David Cummings on Startups

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  • Challenges of a Parallel Entrepreneur

    The term serial entrepreneur is fairly common in describing an entrepreneur that successively starts one business after the other. There’s another less common term, parallel entrepreneur, that describes an entrepreneur creating multiple businesses at the same time. If making one company successful is difficult, what are the odds of simultaneously making two or more successful?

    For many parellel entrepreneurs, the goal is to have a few different things going at the same time such that when one of the projects starts to take off, all energy is focused on that startup and the other startups are phased out or ignored.

    Here are a few challenges being a parellel entrepreneur:

    • While the main challenge with starting a business is to make it successful, there’s also a secondary goal to figure out as quickly as possible if it isn’t going to be successful so that you can move on
    • Multiple projects at the same time results in many little tasks that it becomes even harder to work on the business (most entrepreneurs spend significantly more time working in the business as opposed to on the business)
    • When seeking help from others, networking, or raising money, a parallel entrepreneur can come across as less committed and less likely to succeed (a VC cited this to me personally when I tried to raise money in 2009)

    One way to make parallel entrepreneurship work is to be less of a parallel entrepreneur and more of an investor/advisor in multiple ideas you come up with whereby someone else is focused 100% on the startup and you help out without any day-to-day responsibilities. Being a parallel entrepreneur is exceedingly difficult and shouldn’t be taken lightly.

    What else? What are some other challenges of a parellel entrepreneur?

  • Per Person Per Month Office Space vs Traditional Office Space

    Earlier today an entrepreneur emailed me asking about the Atlanta Tech Village for his software company. With approximately 10 employees now, and growing to an expected 20 employees in the next two years, he wanted to know how it compared to traditional office space. I explained that the per person per month with internet access and furniture included model was very different from traditional office space due to the ability to scale up and down as needed, rather than paying for everything throughout the life of the lease.

    Let’s see how the model compares in a common scenario where a startup raises an angel round, has two co-founders now, and expects to scale to 10 employees at the end of 24 months.

    Traditional office space:

    • Required space for 10 employees at a high density ratio of one employee per two hundred feet results in a need for 2,000 square feet
    • 2,000 square feet at $21/foot/year plus $3/foot/year for parking for a total of $24/foot/year = $48,000/year/rent
    • 100 meg cable modem and 12.5 meg DSL line for internet is $800/month = $9,600/year
    • Used furniture or new IKEA furniture is $300 per person (including desks, conference tables, etc) = $3,000 total
    • Herman Miller Aeron chairs are $800 per person (I’m a fan of getting really nice chairs and just average tables) = $8,000 total
    • Total for 24 months for 10 person startup is $96,000 rent + $19,200 + $3,000 + $8,000 = $126,200

    Per person per month office space at Atlanta Tech Village or similar facility:

    • $300 per person per month for a dedicated desk, internet, shared conference room, etc plus $100 per person for parking and $300 per private room
    • Start with two co-founders and three initial hires followed by three additional hires every six months:
      Five people over the first six months is $1,500 month plus parking of $500 month plus private room of $300 month for a cost of $2,250/month resulting in a six month total of $13,800
      Eight people over the next six months is $2,400 month + $800 per month parking + $300 month private room = $3,500 per month for a total of $21,000 over six months
      10 people over the next 12 months is $3,000 month + $1,000 per month parking + $600 month for two private rooms = $4,600 per month for a total of $55,200 over 12 months
    • Total for 24 months for a 10 person startup is $13,800 first six months + $21,000 next six months + $55,200 last 12 months = $90,000

    In this model the private room plus shared office model is almost 30% more cost effective ($90,000/$126,200) when compared to the traditional office space format.

    Much in the same way a Zipcar created an entirely new category of rental car, the per person per month office space is creating an entirely new category of commercial office space. One of the keys of the model is a company that expects significant growth or volatility whereby locking in a traditional office space that’s the largest they’ll need over a period of time results in significantly higher costs and much less flexibility. For a generic company with a fixed number of employees over an extended period of time, traditional office space is more cost effective and fully customizable. Per person per month office space is a much better model for rapidly changing technology companies.

    What else? What are your thoughts on the idea of per person per month flexible office space?

  • Small Businesses and Tech Startups are Very Different

    Recently I was talking with a friend that had been a small business owner for eight years before shutting down his company to join a tech startup. It’s been over a year since he entered the tech startup world and he said he’s been knocked down making all the common mistakes like taking too much time building features no one needs, not generating enough traction for the product to be viable, and poor timing.

    One of the things he said really stuck with me: being a small business owner for many years and joining a tech startup are very different. Here are three ways he said they differ:

    1. As a small business owner, you focus on profitability from day one. Many tech startups are bought for large sums of money without ever turning a profit.
    2. As a small business owner, it’s easy to keep track of how much a good or service costs and you make money by marking it up some amount and selling it. Tech startups often have no marginal cost for each additional user/customer, creating a very different dynamic.
    3. As a small business owner, marketing typically comes through word of mouth and they service a local geographic area. Tech startups need to build a repeatable customer acquisition process and deliver the technology on a national or international scale.

    The biggest aha moment for him was that tech startups aren’t about making money in the short term and that it’s usually more about building a large customer base before economies of scale and profitability kick in. Small businesses and tech startups are alike in that it all comes down to people and very different in how the economics work.

    What else? What are some other ways small businesses and tech startups are very different?

  • Ways to Grow a Startup Community

    So, I’m on a mission to help grow the Atlanta startup community into one of the top 10 in the country. Much like Austin and Boulder are mentioned as two up-and-comers, my goal is for Atlanta to be mentioned in the breath. Atlanta has all the natural resources to be a major player, including an awesome engineering school (GA Tech), tons of young professionals, a low cost of living, the world’s busiest airport, low taxes, and a mild climate (if you don’t mind humidity). Some of the knocks on the Atlanta startup community include a risk-averse culture, lack of high-risk capital, geographic dispersion of startups, no anchor billion dollar tech company, and few venture backable entrepreneurs.

    On the risk capital and venture backable entrepreneurs front, the debate is around what’s needed first. If we have more high quality entrepreneurs, we’ll attract more capital vs if we have more capital here, more quality entrepreneurs will emerge that will be successful. My personal belief is that capital is portable such that it will find the best opportunities, regardless of geographic location. Even with the theory of the Series A crunch, there’s plenty of money out there to fund the best ventures.

    Here are a few ideas to grow a startup community:

    • Increase the density of startups in a geographic area (see Atlanta Tech Village and ATDC)
    • Recruit talent from outside the region to the region
    • Keep more of the talent that’s already in the region (e.g. get even more of the GA Tech engineers to stay in Atlanta)
    • Facilitate recycling of talent so that there’s rapport and awareness of talented team members to join other teams in the event their startup fails
    • Actively work to build community to learn, share, and create relationships
    • Highlight successful startups and great exits
    • Accelerate the rate at which startups achieve profitability so that they can then control their own destiny
    • Coordinate more introductions between entrepreneurs and capital providers including angels, venture capitalists, and family offices

    At the end of the day, the sure fire way to grow a startup community is through cultivating more successful startups. More successful startups will then breed more successful startups in a virtuous cycle.

    What else? What are some other ways to grow a startup community?

  • Laying Out Bar Code Graphics By Hand

    At home over the holidays I came across a box of personal stuff that had a large, industrial paper cutter. This paper cutter was part of the many supplies I purchased in high school to manufacture CDs and CD-ROM cases to sell my shareware software in stores. Using the Internet it was easy to purchase everything needed: empty CD jewel cases, writable CDs, CD labels, paper cutter, high gloss paper, shrink wrap plastic, and shrink wrap gun (like a hair dryer).

    For the graphic design of the CD label and the CD case, I laid out everything using PageMaker and Photoshop to get it just right. In retrospect, I’d give myself an A for effort and a C+ for the actual quality of the visual design. One aspect of the CD case design was putting together a bar code. I paid a couple hundred dollars to get a UPC number and set to work on a bar code. After looking at bar code generation software, which cost $50+, I decided to hand craft a bar code in Photoshop.

    Bar codes work off a strict formula that involves the width of lines and spacing between lines. Everything has to be precise and perfectly laid out otherwise the scanners won’t be able to read them. Imagine zooming in on Photoshop to the maximum level and hand crafting lines to a precise millimeter-level width. Needless to say, it was a tedious and exacting process that was better left to technology.

    In the end, when the CDs and CD cases were done and shrink wrapped, I took them to several stores in town that had agreed to sell the product on their shelves. After convincing one of the stores to take several on consignment, I casually asked the manager to scan the bar code to make sure the UPC number was returned successfully. Success! I had hoped I had laid everything out correctly but without a bar code scanner I had no way to test it (iPhones didn’t exist back then).

    While it worked out in the end, I realized during the process that my time was better spent on productive tasks that couldn’t be automated with software. Generating bar codes is a perfect task for software and spending a few dollars on a product to take care of it made sense. Now, I repeat to myself the saying “you have to spend money to make money.”

    The next time you’re working on something that isn’t the best use of your time, and there’s an affordable substitute, remember the bar codes.

  • If You Don’t Know What You Want to Do, Join a Startup

    Earlier today I was talking with a friend that’s finishing up his senior year of college this spring. He’s smart, outgoing, hard working, and talented. From a school perspective, he’s a finance major with a good GPA at a large public university. From a career perspective, his current thinking is to get a masters in finance or a masters in management (like a lite MBA) with a goal of getting a job out West.

    After talking for 30 minutes I probed further with questions like “what’s the value of a one year masters if you still don’t know what you want to do?” In the end, my recommendation was to join a startup or an entrepreneurial company where he can have a ton of responsibility and get exposed to a variety of areas before spending a year getting a degree he might or might not use.

    Here are some benefits of joining a startup or an entrepreneurial company:

    • Things move fast creating a great environment for learning
    • Meritocracies are more rewarding, especially for an eager 22 year old
    • Job responsibilities are greater, on average, at a smaller company, and more fulfilling for an ambitious person
    • Startups are more a team sport than individual affair resulting in more exposure to different areas and opportunities

    The message is simple: if you don’t know what you want to do in your career, join a startup or entrepreneurial company.

    What else? What are your thoughts on joining a startup for people that don’t know what they want to do for a career but are interested in business?

  • Ideas for Building Community at Atlanta Tech Village

    With the new Atlanta Tech Village a reality, it’s time to start brainstorming and planning what we need to do to make it a success. The true measure of success, over a 10 year horizon, is the number of startups, tech or otherwise, that grow into real, sustainable businesses creating jobs and wealth for our community. More successful tech companies will also enhance the tech-related service providers in the Village as well as the desirability of larger tech companies to have a remote office in the building (e.g. for engineering or sales). Now that we have the end in mind, let’s backup to the present and start working on how to build community at ATV.

    Community isn’t something that can be forced and will come from a number of places including serendipitous interactions (imagine how many great conversations will take place at Chipotle across the street!). Here are a few ideas to help build community at ATV:

    • Host meetups, get togethers, and conferences in the cool boardroom and awesome event space (room for up to 150 people as well as smaller options)
    • Provide an amazing training lab for teachers and training companies to teach courses (e.g. learn Ruby on Rails in 10 weeks) and do workshops (e.g. SEO 101 for entrepreneurs — a half day session) — learning with a group of peers or as a cohort is one of the best ways to build trust and relationships
    • Facilitate office hours with venture capitalists, coordinate job fairs, and “speed dating” for members of the Village to meet each other
    • Collaborate with other tech and startup organizations in town (e.g. ATDC, Flashpoint, Hypepotamus, TAG, etc)
    • Great coffee shop with tons of indoor and outdoor seating

    Community is one of the most important aspects of the Atlanta Tech Village and it’ll take time to build it.

    What else? What are some other ideas for building community at Atlanta Tech Village?

  • Announcing the Atlanta Tech Village

    In late August this year I was heavily involved in the Pardot acquisition process with ExactTarget and an idea hit me: if this deal goes through, I want to buy a large building and turn it into the Atlanta Tech Village. On August 30th I blogged about the idea generically, calling the post Physical Atlanta Startup Village Idea. The idea is a combination community center and office complex geared specifically towards innovative companies doing cool things while promoting serendipitous interactions. After thinking about it for a while, the name Atlanta Startup Village was too narrow as it implied it was only for startups whereas a technology community needs remote offices of larger tech companies, startups, and tech-related companies like marketing, PR, accounting, legal, and venture firms. A community is all types of people, not just fledgling two-person startups.

    Post Pardot acquisition, I immediately set out looking at all different types of office buildings and empty land throughout Midtown, West Midtown, and Buckhead. After 30 days of researching options and talking to as many people as would listen to me, one building became obvious as far and away the best option: 3423 Piedmont Rd NE (Google Maps). Super important things like great interstate access, MARTA access, walkability to a dozen restaurants, large windows, tall ceilings, indoor/outdoor areas, tons of parking, massive space (100,000 square feet!), and immediate usability were all present. There were some good land options in Midtown and West Midtown but no good buildings that were for sale at a reasonable per square foot price, and I didn’t want to get in the construction business and have a three year horizon before having something usable. Nothing on the market even compared to 3423 Piedmont Rd.

    Midtown, with its startup density at Tech Square, would have been ideal, but land and buildings in that area are significantly more expensive than 3423 Piedmont Rd. Buckhead as a location opens up northern suburbs like Alpharetta, Roswell, Dunwoody, and Sandy Springs to a shorter commute to get to a high density tech community while still being very accessible to the intown crowd that lives in Midtown, Virginia Highlands, and Inman Park. There’s another important piece being in the heart of Buckhead: proximity to the wealthiest Atlantans with an eye towards helping increase investment in local tech companies.

    After a quick tour of the building (it was the last one I looked at), we put in an offer on it the week before Thanksgiving, negotiated for a week, and had it under contract by Thanksgiving. Now, 30 days later, the closing is done and the building is called Atlanta Tech Village.

    Take a look at the Atlanta Tech Village website, read the Atlanta Business Chronicle article on the Atlanta Tech Village, and check out the post on it on the Startup Communities site. I’m excited to get tech companies in the building and start renovations.

    What else? What are your thoughts on the Atlanta Tech Village and what are some ideas to make it great?

  • Getting Involved in the Startup Community

    Earlier this week two separate people that are in the process of moving to Atlanta from the Northeast reached out to me to learn how to get involved in the local startup community. In both cases there’s the desire to be closer to family — a popular reason for people moving to Atlanta.

    Here are a few ideas on how to get involved in a startup community:

    • Look for your college’s local alumni group (hopefully there’s a local entrepreneurship group for your college as well)
    • Network to meet the connectors who enjoy putting people together and help out
    • Find the influential venture capitalists in the area as they are almost always very involved
    • Attend meetups and entrepreneurial get togethers to find like-minded people
    • Write blog posts about your community experiences and tweet interesting information
    • Join organizations like EO and YPO

    Getting involved in a local startup community is rewarding and worthwhile. It takes time to develop rapport and build relationships, as with anything you get out of it what you put into it.

    What else? What are some other ways to get involved in the startup community?

  • Running a Zombie Company Web App

    Startup failures are a standard part of the technology world. One of the interesting aspects of web-based businesses, Software-as-a-Service (SaaS) or otherwise, is that many times no human is necessary to service existing customers or sign on new clients (e.g. it’s a self-service tool). What happens when the founders determine the startup is no longer viable and decide to move on yet there are a modest number of paying customers?

    More often than not, I hear entrepreneurs that are moving on from their startup decide to keep the app running, along with the small amount of revenue coming in. Here are a few thoughts on running a web app for a zombie company:

    • Rarely does maintaining a web app prove to be worthwhile financially if you truly value your time (e.g. value your time at $200/hour and see if it’s actually worth it)
    • Many customers would like to know that the app is no longer going to be improved, or at least what the company status is going forward
    • Fully shutting down the web app, with appropriate notice for the customers, can be cathartic and help with closure for the entrepreneurs

    More often than not, it’s better to shut down the service rather than leave it up.

    What else? What are your thoughts on zombie company web apps?