David Cummings on Startups

Blog

  • The Three Stages of Evolution for SaaS Markets

    After watching the email marketing world for over a decade now, I’ve come to identify three stages of market evolution. These stages are applicable to other Software-as-a-Service (SaaS) markets as well but email marketing is uniquely suited since the market grew up with the Internet and didn’t have an installed software background like others (e.g. accounting software).

    Here are the three stages of evolution for SaaS markets:

    1. Broad, enterprise-strength products. Think Responsys where you have a high-end, infinitely flexible product that’s a private Oracle database instance combined with a powerful front-end. The product does its job well and is very complex.
    2. Turn-key, fairly easy to use products. Think Mailchimp where you have an affordable, straightforward product that’s a magnitude less expensive than the incumbents while still meeting the needs of most businesses.
    3. Vertical-specific, specialized products. Think Sailthru where you have a product that is tailored for the publishing industry with a heavy emphasis on personalization and delivering content to users based on their previous engagement.

    This evolution makes sense as the early startups invent the market and thus go to the large companies, which are willing to pay the most money for the technology. After the market is more defined and well understood, new entrants emerge and take advantage of technological enhancements that have gone on in parallel (e.g. open source, processing power, cloud computing, etc) to deliver a similar service with a better experience at a lower price. Finally, with the generic technology mainstream, in this example email marketing, nuances and applications that are vertical specific get applied to add even more value in a more specialized segment of the market.

    SaaS markets for many applications beyond email marketing are maturing and I believe we’ll see more vertical-specific applications as a result.

    What else? What are your thoughts on the three stages of evolution for SaaS markets?

  • Startups are a Reflection of the Founders

    We like to think of startups as independent entities out to change the world. In reality, startups are a reflection of the founders and their personal styles, goals, and desires. As the founders go, so go the startups.

    Vision, mission, and values are three areas the founders most influence, as defined by Wikipedia in their strategic planning article:

    • Vision – Outlines what the organization wants to be, or how it wants the world in which it operates to be. It is a long-term view and concentrates on the future.
    • Mission – Defines the fundamental purpose of an organization or an enterprise, succinctly describing why it exists and what it does to achieve its vision.
    • Values – Beliefs that are shared among the stakeholders of an organization. Values drive an organization’s culture and priorities and provide a framework in which decisions are made.

    One of the most visible reflections of the founders is the office space and environment. As soon as you step into an office, you have a good feel for the type of people and organization — it’s a reflection of the founders. Startups are a collection of people and a reflection of the founders.

    What else? What are your thoughts that startups are a reflection of the founders?

  • Sugar High with One-Time Sales

    A few weeks ago I was talking to an entrepreneur that has a couple different product lines with one product being installed software and the other product being Software-as-a-Service (SaaS). Naturally, the strategic focus is on the SaaS product but the installed product is still doing well replacing more expensive incumbents. The entrepreneur then said something that really stuck with me:

    A one-time sale is a sugar high for the business.

    Think about it for a minute. Selling an installed product that has a one-time fee is great for short-term revenue but, like a sugar high, it’s only temporary. The following year you have to sell the same amount as the previous year just to get back to the same level of annual revenue. Now, with recurring revenue, each new customer adds more revenue that layers on to the existing revenue making it much easier to grow and making cash flow more predictable (assuming a sticky product with a high renewal rate).

    Businesses with one-time sales aren’t bad, but, if possible, recurring revenue is a much more desirable business model.

    What else? What are your thoughts on the saying that a one-time sale is a sugar high for the business?

  • Pardot as Proving Ground for Startup Community Ideas

    One of the things we did at Pardot was try and help the local entrepreneurship community by providing a handful of desks to startups. At any given time we’d have 3-4 startups in the office with 2-3 desks per startup (by my count, we had at least eight startups use our office). This was a good gauge that showed some of the local demand for an entrepreneurship center like the Atlanta Tech Village.

    Pardot also acted as a proving ground for ideas that were implemented at the Village, including the following:

    • Focus on Values – Values set the tone and define the contract for everyone involved
    • Startup Chowdown – Bringing everyone together on a weekly basis to break bread is incredibly valuable to build relationships and rapport
    • LED Scoreboard – Results matter and clear accountability with metrics define the standards
    • Show & Tell – Products are the heart of the business and doing regular demos keeps everyone updated

    Without realizing it at the time, several of the Pardot experiences and lessons learned translated well to the startup community and have been implemented at the Village.

    What else? What are your thoughts on ideas translated from company to startup community?

  • Atlanta Tech Village as a Sales and Recruiting Tool

    Last week I was talking to a sales executive at the Atlanta Tech Village. He works for one of the startups in the Village and we were talking about how things are going. After hearing about a big deal he’s working on, he volunteered something I wasn’t expecting: the Village is a sales tool whereby if the prospect is local, he’ll invite them to a Startup Chowdown. Pretty sweet.

    Startups are always looking for an edge, especially when it comes to signing customers. With little brand recognition for the startup, sales reps seek to associate with other brands through social proof by referencing recognizable customers or mentioning something that might pique a prospect’s interest, in this case the Village if they are local.

    Later in the week I was talking to another startup that was in the process of hiring a couple new people. After catching up on progress, I heard again how bringing a potential new hire to the Startup Chowdown was a great recruiting tool as it gives the candidate a taste of the energy in the building and gets them excited about being part of the startup community. There’s a real war for talent going on and having an edge makes a big difference.

    Startups are closing more deals. Check. Startups are recruiting great talent. Check. These are great benefits of being in a startup campus that aren’t appreciated until you hear about the results.

    What else? What are your thoughts on the Atlanta Tech Village as a sales and recruiting tool?

  • Bessemer’s SaaS Pricing Strategies Notes

    Bessemer Venture Partners has a great new white paper up on Software-as-a-Service (SaaS) pricing strategies. Pricing is something that entrepreneurs labor over on a regular basis and there’s always multiple quality answers. Besides the standard advice that products should initially be priced higher than what you think it’s worth since it’s better to have push back and easier to lower prices, there’s a good bit of gray area on the different types of pricing options.

    Here are the four categories Bessemer identified:

    • Freemium (Dropbox, Asana, Skype) – Basic services at no charge and then fees for premium features. This is further sub-divided into capacity-based freemium, feature-based freemium, time-based freemium, and use-case freemium.
    • Consumption (Amazon Web Services, Twilio, ZipCar) – Pay-as-you-go pricing based on usage, similar to buying electricity.
    • Tiered (Salesforce.com, Pardot) – Pricing tied to value and usage (e.g. a combination of functionality and quantity) and is often found in enterprise software as well as SaaS.
    • Perpetual License (Oracle, Microsoft) – Initial payment followed by a smaller annual maintenance and support contract. Typically, annual subscription pricing is 3 – 5 years the cost of a perpetual license.

    As expected, some companies do a hybrid of the four categories listed above.

    The authors do a good job diving into the details and trade-offs of each of the approaches as well as case studies of SaaS companies employing each pricing strategy. If you’re interested in SaaS and pricing, go read the report.

    What else? What are your thoughts on SaaS pricing strategies and Bessemer’s white paper?

  • Takeaways from the First Kevy Connects Event / Impact of the Cloud

    Tonight we had our first Kevy Connects event at the Atlanta Tech Village with over 250 registered attendees and a panel of Atlanta cloud software leaders including Reggie Bradford of Oracle / Vitrue, Michael Cohn of Cloud Sherpas, Bill Nussey of Silverpop, and Ed Trimble of Kevy. For the event, our goal was to bring together some of the major Software-as-a-Service companies in town to learn from each other and explore how we can continue to expand Atlanta’s strength in the world of cloud-based applications.

    Here are a few takeaways from the first Kevy Connects event:

    • Cloud-based software, while it’s been around for well over a decade, is one of the fastest growing software segments and shows no signs of slowing down
    • Most companies that were originally averse to putting their information in the cloud due to security, availability, etc have come around and are now comfortable with it
    • Integration of cloud apps is a big challenge for the industry and an opportunity for new entrants
    • Atlanta’s extensive history of successful B2B software companies provides a strong foundation for the next generation of cloud-based software.

    Overall, tonight’s event was a big success and we look forward to bringing the local cloud community together on a regular basis.

    What else? What are some of your takeaways from the event and the impact of the cloud?

  • Atlanta’s Sales Community as Core for a Sales and Marketing Tech Hub

    Atlanta has one of the highest number of sales reps per capita in the world. Think about it: if you live in Atlanta or have friends in Atlanta, how many people do you know that are in sales? That’s right, there are a ton. Now, there are two main reasons why Atlanta has so many sales people:

    1. Capital of the South – Thousands of companies have regional sales offices in Atlanta to call on and service accounts all over the Southeast. Atlanta is the clear leader in the Southeast based on number of people and scale of infrastructure.
    2. World’s Busiest Airport – I know a sales-oriented CEO of a multi-national health IT company that just moved his family to Atlanta because he’s on the road all the time and would rather be based out of Atlanta instead of Boston, even though he grew up in the Midwest. The main reasons: climate and the airport. With the world’s busiest airport, it’s easy for sales reps to quickly visit customers anywhere in the world at a reasonable cost, and almost always with a direct flight.

    So, Atlanta has an unusually large number of sales people, which translates well into Atlanta being a hub for sales technologies, and the close relative of sales, a.k.a. marketing.

    The world’s largest software company in the late 70s was a firm called MSA, based in Atlanta. MSA had an amazing culture that was incredibly sales focused. From the sales reps and sales management at MSA, over 50 startups emerged in Atlanta. Several of Atlanta’s largest success stories, including the billion dollar exit of Internet Security Systems to IBM, were lead by MSA alumni.

    A strong cluster of sales and marketing technology startups and companies have already coalesced in Atlanta including SalesLoft, Rivalry, Insightpool, CallRail, Badgy, Pardot, Vitrue, BrightWhistle, and more not even counting the amazing pool of email marketing companies in town like WhatCounts, Silverpop, and MailChimp.

    Atlanta’s strong sales community is the core that’s helped spawn many tech companies. Over the next 10 years, I predict Atlanta will become even more well known as a sales and marketing technology capital, and I can’t wait to see it happen.

    What else? What are your thoughts on Atlanta’s sales community as core for a sales and marketing tech hub?

  • Successful Entrepreneurs Continually Invest in Personal Improvement

    One pattern I’ve found with successful entrepreneurs is the internal motivation to continually invest in personal improvement. There’s this innate desire to keep getting better, both in life and in work.

    Here are some of the more popular personal improvement things I see entrepreneurs doing:

    • Public speaking practice by joining Toastmasters International
    • Peer experience sharing and learning through EO and YPO
    • Exercise and sports (running, working out, hiking, biking, and golf are popular)
    • Reading books and blogs on a regular basis

    The next time you talk to an entrepreneur, ask about personal improvement initiatives and see what they’re working on — it just might surprise you.

    What else? What are your thoughts on the idea that successful entrepreneurs are continually investing in personal improvement?

  • Business Idea: Google Now for Sales Reps

    Google Now is presented as an intelligent personal assistant that delivers the right information at just the right time. Pretty awesome. After reading about it, it’s clear that there’s a market opportunity for a similar service targeted at sales reps.

    Here’s how the service might work:

    • Tight integration with CRM (Salesforce.com, NetSuite, SugarCRM, Microsoft Dynamics, Nimble, etc) and calendar (Google Apps and Microsoft Exchange)
    • Analysis of rep’s top opportunities and prospects based on score, grade, timeline, and likelihood of closing
    • Monitor prospects’ social media activity to determine if a contact is online so as to prompt the sales rep to make a call or send an email
    • Review sales rep’s daily activity and automatically build recommendations based on previous success (e.g. a sales rep might have a higher close rate when doing demos in the morning and cold calls in the afternoon, so the service figures that out and prompts accordingly)
    • Seamless geographic and timezone integration to make recommendations based on GPS location of the sales rep (e.g. out in the field for a meeting, automatically reference another prospect that’s in the area)
    • Connection to phone systems (cell and VoIP) that both manually logs dialed calls as well as automatically initiates calls (e.g. there’s a 2pm conference call and the service rings the sales rep’s phone at 1:59pm)

    Perhaps the functionality is a bit too broad but the general idea remains the same: analyze everything related to a sales reps and make intelligent recommendations at the right time and place. Sales reps are always looking to close more deals with a shorter sales cycle and smart software will help make that happen.

    What else? What are your thoughts on the opportunity for a Google Now-like service for sales reps?