the decision making process for that change?” Asking the “why” question opens up tremendous insight into how the person thinks, what went well or not well at the employer, what they were looking for in the new company that they didn’t get out of the previous company, and so much more. Understanding how someone thinks and evaluates major life decisions is critical in assessing their fit as a potential team member (see Topgrading Interviews in a Startup).

    The next time you’re interviewing a candidate, ask the “why” question about job changes.

    What else? What are some more thoughts around the “why” for job changes during interviews?

  • 5 Quick Presentation Tips for Startup Pitches

    Tonight I had the opportunity to hear startup pitches at the Harvard Business School New Venture Competition regional final at the Atlanta Tech Village. Being a regional final, this group represented the best HBS-affiliated teams from around the Southeast. Here are five quick presentation tips for startup pitches after seeing tonight’s event:

    1. Tell a Story – Most of the pitches were product-heavy and not story-oriented. The winner of the event told the best story and made the problem/solution most relatable.
    2. Invest in Slides – Slides should be visually compelling, even if the investment is modest. Everyone in the audience knows immediately if they’re homemade.
    3. Don’t Read Slides – One of the presenters read multiple slides to the audience, word for word. Ouch. Engage with the audience and don’t read to them.
    4. Max 10 Words Per Slide – Slides to be used as handouts are different from slides for a visual presentation. For presentations, don’t use more than 10 words per slide and ensure a sufficiently large font such that the furthest person in the room can see it.
    5. Infuse Passion – Excitement and genuine enthusiasm need to come through when pitching a startup. If the pitch isn’t passionate, don’t do it.

    Overall, the idea is to passionately tell a story with supportive slides. Pitching a startup is more involved than that but this is a good start.

    What else? What are some more presentation tips for startup pitches?