David Cummings on Startups

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  • Atlanta Tech Village for the Second Atlanta Location

    One of the goals for the Atlanta Tech Village is to be a great spot for an Atlanta office for technology companies headquartered in other cities. Atlanta has such strong natural resources in software engineering/product management as well as sales and marketing that it’s the perfect spot for a remote office. There’s another need in the market that I didn’t anticipate: technology companies headquartered in Atlanta that want a second Atlanta location to do new product development.

    Much like Steve Jobs, when inventing the Mac, put his team in a separate building down the road from Apple headquarters (with a pirate flag on top!), there’s a desire for engineering and innovation of new products to take place in an environment that isn’t encumbered by the traditional way of thinking and current product offering. Tech companies, especially small-to-medium sized companies, struggle building new products, which is one of the reasons why startups continue to be successful. Absent acquiring a startup, one of the best ways to launch a new product is to put a team on it in a different physical location.

    Atlanta Tech Village is a great spot for that second Atlanta location to do innovation with an amazing community and without all the overhead of a traditional office.

    What else? What are your thoughts on having a second location in the same city as headquarters to work on a new product?

  • Separating Angel Investing Returns from Operating Angel Investing Returns

    One of the questions I’ve been asking angel investors lately is “how confident are you that an angel investor can make money investing in tech startups?” Unequivocally, every one says they are confident angel investors can make money. I then probe deeper and ask if their investment returns include money they put into their personal companies, that is investments they made in businesses they operated or invested significant sweat equity. Each one said yes.

    Now, being an angel investor doesn’t strictly mean being a true passive investor. What it does mean is that not all angel investor returns are equal. Many angel investors credit the returns generated from their own personal businesses as angel investor returns, which they are, but not in the way everyone thinks about passive investing returns. The next time you’re talking to an angel investor, ask them about their track record and level of success investing with their own personal companies removed from the equation. This provides a clearer picture and often removes outliers.

    What else? What are your thoughts on separating angel investing returns from personal operating business angel investing returns?

  • Informational, Feedback, Progress, or Pitch Meeting with Entrepreneurs

    Over the years I’ve talked with hundreds of entrepreneurs about their startup. Conversations are all over the place, based on whatever the entrepreneur is looking to accomplish. One of the things I appreciate is when entrepreneurs take the time to prepare questions in advance to get the most out of the meeting. Even better is preparing questions and setting expectations for the type of meeting desired.

    Here are some of the most common meetings with startups:

    • Informational – mostly a meet and greet sharing backgrounds, areas of interest, and the current state of the union
    • Feedback – the entrepreneur has a specific idea/issue/challenge and they want to get a second opinion or guidance on it
    • Progress – this meeting occurs after one of more meetings previous meetings and the entrepreneur provides updates on goals, what’s new, etc
    • Pitch – here the entrepreneur is pitching to raise money directly or to get introduced to other investors

    The next time an entrepreneur asks for a meeting, clarify in advance the type of meeting to make things more productive and useful.

    What else? What are some other types of entrepreneur meetings about startups?

  • Saying No to Product Feedback Requests

    Several years ago an entrepreneur was evaluating marketing automation software and asked me about Pardot. After a web demo and several calls with a sales rep, he ultimately chose a competitor’s product. Upon selection, he reached out to me to see if I wanted to do a 30 minute phone call so he could tell me why he chose the other product and provide feedback. I politely declined his request over email and passed on doing the call. He was put off when I declined what he viewed as a favor. Here are a few reasons why I said no to product feedback:

    • He wasn’t our normal buyer profile
    • Our product management and engineering teams had their plates full and were doing great work
    • Product feedback channels were open and healthy
    • My time was better spent elsewhere

    It’s hard to say ‘no’ to someone that’s clearly trying to help you, yet it’s the right thing to do. You have to say ‘no’ to most things to be able to say ‘yes’ to the important things.

    What else? What are your thoughts on saying ‘no’ to product feedback requests?

  • The Best Startups Come From Solving Problems You Can’t Get Out of Your Mind

    A number of people have asked me why I’m working on the Atlanta Tech Village when I could be taking time off and relaxing on the beach. Beyond the amazing opportunity to build something that will have an unbelievable impact on Atlanta and the Southeast, there’s another strong reason: I simply had to do it. Literally, for 12 years straight, I’ve battled the traditional commercial real estate world (#1 startup tip for commercial real estate) playing all sorts of games to make it work for a series of software companies with little visibility into just how fast we’d grow and how much space we needed to take (at one point we had 40 people and needed 14,000 square feet of space but went ahead and took 20,000 square feet because it was a good deal and we had an outside chance of needing it all, which proved to be correct).

    Historically, it didn’t make sense for me to invest in real estate as my company was growing and eating tons of cash. Real estate is capital intensive, and my taste (a desire for Class A- space), makes it an expensive proposition to build something that really excites me. I knew that I wanted to solve the office space challenge for tech companies and startups for years but I never did anything about it because the timing wasn’t right. It’s a problem that I couldn’t get out of my mind — it never went away. Now, I can help build a solution that is perfect for companies between 1 and 25 people that don’t have good visibility into their staffing levels as well as have a desire to be part of a community full of cool people doing cool things. My itching needed scratching and I’m all in.

    The best startups come from solving problems you can’t get out of your mind.

    What’s on your mind?

  • Top 7 Entrepreneurial Lessons from Pardot Expanded

    A couple days ago I wrote about the Top 7 Entrepreneurial Lessons from Pardot. After the post, several people asked me to expand on the seven items with more detail.

    Here are the top 7 entrepreneurial lessons learned from Pardot expanded:

    7. Market timing matters: we started in March 2007, just before the Great Recession, and Software-as-a-Service went from hot to cold, along with most technology sectors. Our timing to start the business was perfect because we were forced to make things work in a difficult recession, and by 2010 we had a solid product, customer base, and team just in time for the market to explode. Several of the second tier competitors that had been in business for 7-10 years faded away as too much fatigue had set in for their founders and management teams.

    6. Startups with the most money don’t always win: we didn’t raise money and we competed against a group of companies that had raised more than one quarter of a billion dollars, and we won the majority of our competitive deals. A couple of our competitors had raised more than $20MM in venture capital and virtually went away after 2-3 years. Internally, we constantly debated about raising money but in the end decided it didn’t make sense based on how fast we were already growing and our desire to control our own destiny.

    5. Find the differentiators and deliver: early on we differentiated based on ease of use, no contracts, and a pricing model based on email volume with unlimited database size. We had the catalytic mechanism in place whereby we had to deliver value month in and month out since our customers could leave at any time. This forced us to be great at customer on boarding, support, and client advocacy.

    4. Sell pain killers and not vitamins: after a customer successfully rolled the software out to their sales and marketing teams, we’d routinely hear feedback like “we don’t know how we functioned without the software” and “the sales guys absolutely love the data and insight.” Once it was clear the software was a must-have, we knew we had a pain killer and not a nice-to-have vitamin.

    3. Embrace your constraints: not having a deep war chest of VC money forced us to be scrappier and efficient. One model we took to heart was how Toyota developed the Prius from the ground-up focused on middle class buyers that wanted a high MPG hybrid with four doors at a $22,000 price point. With the $22,000 price point as a fixed constraint that couldn’t budge, the business model and everything else had to be built around that. In a similar manner, we focused on the $1,000/month price point and built the whole business around that — from the inside sales process, on boarding, support, etc.

    2. Focus, focus, focus: we said ‘no’ 100x more than we said ‘yes’ to requests for features, partnerships, white labeling the product, etc. As for customers, for years we were laser-focused on B2B companies or divisions with 20 – 200 total employees of which 5-50 were in sales and marketing as well as one full-time in-house marketing manager. By focusing on a narrow part of the market and saying ‘no’ most of the time, we were able to achieve significantly greater results.

    1. Corporate culture wins: our maniacal desire to be the best place to work and the best place to be a customer combined with team members that were positive, self-starting, and supportive created an unbelievably strong corporate culture. At the end of the day, corporate culture is the only sustainable competitive advantage completely within the control of the entrepreneurs.

    Pardot was an amazing experience and these seven entrepreneurial lessons from Pardot were invaluable.

    What else? What are your thoughts on these entrepreneurial lessons and others?

  • Sell Software or Do More Engineering First

    Recently I was talking to a software company that had a few non-paying beta users and a working product. After getting a demo of the software, which looked really good, I asked what was next and how their round of financing was going to be used. Interestingly, even with a solid, fully-functional product, the vast majority of the funding was going to more product R&D.

    As an entrepreneur, the product is never finished and there’s a tendency to keep adding more and more features. With a ready-to-sell product, even if it has a few rough edges, my recommendation is to start seriously selling it. Here are a few questions to ask internally:

    • Why aren’t we already selling the product?
    • If we add these desired features, how is that better for our short-term cash flow compared to selling the product now?
    • How much of wanting to do more R&D is the desire to build a perfect product vs a desire to build a minimum respectable product?
    • If we never added another feature to the product, and only fixed bugs, could we build a viable business?

    Entrepreneurs like to build more than to sell. Resist the temptation to keep building and instead start selling.

    What else? What are your thoughts on selling software or doing more engineering first?

  • Top 7 Entrepreneurial Lessons from Pardot

    After thinking about my B2BCamp Atlanta talk for this Saturday, and debating what topic would be most interesting for the audience, I decided to change it up and do the Top 7 Entrepreneurial Lessons from Pardot. Pardot was such an amazing experience on so many different levels that I want to share what worked well, and didn’t work well, so that others can learn from it.

    Here are the Top 7 Entrepreneurial Lessons from Pardot:

    7. Market timing matters
    6. Startups with the most money don’t always win
    5. Find the differentiators and deliver
    4. Sell pain killers and not vitamins
    3. Embrace your constraints
    2. Focus, focus, focus
    1. Corporate culture wins

    Please join us at the B2BCamp Atlanta event to hear all the details.

  • Software Engineering Balance Between Strict Deadlines and Time to Get it Right

    One of the challenges we always had with software engineering was finding the balance between strict deadlines and time to get it right. Software development is still more art than science, especially when innovating and working on major changes. Different constituents like customers, prospects, analysts, sales, support, and engineering have things they’d like to see, and want visibility into when the features will be delivered. Naturally, the market changes so fast that as an entrepreneur or product manager, there’s a desire to push back on too many fixed deadlines as that limits flexibility to adapt to new information.

    Here are a few considerations with balancing software engineering deadlines:

    • Work off short deadlines, like two week sprints, and use that to keep up a good pace of progress (don’t allow any to do items longer than two weeks such that something that might take two months is broken down into two week chunks)
    • For longer range considerations and road maps, try painting broader strokes for areas that will be addressed instead of specific improvements
    • Find a level of accountability for the engineering team such that there’s ownership over delivering on time while also making sure it’s fully baked (don’t let the balance of influence sway too much such that deadlines and deliverables aren’t met while still being realistic)

    The best thing to do is to build a really strong engineering culture that views code as craft and has peer-to-peer accountability.

    What else? What are some other considerations for maintaining a software engineering balance between strict deadlines and time to get it right?

  • Commercial Real Estate Challenges When Comparing Office Options

    Offices and office space has always fascinated me. I love bringing people together and customizing a sweet office. Just think about it: what percent of your waking hours do you spend at work? If you’re like me, and it’s a high percentage, you want to have a great space that you genuinely look forward to going to several times a week. Now, the coolest office space in the world won’t make up for a weak corporate culture, but if you have a great corporate culture, an amazing office is just icing on the cake.

    Only, commercial real estate makes it mind-numbingly complicated to simply compare the costs of different offices. Here are some of the common items thrown around:

    • A number of months that are “free rent” or half rent
    • Tenant improvement allowance per foot rented (e.g. the amount of construction costs paid for by the landlord to customize the space)
    • Moving/cabling allowance per foot rented (e.g. money to pay for wiring and moving costs)
    • Percent rent escalation per year and how soon does the escalation start
    • Lease term and how that affects all the allowances above (e.g. a shorter lease results in smaller allowance but more flexibility for startups)

    Imagine a spreadsheet with many different variables and that’s what’s needed to compare different office space options. There has to be a better way for startups to rent office space.

    What else? What are your thoughts on these challenges when comparing commercial real estate options and what are some additional challenges?