David Cummings on Startups

Blog

  • Startups Need to Figure Out How to Compress Time

    Startups need to figure out how to compress time. Compressing time doesn’t mean doing things half way but rather testing assumptions and getting feedback from people in as short a period of time as possible. I was talking to an entrepreneur a few days ago and he described compressing time as talking to as many relevant people in quick succession to validate that the idea should, or should not, be pursued.

    Here are some ideas to compress time:

    • Call 100 potential customers in one day and get their thoughts on the idea (10 calls per hour times 10 hours of work is 100 calls)
    • Talk to 10 angel investors with at least 10 deals under their belt to find out their thoughts
    • Reach out to 20 active entrepreneurs and ask for 15 minutes of their time for insights

    Startups need to figure out how to compress time to focus in on something that has a high likelihood of succeeding. Too often, startups start working on a product, but don’t spend enough time getting feedback from potential prospects and other people with relevant experience.

    What else? What are some other ways startups can compress time?

  • A Key Flashpoint Benefit is Sales Training

    Many more startups fail from a lack of sales than from lack of building a product. Flashpoint, the startup accelerator at Georgia Tech, follows best practices like Customer Driven Development, Lean Startup, and the Business Model Canvas. Flashpoint is different from Y Combinator and TechStars in that it focuses on having the teams test hypotheses until there’s a clear winner, and only then does work on a product start.

    A key Flashpoint benefit is extensive sales training. The idea of getting 15 research interviews per week is much more difficult than it sounds. In fact, with a decent cold caller, that’s likely 500 calls to get 15 meaningful conversations (cold calling isn’t required but getting 15 meetings per week is the goal).

    Here’s how Flashpoint is like sales training:

    • Work through whatever means possible to get 15 meetings per week (referrals, walk-ins, cold calls, networking, etc)
    • Ask a series of consultative questions to uncover pain and latent demand
    • Develop rapport and establish trust with people so that you can reach out to them again with future research questions as well as establish a potential sales relationship in the event they are a good fit for the product or service
    • Articulate their needs and desires so that they will sign a letter of intent to buy whatever product or service is eventually built (assuming it meets the requirements)

    Sales training is a critical skill to develop on the founding team and Flashpoint provides it through a focus on customer discovery. Startups that go through the Flashpoint program will be significantly more successful, on average, than startups that don’t.

    What else? What are your thoughts on the sales training benefit from Flashpoint?

  • Two Tiered Inside Sales Process for Startups

    The inside sales approach for startups is nothing new but as of late it’s become much more popular. Over the last few months several entrepreneurs have reached out to me specifically to learn about how our inside sales process works and what I’d recommend. My top recommendation is often something they aren’t currently doing: implement a two tiered sales process where cold calling and closing are two separate jobs.

    Here’s how it works:

    Business Development Rep

    • Responsible for setting web demos
    • Extensive cold calling
    • Follows up on inbound leads that aren’t sales ready
    • Quota is setting 20-30 demos per month
    • Compensation is base salary plus commission for each completed demo after a certain allotment (e.g. no commission for first 15 demos and then $125 per completed demo after that)

    Account Executive

    • Responsible for delivering product demos, proposals, and taking the prospect all the way through to close
    • Cold calling only when opportunity pipeline isn’t full (e.g. a standard sales rep might be able to work 20 – 30 opportunities at any one time and should be cold calling when their pipeline falls too low)
    • Follows up on inbound leads that are sales ready and schedules a demo
    • Quota, based on new annual recurring revenue, is 3x their on target earnings

    This two tiered sales process for startups works extremely well for dynamic markets with a web-based application that has a price point high enough to warrant a consultative sales approach.

    What else? What are your thoughts on the two tiered inside sales process for startups?

  • Start With More Interns to Grow the Startup Community

    At tonight’s Flashpoint meeting I had the opportunity to talk with Heath Hyneman (@hhyneman) and hear his ideas around improving the startup community. One idea really stood out to me: get technical talent from local universities involved in the startup community as early as possible through paid internships. Strong technical talent, once in the workforce, will rarely have to update their resume as there is so much demand for their skills, and job opportunities are abundant.

    Big companies, especially local Fortune 500 companies, have huge internships programs due to their size. As a college student, the company or experience that’s most familiar becomes the default choice for a full-time position post graduation. Without exposure to the startup community, a college student is much less likely to look into startups as a career path.

    As a long term strategy to grow the startup community, interns are a great way to start. Startups need to make a concerted effort to start recruiting on local campuses and build their technical talent pipeline early.

    What else? What are your thoughts on getting more interns involved with startups to grow the startup community?

  • The 3x Rule for SaaS Inside Sales Rep Quotas

    Inside sales is rapidly becoming the go to sales model for Software-as-a-Service (SaaS) companies. More startups are following modern selling models like Predictable Revenue where a heavy emphasis is placed on efficient emailing and calling while using the web to help make appointment setters much more effective. After the appointment setter tees up the demo for the inside sales rep, the inside sales rep takes over all the way to close.

    One of the things I like to do is to learn about the sales compensation models of other startups, especially the base salary and variable compensation from commission, which when combined equals the sales person’s on target earnings. After that, I’ll ask about quota in terms of annual recurring revenue to get a feel for expectations.

    Almost always, the annual recurring revenue quota for a SaaS inside sales rep is roughly 3x their on target earnings.

    Here are some examples:

    • $30,000 base salary with $30,000 commission target ($60k OTE) results in an annual quota of $180,000 in new recurring revenue
    • $50,000 base salary with $50,000 commission target ($100k OTE) results in an annual quota of $300,000 in new recurring revenue

    Now, most quotas are based on new annual recurring revenue and very little of quota is based on one-time professional services revenue, which is common with SaaS businesses. The next time you’re thinking through quotas for SaaS inside sales reps consider the 3x rule.

    What else? What are your thoughts on the 3x rule for SaaS inside sales rep quotas?

  • A Day in the Life of a Growth Stage Startup CEO

    One of the questions I get from entrepreneurs is “how has your day-to-day changed going from a seed stage startup to a growth stage startup?” The three core responsibilities of a CEO never change: make sure there’s enough cash to keep going, help set the vision, and get the right employees on board. For my first year as a seed stage CEO, I spent most of my time writing code (~40 hours/week) and the rest of the time doing whatever it takes to be successful (20 – 30 hours/week). Now, five years later, things are much different.

    Here’s what a typical day looks like:

    • 10 minute daily check-in with the executive team
    • One or two one hour catch ups with a department head (meet with each department head bi-weekly)
    • One to two hours working on strategic projects (usually juggling 2-3 strategic projects at any one time)
    • One hour reading blog posts and books (usually read one business book per month)
    • Miscellaneous meetings, email, and other work

    As you can see, the ratio of doing front-line work to managing people changes dramatically as the startup gets larger. Days go quickly and are very productive.

    What else? What does a day in the life of your startup look like?

  • LED Scoreboards for Startups

    Continuing with the metrics and KPIs posts over the past two days, I next want to talk about scoreboards. Scoreboards, just like they sound, are large displays with the latest metrics for team members to know exactly where the team/department/business stands. Now, you can get a massive 55 inch LED TV with 1080p HD for under $900 from Amazon.com, mount it on the wall for under $100, and get an old MacMini for a couple hundred dollars to power it. Whenever people come into our office, one of the most common comments is on our LED Scoreboard and how they’re impressed we share the information and make it so accessible for everyone.

    Here are a few web apps to power the LED scoreboard:

    LED scoreboards are a great way to empower and align team members with the latest metrics in a centralized manner. Startups should consider LED scoreboards for their office.

    What else? What are some other thoughts on LED scoreboards for startups?

  • KPIs and Startups

    Key performance indicators, or KPIs, have been around for decades as business jargon representing the metrics that matter most. Too often, I see startups measuring a ton of different things (which is good) and then making everything important (which isn’t good). The idea is to measure a bunch of stuff, but for the purposes of getting all team members on the same page, there should be a minimal number of KPIs that are shared and talked about regularly with the management team and company — the metrics that matter the most.

    Here are some example KPIs that a startup should consider tracking on a weekly/bi-weekly/monthly basis:

    • Cash on hand/runway in months
    • Current annual recurring revenue (ARR)
    • New ARR
    • New customer churn ARR
    • Current weighted sales pipeline
    • New marketing qualified leads
    • New sales qualified leads
    • New clients implemented
    • New bugs
    • Current recruiting pipeline

    KPIs are an important part of a startup and should be made as simple and effective as possible.

    What else? What are some other key performance indicators you like to track?

  • Thinking About Startup Marketing Metrics

    Marketing metrics are great in that they provide objective, concrete evidence as to how things are going. With the rise of digital marketing, marketing automation, inbound marketing, growth hackers, and more, marketing metric awareness is growing even faster now. Startups, with a clean slate, can measure anything and everything. Only, most don’t build a culture of marketing accountability and ingrain it into their startup ethos.

    Here are some startup marketing metrics to consider:

    • Lead funnel:
      Visitor
      Prospect
      Marketing qualified lead
      Sales qualified lead
      CRM opportunity
      Closed deal
    • Lead channel volume and cost:
      Affiliate
      Pay per click
      SEO
      Referral
      Email
      Facebook
      Twitter
      Trade show
      Cold call
    • Site traffic types:
      Direct hit
      Social
      Referral
      Search engine (branded and non branded)

    Marketing is more scientific and metrics driven now, especially with the advent of online marketing. Startups would do well to build simple Google Spreadsheets and start tracking a variety of metrics. Over time, it’ll become clear what’s working, not working, declining, and improving in value. What gets measured gets done and measure what matters.

    What else? What are some other startup marketing metrics you like to track?

  • Inside Sales Management in Startups

    With the rise of the Software-as-a-Service (SaaS) business model, there’s more focus on inside sales as part of the customer acquisition process due to the lower deal values compared to enterprise software. Enterprise software, having been popular for several decades, has a large number of experienced executives, even if most aren’t right to be a VP of Sales for a seed stage startup. Consultative inside sales and consultative field sales are very different.

    There’s a lack of experienced inside sales management talent for startups.

    Here are a few thoughts around inside sales management for startups:

    • Look to develop a leadership pipeline internally on the sales team through training, mentoring, and coaching
    • Remember that the top sales person isn’t usually the person you want to be a sales manager since selling and sales management are different skills (and the best sales people should make more money than sales managers)
    • Consider two different types of sales managers: inspirational/motivators vs analytical/quantitative (not mutually exclusive, but often different types)
    • Find managers who aren’t from a sales background, but are excited about coaching people, and consider them for sales management

    Inside sales management isn’t easy to find but the right talent makes all the difference in a startup. Work hard to find the right person and don’t settle.

    What else? What are some other thoughts on inside sales management in startups?