David Cummings on Startups

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  • 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?

  • 10 Atlanta Tech Village Frequently Asked Questions

    Earlier today I gave a tour of the Atlanta Tech Village to a group of CMOs from large companies in Atlanta. Naturally, the CMOs asked a number of great questions as we walked around the community. After finishing the tour, I realized I needed to write down the most frequently asked questions. Here we go:

    1. Is there an equity component to being a member of the Village?
      No, we want to keep the model simple and attract the best entrepreneurs possible. An equity component would discourage previously successful entrepreneurs as well as entrepreneurs that already have a successful startup (we stay away from the word incubator for this reason).
    2. Do entrepreneurs have to sign a lease?
      No, the model is to pre-pay per desk per month with a 30-day notice to cancel. Everything is furnished and turn-key so that entrepreneurs can show up with a laptop and be immediately productive.
    3. Is there a period of time entrepreneurs are allowed to stay before being asked to leave?
      No, right now entrepreneurs can stay as long as they continue meeting the core values. This might change in the future but we don’t have any plans.
    4. What’s the turnover like on an annual basis?
      We haven’t been open long enough to know what the churn will be but we’re guessing 20% per year (so, with 200 startups, 40 startups will come and go each year).
    5. Are back office services provided as part of the model?
      No, we believe back office services like accounting, payroll, and others are best provided by experts that specialize in the area. There are a number of great service providers locally and online that have extensive startup experience.
    6. How does having free beer on tap for Villagers work?
      Great! Seriously, we haven’t had any issues so far, and as long as we don’t sell it, we don’t need a liquor license.
    7. Have you had to kick out any Villagers yet?
      Yes, we’ve had to kick out a few Villagers for not meeting our core values. Luckily, it’s been a very small number.
    8. What are some of the biggest success stories at the Village?
      We’ve had a number of success stories so far including BitPay, Yik Yak, Insightpool, and SalesLoft.
    9. What’s the goal of the Tech Village for the next 10 years?
      Our goal is to help make Atlanta a top 10 city for tech startups and to create 10,000 new jobs in Metro Atlanta by way of startups that come through the Village.
    10. How does the Tech Village bring entrepreneurs together?
      We put on a number of events and programs like Startup Chowdown, Atlanta Startup Village, monthly roundtables, happy hours, workshops, panels, and more. Bringing together like-minded people so that they can help each other out is one of the most important aspects of the Tech Village.

    I’ve had the opportunity to answer these questions hundreds of time and they never get old. I love sharing the Atlanta Tech Village story and lessons learned.

    What else? What are some other frequently asked questions about the Atlanta Tech Village?

  • 2,000th Blog Post

    Back in January of 2007 I took the blogging plunge and put up a quick Inaugural Blog Post on WordPress. I started out strong posting several times in the first few weeks, but then gave up on it. Then, 18 months later, on July 20, 2009, I wrote Rethink PowerPoint Presentations with BBP, and that was the start of writing a post every day.

    My inspiration for doing a post per day came from AVC.com. After seeing Fred Wilson’s content pop up on a regular basis, and reading his About page, I thought to myself “I want to do that!” Well, I started the daily post and haven’t looked back.

    Writing one short blog post per day is such a great way to share ideas, document best practices, and get feedback from smart people. Now, it’s been over five years of writing daily and today marks my 2,000th post. Thank you to everyone for your help and here’s to 2,000 more posts.

  • Notes from the New Relic S-1 IPO Filing

    Last week New Relic, an application performance company, published their S-1 IPO filing to go public. From a technical perspective, New Relic provides software developers insight into how every part of their web and mobile application performs, which is incredibly valuable. New Relic is part installed software (to gather the data) and part cloud-based software (to review and analyze the data).

    Here are a few notes from the New Relic S-1 IPO filing:

    • Mission is to empower organizations to build the best modern software possible and to improve their business intelligence using the data flowing through and about that software (pg. 1)
    • Revenues for fiscal years ending in March (pg. 2):
      2012 – $11.7 million
      2013 – $29.7 million
      2014 – $63.2 million
    • Losses for fiscal years ending in March (pg. 2):
      2012 – $7.5 million
      2013 – $22.5 million
      2014 – $40.2 million
    • Gartner says the IT Operations Management market is $19.1 billion in 2013 and growing to $27.9 billion in 2017 (pg. 5)
    • Business started in September 2007 (pg. 6)
    • Accumulated deficit of $100.8 million (pg. 11)
    • Employee headcount grown from 315 employees as of September 30, 2013 to 534 as of September 30, 2014 (pg. 12)
    • In the fiscal year ended March 31, 2014, sales and marketing expenses represented 92% of revenue (pg. 14)
    • 83% gross margin in 2014 (pg. 46)
    • Product line (pg. 67):
      New Relic APM: Application performance management
      New Relic Mobile: Mobile application performance management
      New Relic Servers: Server monitoring for cloud and data centers
      New Relic Browser: End-user experience monitoring and performance monitoring
      New Relic Synthetics: Software testing through simulated usage
      New Relic Platform: Platform that extends our functionality into other applications
      New Relic Insights: Real-time big data analytics for business managers
    • As of September 30, 2014, had over 250,000 users and had 10,590 paid business accounts worldwide (pg. 75)
    • Three core values (pg. 77):
      Customer Trust and Success
      Growth—“Excelsior!”
      Team—“Be Bold, You’re Not Alone”
    • Ownership percentages (pg. 100):
      CEO/Founder – 27.3% (this is an impressive amount for a company at this scale)
      Benchmark Capital – 22%
      Trinity Ventures – 13.6%
      Insight Venture Partners – 5.6%
      Tenaya Capital – 4.9%

    New Relic is one of the leading infrastructure apps for the cloud-generation of companies. With its scale and growth rate, the public markets will be very receptive to the IPO.

    What else? What are some other thoughts on theNew Relic S-1 IPO filing?