David Cummings on Startups

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  • 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?

  • Notes from Mike McQuary at EO Nerve Atlanta 2012

    EO Nerve Atlanta 2012 kicked off today and was a big success. The theme is Dream | Challenge | Lead and the events to support it have been excellent. First thing this morning we were inspired by Dr. Martin Luther King’s “I Have a Dream” speech in video and live re-enactment form. After that we heard from the CEO of a NYSE company followed by Mike McQuary, the co-founder of Mindspring/Earthlink as well as Wheego, one of only three companies in the United States to have a completely electric car on the market today.

    Here are some notes from Mike McQuary’s talk at EO Nerve Atlanta 2012:

    • Mike was sleeping on the floor of the studio apartment of Charles Brewer when Charles quit his job and said he wanted to start a company based on a strong culture of people that he liked, and the business idea didn’t matter
    • Mike was the operations guy and Charles was the visionary for Earthlink, which grew to thousands of employees in only a few years
    • Org charts should be flipped upside down whereby the leaders are serving the employees
    • Don’t have offices or reserved parking spots as that creates unnecessary hierarchy
    • Mike personally interviewed the first 1,000 Mindspring employees for corporate culture fit
    • Earthlink hired people who were passionate about helping other people, and then trained them on the skills
    • Integrating Earthlink and Mindspring into one company was the hardest thing because the cultures were very different
    • Mike walked away from Earthlink when he realized he’d regret not spending time with his four little kids
    • As leader be careful what you say because it’s taken differently
    • Make sure you have hard metrics to measure success
    • Wheego was started after Mike saw the documentary Who Killed the Electric Car and heard the sound of the voice of customers who were passionate about the product, just like his customers at Earthlink

    Mike did a great job sharing anecdotes and advice from his entrepreneurial experiences. Mingspring was a massive success and I hope Wheego turns out the same way.

  • Email is Your #1 Security Weakness

    When people think of cyber security and identity theft one’s email account doesn’t come up nearly as often as it should. An email account is the number one security weakness for 99% of the startups out there. Just think about the “Reset Password” option for the sites you use on a regular basis — online banking, QuickBooks Online, Amazon.com, Google AdWords (a savvy bad guy can run up your bill driving traffic to an affiliate program in China), etc.

    Jeff Atwood’s recent post Make Your Email Hacker Proof recommends the same solution I recommend and use personally.

    All startups should use Gmail with two-factor authentication enabled for personal and business email. Yes, it makes it more annoying to sign into Gmail from a random laptop but it’s totally worth it. The idea is that you sign in like you normally would with a standard password and then you use a separate program on your smart phone (or get a number texted to you) that has a random second password. This second password is the key since it is much harder to steal as it changes every 60 seconds and is created on the fly.

    If your email account contains important information or is connected to another account that’s important, and has a “Password Reset” function, Gmail with two-factor authentication is the way to go.

    What else? Do you agree that email is your #1 security weakness?

  • Thinking About Sales Rep Compensation Plans

    Sales rep compensation plans are super important and super challenging. There’s a necessary element of incenting the right behavior while keeping things straightforward and easy to understand. Too often companies make the compensation plan a tome with a corresponding Excel file required for some spreadsheet jockeying just to understand the different commission levers.

    Here a few ideas to keep in mind when developing a sales rep compensation plan:

    • Incent the right things — not all revenue is created equal so consider gross margin, profit, etc when incenting results
    • Make the commission policy easy to understand — money is one of many motivators so make it clear how things work
    • Don’t pay full commission unless quota is attained — quota is the minimum a rep should do and should be readily attainable by the right person
    • Don’t cap commissions — why companies do this is beyond me
    • Always have a timely plan — it’s demoralizing to reps to say the plan is changing but then to not deliver it when the year starts
    • Recognize the stars — provide additional awards, incentives, etc for the top performers
    • Align commission payments with revenue received — once the company gets paid the rep should get paid
    • Strive for plan stability — Constantly changing the comp plan can be demoralizing so try to minimize changes and maintain consistency

    Sales rep compensation plans are challenging but by following the keep it simple approach, customer interests, company interests, and sales rep interests can all be aligned.

    What else? What are some other ideas for sales rep compensation plans?

  • Team Members Scaling From Front Line to Executive

    When a company is just getting started it’s critical to get ‘A’ players on board that are excited to roll up their sleeves and do whatever it takes to be successful. As the startup grows and matures, one of the most difficult things is developing the early team members to scale as the business scales. It’s super tough to go from front-line team member to an executive managing a fast-growing department.

    Here are some items to look for in team members that aspire to scale as the business scales:

    • Executive presence – a level of confidence and professionalism that reflects strongly on the company
    • Penchant for bigger-picture thinking – getting the job done is great but successful executives need to be thinking about long-term strategies, metrics, and ways to improve
    • Strong communication skills – in-person discussions, team meetings, and conference calls should be productive and facilitated in an effective manner (great public speaking skills are a nice bonus)

    As team members express a desire to scale with the organization, set proper expectations and ask hard questions regarding their ability to deliver as an executive at the next level.

    What else? What other thoughts do you have on team members scaling from front line to executive?

  • Raising Limited Money to Get Key People Formally Involved

    Most startups should not raise money. Some exceptions include when it’s a winner take all market (like eBay), winner take most with a huge valuation boost (like Salesforce.com), or very capital intensive (like a hardware business). In this context “raise money” means the traditional large sums of money over multiple rounds approach. There’s another  approach that isn’t talked about as frequently: raising limited money to get key people formally involved.

    By raising limited money you might sell 2 – 10% of the business to get key people participating instead of the traditional 20 – 40% (usually 30%) per round, not because you need the money but because you want them formally involved. You might say you could do that through board seats or advisors — you could, but it’s better if they have some skin in the game through a formal investment as well as the board/advisor participation.

    The next time you want to get a person involved in the business for a long time, and you’re not raising money, consider raising money from them as a way to align interests and formalize the relationship.

    What else? What are your thoughts on raising limited money to get key people formally involved?

  • Sales Rep Metrics for Startups to Track

    Hiring and managing a successful B2B sales team is one of the hardest things to do for technology entrepreneurs. In a previous post, Milestones for New Sales Reps, there were four simple sales metrics to track: call conversations logged, demos completed, opportunities created, and deals won — those are pretty straightforward. As the sales department matures, there are a number of additional metrics to track.

    Here are some sales rep metrics for startups to track:

    • Calls:
      No message left
      Voicemail
      Conversation positive
      Conversation neutral
      Conversation negative
    • Demos:
      Demo 1 Scheduled
      Demo 1 Completed
      Demo 1 Missed
      Demo 2 Scheduled
      Demo 2 Completed
      Demo 2 Missed
    • Opportunities:
      Opportunity created
      Opportunity won
      Opportunity lost
      Revenue booked
      Average days till closed / won
      Lost opportunity revenue
      Competitive opportunity

    This isn’t an exhaustive list but it’s a good start for understanding on a more detailed level how sales reps are performing. These should be measured on a monthly and quarterly basis as well as rolled up team and department-wide.

    What else? What are some other sales rep metrics for startups to track?

  • Quick Management Exercise for Startup Team Building

    In the book The Advantage, Patrick Lencioni argues that one aspect of organizational health is management trust and connectedness. Many management teams don’t have enough trust and rapport amongst each other and that shows when they’re focused on achieving personal and department goals while sacrificing company-wide goals. In order for management to work better together they need to understand more about each other on a personal level.

    Here’s a quick management exercise for startups to help get to know each other better in 20 minutes by each person answering the following questions:

    • Where were you born?
    • How many siblings do you have?
    • What was your birth order?
    • What was the most difficult or challenging part of your childhood?

    Obviously the last question is the most difficult, and the most insightful, for getting to know someone better. The next time you’re looking to building connectedness, try out this exercise.

    What else? What are your thoughts on this quick management exercise for startup team building?