David Cummings on Startups

Blog

  • Entrepreneurs Want Private Space Combined With Community

    When we started the Atlanta Tech Village we thought that there would be more demand for coworking space, with the idea that entrepreneurs and tech-related service providers wanted to be in large, open areas together. In reality, the initial private rooms sold out immediately — entrepreneurs want private space combined with community.

    Here are a few ideas around private space combined with community:

    • Entrepreneurship can be lonely, especially in the early days if things aren’t working out, so community is important
    • Absent coworkers, community provides for more social interactions
    • Private space provides more options for branding and customizing the furniture, pictures, etc
    • Private space makes it easier to lock things up and leave personal effects behind

    Of course, private space is more expensive than individual space if you don’t have the requisite number of people to fill the room, so it’s good to have a variety of options.

    What else? What are your thoughts on entrepreneurs wanting private space combined with community?

  • Get Potential Customers to “No” as Quickly as Possible

    Earlier today I was talking to an entrepreneur in the finding product/market fit stage of the startup adventure. He’s making progress collecting information but is still trying to understand if there’s a viable market. After hearing an update and sharing a few ideas, I recommended that he get to “no” with a bunch of potential customers as quickly as possible. The idea is that it’s often easier and faster to figure out if an idea isn’t viable, such that you can then move on. Too often, entrepreneurs take too long to kill an idea.

    Here are a few labor-intensive ideas to get in front of a number of people to determine viability for an idea:

    • Make a methodical plan to reach a certain type of person (e.g. take the last 100 people featured in the local business journal and contact them via phone)
    • Find a list of award winners (e.g. the Inc. 5000) and contact at least 500 companies on the list
    • Reach out to 100+ people that you know and ask for a referral to someone that could be a potential customer or could point you in the right direction

    Now, if this sounds like sales, it’s because it is sales. Most startup founders like building a product and don’t like selling. Whether it’s sales or customer discovery, the best thing to do is to get in front of as many people as possible, as quickly as possible.

    What else? What are your thoughts on getting potential customers to “no” as quickly as possible?

  • Cold Calling Doesn’t Scale Initially

    Paul Graham has his latest essay online titled Do Things that Don’t Scale. The idea is that many founders believe that every part of a startup should be scalable and automated right from the beginning. In reality, it’s better to get things going as quickly as possible, even if it’s manual and doesn’t scale.

    Early on in Hannon Hill, my first real company, we built a solid product, but had no customers. I knew how to build software while I had no idea how to build a customer acquisition machine. With limited resources, I started a very manual process: cold calling all 4,160 two year and four year colleges / universities in the United States.

    To start, I went over to the local Barnes & Noble in Buckhead and bought one of those massive books that listed all the colleges (geared towards high school seniors). Next, I had my brother, who was a student at Emory, post a job opening for a sales intern on the internal Emory website. Finally, I hired two students part-time to call every school, with the goal of scheduling an appointment for me to do a web demo. After much trial and error we developed a process that worked and today Hannon Hill has hundreds of school customers, many from cold calling.

    Paul Graham cites cold calling for B2B startups as an example of something not scalable for the founders. While it doesn’t scale for an individual, it does scale for many organizations.

    What else? What are your thoughts on doing things that don’t scale, including cold calling?

  • Experimenting with the Internet of Things

    As I sat down to write this post I noticed it was warm in the room. Not thinking twice, I loaded up my Nest iPhone app and promptly lowered the temperature for the area. That is, I took advantage of the Internet of Things — the idea that everyday objects become connected to the internet and can communicate in new ways.

    Here’s my current list of internet-enabled objects that were traditionally isolated:

    • Tesla Model S – From my iPhone I can control the car’s A/C, sunroof, charging, door locks, see how many miles of range is left on the battery, and see the GPS location overlaid on a map.
    • Nest – The thermostat is tracking our usage patterns to learn how we live so that it can optimize for our lifestyle while saving money on our energy bills. As a bonus, if we go on a trip and set the temperature to 80 while we’re gone, from my iPhone I can lower the temperature a few hours before we return so we get home to a cooler house.
    • Withings Scale – Every time I step on the scale it knows it’s me and records my weight, pulse, and other factors in the cloud so that I can see my progress on my iPhone anytime, anywhere.
    • Dropcam – With this internet-only video camera, I can have a two-way conversation with a person on my front porch via my iPhone anywhere in the world. If the baby is sleeping, I can go do yard work and keep an eye on him from anywhere around my house.

    The Internet of Things is going to have a profound impact on how we work and live. I’m excited to keep trying them out and experimenting.

    What else? What are your thoughts on the Internet of Things and what other objects do you have that are internet-enabled?

  • When Does the Millennial Workplace and Culture Become Standard

    Earlier today I was talking to a colleague about the environment at the Atlanta Tech Village and how it was the ideal place for Millennials. It’s not that we’re anti-establishment, but more so that we’re working on creating the best environment possible for how we want to work.

    Here are a few characteristics of the modern Millennial workplace and culture:

    • Creative and collaborative rooms, open spaces, and multiple work options (less private space and more communal space)
    • Tools to work whenever, wherever (thanks to the cloud and mobile technology)
    • Strong transparency and openness
    • Results only work environment
    • Focus on autonomy, mastery, and purpose

    Now, we’re likely in the first inning of this type of environment becoming more commonplace, but it’s going to happen.

    What else? When do you think the millennial workplace and culture will become more standard?

  • The Real-Time Entrepreneur

    As I was switching through different web apps and reports today, it struck me how real-time information is today as an entrepreneur. I had just published a new post on the Kevy blog titled Managing a SaaS Metrics Dashboard With Pardot (check it out for an example on how to use a marketing automation system to feed the top-of-the-funnel SaaS metrics). Right after hitting publish and sending out a couple tweets about it, I was immediately able to see clicks and prospects interacting with it. As an entrepreneur that loves results, it doesn’t get much better than that!

    Think about information from the most common apps:

    • Salesforce.com – Watch sales rep activities, opportunities, and deals
    • Pardot – Watch anonymous visitors, leads, and digital fingerprints
    • Google Analytics – Watch information on macro hits and visitors
    • GitHub – Watch pull requests and progress on the current sprint
    • Zendesk – Watch support tickets and customer interaction

    Of course, a dashboard with all the critical data in one place would be cool (like Geckoboard), but the fact that each system is there and can be left open in a browser tab makes it readily accessible. It’s great to be a real-time entrepreneur.

    What else? What are your thoughts on the real-time entrepreneur?

  • SaaS Metrics Dashboard With Inside Sales

    Previously I posted about a Killer SaaS KPIs Spreadsheet that I really liked. After digging into the spreadsheet more, I realized it was geared towards a self-service SaaS model where the prospect finds the service, signs up for a free trial, and then becomes a customer (or doesn’t). While this is a great model, I see most SaaS startups using some inside sales component where a sales rep holds the hand of a prospect and guides them through things. It’s a light touch model that still involves people helping people.

    So, I went in and changed several things and made an enhanced SaaS Metrics Dashboard Google Spreadsheet Template. Here are the changes I made:

    • Replaced “signups” with “leads”
    • Added a row for “Sales generated leads” to reflect leads that come from cold calls, partners, trade shows, direct emails, etc
    • Fixed the formulas throughout to support zeros for data (dividing by zero caused problems before)
    • Fixed the header and left column to make it easier when scrolling
    • Simplified some of the formatting

    Take a look at the new SaaS Metrics Dashboard Google Spreadsheet Template and give it a try — it’ll add value to most B2B SaaS startups.

    What else? What are your thoughts on the updated SaaS Metrics Dashboard Google Spreadsheet Template with support for inside sales?

  • Ideal Four Year Startup Trajectory at the Atlanta Tech Village

    One of the interesting parts about the Atlanta Tech Village is that the more successful we are helping startups grow, the more turnover we’ll have due to startups graduating out of the building. We don’t exactly know what size company that will be but we’re guessing somewhere in the 30 – 40 employee range. Of course, most of the startups in the building will be much smaller, usually with 1 – 5 employees, and will have substantial room to grow. 

    Thinking about growth, here’s the ideal four year startup trajectory at the Atlanta Tech Village:

    • Year 1 – Two entrepreneurs with an idea rent coworking desks, build a minimum respectable product, and raise some money and / or sell their product.
    • Year 2 – Early in the year, the entrepreneurs move up in the building from the coworking space on the 1st floor to a private five-person office on the 2nd floor. Product traction is coming along nicely and product / market fit has been achieved (stage one is complete).
    • Year 3 – With revenues growing nicely, the startup moves up to a 10-person modular suite on one of the upper floors. By the end of the year, it’s clear there’s a repeatable customer acquisition process in place (stage 2 is done), the startup raises a solid Series A round of financing, and takes an additional 10-person modular suite next to the first one.
    • Year 4 – As the customer acquisition machine hums along, revenues grow substantially. Mid-year, the startup takes a third 10-person modular suite and has contiguous space for 30 people. With full on growth mode in effect (stage 3), and north of 30 employees, the startup graduates and moves next door to Tower Place or Piedmont Center. The cycle is complete.

    Startup journeys are much more messy than outlined above, and that’s why being in a strong community is so important.

    What else? What are your thoughts on the ideal four year startup trajectory at the Atlanta Tech Village?

  • Notes from the Cvent S-1 IPO Filing

    Cvent, one of the oldest and largest online event management software companies, just released their S-1 IPO filing. Cvent has an interesting background raising money as a dot com startup in the late 90s, growing without much capital for over a decade, and then raising a large round of $135.9 million in July 2011 to recapitalize the business and accelerate growth. Event management software, especially with a two sided offering like Cvent provides, has the potential to be a winner-take-most market.

    Here are notes from the Cvent S-1 IPO filing:

    • Mission is to transform the meetings and events industry (pg. 1)
    • For some hotels events and group meetings constitute one-third of total revenue (pg. 2)
    • More than 6,200 event and meeting planner customers (pg. 2)
    • More than 4,700 hotels and venues have purchased marketing solutions from them (pg. 2)
    • Offers six products for event and meeting planners: event management software, strategic meetings management software, mobile event apps, pre- and post-event web surveys, ticketing software, and Cvent Supplier Network (pg. 4)
    • 1.1 million RFPs were transmitted using Cvent software in 2012 (pg. 4)
    • 600 employees in India (pg. 6)
    • 1,300 total employees (pg. 8)
    • Revenue (pg. 11)
      2010 – $45 million
      2011 – $60.9 million
      2012 – $83.5 million
    • Income (profits! – pg. 11)
      2010 – $7.7 million
      2011 – $2.6 million
      2012 – $8.7 million
    • Accumulated deficit of $19.5 million (pg. 24)
    • Three acquisitions in 2012 (pg. 62)
      Seed Labs LLC – $1.4 million in cash and $0.9 million in stock
      CrowdCompass, Inc – $5.8 million in cash
      TicketMob LLC – $5.2 million in cash
    • Research and development expenses were 9% of revenue in 2012 (pg. 92)
    • CEO/co-founder owns 16% (pg. 111)

    Overall, it’s an impressive story of profitable growth and execution, with a huge market opportunity. I predict the IPO will do well and the public markets will like the company.

    What else? What are your thoughts on the Cvent S-1 IPO filing?

  • Valuations through the 4 Stages of a B2B Startup

    Valuations are more art than entrepreneurs are led to believe. Often, the most common refrain is that business valuations are a multiple of EBITDA (a.k.a. profits with some stuff added back). In reality, the stage of the business, along with other measures like revenue, profitability, growth rate, and more help drive valuation. Like anything rare, a business is only worth what someone else will pay for it.

    Here are a few thoughts on valuations through the four stages of a B2B startup:

    • Stage 1: Search for Product / Market Fit – Valuation is largely driven by the region of the country, background of the entrepreneur, and investor belief in the opportunity (e.g. in the Southeast valuation might be in $1mm – $1.5mm range while in Silicon Valley it could be $3mm – $4mm for the same thing)
    • Stage 2: Build a Repeatable Customer Acquisition Process – Valuation is largely driven by the size of round and desired ownership stake of the venture capitalist (e.g. based on the size of the VC fund, and the number of investments a VC makes of the life of the fund, it’s simple math to figure out the necessary size of each investment, which when combined with a 20 – 30% ownership stake, results in the valuation of the company)
    • Stage 3: Maximize Growth – Valuation is driven by factors like recurring revenue, growth rate, gross margin, market size, etc and is often negotiated as a multiple of revenue (e.g. 3 times forward-looking twelve months revenue)
    • Stage 4: Maximize Profitability – Valuation is driven by earnings before interest, taxes, depreciation, and amortization (EBITDA) where it’s often a multiple of that (e.g. 4 – 6x EBITDA for a small business and 7 – 10x EBITDA for a larger business)

    In the first few years valuation is driven by what investors are willing to value the idea and business, followed by valuation driven by top line revenue and growth, and concluded by profitability.

    What else? What are some other thoughts on valuation through the four stages of a B2B startup?