David Cummings on Startups

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  • Corporate Culture Book

    An idea we borrowed from Zappos several years ago is a corporate culture book. The book is a physical manifestation of our culture that sits prominently in our lobby on an ornate wood pedestal. In the book we’ve documented the history of things like Free Food Friday, inside jokes, and other aspects of the business so that new hires can get a better understanding of why we do the things we do. By being so visible in the lobby, it sets the tone for everyone in the office that corporate culture is out top priority.

    Here are some quick details on a corporate culture book:

    • Have all stories in the book come directly from employees
    • Invest in a high quality cover for it
    • Place it in a noticeable position
    • Update it on a regular basis
    • Encourage new hires to read and spend time with it

    A corporate culture book is a fun and powerful way to emphasize the importance of corporate culture.

    What else? What are your thoughts on a corporate culture book?

  • Watch Out for Someone in the Hallway When the Money Ball Exploded

    One of our Shotput Ventures speakers from three years ago gave a great talk about his experiences as an entrepreneur. About halfway through his talk he was giving advice about what to look for in a mentor and angel investor and he said a line I’ll never forget: watch out for someone who is rich because they were in the hallway when the money ball exploded. The idea is that some people had immense financial luck without gaining the experience of building a sustainable business because they were at the right place at the right time.

    Josh James, the co-founder of Omniture and Domo, sent a tweet out recently saying that sometimes success comes in spite of what you did and not because of it — pay attention to the truth:

    https://twitter.com/#!/joshjames/status/182546524973182977

    The next time you’re seeking a mentor or angel investor find out if they were in the hallway when the money ball exploded or if they were something else.

    What else? What are your thoughts on deciphering how success was achieved by someone?

  • Keepers of the Culture

    Strong corporate culture starts from the top with the co-founders. If the co-founders don’t emphasize corporate culture it’ll take on a life of its own, even more so than it already does. As the company grows, middle management will drive corporate culture if it isn’t pushed from the top, and the outcome can be fine but the only sustainable competitive advantage that’s completely controllable will be lost.

    When a company is starting out it’s important for the co-founders to interview and approve every new hire. Only A players hire A players. As the company gets larger, around 100-200 employees, it becomes much more difficult for the co-founders to be involved in all the hiring. At this point designated Keepers of the Culture should already be trained and at least two should be in every hiring process — exclusively assessing corporate culture fit.

    How do you train Keepers of the Culture? Easy, get them involved in the hiring process at an earlier stage in company growth and have them interview a significant number of potential hires and compare cultural fit with the notes from the co-founders. Only after the Keepers of the Culture and the co-founders opinion match 100% of the time are the Keepers of the Culture ready to carry the torch forward, and train future Keepers of the Culture.

    What else? What are your thoughts on Keepers of the Culture?

  • APIs Provide Unbelievable Power

    Application Programming Interface (API) is the term to describe a way for computers to talk to other computers in an automated fashion. Imagine your accounting software talking to your payroll software to cut checks, pay taxes, and facilitate 401k matching — that would be done via an API. APIs open up a world of unbelievable power due to the ability to control other systems as well as consume data, and vice versa.

    The famous Paul Graham of Y Combinator sent a tweet recently saying an API is self-serve business development:

    https://twitter.com/#!/paulg/status/171840230373081088

    Business development is traditionally slow, labor intensive, and often ineffective. With APIs acting as self-serve business development, companies can start integrating services or data from other providers and mashing it up with their own functionality. This way, they can build real enterprise value and let the market decide faster than humans trying to work out deals with other humans. APIs provide unbelievable power.

    The next time someone talks about building a new feature or developing their own data source, do some Google searching and see if an API is already out there — you might be surprised.

    What else? What are your thoughts on APIs?

  • Thinking, Fast and Slow for Startups

    Recently I started reading the book Thinking, Fast and Slow by Daniel Kahneman after an entrepreneur recommended it to me. Now the book is a tome packed with anecdotes and research by the author who won the Nobel Price in Economics. The idea is that the mind has two core systems as follows:

    • System 1 – the instinctive response that you immediately know (e.g. 2 + 2)
    • System 2 – the thinking that goes into a more detailed thought that takes time to answer (e.g. 17 x 12)

    Even though Kahneman won the Nobel Price in Economics there’s a significant amount of psychological and human elements that are fascinating with a number of behavioral economics items thrown in as well. As an example, if a person gets the option to flip a coin and can win $13 if they guess right and lose $10 if they guess wrong, they are less likely to take the bet at all due to loss aversion even though the weighted average is clearly in their favor. This applies to the corporate world where people don’t take risks for fear of failure. As for startups, those are the people that like the bet.

    If you enjoy psychology and economics I’d recommend the book.

    What else? What were your thoughts on the book?

  • Subtle Marketing That’s Effective

    Earlier today I was at the Atlanta Zoo with my little kids. We were at the playground area on the right just past the entrance hanging out on the short climbing wall. Five minutes in, the little train comes around the corner and proceeds to honk its horn several times. Naturally, all the little kids stop and wave as the train moves by followed promptly with asking their parents if they could ride the train. Was the train honking its horn with the kids there subtle marketing, general train conductor behavior, or both?

    In Atlanta there are a number of burrito places around town including Chipotle, Moe’s, and Willy’s. When I ask my son which one is his favorite (we frequent them all) he always says Moe’s. I ask him if the burritos are better — nope. I ask him if the chips are better — nope. I ask him why he likes it the best and he says he doesn’t know why. My theory why he likes it the best is that when he walks in the door the Moe’s employees always say “Welcome to Moe’s” and that enthusiastic greeting sets the tone for the rest of the experience. It’s subtle marketing that’s effective.

    The next time an experience puts a smile on your face or nudges you towards a buying event, ask yourself if the marketing was overt or subtle — it might just surprise you. Subtle marketing is some of the most effective marketing.

    What else? What are some other examples of subtle marketing that’s effective?

  • Basic Search Engine Optimization Tracking for Startups

    Search engine optimization (SEO) is a core part of most startup web marketing strategies. The content marketing component is talked about frequently with people cranking out blog posts, articles, white papers, ebooks, webinars, and more. Along with content marketing is the SEO work for on-page and off-page factors, inbound links, etc. To understand the results and progress on these efforts it’s important to do some basic tracking of data.

    Here are some basic search engine optimization tracking items for startups:

    • Keywords – the search engine ranking position (SERP) of the most important search terms should be tracked for your site on both Google and Bing/Yahoo
    • Competitors – common information like the number of Google indexed pages, the number of inbound links, traffic rankings, and more should be tracked for your site and your competitors’ sites
    • Keywords of Competitors – how the competitors’ rankings compare to your rankings for keywords as well as the keywords competitors rank well for should be tracked

    There are an unlimited number of data points that can be tracked around SEO but focusing on keywords and competitors is a good, simple start.

    What else? What are some other basic search engine optimization items that startups should track?

  • Why Big Companies Buy Small Startups

    Last month LinkedIn ($9.3 billion market cap) bought Rapportive for $15 million, which according to LinkedIn (naturally), has less than five people (LinkedIn Rapportive search). Rapportive, which is a great product that I use daily, is a dedicated Gmail plugin that takes the email address of the To: or From: address and shows social information like profile photo, recent tweets, links to Twitter/LinkedIn/Facebook profile, and more. It’s an awesome tool.

    Now, why would LinkedIn pay $15 million cash for a Gmail plugin that on the surface looks like the LinkedIn piece could be written in one week by a talented developer?

    Here are some reasons why big companies on occasion pay good money for small startups:

    • Time to market – Rapportive already has a raving fan base that loves the solid product
    • Talent acquisition – The Rapportive co-founders have built a killer product and likely have ideas for many more ways to make the product better with additional resources supplied by LinkedIn (or LinkedIn wants the talent to spearhead the development of a new product)
    • Competitive preemptive move – If LinkedIn didn’t acquire them someone else that’s trying to be more social (Google?) might pick them up
    • Cost of capital – If LinkedIn is sitting on a ton of cash or has a low cost of capital, which it does due to the large market cap and lack of leverage, putting the money to use immediately, even at premium, helps the company grow faster and create more enterprise value

    With engineering resources scarce, and new product development tough (I’ve seen it fail twice inside a small company), big companies buy small startups to get a proven commodity that is already successful.

    What else? What are some other reasons why big companies buy small startups?

  • The Incubator Approach and Startups

    Earlier today I had the opportunity to meet with another entrepreneur in town that I hadn’t met before. We got to talking about what his ideal role would be once he made his FU money and he said it was to build a startup incubator or lab that created a number of companies where he helped get them off the ground but someone else would run them.

    Interestingly, a story came out today where Kevin Rose, founder of Digg, took the acqui-hire route and sold his incubator to Google after their first product wasn’t successful. Rose is a guy who made his FU money, started a product incubator, and has now moved on to a giant company.

    Here are some pros and cons with the incubator approach to startups:

    • Idea to product won’t take much time at all since there aren’t any legacy customers to slow things down
    • Hockey stick-like revenue growth often occurs several years in, assuming things are successful, so if you start five or 10 companies simultaneously, you still have a long time to see good cash flow even after killing the ideas that aren’t working
    • Some startups are successful because they hang around a market long enough to find the pot of gold but with an incubator the staying power is less likely
    • Timing a market is one of the most difficult things to do, so building multiple startups at the same time increases the chance that the timing for one of the markets is right

    Idealab (great video) is one of the most successful incubators ever and should be closely studied by anyone thinking about doing their own startup lab. Building a successful incubator is hard, and I believe it’s even harder than building a successful startup (successful startup defined).

    What else? What are your thoughts on the incubator approach and startups?

  • Thinking Big or Thinking Small

    Earlier today I was talking with a friend about startups. He commented that most entrepreneurs have a tendency to think small in the grand scheme of things. The context for this part of the conversation was scaling a sales team from 10 sales reps to 100 sales reps. Often, an entrepreneur that currently has five or 10 sales reps sees 100 sales reps as massive, and to them its thinking big. If Groupon had stopped at 100 sales reps they wouldn’t have grown nearly as fast.

    Today, Groupon hires 100s of sales reps per month and has several thousand sales reps on staff — all hired in the past couple years. Think about it for a second — Groupon believed that the market opportunity was large enough, and growing fast enough, to support a literal army of sales reps. Alibaba, based in China, has one of the largest direct sales force in the world with tens of thousands of sales reps — that’s thinking big.

    The next time you’re dreaming big, ask yourself if’s truly big, and take it out to a magnitude (10x) larger and see how that feels. Are you thinking big or thinking small?

    What else? What are your thoughts on thinking big or thinking small?