David Cummings on Startups

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  • Characteristics of an Anchor Technology Company

    Strong startup communities need to have anchor technology companies in town for a number of reasons. The idea is that anchor technology companies provide large-scale success stories for the area, import talent from outside the region, and directly support a number of functions in the community. In addition, anchor technology companies generate large amounts of press, get attention from outside the city, and have significant influence due to size and scale. So, we know that anchor technology companies are important, but what are some of their characteristics?

    Here are a few characteristics of anchor technology companies:

    • Significant number of high paying jobs in the city (greater than 500)
    • National or international recognition in the press
    • Support for the community through events, talks, donations (greater than $100,000/yr), etc
    • Willingness to buy from or work with smaller technology startups
    • Serious wealth creation (often monetized via an IPO)

    Putting hard metrics and definitions on the characteristics of an anchor technology company is difficult. You’ll know it when you see it and the value is immense.

    What else? What are some other characteristics of an anchor technology company?

  • Employee, Customer, and Investor Pyramids from Peak

    Continuing with yesterday’s post Self-Actualization as a Startup Outcome, I wanted to highlight a few more items from the book Peak: How Great Companies Get Their Mojo From Maslow by Chip Conley. The author does a great job adapting Maslow’s Hierarchy of Needs into a simplified form for employees, customers, and investors. I believe that employees come first, as he states as well, especially since everything starts there. Yes, you need cash from customers to pay the bills but long-term success is driven by putting employees first.

    Here are the three pyramids outlined by Chip Conley:

    Employee Pyramid

    •   – Meaning –
    •  — Recognition —
    • — Money —

    Customer Pyramid

    •   – Meets Unrecognized Needs –
    •  — Meets Desires —
    • — Meets Expectations —

    Investor Pyramid

    •   – Legacy –
    •  — Relationship Alignment —
    • — Transaction Alignment —

    As you can see, what people normally think of for each category is really just the basic foundation to be in the game, and everything else builds on top of that.

    What else? What are your thoughts on the employee, customer, and investor pyramids from Peak?

  • Self-Actualization as a Startup Outcome

    Recently I started reading Peak: How Great Companies Get Their Mojo From Maslow by Chip Conley after a friend of mine sent it to me in the mail unannounced. Chip Conley is the founder of Joie de Vivre Hospitality, which is one of the largest boutique hotel firms in the country. I had the opportunity to meet Chip in 2006 at a Baltimore conference on delivering great experiences where he talked about the importance of corporate culture and employee development. At the time, I didn’t believe in corporate culture as the guiding principle, as I do now, but I remember Chip as being thoughtful and engaging.

    In the book Peak, Chip articulates my shared belief that companies are one of the best vehicles possible to change the world for the better by helping employees achieve their full potential at work and in life. Wikipedia defines self-actualization from writer Abraham Maslow as the following:

    The desire for self-fulfillment, namely the tendency for him [the individual] to become actualized in what he is potentially.

    Much like startups are a vehicle to build community leaders, startups are also vehicles to help people maximize their potential and really push the limits of their capabilities, in a good way. Startups, unique from many other work environments, empower employees to wear different hats and work on a wider range of projects when compared to a traditional company. This exposure, and the corresponding challenges, increases the likelihood that the team member will find what they enjoy doing, stretch them to get better, and result in more self-fulfillment. It doesn’t always work out, but for people it does, the startup helps in their self-actualization journey.

    What else? What are some other ways self-actualization can be the outcome of a startup?

  • Pricing Options for SaaS Products

    Software-as-a-Service (SaaS) is an amazing way to deliver a product for many reasons, one of which is that there’s almost no marginal cost save for hosting bills and customer service. With high gross margins generally, there’s a fair amount of flexibility in how the service is priced.

    Here are some of the more common pricing options for SaaS products:

    • Per user that uses the system with pricing differentiation based on type of user (e.g. an administrator user would be more expensive than a report viewer user)
    • Per module used (e.g. based on functionality)
    • Per instance of a type of object used (e.g. based on how many of X are used, like projects managed or emails sent)
    • Per transaction (e.g. a percentage of a deal, like how eBay does)

    There’s no right or wrong answer, but in general, pricing should be kept as simple as possible while also representing the value delivered to the customer.

    What else? What are some other pricing options for SaaS products?

  • Strong Corporate Culture Must be Cared Deeply About by the Founders

    @melonakos tweeted a link earlier today to The Culture Myth where the author covers a number of importants points about corporate culture. Corporate culture is a part of life in all companies. Some companies embrace it, talk about it, care about it, and actively work to improve it. Most companies do little about corporate culture and let it manifest itself in an unintentional manner.

    The strongest corporate cultures are cared deeply about by the founders from the early days with formal and informal efforts to make the best culture possible infused throughout everything the startup does. A strong corporate culture doesn’t mean it’s the best culture for all companies, but that it’s the best culture for that one specific company — one that passionately believes in it and works to make it great.

    It’s extremely hard to retrofit an existing company that hasn’t had a strong, cohesive culture from the start. It can be done but plenty of people will have to be fired, incremental changes will need to be made to processes, and the reorienting to focus on culture needs extensive buy-in. If front-line team members care about culture and the executive doesn’t, the culture won’t be strong. The founders and executives need to care deeply about the culture for it to be strong.

    What else? What are some other reasons a strong corporate culture must be cared deeply about by the founders?

  • Trading One-Off Revenue for Scalable Revenue

    One of the challenges entrepreneurs have is finding the balance between one-off revenue, like consulting services, compared to scalable revenue, like recurring Software-as-a-Service (SaaS) revenue. When times are tight financially, or it’s a bootstrapped startup, one-off revenue can become a necessity and highly desirable to get cash in the door.

    Entrepreneurs need to continually ask the hard questions internally about what scalable revenue is being sacrificed for one-off revenue.

    There’s no simple formula for determining when to give up one-off revenue in lieu of harder, scalable revenue. As the business grows and gains momentum, more opportunities arise for one-off revenue. Customers will ask for more consulting services, potential partners will reach out about one-time opportunities, and so on. When revenue sources arise, stay opinionated about what does, and does not, fit with the long-term vision.

    What else? What are some more examples of trading one-off revenue for scalable revenue?

  • Annual Think Big Question for Entrepreneurs

    Bootstrapping technology entrepreneurs are a special breed, especially once they cross the desert to profitability. There’s a real challenge that occurs when attempting to shift away some of the scrappiness inherit in a bootstrapped culture to being more aggressive with resources so as to maximize growth. Here’s one question I like bootstrapped startups to think about annually:

    Where would you direct your resources if you had an extra $1M/$10M/$100M that you had to spend in the next 18 months?

    Thinking bigger, especially when it comes to resources and money, isn’t done frequently enough with bootstrapped startups. With this question, the goal isn’t to encourage entrepreneurs to go about raise institutional money, rather, the goal is to stretch the mind and contemplate putting a significant amount of money to work in a short period of time  in new ways. Thought-provoking questions like this are good for entrepreneurs on a regular basis.

    What else? What are some other questions bootstrapped entrepreneurs should think about annually?

  • 5 Highlights of the Atlanta Technology Community

    With the Atlanta TechCrunch meetup next week on July 9th at Sweetwater Brewery, it’s a good time to talk about five highlights of the Atlanta technology community. The technology community has improved tremendously over the 10 years that I’ve been here, with social media and general maturation being a big part of it.

    With social media, especially Twitter, ideas spread faster and conversations are public. Several years ago the Atlanta technology community had more of an old boys network feel where it mattered who you knew and introductions were critical. Now, events like Startup Riot bring together hundreds of people on a regular basis and the hot startups are highlighted at the event as well as over Twitter, where the community participates.

    Here are five highlights of the Atlanta technology community:

    • ATDC – the oldest and most prestigious publicly funded technology incubator that supports over 400 startups
    • Flashpoint – startup engineering accelerator sponsored by Georgia Tech that takes teams through a 90 day program
    • Atlanta Technology Angels – member-lead organization that is actively doing seed stage and early stage deals
    • Venture Atlanta / Startup Riot – Venture Atlanta is the largest annual venture conference in the Southeast and Startup Riot is the largest annual seed stage startup conference in the Southeast
    • Georgia Tech – the largest engineering school in the country, based on number of engineering graduates per year, and in the top five academically

    As of July 4th, 2012, 778 people are signed up for the Atlanta TechCrunch meetup. Think about that for a second — there’s a good chance 1,000 people will sign up for a single tech startup event in Atlanta. Impressive! There are fewer than a dozen cities in the United States that would have that kind of volume for a tech startup event.

    The Atlanta technology community has made amazing progress in the past 10 years, and still has a ways to go. Things like anchor billion dollar technology companies, more risk-loving seed stage capital, and many more success stories will help Atlanta get to the next level. Thankfully, a strong foundation is already in place and getting better every day.

    What else? What are some other highlights of the Atlanta technology community?

  • Balancing Product Expectations with Constituents

    Software-as-a-Service (SaaS) is great from an engineering perspective because of the economies of scale from a low-friction release process (release early and often!) as well as controlling all aspects of the datacenter/cloud servers (more time is spent on the product instead of issues outside of your control found with installed enterprise software). With great power comes great responsibility. One of the biggest challenges is balancing expectations from all the different constituents involved like customers, marketing, sales, prospects, analysts, etc.

    Here are a few tactics for balancing product expectations with constituents:

    • Find the right trade-off between committing to certain features with a timeline and maintaining the flexibility to quickly adjust the priorities
    • Consider using tools like an idea exchange (e.g. UserVoice) so that customers can submit and vote on features they want
    • Develop a customer advisory council and solicit feedback from them in-person or over the phone once per quarter
    • Share a product vision and high-level future features once per year at a user conference

    Balancing product expectations with constituents is difficult. With so many different demands and opinions it’s challenging to make everyone happy. The key isn’t that everyone needs to be happy, but rather that the product has a strong vision in general and everyone understands where things are headed and why it’s headed there. Clarity and direction is key.

    What else? What are some other tactics for balancing product expectations with constituents?

  • When Tuck-in Acquisitions Make Sense for Startups

    While we haven’t done any tuck-in acquisitions, I’ve talked to a number of entrepreneurs who’ve made small acquisitions for their startups with success. Tuck-in acquisitions, by their name, are smaller acquisitions that open up new opportunities or jump start a strategy change. The idea with these types of acquisitions isn’t to bet the farm, but rather to take advantage of an opportunity.

    Tuck-in acquisitions make sense for a variety of reasons:

    • Key employee talent is desired and the tuck-in acquisition brings it on board (e.g. an acqui-hire)
    • Cross-sell/up-sell of an existing customer base with little risk
    • Startup wants to introduce a new product without distracting the core engineering team working on the mothership
    • Time to market for an opportunity that is moving quickly
    • Geographic expansion, especially if an office is desired in a certain city

    Tuck-in acquisitions, even if it is acquiring assets, are a good way for startups to grow faster and do it in a way that is more of a known quantity. Time and money are always constraints making tuck-in acquisitions more desirable if the capital or equity is available.

    What else? What are some other reasons tuck-in acquisitions make sense for startups?