David Cummings on Startups

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  • 2 Lean Approaches in the 90 Day Startup Accelerators

    Over the past few years I’ve had the opportunity to talk with a number of startups that have gone through 90 day accelerator programs, some regional and some from the most well known brands. There’s typically two lean startup approaches that are related but different. The difference is characterized by the extensiveness of the customer discovery methodology and the timing of building of a minimum viable product.

    Here are the two approaches to the 90 days of a startup accelerator:

    • Build Something Simple Immediately and Iterate with Customer Discovery – The thinking here is that there’s a general market idea and opportunity, an extremely simple product is built, and the product is then constantly improved after getting input from prospects. As an approach, this solves the common mistake of startups building their product in a vacuum, only to emerge with something that doesn’t fit the market’s needs, have code debt, and usually run out of money before they can find product/market fit.
    • Do Customer Discovery Without Product Building Until a Clear Need is Identified – The thinking here is that even with a general market idea and opportunity, you really don’t know what the market needs until you talk to so many people that a high percentage of a large enough demographic jump out of their seat and say they must have it. Only when it’s abundantly clear what the product needs to do it, prospects are ready to sign to be customers, and there’s a big opportunity should work be started (e.g. talk to 100 people and 15 out of a demographic of 20 say it is a “must have”, then start work on it).

    As you can see, the big difference here is whether or not a simple product is started immediately and improved upon as more prospects are talked to vs talking to as many prospects as needed to find a clear market opportunity, and only then starting to build it. Most startups should do the second approach where no product work is done until a clear need is identified so that all the co-founders are focused on customer development and not distracted by product building, since they don’t actually know what the market needs. This approach is at the other end of the spectrum from building a product with tunnel vision for a year before coming up and talking to prospects, but it’s the right way to do it since time and money are so precious. As for the first approach where a product is started right away, it works well when the co-founders have extensive domain expertise in the market they’re going after and have experience first-hand with new product development. Both styles have their pros and cons and are much better ways than the traditional approach.

    What else? What are your thoughts on these two lean approaches in the 90 day startup accelerators?

  • Radical Workplace Ideas from 1993

    Recently I started reading Maverick: The Success Story Behind the World’s Most Unusual Workplace by Ricardo Semler, published in 1993. The author was born in Brazil, the son of Austrian immigrants, and inherited his father’s manufacturing business, Semco, at an early age. Not liking the traditional workplace style after several years of stress, Semler set out to build the most democratic environment.

    Here’s what the book publishers labeled the most radical ideas in 1993:

    • No dress code
    • No secretaries
    • Workers set their own salaries (based on budgets and department profitability)
    • Required vacation time

    It’s interesting to look back nearly 20 years and see three of the four highlighted items as things that are pretty commonplace today. 20 years from now I wonder what will be common in the workplace that’s considered radical today.

    What else? What are some other major changes in the workplace over the past 20 years? What’s going to be normal 20 years from now?

  • When to Hire the Next Sales Person

    Sales is the lifeblood of startups. Getting a sales machine humming along is one of the most difficult things for an entrepreneur to do, especially if they haven’t done it before. Assuming the VP of Sales temptation was defeated and a few sales reps are on board delivering results, how do you know when to hire the next sales person?

    Here are a few things to keep in mind when determining when to hire the next sales person:

    • What percentage of sales reps are currently making quota? Typically, 60 – 80% of reps should be making quota for any given quarter once you have product/market fit. With higher quota attainment, you likely need more reps.
    • What percentage of deals are from marketing-sourced leads vs sales-sourced leads? If sales-sourced leads are higher than 25%, you likely can support more reps.
    • How fast is the market growing relative to the startup’s revenue? Markets that are growing faster can often support more sales reps.

    There’s no magic formula for determining when it’s the right time to hire another sales person. Often, there will be diminishing marginal returns with each additional sales rep and it becomes clear when you have reached the limit.

    What else? What are some other things to think about when determining if it’s time to hire the next sales person?

  • Timing a New Market for Startups

    Timing a new market is one of the most difficult things to do in a startup. If you’re too earlier, there’s a serious chance you’ll run out of money or run out of energy by the time the market takes off. If you’re too late, which can be hard to tell, you’ll rapidly see a handful of competitors separate themselves from the pack and take disproportionate market share. Like Goldilocks and the Three Bears, you want to be just right.

    How do you time a market? From my limited experience, you want to be in the middle part of the early adopter phase and before the chasm has been crossed, but not at the end of the early adopter phase. Depending on how fast the market develops, this is somewhere between 4-7 years before the market becomes mainstream. A number of anecdotes are available regarding companies that were too early but had some notoriety (e.g. Friendster) while the market is shaking out and winners emerge (e.g. Facebook and Twitter) and other once high flying competitors are almost no more (e.g. MySpace).

    The next time you think about your market or a startup opportunity, ask yourself the following questions:

    • What percentage of the market has a vendor currently?
    • How fast is the market growing?
    • Do you have to replace an existing vendor or are you the first vendor a customer has ever had?
    • When will the chasm be crossed over into the early majority? How will you know? What will be the percentage of market adoption?
    • What position do you need to be in once the chasm is crossed to be relevant going forward (e.g. one of the three largest vendors, a certain number of employees, etc)?

    Timing a new market is one of the most difficult things to do and results in many startups going out of business or pivoting to find a market opportunity with better timing.

    What else? What are some other thoughts on timing a new market for startups?

  • The Startup Journey or the Startup Exit

    One of my favorite questions to ask entrepreneurs is “What’s your exit strategy?” Now, this isn’t because I actually want them to share with me an exit strategy, far from it, rather I want to hear that they don’t have a strategy and are looking to build an enduring business that changes the world. Or, at least solves a problem they really want to solve (candy, vitamin, or pain-killer).

    When an entrepreneur says that they want to sell the business in 24 months for at least $6 million, which is exactly what I heard from someone at a networking event tonight, I think to myself that that’s an approach to business I never want to be a part of. Yes, a number of entrepreneurs do operate this way, and some are successful, but it isn’t the norm and isn’t the most fulfilling.

    My favorite entrepreneurs are the ones that are focused on the startup journey, and not the startup exit. Self-actualization, from the world of Maslow’s Hierarchy of Needs, is the ideal goal. It takes time and a number of experiences to reach that understanding, and I wouldn’t even characterize myself as being there yet, but from what I’ve read and my limited experience, I believe it to be true. The happiest and most fulfilled entrepreneurs focus on the journey, and not an exit.

    What else? What are your thoughts on the startup journey and the startup exit?

  • Consider Alternate Job Titles When Recruiting

    Earlier today I was meeting with a couple entrepreneurs to talk through what is and isn’t working well with their startup. One of their challenges was on the recruiting front: they couldn’t find the right sales engineer. Only, they were calling it an application engineer. The position, based on the roles and responsibilities, could also be a support engineer.

    When recruiting, consider alternate job titles that have the same roles and responsibilities. Here are some items to keep in mind:

    • Job seekers look at job titles that are similar to what they are currently doing
    • Five startups can give the same position five different job titles
    • Roles and responsibilities can be exactly the same with job titles that vary wildly
    • Consider offering a fancier title to recruit someone earlier in their career as a perk for joining a startup

    Recruiting is tough, especially in the current technology boom. Look for ways to cast a wider net through alternate job titles.

    What else? What are some other ideas for using alternate job titles when recruiting?

  • Working with Contractors in a Startup

    Contractors are an important part of the startup world. Some people really enjoy the variety and nomadic aspect of being a contractor. Some people seek the higher pay and time-frame driven approach to a project or company. Contractors also work well when there are specific skills that are needed for a short period of time, making the hiring of a full-time person not available or not affordable. Whatever the case, contractors should be considered part of the startup mix.

    Here are a few recommendations when working with contractors in a startup:

    • Set clear expectations if this is a temporary-to-permanent type opportunity or purely temporary as well as responsibilities, goals, and desired results
    • Ensure that the contractor is putting in enough hours per week over enough months to be worthwhile due to time necessary to ramp up and become productive (e.g. you might want at least 15 hours per week for three months)
    • Incorporate tools like Google+ Hangout or Meetings.io into the process, especially if the contractor is working remotely (which is often the case with contractors)
    • Recruit and interview contractors in the same manner as team members so that there’s continued corporate culture alignment

    Contractors are an important part of the startup world and entrepreneurs would do well to learn how to incorporate them into the mix.

    What else? What are some other recommendations when working with contractors in a startup?

  • Warren Buffet’s 3 Commands for CEOs

    Warren Buffet is one of the most celebrated and successful investors of all time. Many of his musing has been recorded in books, articles, and posts over the years, especially content taken from his annual shareholder letter. Several of his essays were compiled into the book The Essays of Warren Buffet: Lessons for Corporate America several years ago, providing tremendous content for entrepreneurs.

    Warren Buffet has three commands for CEOs at Berkshire’s operating companies, which are especially pertinent for all startup CEOs. The commands, according to the book, are for the CEO to run the business as if:

    1. They are its sole owner
    2. It is the only asset they hold
    3. They can never sell or merge it for a hundred years

    Vinod Khosla drove this home yesterday with his post in the NY Times — Vinod Khosla: Maintain the Silicon Valley Vision. The Silicon Vally Vision, according to Khosla, and Buffet’s three commands for CEOs go hand-in-hand with long-term, big picture thinking and actions.

    What else? What are your thoughts on Warren Buffett’s three commands for CEOs?

  • Google+ Hangout Link for Repeating Events

    Google+ Hangout is a big part of how we communicate internally, or at least it was up until a couple months ago when Google disabled the permanent link. After the feature was removed, we had to generate a new link every time we met (daily check-in, weekly executive meeting, weekly all hands meeting, etc) creating quite a bit of friction and frustration because of the extra work and the fact that the link of each Hangout was obfuscated due to the hidden browser URL bar.

    Thankfully, with the new Google+ Events feature, there’s a nice permalink workaround, first published by the team over at Singly.com. The idea is that you create a Google+ Event far into the future, make it an online event, and then take the Google+ Hangout URL that is produced and use it over and over again until that date is met.

    Here’s how to do it:

    • Create a new event on Google+ Events
    • Give the event a date far into the future, like the year 2020
    • Go to Event options -> Advanced and click on Google+ Hangout
    • Save the event
    • Share the link to the Google+ Hangout on your repeating Google Calendar event

    This method isn’t as effortless as the previous approach but it works well and makes recurring Google+ Hangouts easy and frictionless.

    What else? What are some other tips for Google+ Hangouts?

  • Opportunistic Hiring All The Time in a Startup

    A popular question I get on a regular basis is “what positions are you guys hiring for now?” Previously, I’d enumerate a small number of outstanding positions that were top of mind. Now, I say that we’re opportunistically hiring for all major positions all the time. Our most common positions are software engineer, support specialist, services coordinator, and sales rep — we’re literally trying to hire as many as we can that fit our culture with no limit, other than office space, on the number of people.

    Early stage startups do well having opportunistic hiring for a few key positions, like engineering and sales, so that they’re always welcoming resumes and building a pipeline of potential candidates. Plus, if you go to the careers section of a startup site and it says they aren’t hiring for any positions, it gives you pause as to how well the business is doing. Early stage startups usually don’t have the resources to hire as many people as fit their culture, but they should always be on the look out for the tough-to-fill positions.

    Product-based companies work differently compared to consulting companies in that for a handful of roles, there are much greater economies of scale, especially in small, fast-growing markets with great potential. With consulting, everyone needs to have billable hours and it’s often difficult to balance internal staffing so that everyone is billable as unbillable team members on the beach/bench significantly diminish profitability of the firm. Consulting firms can have some level of opportunistic hiring but rarely like a growth-stage software startup.

    What else? What are your thoughts on opportunistic hiring all the time in a startup?