David Cummings on Startups

Blog

  • Desire to Win

    Last week I was talking with a successful entrepreneur. He’d sold two companies and never had to work again. Even with the financial success he continues to work hard on a new startup. Of course, I had to ask why he’s still chugging away. Here’s his answer:

    I have a desire to win. Personally, I love the game of business. It’s such an incredible thrill to build a winning company.

    Thinking about it, I really like this answer. The desire to win and build a great company drives me. Also, there’s an element to proving the naysayers wrong (every successful business I’ve been involved in I’ve had someone tell me it wasn’t a good idea or market).

    The next time things are getting tough, figure out how important the desire to win is to you.

    What else? What are some other thoughts on the desire to win?

  • Lessons Learned from Heavy Startups

    Over the past few years I’ve invested in a number of lean startups and a few heavy startups. As it sounds, a heavy startup is nearly the opposite of a lean startup: a high burn rate from the beginning and an assumption that the original idea will be successful. While the heavy startups are making progress, the lean startup model has been superior.

    Here are a few lessons learned from investing in heavy startups:

    • No matter how great the idea sounds, it always hard to build a product that customers love and where customers can be repeatedly acquired
    • Every successful business requires multiple product iterations, and sometimes full pivots, before arriving at the product that takes off (thus, it’s important to plan accordingly with financial resources)
    • Regardless of how much cash is in the bank, it will be burned within 12 months, so the more cash in the bank, the higher the monthly burn rate — entrepreneurs love to spend money to get things done (myself included)
    • Many aspects of the customer discovery and product/market fit process take time no matter how many people are on staff (similar to the idea that adding software engineers towards the end of a project actually makes the project take longer — see The Mythical Man Month)
    • Laying people off is much more painful to morale compared to running on limited staff and waiting to hire until the requisite revenue growth

    Heavy startups, while more limited now, are still a part of the startup ecosystem. My recommendation is to go the lean startup route and delay raising a large amount of money and hiring a big team until product/market fit is in place and a repeatable customer acquisition process has been proven.

    What else? What are some other lessons learned with heavy startups?

  • Community Building Adds Value to Entrepreneurs

    Two years ago I gave a talk about the Pardot experience to a group of entrepreneurs in Atlanta. After the event, an entrepreneur approached me saying he was looking for his next opportunity. Immediately, I put him in touch with another entrepreneur that was looking for a co-founder with his skillset, and they hit it off. Now, they have one of the fastest growing startups in town and are doing great. Community building pays off in more ways than expected.

    Here are a few ways that community building adds value to entrepreneurs beyond the primary benefit of helping the region:

    • Recruiting – We’ve hired a number of team members where the relationship originated at a community event, and if you add in referrals from those employees, the number gets even bigger.
    • Lead Generation – One of the earliest Hannon Hill customers was Silverpop, and that relationship started when I approached their CEO after he spoke at an entrepreneur event. On the other side, we’ve signed a number of customers over the years based on relationships that started while helping grow the community.
    • Investment – The best investor relationships start well in advance of trying to raise money. I know one entrepreneur that attributes his ability to easily raise money to the fact that he had already built rapport through his community building with his lead investor before he had even started a company.

    Entrepreneurs that pay it forward receive significantly more value that they give out. Entrepreneurs would do well to get involved in community building and make a difference.

    What else? What are some other ways community building adds value to entrepreneurs?

  • 3 Ideas to Grow the Atlanta Startup Community

    Earlier today I was talking with a few civic leaders in Atlanta on the topic of how to grow the region’s startup community. We discussed several of the current trends, including the rise of entrepreneurship centers around town (e.g. the Atlanta Tech Village), more focus on creative space by local commercial real estate firms, and general excitement around entrepreneurship. I then offered up three ideas to grow the Atlanta startup community:

    1. Entrepreneur Education – Run programs from the Kauffman Foundation and others on a regular basis in different parts of the city. These programs would be much more in-depth and hands-on for entrepreneurs to learn new business skills and build relationships with other entrepreneurs and mentors in town.
    2. Connect Local Businesses and Startups – Most mid-to-large companies in the area don’t have a good understanding of the technology innovation taking place in their own city. The idea is to run regular programs where curated groups of startups present in front of local companies (cash from customers is always the best type of cash for startups).
    3. Elevate Successes to the National Stage –  While there are a number of great entrepreneurial success stories, very few are known nationally — southern charm makes for a humble city. More showcasing of success stories will result in more credibility and interest from investors.

    So, there you have it: educate the entrepreneurs, make it easy for businesses to buy local tech, and get the megaphone out for the success stories. Atlanta has all the ingredients to be a top 10 tech startup city and is on the way to realizing its potential.

    What else? What are some other ideas to grow the Atlanta startup community?

  • The First 30 Days for a New Sales Rep

    When interviewing sales reps, one of the most common questions we receive as an interviewer is “what would the first 30 days look like if I earned the job?” While the first 30 days will vary from company to company, there’s still plenty of commonality. Here’s an example first 30 days for a new sales rep:

    Week 1

    Week 2

    • Build a prospect list of 100 people that fit the ideal customer profile (preferably with SalesLoft)
    • Practice cold calling with the script for 30 minutes per day with the sales manager
    • Sit in on five prospect demos
    • Sit in on five client onboarding calls

    Week 3

    • Cold call 25 prospects per day
    • Practice cold calling with the script for 30 minutes per day with the sales manager
    • Sit in on five prospect demos
    • Sit in on five client onboarding calls

    Week 4

    • Cold call 50 prospects per day
    • Schedule four demos
    • Sit in on five prospect demos
    • Coaching session for one hour per week with the sales manager (preferably with Rivalry)

    The first 30 days for a new sales rep is all about shadowing existing team members as well as training with the sales manager. Then, by the end of the month, it’s time for live calling and prospecting. Training is a critical part of the sales rep on-boarding process.

    What else? What are some other aspects of the first 30 days for a new sales rep?

  • What Happens to Small SaaS Companies

    Earlier this week I was talking to a venture capitalist about the Software-as-a-Service (SaaS) market. Halfway through our conversation we got to talking about what’s going to happen to all the successful (greater than $2 million recurring revenue) SaaS companies that are providing a service that isn’t venture backable (hard to see how the business achieves a value of $100+ million). It’s tough for investors to make good money as the market for small acquisitions is tiny outside of Silicon Valley.

    Here are a few thoughts on small SaaS companies:

    • SaaS has such good cash flow, predictability, and gross margins that many of these small businesses can be very profitable, even sub-scale
    • Investors will likely make their returns off of dividends once the business stops spending for growth and instead looks to maximize profitability
    • Rollup companies will emerge that specialize in SaaS businesses (scale might need to be a bit higher e.g. $10+ million in revenue) much like Infor did for maintenance-focused enterprise software companies
    • SaaS companies that are growing fast (greater than 40% year over year) get premium valuations (e.g. 7-10x revenue), and ones with lower growth are going to get smaller valuations (e.g. 2-4x revenue)
    • SaaS as a delivery model for software is only going to grow, and more entrepreneurs are going to find unmet needs (a SaaS trend is to provide one component of a larger SaaS product in a format that’s better, faster, and cheaper)

    Just like any cottage industry, more and more small SaaS companies are going to emerge and carve out their own profitable niche. While most won’t have splashy exits, they’ll be great businesses and provide nice lifestyles for the entrepreneurs.

    What else? What are some other thoughts on what happens to small SaaS companies?

  • Connect the Product to the Wallet

    Last week I was talking with an entrepreneur about their new product focus. After digging in, he volunteered something that really stuck with me: their new direction connects the product with the wallet in a way it never was before. Similar to the idea of candy, pain-killers, or vitamins, products that can clearly demonstrate an increase in revenue for the customer are more desirable.

    Here are a few thoughts on connecting the product to the wallet:

    • Something that saves time is less compelling compared to something that makes more money (more bonuses are tied to revenue growth than decreasing costs)
    • Products that provide value closest to where money is made are easiest to show value (e.g. a sales tool is easier to attribute to revenue growth compared to a tool to manage meeting rooms)
    • Case studies and ROI calculators are more compelling when it’s clear how the value is generated

    Entrepreneurs would do well to connect the product to the wallet, whenever possible. Products that help generate revenue are more compelling than products that save time or money.

    What else? What are some other thoughts on connecting the product to the wallet?

  • Cloud-Based Software Engineering Tools

    The cost to develop web-based software has dropped an order of magnitude over the past 15 years. Part of it is due to the rise of open source software, part of it is due to cloud computing, and part of it is due to general advancements in software development. One area that’s been fascinating to watch is the rise of cloud-based software engineering tools to enhance communication, quality control, performance, and more.

    Here’s an example set of cloud-based software engineering tools:

    • GitHub – Source code management and version control system
    • GitHub Issues – Issue tracker and milestone management system
    • Codeship – Automate testing and product deployment
    • Airbrake – Capture product errors as they occur
    • Rigor – Monitor web application performance from real browsers in the cloud
    • New Relic – Analyze product performance at the code level
    • Amazon Web Services – Numerous products including application and database hosting

    Building a quality application still takes expertise and time. Cloud-based software engineering tools greatly enhance the process.

    What else? What are some other cloud-based software engineering tools that you use?

  • Nail the Basics Before Worrying About Scaling

    Recently I was talking with an entrepreneur about his startup and the concern about potentially not being able to hire fast enough. After asking a few questions about product-market fit, repeatability in acquiring customers, burn rate, and more, it became clear that the business wasn’t close to the scaling phase. The entrepreneur was worrying about a non-issue.

    Here are a few thoughts on nailing the basics:

    Entrepreneurs would do well to nail the basics before worrying about scaling the business. Scaling brings on an additional set of challenges best handled with a strong foundation.

    What else? What are some other thoughts on nailing the basics first?

  • Picking the Right Battles as an Entrepreneur

    As an entrepreneur biased towards doing things, one of the questions I have to keep asking myself is whether or not it’s a battle worth fighting. Every time I see an issue or opportunity to improve something (and I see a ton!), my immediate reaction is to fix it or make it better. Only, I don’t have the time to do most things myself, so I delegate (which I enjoy), but I don’t want to distract from other team members’ priorities and focus.

    Here are a few ideas to considering when picking battles:

    Most startups die of indigestion and not starvation. Entrepreneurs would do well to pick the right battles in a thoughtful manner.

    What else? What are some more thoughts on picking the right battles as an entrepreneur?