David Cummings on Startups

Blog

  • Spinning a Startup Out of a Consulting Firm

    Recently I was talking to an entrepreneur that has owned his own consulting firm for many years and is in the process of spinning out a startup based around a product they had built for a customer. After hearing the pitch, and seeing the product, I thought about it for a minute and offered up a few suggestions.

    Here are a few ideas around spinning a startup out of a consulting firm:

    • Ensure the startup is truly separate from the consulting firm including separate employees, payroll, financials, etc (shared office space makes sense but the startup needs to be a completely different business)
    • If the consulting firm is owned by one person, it’s important to unwind the use of “I” and to start using “we”, assuming the startup is going to have one or more co-founders and an employee stock option plan
    • With a handful of paying customers courtesy of existing consulting relationships, there’s a good chance there’s solid progress towards product/market fit, but it’s important to separate out the consulting value from the product value so that the majority of future clients buy the product without buying the consulting
    • Building a repeatable customer acquisition process will be one of the most difficult things as the sales and marketing process for a product company is often very different from a consulting company, and most consulting companies don’t have a repeatable customer acquisition process, so they don’t know what it looks like (most consulting companies generate customers via word-of-mouth)
    • Determining the startup’s core competency early on (e.g. product/engineering focused or sales focused) is important as well as it’s a different mindset from a consulting firm where the core competency is the domain expertise and specialty of the consultants

    All startups are hard regardless of origin. Spinning a startup out of a consulting firm is especially difficult as there’s a tendency to not fully separate the two and resources eventually get pulled back into the larger entity as it’s the one paying the bills. Figuring out how to get the startup self sustainable as quickly as possible through sales or investors is key.

    What else? What are some other thoughts on spinning a startup out of a consulting firm?

  • Entrepreneurs Owning Office Space

    Recently I was talking to entrepreneur that had just purchased an office building for his small but growing company. His business is doing well in a hot market that is set to explode over the next few years. Only, by purchasing a building, he’s set an artificial upper limit of employees for the firm. Several years ago, when I was talking to another entrepreneur about buying a building, he described it this way:

    A goldfish will grow to the size of the fishbowl, and no more. An entrepreneur’s company won’t grow larger than the building.

    The company will over optimize the number of employees for the size of the building, and not for the needs of the business. Yes, space can be rented in nearby buildings and adjustments can be made, but owning a building results in unnatural acts to not expand beyond it. If an entrepreneur has ambitions for major growth, and major growth requires a significant increase in employees, buying a building is a bad idea.

    What else? What are your thoughts on entrepreneurs owning office space?

  • Notes from Jeff Haynie’s Talk at the Village

    Jeff Haynie gave a passionate talk today at the Atlanta Tech Village about lessons learned growing his 170+ person company Appcelerator. Over the past six years, Jeff has raised over $75 million dollars, fought off a near-shutdown of his startup, and built one of the fastest growing mobile app development platforms in the world.

    Here are a few notes from the talk:

    • Investment capital is portable, so it doesn’t matter where the entrepreneur is located
    • Entrepreneurs should raise as much money possible from anyone available and not worry about control
    • Future growth in technology will come from wearable computing and mobile devices (Dell went private so that they could kill their PC business faster and reinvent themselves)
    • Shift away from Nokia and Blackberry as the dominant platforms to Apple and Android were faster and more dramatic than people expected, making Appcelerator’s timing even better
    • Almost went out a business when Apple changed their terms of service disallowing programs like Appcelerator to produce iOS apps, but two months later Apple reversed the change

    A big thanks to Jeff for spending time with us today and sharing some of his lessons learned.

    What else? What are some other takeaways from today’s talk with Jeff?

  • Every SaaS Company Should Have an App Store Strategy

    Salesforce.com set the standard several years ago with the introduction of their AppExchange app store providing a central repository of third-party applications that work with their platform. Apple took the idea and made it mainstream for consumers with their App Store for iPhone and iPad programs. Now, every Software-as-a-Service (SaaS) company should have an app store strategy.

    Here are a few items to keep in mind:

    • Curating the app store is critical; too many SaaS companies claim to have an app store only to have many apps that aren’t functional or are “pretend apps” that are really lead generation to sell custom consulting engagements
    • An app store should be implemented once the startup reaches scale (e.g. 500 – 1,000+ customers) so that there’s sufficient demand from users to warrant the building and maintaining of the store
    • Some vendors charge a tax (e.g. 15% of revenue from apps that connect to the platform), which should be avoided as it’s better to encourage as many integrated products as possible and not alienate potential partners

    While not an app store directly, companies like Kevy will emerge as data synchronization app connectors for hundreds of cloud-based products. Regardless, every SaaS company should have an app store strategy.

    What else? What are your thoughts on SaaS companies needing an app store strategy?

  • Telling an Entrepreneur You Don’t Like Their Idea

    Unfortunately, it happens. You know the story: an excited entrepreneur comes in full of passion and enthusiasm to share with you their game changing idea. Only, the idea falls flat. It isn’t good. In fact, the idea is down-right horrible. But, as a thoughtful, nice person what do you do? How do you tell an entrepreneur that their idea is bad, really bad.

    The answer: you don’t tell them what you believe. Instead, you tell them to go validate the idea in the market. Go get 10 businesses to commit to paying for the product in advance of building anything. Don’t have a B2B product? No problem, put together an awesome video and do a Kickstarter campaign. It isn’t your responsibility to guess whether a business idea is good or bad on behalf of an entrepreneur. It is your responsibility to put the entrepreneur on the path to validate if their target audience will pay for it before the entrepreneur spends any money on it.

    Friends don’t let friends spend money on unvalidated ideas. When an entrepreneur has a bad idea, tell them to go validate it without wasting valuable money on it.

    What else? What are your thoughts on telling an entrepreneur you don’t like their idea?

  • Atlanta Tech Village as Being Expensive

    The most common negative comment about the Atlanta Tech Village is that it is too expensive. As someone who enjoys thinking about marketing, positioning, and branding, I try to stay away from merely comparing costs between per desk pricing vs per square foot pricing. As an organization working hard to help Atlanta, we fully embrace that we want to provide the absolute best high tech entrepreneurship center in region, and that also means that we’re going to be the most expensive when compared to other options.

    One way we focus on being the best is in terms of infrastructure. From a furniture perspective, we have high-end Knoll desks and chairs, which everyone raves about. From a wireless perspective, we have a $200,000 Meraki Cisco network that delivers amazing WiFi throughout the building. From a bandwidth perspective, we have 1.4 gigabits per second of redundant fiber internet access that costs over $100,000 per year.

    A second way we focus on being the best is employing an amazing staff of people that help make the community great. With awesome events, networking sessions, educational programs, and more, it takes a solid team to coordinate all the moving parts and continually improve as we go. Regular programs include the weekly Startup Chowdown, monthly Show & Tell, and more. Our team is amazing.

    Knowing that there are some people that want to be in the Village community, but can’t afford it, we created a scholarship program. To date, we’ve given away over 30 scholarships and anticipate giving away hundreds more over the coming years. Our mission is to support and inspire entrepreneurs, which includes all types of members.

    Much like Rackspace is the most expensive and best option for managed server hosting with their amazing Fanatical Support, so too the Atlanta Tech Village is the most expensive option with amazing infrastructure and staff. Regardless of infrastructure and staff, the ultimate measure of success is the quality of the community and the number of successful startups that emerge.

    What else? What are your thoughts on the Atlanta Tech Village as being expensive?

  • Top 5 Most Common Sales Hiring Mistakes

    Over the past few weeks I’ve received an uptick in requests for advice on building out a sales team. More startups in the community are finding product / market fit or are past product / market fit and are in the process of building a repeatable customer acquisition machine. One of the first things I recommend is to hire a sales assistant to support one of the founders as he or she learns what works, and doesn’t work, first hand. Once the first 50 customers have been acquired, and things are looking good, it’s time to make that first sales hire.

    Here are the top five mistakes entrepreneurs make hiring sales people:

    • Culture Fit – Never settle on finding team members that fit the core values and culture of the startup. Too often, startups get desperate to fill a position and start relaxing standards. Don’t do it.
    • Lack of a Clear Plan – When a sales person starts it should be crystal clear as to what’s expected of them in terms of role, metrics, and quota. The best sales people are self-motivated and want to know expectations.
    • Commission Complexity – Whatever the system for compensation, human nature is to game it and optimize for what’s best personally. As an entrepreneur, the best solution is to keep the commission policy incredibly simple and straightforward. If it can’t fit on one sheet of paper in simple bullet point form, it’s too complicated.
    • Cap on Commissions – In the fastest growing startups, the top sales people should make more money than the CEO, and that’s a good thing. Never put a cap on commissions as sales people need to stay focused on what they do best — bringing in revenue.
    • Unrealistic Expectations – Top sales people shouldn’t be expected to hunt, farm, support, and exceed quota all at the same time. Sales people should be empowered to do one thing and do it exceptionally well. Limit the number of responsibilities and create realistic expectations.

    Building a great sales team is one of the most difficult challenges for an entrepreneur. Moving quickly, having a clear plan, and being very hands-on is one of the best ways to do it. Regardless, don’t make these five common sales hire mistakes.

    What else? What are your thoughts on the top five most common sales hire mistakes?

  • Atlanta Tech Village for Talent Retention and Recruiting

    Last week I was talking to a local technology executive that wanted to start a new software company at the beginning of 2014. During the conversation, he volunteered that six months ago he was all ready to move his family to California to start the business, but with the advent of the Atlanta Tech Village, he felt Atlanta finally had the critical mass of entrepreneurs and community he desired to help his startup be successful. Thinking more about it, there’s a real desire to be in a community that has enough scale and density such that there’s peace of mind that if a startup doesn’t work out that there are other jobs in the area.

    Several startups in the Atlanta Tech Village moved to Atlanta in 2013 to be a part of the Atlanta community. BitPay moved to Atlanta from Orlando. CheckAction moved to Atlanta from New Orleans. Over the next few years, I expect to see many more startups move to Atlanta to take advantage of all the great resources and community.

    I knew the Atlanta Tech Village would help with recruiting but talent retention didn’t cross my mind. Now, I’ll add it to the list of Village benefits.

    What else? What are your thoughts on the Atlanta Tech Village for talent retention and recruiting?

  • Driving an Emotional Reaction

    One of the things Pardot is really known for is amazing customer service. Over the years, we received hundreds of unsolicited compliments from customers praising how thorough, attentive, and friendly everyone was on the team. The services team is so good it drives an emotional reaction.

    Jason Cohen, founder of WPEngine, recently wrote a piece titled Imbalanced People where he talks about the difference in results between an average team member and an extraordinary team member. In the piece, Cohen writes, “A great customer support rep thrilling customers and causing love on Twitter versus 100 others…never invoking an emotional reaction.” The emotional reaction, while hard to measure, is one of the most powerful services of a great team member.

    Much like Dan Martell sent the tweet “Support is the new marketing” earlier this week, delivering an experience that results in an emotional reaction, whether via support, sales, or something else, creates an entirely different kind of relationship. When thinking about experiences, think about driving an emotional reaction.

    What else? What are your thoughts on experiences interacting with people that drive an emotional reaction?

  • Domain Experts Requested with No Technical Co-Founder

    One of the ongoing questions in the startup world is around the importance of having a technical co-founder. The idea is that by having a strong technical person on the founding team, the startup will be able to move faster, make more intelligent architectural decisions, and build a better product. Several days ago PandoDaily published an article about Quotidian Ventures and their focus on “founders who have domain expertise in large, opaque old school industries.”

    I agree that having a technical co-founder is great, but is no longer a requirement. Here are a few reasons why it isn’t as important as it used to be:

    • Cloud computing, and specifically Amazon Web Services, are much better understood and have more ready-to-use scripts and tools that remove many of the previous challenges
    • Languages and frameworks, like Ruby on Rails, have significantly reduced the learning curve to not only get up-and-running but to also be productive in a short amount of time
    • Pre-built libraries to build interfaces, like Bootstrap, enable the development of high quality front-ends, and new tools have emerged enabling non-technical people to build interfaces, like Divshot

    Now, if the founding team doesn’t include a technical person, the first hire should be an in-house lead engineer. Overall, a technical co-founder is no longer a requirement and domain expertise with an idea in a big market is much more important.

    What else? What are your thoughts on the idea that domain experts no longer require a technical co-founder?