David Cummings on Startups

Blog

  • Forcing Sales Without Product / Market Fit

    Over the years, I’ve seen startups raise significant amounts of money from investors and plow it into sales and marketing. Only, many times this is prior to product / market fit — I call it forcing sales. The reason it’s forcing sales is that the product doesn’t meet the needs of the market (yet) and good sales and marketing can sell an inferior product.

    What’s the tell tale sign sales are being forced?

    Answer: high churn rates.

    Now, some products, due to the nature of what they do, are prone to high churn rates (think of things that are one-off or temporary). But, products that are designed to be used indefinitely, as long as they are providing real value, shouldn’t have high churn rates (annual renewal rates in the 75 – 90% range are normal with 90%+ renewal rates being exceptional).

    So, if you hear of extremely high churn rates, peel back the layers and see if sales are being forced without product / market fit.

    What else? What are your thoughts on forcing sales without product / market fit?

  • Thinking About Early Employee Equity in a Startup

    An important part of the startup ethos is equity and having an owner’s mentality, especially for early employees. Naturally, co-founders have a good chunk of equity along with investors, advisors, and employees. Early employees will often have equity in the range of .1% – 1%, depending on the role, experience level, and salary (executives and key hires often have larger percentages of equity depending on the stage of the startup).

    Here are a few thoughts on early employee equity in a startup:

    • Vesting of equity is common with it being either time-based (e.g. vesting over four years) or performance-based (e.g. vesting based on hitting milestones)
    • Salary and equity should have an inverse relationship with market-rate salaries having less equity and below-market salaries having more equity
    • Tempering expectations as to getting rich off early employee equity is important – I like to present it as if we do well, it’ll pay for a new car; if we do great, it’ll pay for a new house; and if we are a once-in-a-generation company, it’ll pay for a new life
    • Cash compensation should cover minimum lifestyle expenses, if possible, otherwise the added stress of not making ends meet can derail the focus on making the startup successful
    • Ownership percentages aren’t static – raising money from investors as well as issuing more stock options will result in dilution, which is a normal part of growing a business

    Equity is an important and sometimes challenging topic. Early employees in a startup would do well to further research it and have a conversation with the founders of their startup.

    What else? What are some other thoughts on early employee equity in a startup?

  • Differences as an Entrepreneur on the Next Venture

    Life as a first-time entrepreneur is well documented. Naturally, things change on the next entrepreneurial venture, especially when the first time goes well. Here are a few differences as an entrepreneur on the next venture:

    • Culture – Eventually entrepreneurs arrive at the understanding that people trump all other opportunities and challenges in a startup, making a focus on culture from the beginning more commonplace
    • Hiring – People want to be part of a team with proven success, making the recruiting process easier
    • Rhythm, Data, and Priorities – Whether it’s Mastering the Rockefeller Habits, or some other methodology, the second time around is easier due to having an established management process
    • Capital – Raising money is much easier after having a successful exit and investment terms are more entrepreneur friendly

    Finding product / market fit, building a customer acquisition machine, and scaling the business are still extremely difficult, regardless of being a first-time or tenth-time entrepreneur. Startups are hard, but having gone through it before makes entrepreneurs on their next venture more confident and more likely to not make the same mistakes.

    What else? What are some other differences as an entrepreneur on the next venture?

  • Rise of the Browser Add-on Business

    Now that Google Chrome and Firefox have healthy, active extension / add-on marketplaces, we’re starting to see more companies build businesses that interact with data and services from other web apps with the browser add-on being a critical component. Here are three popular examples:

    • Rapportive – Adds a sidebar in Gmail that shows rich contact profiles and information (e.g. social profiles, LinkedIn data, etc). Rapportive was acquired by LinkedIn.
    • Boomerang for Gmail – Enables scheduling emails for delivery at a date / time in the future as well as generating reminders if an email doesn’t receive a response.
    • SalesLoft – Enables fast and efficient capture of data returned in Google search results for the purpose of building prospect lists as well as integrating the data into a CRM (Disclosure: I’m an investor).

    Over time, I expect more products will emerge as browser add-ons that take advantage of data and interactions with existing web apps to provide substantially more value.

    What else? What are some other examples of browser add-ons that you like?

  • 2 Action Items Going from Doer to Leader

    Last week an entrepreneur emailed me for advice on going from doer to leader. His startup is doing well and now has several employees for the first time. Only, he’s being pulled in many directions and knows he needs to start the slow process of spending a more time on the business and less time in the business.

    I quickly responded that there are two immediate action items to start going from doer to leader:

    So, join a group of other people that are interested in improving their leadership abilities and implement rhythm, data, and priorities to establish a foundation for the business to scale.

    What else? What are some other recommendations for entrepreneurs going from doer to leader?

  • Investment Readiness Level

    Last night Keith McGreggor tweeted a picture laying out the characteristics of the Investment Readiness Level (IRL). After seeing it, I was impressed as seed and early stage angel investors often invest based on the team, the market, and gut feel — a very unscientific process. With the Investment Readiness Level, there’s a barometer of progress that brings much more rigor to the evaluation.

    Here’s the Investment Readiness Level, based on the picture of the slide:

    • High-fidelity MVP
    • Sufficient market opportunity
    • Left side of canvas validation
    • Right side of canvas validation
    • Product / market fit
    • Problem / solution validation
    • Low-fidelity MVP
    • Canvas
    • Hypotheses

    So, the next time an entrepreneur is trying to raise money, have them evaluate their Investment Readiness Level using these attributes.

    What else? What are your thoughts on the Investment Readiness Level?

  • Fear of a Dominant Vendor

    One of the most common refrains I hear from people when talking about a new startup in the Village  is “doesn’t so and so already do that?” Why, yes, you’re right, XYZ company does do a similar thing as the new startup. So, then, why is the new startup doing what they’re doing?

    Answer: they don’t fear the dominant vendor.

    Let me explain further:

    • Large, fast growing markets have room for multiple vendors as most aren’t winner-take-all or winner-take-most
    • Markets have segments like small-to-medium sized businesses and large enterprise customers, which have different needs
    • Vertical specialization is the next wave of successful startups, so even if the new startup looks like the dominant vendor, the vertical specialization creates significant differentiation
    • Incumbents, especially as they get larger, move slower and slower creating room for startup to outmaneuver them (speed and ability to stay close to the customer are two major reasons startups win)

    So, the next time someone brings up a dominant vendor in a category, think about some of the reasons why a new startup can carve out a successful space in the same field.

    What else? What are some other reasons startups can be successful in the face of a dominant vendor?

  • Teddy Roosevelt on Entrepreneurs: The Man in Arena

    Tonight I had the opportunity to attend a wonderful retirement celebration for Sam Williams of the Metro Atlanta Chamber. Sam has been an amazing leader of the Atlanta community for two decades starting with Central Atlanta Progress prior to the Olympics and through the Chamber for 17 years. At the end of his remarks he quoted Teddy Roosevelt’s famous speech titled “The Man in the Arena”:

    It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.

    Entrepreneurs and other leaders that put themselves out there to make a positive impact best exemplify the man in the arena.

    Thank you to Sam for being the man in the area for so many years and helping our city take great steps to realizing our potential.

  • 4 Sales Rep Activity Metrics that Matter

    One of the repeated themes at last week’s Ultimate Sales Conference was around measuring sales rep activity metrics. Sales is an unusual position in that the desired results and expectations are so easy to measure: revenue from deals. While measuring a rep based on quota makes sense, it’s also important to measure sales rep activity since it’s a great proxy for deals.

    Here are four sales rep activity metrics that every sales manager should measure:

    • Calls Logged – The phone is not dead. In fact, selling over the phone and cold calling is extremely effective.
    • Meaningful Conversations – Just because calls are being logged it doesn’t mean the sales rep is productive. More importantly, making calls is not enough as reps need to reach people on the other end and have meaningful conversations
    • Demos / Appointments Completed – Following the logical progression, meaningful conversations with the right people should turn into demos or appointments, and completed meetings are more important than scheduled meetings.
    • Opportunities – Often the last step before signing a deal, an opportunity should be created once some defined criteria are met, typically budget, authority, need, and timeline (BANT).

    What gets measured gets done and these four sales rep activities are key to a productive sales team and management visibility into future revenue.

    What else? What are your thoughts on these sales rep activity metrics and what are others that you like?

  • Takeaways from the Ultimate Sales Conference

    Last Thursday the Atlanta Tech Village hosted the first Ultimate Sales Conference and four great speakers. With 200+ people, there was an excellent turnout and the quality of conversations set the bar high. Here are a few takeaways from each conference speaker:

    Derek Grant of Pardot / Salesforce.com

    Steve Richards of Vorsight

    • Coaching is a critical part of sales management
    • Use a headset splitter and listen to sales calls weekly
    • Sales prospecting is a science
    • Millennials want small promotions ever six months and a career path

    Howard Diamond of MobileDay

    • Listen, listen, listen – the best sales people are the best listeners
    • Enter sales meetings with a goal but adapt during the conversation
    • Culture is critical and should be nourished

    Allen Nance of WhatCounts

    • Embrace sales rep specialization as much as possible
    • Recognize the need to go from individual contributor to leader as the company scales
    • Sales leaders should not carry a quota while managing a team
    • List building gets much more difficult as the team grows due to the need for such large numbers of contacts
    • Scaling a sales team is incredibly hard

    Special thanks to SalesLoft and Rivalry for putting on the event.

    What else? What are some other takeaways from the Ultimate Sales Conference?