David Cummings on Startups

Blog

  • Gap Between Prototype and Robust Product

    While assembling a prototype to assess market demand is dramatically cheaper than 10 years old, there’s still a serious gap between minimum viable product and robust product. Software, like any product, can always be improved. Unlike many physical products, the complexity of a software product is not always understood even after a fair amount of usage.

    Here are a few thoughts on the gap between prototype and robust product:

    • All software has bugs, but over time the frequency of new known bugs will decrease (assuming minimal new functionality introduced)
    • Some software is inherently more complicated resulting in more time and effort required to achieve a robust state
    • One gauge to assess product robustness is to get it to the point where there aren’t any known blocker bugs and to have configured 10-25 new customers without any issues (bugs are always going to be present but the severity isn’t always going to be high)
    • Product robustness and product/market fit aren’t correlated as the product can be solid without market fit

    Prototypes aren’t the same as robust products but they are very important. Entrepreneurs need to budget for continued product development and pay attention to issues.

    What else? What are some other thoughts on the gap between prototype and robust product?

  • Calendly For Self-Service Calendar Scheduling

    Atlanta Ventures just partnered with entrepreneur Tope Awotona and made a seed investment in Calendly — a cloud-based service that sits on top of Google Calendar making it super easy to provide self-service scheduling (no more sending several emails back and forth to find a time that works). Calendly has signed up thousands of users over the past few months and is focused on helping professionals save time and increase revenue.

    Here are a few of the main benefits of Calendly:

    • Reduce the friction to setting up a meeting (how many times have you gone back and forth over the phone or email to find a time that works?)
    • Make it easy to cancel or reschedule a meeting (many meetings are changed and Calendly cuts down on the noise)
    • More consistent meeting information and preparation (e.g. you can require certain information be provided as part of scheduling a meeting as well as have different meeting types)
    • Automated integration with other systems like CRM (e.g. when a lead schedules a meeting, put it in Salesforce.com)

    Anyone that schedules meetings on a regular basis (e.g. sales reps, customer success managers, support reps, etc) would do well to put a Calendly link in their email signature and make it easy for prospects and clients to schedule a meeting. We’re big fans of Calendly and are looking forward to working with Tope.

    What else? What are some other thoughts on Calendly and self-service calendar scheduling apps?

  • Hot or Not for Startup Potential Customer Matchmaking With Big Companies

    One of the biggest opportunities I see for the Atlanta startup community, and many other startup communities around the country, is helping connect local startups with local mid-to-large companies looking for certain technologies. Big companies are difficult to navigate, have many competing interests, and are not oriented to purchase from startups. With that said, big companies do want to be more innovative and want to try new things but don’t know where to begin or how to engage local startups.

    Here’s an idea for a hot or not service to connect startups with potential big companies:

    • Similar to the site James Hong launched in 2000 (history), the idea is to have startups and big companies list their information in a database with some data being public and some being private
    • Startups filter and browse the big companies giving a thumbs up or down depending on if they are a good fit (hot) or not
    • Big companies filter and browse the startups giving a thumbs up or down depending on if they are a good fit or not
    • When a match is made (both parties give a thumbs up), the software does an email introduction and let’s the startup and big company take it from there

    Some of the key aspects of this include startups agreeing not to hassle big companies that get introduced, big companies agreeing to spend a modest amount of time using the system (will need some C-level buy-in from people that want to help the local community), and a constant curation of information by someone that manages the system (e.g. the local chamber of commerce). Connecting startups with mid-to-large companies is a big opportunity to help grow the local entrepreneurial community

    What else? What are some thoughts on this hot or not system to connect startups with large companies?

  • Sell Before Optimizing

    Today I was talking to an entrepreneur that’s working on a physical product that solves a specific issue within a traditional industry. After describing the idea, he started asking questions about patents, low-cost manufacturing options, and state-related tax laws. Naturally, I asked the logical next question: how many paying customers do you have? Answer: 0. How many customers do you have lined up that will pay as soon as the product is ready? Answer: 0.

    Without people interested in buying, most entrepreneurial efforts result in premature optimization. Here are a few reasons why:

    • Product/market fit and entrepreneurial instincts differ, so listen to the market and act accordingly
    • Messaging, positioning, value propositions, etc. all become much stronger with customer feedback
    • Optimizing is a neverending thing, so get in the habit of selling before optimizing
    • Nothing happens until something is sold

    Don’t let entrepreneurs start optimizing their business without first getting potential customers engaged. Too much time is wasted on premature optimization.

    What else? What are some other thoughts on sales as a prerequisite before optimizing the business?

  • What Percentage of the Company Should Entrepreneurs Sell to Investors?

    When I talk to entrepreneurs that are in the process of raising money I always like to ask “what percentage of the company are you looking to sell to investors?” Inevitably, the answers come back all over the board, often ranging from 20%-35%. Entrepreneurs also like to quote a range when it comes to how much money they’re raising e.g. we’re raising $2M-$3M at a $4M pre-money valuation.

    Here are a few thoughts on what percentage of the company entrepreneurs should sell to investors:

    • Entrepreneurs should raise enough money to run the business at a certain scale for 12-18 months in order to hit a major milestone so as to raise more money or achieve modest profitability
    • Startups often require multiple rounds of financing, so it’s best to think about selling part of the company at each step in the process, and what that looks like in terms of dilution
    • Some investors will “require” a certain percentage of the business to be worthwhile for them to invest — this is a game that should be avoided, if possible, as investors are flexible as to what percentage of the business they’ll buy if they believe they make a large return
    • One school of thought is to raise as much money as possible, whenever possible, as you don’t know when fundraising will dry up, and to not worry about dilution (I don’t subscribe to this but others do)

    The best answer to the question is that entrepreneurs should sell as little as possible to investors while still raising enough money to hit the next major milestone. In reality, entrepreneurs usually sell between 1/5th and 1/3rd of the business with each round of financing.

    What else? What are some other thoughts on how much of the company entrepreneurs should sell to investors?

  • Large Growth Companies Create Sizable Startup Opportunities

    Jason Lemkin wrote a great post last month titled The Simple Reason Why There Will be 10-20 Great CRM IPOs in the Next Few Years. The idea is awesome: when a company like Salesforce.com hits $10 billion in run rate, the bottom 10% of the customers get neglected, creating $1 billion in revenue opportunities for startups. Here are a few thoughts on large growth companies creating sizable startup opportunities:

    • Market reinventions happen every 10-15 years, so it’s inevitable everyone will be disrupted at some point (think mainframes, PCs, Internet, mobile, etc)
    • Opportunities come in the form of a vertical-specific offering, a lower priced offering, and/or a better solution
    • Better solutions in CRM will come in the form of more fully integrated marketing and sales platforms that aren’t tied to traditional conventions
    • Disruptive vertical-specific offerings will be the most prominent (e.g. CRM for real estate, CRM for legal, CRM for accounting, etc.)
    • Startups that can hit $5 or $10 million in run rate will have nice, solid businesses whereas ones that can get to $75-$100 million in run rate will be homeruns, and the market will support several of these

    Go read Jason’s post on why there will be 10-20 great CRM IPOs in the next few years. Large growth companies create sizable startup opportunities and entrepreneurs should capitalize on it.

    What else? What are some other thoughts on large growth companies creating sizable startup opportunities?

  • Startup Theatre

    Over the past four days I’ve attended three different startup events. Each event served a slightly different purpose and had overlap in attendees. One of the benefits of a medium-sized tech startup community, like what’s found in Atlanta, is that there are a tremendous number of events and get togethers. Only, there’s a real risk in people attending events and equating that to making progress as an entrepreneur.

    Attending events is for learning, networking, and helping each other. If someone’s repeatedly attending startup events, and not actually in the startup game, it becomes startup theatre: a form of entertainment and enjoyment with no advancement. Even worse, it can bring a sense of accomplishment that you’re doing something, when, in fact, no progress is being made.

    Here are a few thoughts on startup theatre:

    • Entrepreneurship is best learned by doing and accelerated by the quality teaching, mentoring, etc
    • Attending events is a great way to get to know people in the community, but shouldn’t be a substitute for actually working on something (see 3 Next Steps for an Entrepreneur Without an Idea and Finding a Startup Idea)
    • Accountability is an important component of a health startup community, and starts with repeatedly asking direct questions like “what have you accomplished in the last 30 days?” and “how close are you to product/market fit?”

    Startup theatre is a very real challenge for startup communities around the world. Startup communities should work hard to maintain a bias towards action and not theatre.

    What else? What are some other thoughts on startup theatre?

  • Loss of Control of Personal Schedule

    Earlier this week I was talking to a successful entrepreneur that had recently sold his company. After the normal conversation topics I asked, “What’s changed the most for you after selling your business?” Without missing a beat he said it was loss of control of his personal schedule.

    Before, he set the agenda and dictated where he would spend his time. Now, he’s part of a much larger organization that puts required events on his calendar and more time is spent in meetings. All of this is part of a process to integrate the respective companies and make sure that the acquirer receives the desired value from the acquisition.

    As an entrepreneur, one of the things I greatly value is control of my schedule and where I choose to spend my time. Once you’ve experienced that level of freedom, it’s tough to go back to a style that’s less in control. Entrepreneurs love control.

    What else? What are some other thoughts on loss of control of one’s personal schedule?

  • Common Complaints in Atlanta’s Startup Community

    Yesterday I was talking with a visitor at the Atlanta Tech Village who moved to Atlanta recently. After covering a number of subjects, he brought up several common complaints he’d heard about Atlanta’s startup community. We spent 10 minutes talking through them and I offered up an insider’s perspective.

    Here are some common complaints about Atlanta’s startup community and ideas about them:

    • Lack of Talent – With Georgia Tech (one of the largest engineering schools in the country and top five academically), there’s a tremendous amount of technical talent in town. When large companies complain about a lack of talent, it’s a function of culture and desirability of work environment (large companies find it easier to open an innovation office in a different city as opposed to making the harder changes at their headquarters).
    • Dearth of Capital – Capital is still scarce but the cost of building a product and signing the first 10 customers has gone down by 90% over the past 10 years, making limited capital a non issue to get started (see Assembling a Minimum Viable Product for Market Validation). Scaling a startup is still capital intensive, but once revenue is growing nicely, even at a modest scale, it’s easy to raise money as capital is much more mobile (see AngelList).
    • Disconnected Community – Community cohesiveness is stronger than ever with a number of regular events, entrepreneurship centers, and leaders committed to strengthening the community (check out the open-to-the-public Atlanta Startup Village with 350+ attendees every month).
    • Limited Number of Exits – Every year Atlanta has 3-5 $100M+ exits (see AirWatch and Silverpop already this year). Atlanta startups do have a higher bar for an exit, but there’s a steady flow of success stories.

    I’m sure these complaints aren’t unique to Atlanta and are applicable to most regions of the country. So while there’s plenty of room for improvement and growth in Atlanta’s startup community, many of the common complaints are outdated and not as relevant.

    What else? What are your thoughts on these common complaints in Atlanta’s startup community?

  • Notes from Brad Feld’s Atlanta Tech Village Talk

    Today Brad Feld did a great video chat with 50 entrepreneurs at the Atlanta Tech Village. Kyle Porter ran the event asking a number of questions directly as well as coordinating audience questions. Here are a few notes from Brad Feld’s talk:

    • Corporate culture should simply be called culture and the word “corporate” should be dropped
    • Culture is paramount to everything and is one of the reasons Gnip was able to execute so well and get acquired by Twitter for a large sum
    • Culture isn’t one size fits all — it’s critical that’s it’s defined and consistent in a company (some companies have a strong culture of nice people and other companies have a strong culture of people who routinely yell at each other)
    • Startup communities must be lead by entrepreneurs and not government or universities
    • Startup communities need to be inclusive of everyone and let all types of events and groups form (plant a thousand seeds and some will take root while others don’t)
    • Foundary Group takes a thematic approach to investing and will invest anywhere geographically
    • Brad has published a number of books including Ventures Deals, Startup Communities, and Do More Faster

    A big thanks to Brad for doing the event and to the Metro Atlanta Chamber for providing lunch to all the attendees.

    What else? What are some other thoughts on Brad Feld’s talk at the Atlanta Tech Village?