David Cummings on Startups

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  • Two Requirements for Success from The Advantage

    Patrick Lencioni’s most recent book, The Advantage, is one of the best business books published in the past year. Early on he argues that there’s two requirements for success in business:

    1. Smart – strategy, marketing, finance, and technology
    2. Healthy – minimal politics, minimal confusion, high morale, high productivity, and low turnover

    Most executives focus on the “smart” side of the equation because it is easier to deal with, taught in school, and believed to be the differentiating part of running a successful business. The reality is that the “smart” requirement is now much more of a given due to the availability of information, educational background of executives, and competitive nature of most markets in the Internet age.

    The “healthy” side of the equation is the one that isn’t given enough attention and over the next 10-20 years will become just as top-of-mind and worked on as the “smart” side. Entrepreneurs and executives that don’t embrace the “healthy” side will have more limited lifespans and outcomes compared to those that do. Some people will deride it as being fuzzy and a corporate culture ploy but in the end a strong corporate culture is the only sustainable competitive advantage completely within the control of the company’s leaders.

    What else? What are your thoughts on the two requirements for success from Patrick Lencioni’s book The Advantage?

  • Entrepreneurs Should Focus on One Startup and One Idea

    Last week I was judging the Global Student Entrepreneur Awards at the EO Nerve Atlanta 2012 conference. One of the student entrepreneurs presented his business and at the end said he was working on two other startup ideas the same time. Ouch, there a was big subtraction of points for lack of focus.

    Earlier today I was on a panel titled Startups Are Not Businesses Like Caterpillars Are Not Butterflies at the TiECON Southeast 2012 conference. One of the first questions from a guest in the audience was a conundrum about her two related startups and whether or not she should do one or both simultaneously. My response was direct: focus on one startup and one idea at a time.

    The risk for most startups is not whether or not you’ll fail, but rather will you fail fast enough to keep going if the idea isn’t the right one. Most initial ideas aren’t right, even though the area or market might be right, and not giving it enough attention means you won’t make enough progress to realize it won’t work and to find a related iteration or more comprehensive pivot that will work. More focus equals more progress which equals more chance for success.

    Now some people will point out successful parallel entrepreneurs that have multiple multi-million dollar businesses and say that they aren’t focusing on one startup and one idea. The reality is that they are focusing on one startup and one idea, but they’ve achieved enough scale with their organizations that they have senior executives 100% focused on an individual venture. So, while the entrepreneur might have multiple businesses, people within each business are exclusively focused on their respective business.

    What else? What are your thoughts on entrepreneurs focusing on one startup and one idea?

  • Extracting Talent from Large Companies to Work in Startups

    There’s a serious talent shortage right now for strong analytical and technical people. It’s a shortage for startups and established companies alike. Startups, inventing the future, are a much better place for the talent but it’s difficult to convince people that there’s a better, more exciting opportunity when things are good enough. People are generally averse to change.

    Startups, as a community, need a more concerted effort to extract talent from large companies. Here are a few ideas to start extracting more talent:

    • Work harder to target and invite developers to meetups around certain technologies or programming languages — one of the best ways to convince someone to change jobs is to talk to them in person about some common bond
    • Additional content marketing around tech talks, best places to work, and more so that people will be exposed to other corporate cultures that get them excited
    • Better articulation of the value of startups having more autonomy, mastery, and purpose
    • More highlighting that large companies aren’t as safe as people believe, with the recent Google office closing and Yahoo layoffs as prime examples

    Extracting more talent from large companies to work in startups will be hard. Very hard. For startup communities to thrive, especially in markets that are still aren’t mature, extracting more talent from large companies is one of the best things they can do.

    What else? What are some other ways to extract talent from large companies to work in startups?

  • Billboards and Startups

    Driving up and down the 101 in Silicon Valley you’ll see a highway littered with billboards for startups and established technology companies. Some of these billboards are advertising products and some are advertising job openings (“you could be at work now and commute less…”). With all the talk of moving off-line spending online, billboards in my city seem to be doing fine as there is no shortage of advertisers for them.

    Last week RippleIT put up a new billboard in a prime part of town to increase brand awareness in an area dense with attorneys and creative types. The goal isn’t necessarily to directly produce leads, although that would be nice, but rather to educate people on the brand so that they’re more likely to respond to an outbound call or referral.

    Interestingly, very few billboards have unique web addresses on them to track how many times people typed in the value.  Yes, some have QR codes, which is even crazier, but I would think short web addresses would be common by now. Perhaps billboard advertisers are less savvy or they know more than I do and don’t bother with unique URLs since no one types them in anyway.

    With the talent war and talent shortage in certain areas I suspect that we’ll start seeing more billboards for startups outside of Silicon Valley. Startups need to make a more concerted effort to extract smart people out of large companies so that they have the opportunity to be a part of something much more exciting. Billboards aren’t the only answer but they can be part of a comprehensive solution.

    What else? What are your thoughts on billboards and startups?

  • Business Idea: Career Fairs at Trade Shows and Industry Events

    Hiring A+ team members that fit your corporate culture is a serious challenge. In fact, talent is the most pressing challenge for almost all successful startups I know. Earlier today I was talking to an economic development person brainstorming ideas to help with the talent shortage and came up with a simple one:

    Business idea – A service that runs career fairs outside trade shows and industry events.

    Since the trade show and industry event attendees are already in the physical city for a specific event, it’s much easier for a local employer to try and sell them on the area and the position in person. Now, some interaction would need to be discrete as people that are gainfully employed don’t want to have their co-workers seeing them talk about a new job. The economics are easy based on the fees paid to recruiters to fill positions, especially specialized skills in high demand.

    Economic development agencies should be supportive as well since it’s much better for a company to employee someone locally instead of a in a different area so that all the taxes paid and money spent by the person go into the local economy. Yes, economic development is a zero sum game but it’s a game that’s still played on a regular basis.

    Trade shows and industry events have a unique, captive audience that should be tapped for talent by local firms. It isn’t the easiest or most direct form of recruiting but getting great talent is never easy.

    What else? What are your thoughts on the idea of a business that runs career fairs at trade shows and industry events for markets with sought-after talent?

  • Gathering User Feedback For An Established Product

    User feedback is critical for building a successful software product. As the product matures and becomes established, user feedback is easier to get, but can also become overwhelming with requests from so many different constituents. Here are some ideas for gathering user feedback for an established product:

    • Quarterly check-in calls by a client advocate or account manager to find out how things are going
    • Idea exchange with single sign-on so that customers can post ideas and vote on other ideas
    • In-app net promoter score where you ask once per quarter how likely they are to recommend the product
    • Regional user groups with a company team member facilitating
    • Annual users conference with significant customer interaction
    • Customer advisory board that does a quarterly conference call with the VP of Product Management

    Gathering user feedback with these methods is the easy part. The real challenge is organizing the information and combining it with your own vision and opinion for the product. Then, clearly communicating the direction and future functionality with the key stakeholders.

    What else? What are some other ways to gather user feedback for an established product?

  • Thoughts on Pardot as AJC #1 Best Place to Work

    Yesterday the Atlanta Journal Constitution named Pardot as the #1 place to work in the small business category (50 – 149 employees) — we couldn’t be more honored, humbled, and thrilled by the recognition. It truly is our greatest accomplishment as an organization and is also external validation of our goal to be the best place to work and the best place to be a customer. Our guiding purpose is to be a platform for good work, good people, and good pay with the people side being the most important. Good people to us are ones that are positive, self-starting, and supportive. Yes, it’s really that simple.

    Are we perfect? No, not in the slightest. We still have significant work to do around team member alignment, clarity of career paths, and leadership development. We do know some of our weaknesses and we’re working hard to make them better.

    Here are some of the things that we do well and that contributed to us being named the best place to work in Atlanta:

    • Amazing people that fit our culture (most important!) — we hire people that already fit our style and recognize that the way we operate isn’t for everyone
    • Great benefits — we pay full health, dental, short term disability, long term disability, and 401k with match for all employees combined with catered breakfasts daily, catered lunches on Fridays, all you can eat and drink snacks throughout the week, and free massage therapists on Fridays
    • Encourage work/life balance — we work standard 40 hour weeks, in fact, most people work from home a couple days a week to avoid traffic, run errands, etc
    • Constant communication — we aren’t afraid of meetings, but we do them with a purpose and consistent rhythm between daily check-ins, weekly tacticals, monthly strategics, and quarterly off-sites
    • Celebrate success — every quarter we have a big company-wide off-site event where we celebrate as a team
    • One page strategic plan — a simple one-sided document has everything

    One of the hardest things about this approach is that it limits our growth. We’re confident we could grow revenue much faster but we’d have to sacrifice our hiring standards and we’re not going to do it. Our long term bet is to build the best company, not the largest company. We’re going to do everything in our power to achieve that goal.

    The amazing people on our team deserve all the credit and I’m extremely proud of what we’ve built. We’re just getting started.

    P.S. We’re hiring!

  • Atlanta Startup Weekend 2012 Notes

    Tonight I had the opportunity to hear the final pitches at Atlanta Startup Weekend 2012 at Georgia Tech’s ATDC. The teams did a great job, especially considering they only had a weekend. With over 120 people, Atlanta Startup Weekend continues to be one of the largest annual startup events in town.

    Here’s a summary of the different projects:

    Wink (overall winner)
    – winkandlink.co
    – Meet friends of friends
    – Dating site
    – $2.1 billion industry, 1,500 dating sites
    – Use Facebook social graph
    – Matching through mutual friends
    – Target U.S. young-to-middle age
    – Freemium model
    – Daily deal affiliates sales to make money

    SceneFlow
    – Way to turn an idea into a fleshed out screen play for movie
    – Don’t worry about scripting formatting — it’s automated
    – Subscription service on a per-user basis
    – Collaborate with multiple people on the screen play
    – Script, scenes with description, list of scenes, WYSIWYG editor for the scene, multiple people can work in editor at same time from different browsers
    – Give me the script button generates a fully formatted Word Doc
    – API already available

    LoveBug
    – Mobile app for couples to communicate in a romantic and fun way
    – Communication is number one reason for breakup and divorce
    – Pair launched and quickly reached 100,000 downloads
    – Competitors: Facebook, Path, Pair
    – Fun games like quizes, voice notes, recommendations for products based on pins/likes

    SayRoom
    – Social space for people to capture 10 second audio bites
    – Serves the casual user as well as businesses to help share their short messages
    – Audio is stronger than text
    – iPhone app to record and broadcast audio
    – Emotion driven alternative to texting and Twitter

    Tuxedo
    – Weddings are $40B annually
    – Avg wedding is $25k
    – Making weddings easy, fun, social, and memorable
    – Text, images, audio
    – iOS initially
    – Stream view of the wedding

    ServicePunch
    – Manage your services and products
    – Avg household has 26 products that need regular maintenance
    – Car servicing, oil changing, home A/C filter, etc
    – Reminders by email, text, and voice

    FinishBig
    – Track, log, compare, and share your official race results
    – Target is the running enthusiast = 2 million runners
    – Runners want to track results plus more like weather, location, satisfaction, etc
    – Data is super valuable
    – Deliver recommendations for your own personal awesome sauce
    – @finishbigapp on Twitter

    OnSlyde
    – Real time audience interaction
    – @onslyde
    – Presenter performance, audience engagement, detailed analytics on presentation
    – Users include public speakers, sales professionals, professors

    BeanStock
    – Children’s educational game that teaches about money and financial management
    – $300M market for education apps and kids games
    – Gap in the market for kids learning about money
    – 60% of children ages 4-8 use apps
    – Targeting ages 5-9
    – Freemium — free app with $.99 per additional stage

    RealVision (came in 2nd place)
    – Commercial real estate software to analyze cash flow and value of properties
    – Argus is industry standard – $4,700/yr/computer – $90M revenue
    – Argus is out-dated and Windows 3.1 like
    – Idea is a cloud-based app with smart phone component for brokers, owners, and lenders
    – Test cash flow assumptions, sensitivity analysis, etc
    – http://www.getrealvision.co

    Real Time Today
    – Improve skills to get a better job
    – Find best candidate in the market
    – Current online recruitment sites have several issues
    – Settings to better match candidates

    Leave.im
    – Developers occasionally have to put on IT hat and help people
    – Fastest way to share files locally over WiFi
    – Browsers can geo locate so you know where the file is left
    – iOS mobile app ready
    – Can share photos and or any type of file
    – Files expire after an hour
    – Paid accounts to have the files last longer

    Splitango
    – Splitting costs is difficult
    – Trust is the main issue for co-ownership of property
    – Splitango handles the legal side of sharing ownership of property
    – People are interested in owning things with their friends
    – Meetup meets Kickstarter

    QuitFor
    – Mobile app to help people quit smoking
    – No comprehensive digital tools out there to help quit smoking
    – Key learnings: ready to commit, anonymity required, physical and mental distraction needed
    – Buttons: I smoked | I beat a craving

    Trustable.com
    – eBay reputation is a brilliant idea but it’s only on eBay
    – Single site to get reputation from all your sites and centralize it
    – Allows you to prove you say what you do
    – People are worried others will cheat the system

    Again, great job to the presenting teams.

  • Notes from SaaS Growth and the Cost of Capital

    SaaS Capital has some great resources for Software-as-a-Service (SaaS) companies with one of them being a white paper titled SaaS Growth and the Cost of Capital. ExactTarget in the 8x revenue club is a great example of the SaaS business model, which is one of my favorites. Here are some notes from SaaS Growth and the Cost of Capital:

    • 13 public SaaS companies tracked by Pacific Crest Securities have increased 40% in value from the beginning of 2008 to the beginning of 2011
    • Best valuations come from SaaS companies growing more than 25% annually in a large market
    • Main driver for valuations comes from revenue growth rate (not profit growth)
    • Three of the four fastest growing SaaS companies are spending more than 40% of revenue on sales and marketing
    • When today’s market leading SaaS companies were in expansion stage before going public they spent 60 – 70% of revenue of sales and marketing and took on outside investment
    • Cloud technologies are contributing to higher incremental gross margin for SaaS companies (along with Moore’s Law)
    • High-growth SaaS businesses are worth three to five times more than slow growth ones

    The author of the white paper really drives home the point that growth for SaaS companies results in a huge premium and should be seriously pursued.

    What else? What are your thoughts on SaaS growth and thd cost of capital?

  • Networking Advice for Entrepreneurs

    At the EO Nerve Atlanta 2012 event there were a number of breakout sessions. One of them was on networking and how to be a better networker, but not in the cheesy, low-value way. The main premise is that networking should always be about helping the other person and paying it forward, without asking for anything in return. Once some level of value has been provided inevitably the favor will get returned.

    When networking with someone it’s important to do the standard chit chat and then get to a comfort level where you can safely ask what’s the biggest challenge or opportunity they’re working through right now in their personal, family, or business. Once you have something concrete that they care about, there are two general recommendations:

    • Offer free help in an area that’s relevant to that issue, assuming you have legitimate expertise
    • Make an introduction to someone you know that can help the person with their challenge or opportunity

    So, it’s pretty simple: either help them directly with no strings attached or introduce them to someone else that can help them. It’s common sense but still really good advice to keep in mind.

    What else? What are some additional networking recommendations for entrepreneurs?