David Cummings on Startups

Blog

  • APIs and the Future of Web Apps

    Today’s TechCrunch piece entitled 3 Pillars Of The New Business World: APIs, Identity, and Data hits on several topics I’m passionate about. With the proliferation of Software-as-a-Service (SaaS) for line-of-business applications, there’s a huge opportunity to use APIs, as well as the exchanging of data, to the make businesses more efficient, and decision making more effective.

    Application Programming Interfaces (APIs) are a way for computers to talk to other computers in an automated fashion. As an example, all iPhone apps that interface with servers to get data or call functions are interfacing with APIs that are accessible over the web (e.g. checking your flight on the Delta mobile app). Just like mobile apps access web-based APIs, web-based applications access the APIs of the other web-based applications, providing more value to the customer. When a marketing automation system interfaces with a CRM, the marketing automation platform can automatically pull down CRM pipeline opportunity information and correlate it back to lead gen campaigns, providing a more complete picture of the return on investment for a dollar spent by marketing — APIs make that possible.

    An application talking to other applications is nothing new. Only now, with so many more applications being delivered over the web, the friction and difficulty of one app talking to another is significantly diminished as challenges with custom code and firewalls are no longer present. The future of web apps is more APIs and more data exchange, significantly enhancing the value of business software.

    What else? What are your thoughts on APIs and the future of web apps?

  • Founder/Idea Fit for Startups

    Product/market fit is a common startup concept relating to how well a product meets the needs of the market. There’s another kind of fit that deserves more discussion: founder/idea. Founder/idea fit is taking into account the passions and strengths of the co-founders and maximizing them in the context of the business idea. A founder with little interest or zeal for an idea, even though it’s the best one he could come up with, is more likely to fail than a founder that truly believes in something, even if the idea isn’t as good.

    Here are some ways to look at founder/idea fit:

    • Take the concepts from Strengths Finder and apply those to the founder in regards to the startup idea
    • Identify the things that you do for fun, regardless of getting paid, and see if the idea gets real value from them
    • Imagine yourself five years from now running the startup at a successful, sustainable scale — how happy do you see yourself?

    Founder/idea fit is a critical component of the startup equation and shouldn’t be underestimated. Some of the best advice I ever received was to figure out what I was good at, figure out what I truly enjoy, and figure out how to combine those to make a living — you’ll never work a day in your life.

    What else? What are your thoughts on founder/idea fit for startups?

  • Team Building in the Early Days of a New Startup

    Knowing that startups are all about people, people, people, it’s important to address team building in the early days of a new startup. Getting the right people on the bus is the first and foremost priority followed by building rapport and trust amongst the team members — the better the team works together, the better the results.

    Here are some team building ideas for the early days of a new startup:

    • Use daily check-ins to align focus and develop transparency
    • Simple things like breaking bread and grabbing lunch together on a regular basis goes a long ways
    • Get team members involved in the hiring decisions whenever possible and always focus on corporate culture fit
    • Work to understand each other’s personality styles and be open about how best to communicate internally

    People are what make a startup work, or not work, and should be taken very seriously. With the right people in place, the next step is getting the team operating at a high level — this takes time and is critically important.

    What else? What are some other ideas for team building in the early days of a new startup?

  • Startup Failures Lead to New Opportunities

    Failing at a startup is never fun. In fact, it’s often emotionally draining and frustrating. Fortunately, for many entrepreneurs I’ve talked to, myself included, failing at a startup always results in amazing learnings. When a startup fails there’s often so much more to learn because a number of tactics were tried and didn’t work. When a startup succeeds and does really well, it’s easy to believe that most of the decisions were right without necessarily learning many hard lessons.

    After an entrepreneur fails, often some of the best opportunities emerge, including joining a new startup. Here are some observations about entrepreneurs that have decided to move on to the next venture:

    • After a failure, it’s easier to judge what type of team and market you want to be part of for the next venture
    • Failure creates more humility and hunger for the next go around
    • Often what not to do is easier to define than what to do
    • Failure tests whether you really like the startup world or would prefer a different type of environment

    Startup failures are a healthy part of the ecosystem, especially when the entrepreneurs reflect on what worked, and didn’t work, and talent is recycled into the next wave of ventures.

    What else? What are some other reasons startup failures lead to new opportunities?

  • How Does Life Change After a Nice Exit

    Recently I was talking to a friend and he posed the question, “how does life change after a nice exit?” After thinking about it for a second, I quickly replied that things really aren’t any different. This amazing, life-changing event happens and things continue as normal, as would be expected.

    Here are some things that do change after a nice exit:

    • More people ask you to join their non-profit board, be a startup advisor, give advice, etc
    • Local entrepreneur-related organizations ask you to speak (you’re the cool new kid at the party)
    • Private wealth managers and investment advisors aggressively seek to manage your money with many different ideas on how to invest it
    • Friends, family, and acquaintances realize that this crazy entrepreneur (you) really was on to something and wasn’t just toiling away alone in the basement (things seem so much more legitimate when there’s a large dollar exit attached to it)
    • Earning money, for the purposes of making ends meet and having a nice lifestyle, no longer becomes something on the to do list, resulting in more thinking about how to make an impact in your field/community and leave a legacy

    In the end, life is about the journey, relationships, higher purpose, and the all the little things. Like a big canvas with only a tiny picture drawn, a nice exit is just an opportunity to continue fleshing out the art.

    What else? What are some other ways life changes after a nice exit?

  • Thoughts on Software Programming Schools for Non-Developers

    Yesterday TechCrunch had a good piece on Galvanize, a new startup village in Denver. Galvanize sounds like a great place with co-working space, event rooms, private offices, restaurant, and even gSchool — a six-month intensive program to teach software programming to non-developers. We have a serious shortage of software engineers in the United States. Atlanta alone has four open positions for every one developer actively looking. How feasible is a software programming school for non-developers?

    Here are a few thoughts on software programming schools for non-developers:

    • Most of the top programmers I’ve worked with are the ones that have loved it from an early age and do it on their own time — how proficient will a post-college professional first picking up programming get in 3-6 months?
    • Accenture, and other technical consulting firms, put recent, non-technical college grads through intense six week programs to teach them programming and then promptly bill them out at $150/hr, so I’m confident it works on some level
    • High unemployment generically is a positive for schools like this working out since there are so many people that need to be retrained, with software programming being very desirable and lucrative
    • College degrees like finance, accounting, law and others are well suited for potential software developers due to the emphasis on logic and following rules
    • Night programs seem more desirable than full-time classes but if the person was motivated they’d already have learned on their own through the teach yourself books and sites, or they’d go to the local community college, both of which are cheaper than $20k for six months at gSchool
    • One angle could be programs to get existing software engineers working in large, non-entrepreneurial companies, exposed to startup life, and excited about working in that environment, without leaving their day job

    Knowing a few people that have gone through the Accenture program that trains non-technical people to write code makes me believe that these software programming schools will work. Perhaps they need the prestige and guaranteed high salaries Accenture provides to make them successful. I hope to see more of them emerge and that they are successful.

    What else? What are your thoughts on software programming schools for non-developers?

  • Spreadsheets vs Big Round Numbers for Startup Financial Planning

    Recently an entrepreneur was asking me how detailed I like the standard financial planning spreadsheet for a new business idea. Immediately I replied that I don’t usually do spreadsheets for new software ideas. Instead of spreadsheets with detailed financials, which I really like once the business is operating, I prefer to think through the financials of the new idea with big round numbers. Big round numbers make it easy to see if the idea is financially feasible, knowing that there will always be variations with the numbers in the real world.

    Here’s an example of thinking through an idea with big round numbers:

    • Software-as-a-Service (SaaS) application that costs between $250/month and $2,000/month with an average of $1,000/month
    • Year 1
      10 customers @ $12k/year = $120,000 revenue
    • Year 2
      35 customers @ $12k/year  = $420,000 revenue
    • Year 3
      83 customers @ $12k/year = $1,000,000 revenue
    • Year 4
      166 customers @ $12k/year = $2,000,000 revenue

    Assuming a SaaS company with 80%+ gross margins, typical hosting costs, and other normal metrics, if the product can be sold for $1,000/month, everything checks out as a viable business. Big round number aren’t as desirable for businesses with more complexity and sophistication but they work well for many tech companies starting out.

    What else? What are your thoughts on spreadsheets vs big round numbers for startup financial planning?

  • Startups are About People, People, and People

    Tonight I was at a local awards ceremony for the top entrepreneurs in Atlanta. After an entrepreneur is nominated, they have to answer a number of questions and get their financials certified by a third-party accounting firm. Several of the questions are generic company stuff and several of the questions are around the entrepreneur’s specific philosophy and approach to business. At the awards ceremony, as part of introducing each winner, the announcer read some choice responses from the questionnaire.

    Overwhelmingly, the entrepreneurs espoused the benefits of focusing on people. In real estate, the motto is location, location, location. For startups, the motto should be people, people, people. People are what drive everything about a business. People interface with customers. People build products. People sell goods and services.

    The next time you’re talking to an entrepreneur, ask her what the most important thing is about her startup. Listen closely, because the response is everything you need to know about her philosophies for the business.

    What else? What are your thoughts on startups being about people, people, and people?

  • Advice for Tech Accelerator Graduates

    Tonight I had the opportunity to attend the Flashpoint graduation ceremony over at Georgia Tech. Flashpoint is an accelerator program in a similar vein to Y Combinator and TechStars, except with some distinct differences. One of the questions Merrick Furst asked for the mentors to answer was “What advice do you have for these startups now that they’ve completed the program?” There weren’t too many responses on the fly but with time more have come to mind.

    Here’s advice for recent tech accelerator graduates:

    • Stay connected with a tribe of entrepreneurs in your cohort or otherwise as the roller coaster of emotions only slightly flattens over time
    • Sales solves everything so remember that when the business is breakeven or profitable the amount of stress drops significantly
    • Finding investors is a sales process and should be treated as such
    • Most products die from a lack of oxygen (get users using it)
    • Err on the side of customer discovery and never build the product in a vacuum
    • Move on when you’ve realized the startup isn’t going to be successful (entrepreneurs, on average, hang on too long to an idea)
    • Mentors are invaluable — use them to increase the chance of success and minimize common mistakes

    Completing an accelerator program is a nice early step in the process of building a business. Take advantage of the peer group in the cohort and lean on each other for the challenges that lie ahead. Getting a startup off the ground and developing it into a profitable company is one of the most difficult, and most rewarding, journeys available to an entrepreneur.

    What else? What other advice do you have for tech accelerator graduates?

  • Organizational Development Takes Time in a Startup

    One of the most important aspects of a startup that can’t be easily accelerated is organizational development of the corporate culture and market understanding. Some things take time even with quick learners and hardworking people — there’s no way to rush it. Generally, it takes 12-24 months for a new startup to solidify its own personality.

    Even with extensive experience working together on the founding team, there are always new people in the startup that introduce their own nuances and characteristics. No two corporate cultures are exactly alike. One of the best things a new startup can do is be intentional about its core values and use those as a guide for decision making, especially on the hiring front. Everything starts and stops with people.

    Organizational learning about the market also takes time, like the corporate culture. Markets are always more complicated on the inside compared to how they look on the outside. Competitive dynamics are often difficult to understand until a startup gets on the front lines and goes to battle. One of the reasons I recommend startups raise less money in their seed round (see Death to the $700k Seed Round), or raise more money and make it last longer, is that it always takes more time than expected to make progress. No matter how hard an entrepreneur tries to make the right decision, the market dictates what wins, and iterating quickly is the best path.

    Organizational development takes time in a startup — there’s no way to rush it.

    What else? What are some other reasons organizational development takes time in a startup?