David Cummings on Startups

Blog

  • Work/Life Blend

    On this beautiful Christmas day it’s a great time to reflect on work/life blend. While the phrase work/life balance is more common, I think work/life blend is more appropriate. The days of only doing “work” at the office and “life” outside the office have been over for many years, especially as an entrepreneur. Things like this blog are more “life” for me and less “work” as I believe it’s a great way to capture thoughts and help other entrepreneurs minimize common mistakes and grow faster.

    As for me, I achieve my version of work/life blend by defining a rhythm and sticking to it. Here’s the rhythm I’ve been followed for a few years now:

    • Weekly
      – Friday date night
      – Weekend kids adventure
      – No more than one business breakfast event and one evening event
    • Quarterly
      – Family vacation out of town for one week
      – No more than five days of business travel
    • Annual
      – Getaway without the kids
      – Review the family rhythm and priorities

    I highly recommend coming up with a work/life blend plan, implementing it, and adjusting it as needed. This simple framework has been beneficial to me.

    What else? What are some other thoughts on work/life blend?

  • Comparing Competitor Functionality

    Most startups have an arch enemy and only a handful of other serious competitors. While markets might seem crowded from the outside, on the inside there are usually just a handful of companies that compete on a regular basis. One caution with an arch enemy is to not get caught up in the functionality arms-race. That is, don’t blindly copy new competitor functionality just because they’re boasting about it.

    Here are a few thoughts on competitor functionality:

    • Competitors might be positioning themselves for a move in a different direction (e.g. to a different vertical, up market, etc), so analyze the potential motives
    • 5-10% of functionality added by a competitor will actually not be useful (e.g. they’ll make a big splash about the new functionality but customers won’t actually use it for a variety of reasons)
    • Listen to customers, especially ones that best represent the ideal customer, and deliver new functionality that meets their needs, not the needs of competitors’ customers

    Playing the functionality game with major competitors is standard course for entrepreneurs. Resist the temptation and focus on adding value to the right customers.

    What else? What are some other thoughts on comparing competitor functionality?

  • Year-End Reports Review

    The end of the year is a great time to look back and reflect on the progress throughout the year. Most of the tools and processes I use to plan and evaluate progress are on a weekly/monthly/quarterly basis, so looking back over the course of 12 months helps me see things from a more strategic perspective.

    Here’s what I like to review:

    Reviewing reports from a year-end perspective is a standard part of the entrepreneurial journey. Every year is different and it helps to study the past to make more informed decisions about the future.

    What else? What are some more thoughts on reviewing year-end reports?

  • SMART Goals for 2015

    With 2015 almost upon us, it’s a good time to review goals for the next year. When I talk with entrepreneurs, I enjoy asking about their big-picture goals. Too often, I’ll hear “my goal is to build a successful tech company.” Great, what does successful mean (here’s my definition of a successful business)? That’s when I like to drill in and talk about SMART goals:

    • Specific – What exactly are you going to accomplish?
    • Measurable – How can you track it?
    • Actionable – What steps do you need to take?
    • Realistic – Is it truly feasible to accomplish the goal?
    • Timeline – When will it be finished?

    The next time you think of goals, think of SMART goals.

    What else? What are some other thoughts on setting SMART goals?

  • Atlanta Tech Village 2 Year Anniversary

    Yesterday marked the two year anniversary of buying the Atlanta Tech Village. When David Lightburn and I showed up at the building post closing, we were promptly handed a huge bag with 50 keys and told “good luck” by the previous manager. Then, as would be expected, on our first day working in the Village, the power went out in the whole building and the 5th floor bathrooms overflowed into the hallways. Tenants were furious with us and were just getting started.

    Now, we have a gorgeous renovation (2nd floor, 4th floor) and a thriving community of 200+ entrepreneurs and 700+ Villagers. I’ve had the chance to answer these frequently asked questions hundreds of times and I still enjoy telling the founding story from August 30, 2012, a full six weeks before selling Pardot.

    So, with two years under our belt, I’m just as excited and optimistic about that future as I was then, only more so now based on our progress. Atlanta will be a top 10 startup city in the next 10 years – mark my words.

  • Clarity

    I had been stewing on this one idea for a couple weeks now and suddenly the answer came to me. I had clarity. I had relief. I knew exactly what to do next. Only, sometimes it takes a few minutes for clarity and sometimes it takes a few weeks. I like to make decisions quickly, with an optimistic outlook, and learn as much as I can as I go along.

    Here are a few areas to seek clarity as an entrepreneur:

    • Personal mission, vision, and values
    • Family mission, vision, and values
    • Company mission, vision, and values

    Clarity is powerful in so many ways. The next time something doesn’t feel right, step back and seek clarity on it.

    What else? What are some more thoughts on clarity?

  • The Best Time to Raise a Series A

    Continuing with yesterday’s post Revenue Run-Rate to Raise a Series A, the immediate follow up question is: assuming low-to-mid six figures of recurring revenue, when’s the best time to raise a Series A? While the simplest answer is that the best time to do it is anytime you can do it on good terms, the real answer is more nuanced.

    Going back to the four stages of a B2B startup, stage one is product-market fit. With a few hundred thousand in annual recurring revenue, there’s a good chance product-market fit is in place. Next, stage two, is building a repeatable customer acquisition process with good metrics (e.g. the ratio of cost of customer acquisition relative to the lifetime value of the customer). Once this has been achieved on a small scale, it’s the best time to raise a Series A round of financing. Why? With firm customer acquisition metrics, it’s easy to make a compelling case that investing X dollars in the business will turn into Y revenue. Investors want a compelling story and many focus on financial models, so when there’s a clear path to significantly increase the startup’s value relative to money invested, investors get excited.

    The best time to raise a Series A is when a repeatable customer acquisition process is in place with good metrics.

    What else? What are some other thoughts on the best time to raise a Series A?

  • Revenue Run-Rate to Raise a Series A

    Here’s a common conversation I have with entrepreneurs:

    Entrepreneur: I want to raise a $2 million Series A.

    Me: Great. How much recurring revenue do you have now?

    Entrepreneur: We’re just getting started and have a few pilot projects.

    Me: Cool. What’s your annual revenue run-rate?

    Entrepreneur: Well, we don’t have any revenue yet.

    Me: Unfortunately, the chance of you raising a Series A is slim-to-none.

    Of course, investors want a great management team, market, traction, growth-rate, and, naturally, revenue. So, what’s a good target run-rate to raise a modest Series A (e.g. $2 million – $3 million)? From my experience outside Silicon Valley, I’ve found entrepreneurs usually need to have $250,000 – $500,000 in recurring revenue (annual run-rate) to raise a couple million dollars from investors.

    Now, investors typically want to buy 20-35% of the company with each round of investment, so that means a $2 million investment for 25% of the company results in a pre-money valuation of $6 million and a post-money valuation of $8 million. Is a company with $500,000 in recurring revenue worth $6 million? That’s for the market to decide.

    What else? What are some more thoughts on revenue run-rate to raise a Series A?

  • Cheaper Offering that’s Structurally Defensible and Sustainable

    Larry Cheng, Managing Partner at Volition Capital, has a new post up titled My Favorite Value Proposition is Admittedly Boring. The idea is that after 16 years as professional investors, he’s zeroed in on his preferred type of tech startup that has the following criteria:

    • Existing Market – People/companies are already paying for the product or service (it’s not a new market)
    • Cheaper Offering – Instead of better, faster, and cheaper, the focus is on the cheaper part of the equation
    • Structurally Defensible – At it’s core, this new technology or delivery model is different enough from the incumbent that it’s not feasible for the incumbent to switch (many companies have died clinging to their golden goose)
    • Sustainable – Like the transition from buying in stores to buying online, it has to be innovative and sustainable (ecommerce isn’t going away anytime soon)

    My personal style as an entrepreneur is to invent new products whereby the business buyer didn’t have a solution before, and not the cheaper offering route. Thankfully, there are a number great ways to build successful companies.

    What else? What are some more thoughts on a cheaper offering that’s structurally defensible and sustainable?

  • Build to Last or Build to Sell

    Whenever I give a talk and tell the Pardot story, one of the 10 most popular questions I get is “did you have a plan to sell the company?” My response is always that our goal was to build the best company possible and to make sure that it met the two following conditions:

    • Be the best place to work and the best place to be a customer
    • Follow the core values of positive, self-starting, and supportive

    If a potential acquirer comes along and makes an offer we can’t refuse, we’ll look at and consider it (which is what happened). Put another way, the business isn’t for sale, but tell me what you’re offering.

    Yes, it’s common for entrepreneurs to have a financial goal and to sell the company when the financial goal is met. Based on how much luck and timing is involved in a successful exit, I think the best approach is to build a company to last, not to sell.

    What else? What are some more thoughts on build to last or build to sell?