David Cummings on Startups

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Challenges Productizing a High-End Service Offering
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Today I had lunch with a successful entrepreneur that bootstrapped and sold his first company five years ago and is in the middle of his second startup. His second company, much like his first, uses his domain expertise around a complex problem where he sells annual contracts with a combination of consulting, customized product, and data. Being so services intensive, the offering requires a minimum six-figure annual contract, thereby limiting the companies he can go after. Now, in order to grow the business, he wants to productize the offering, make it more self-service, and sell it at a lower price point.

Here are a few of his challenges:
- The offering is so specialized he’s worried about making it usable as a turn-key product
- He’s done all the selling to date, wants to hire a sales rep, but hasn’t had good experiences hiring sales people in the past due to a lack of results
- The lower-end market is more competitive and commoditized, but still has opportunity for growth
His goal is to build an enduring, sustainable business with a strong corporate culture. Productizing a service is extremely difficult, but with his timeline and resources he’ll be successful.

What else? What other challenges have you encountered productizing a service?
May 24, 2011
How our Culture is Different
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Today I took six of our new hires out to lunch. I try to take new employees out to lunch within their first month of starting and I also do a monthly cross-functional lunch with team members I don’t work with on a regular basis. The goal with the lunch is for people to get to know each other in a more casual setting outside the office. At lunch I do two simple conversation starters: tell us about your background and how is our corporate culture different from your previous company.

Here are a few of today’s responses to the question of how our culture is different:
- Training was more comprehensive and hands-on
- The other sales team members genuinely want to help each other and aren’t looking to split commissions for their help
- There’s not as much pressure and craziness to get new product features out the door
- People genuinely love coming to work
- Co-workers hang out with each other after work
This question about corporate culture is important because often times people don’t think about their corporate culture consciously, but rather they think of what they like and don’t like about their company. Talking about corporate culture, and using those two words, makes it more meaningful and easier to stress how critical it is to everything we do.

What else? How is your corporate culture different from other places you’ve worked?
May 23, 2011
Defining the Word Entrepreneur

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Last Friday I had the opportunity to spend time with a PhD student working on her thesis research. She’s collecting information from serial entrepreneurs to develop new academic theories around the traits most correlated with repeat entrepreneurs. Along with asking questions like how do I define startup success, trigger descisions that lead to success, and more, she asked how I define the word entrepreneur. Here’s what I said:

An entrepreneur is a person who takes considerable risk assembling resources and people to build something new.

After thinking through it, giving my definition, and talking more, I wanted to read the dictionary.com definition:
1. a person who organizes and manages any enterprise, especially a business, usually with considerable initiative and risk.
2. an employer of productive labor; contractor.

It’s interesting to note that the dictionary definition regards managing with initiative an entrepreneur. I would regard that as an ambitious executive executive and not an entrepreneur. For me, the key entrepreneurial tenet is risk taking and the uncertainty of doing something new.

What else? How do you define the word entrepreneur?

May 22, 2011
Firing ‘A’ Players in a Startup

Jason Evanish’s tweet tonight prompted this blog post:

http://twitter.com/#!/Evanish/statuses/72013770720935936

One of the hardest things to do in a startup or regular company is to fire an ‘A’ player. I’ve had to do it a couple times and it is extremely painful. Jack Welch says that if you have a high performer that doesn’t buy into the corporate culture you should do a public hanging.

The better you hire the less you fire. We’ve continued to improve our hiring process over the years and are in a good spot now. Do we still make mistakes? Yes, definitely. The good news is that we’re strict, and we’ve trained many of our team members in the process — the results speak for themselves.

When we started to ramp up our hiring 12 months ago team members, being really nice people, would say ‘yes’ to most candidates because the candidates were nice people — not because they fit our core values. As the candidates that reached me got turned down, each one provided a good training session to explain to my team members which core value(s) weren’t met and how that was revealed. The end result was much better screening of candidates.

Firing ‘A’ players is a necessary part of a startup, and should not be taken lightly. It is one of the hardest things to do as an entrepreneur and leader, but also a great learning experience for the team members on the bus.

What else? What other thoughts do you have about firing ‘A’ players in a startup?

May 21, 2011
SaaS Metrics Resources
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Yesterday I had lunch with the CEO of one of the most successful SaaS startups in Atlanta. They have well over 100 employees and are on a path to IPO in the next 36 months. Towards the end of the lunch we got to talking about Software-as-a-Service (SaaS) metrics and which ones we track in our firm. One of the great parts of SaaS is that the predictability of the business also provides for easy management of metrics and forecasts.

Here are some of the best SaaS metrics resources:
These SaaS metrics resources are a powerful way to understand the dynamics of the underlying business and should be studied by management teams of SaaS startups.

What else? What are some other resources for SaaS metrics that you like?
May 20, 2011
Offshore Labor for Administrative Tasks
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Many people have heard of Tim Ferriss’ The 4-Hour Workweek, or at least the concepts: most of the “work” people do is administrative, so outsource/offshore it to focus on what you do best. Well, much of that applies to entrepreneurs who are trying to squeeze more hours out of the week. An executive assistant is often too expensive for early stage entrepreneurs so they end up doing many administrative tasks by hand. Outsourced/offshore labor is great for freeing up time and doing tasks that seem simple but can be burdensome.

Here are some example administrative tasks for offshore labor:
- Build lists of information you want (e.g. say a site has a directory of 1,000 companies listed on it and you want to call them all — put up a job on oDesk.com for $50 for someone to build a Google Spreadsheet by hand of those 1,000 companies including contact information, company size, city, state, etc)
- Research the best flight and hotel options for a tradeshow
- Perform online research projects
I like to remind people that 50 cents an hour is a middle class wage in many countries. Entrepreneurs, even ones bootstrapping with little resources, will do well to start learning how to maximize their time and offload administrative tasks to other people that have a comparative advantage.

What else? What are your experiences using offshore labor for administrative tasks?
May 19, 2011
The Power of APIs

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Applications Programming Interfaces, or APIs, enable applications to talk to other applications in an automated and structured fashion. They are powerful. Extremely powerful. Thinking through the advent of technological development we’re now entering a phase where robust, generally available APIs allow for significant new opportunities. It is much easier to mash up disparate data sources to provide new products that deliver results better, faster, and cheaper.

In the same way cloud computing has changed the equation for scaling web apps, APIs are changing the speed with which apps can be developed. There are off-the-shelf APIs for a number of things like sending emails, looking up WHOIS info, connecting to Google AdWords, connecting to Amazon Web Services (that’s right – use APIs to scale up or down your cloud computing tools), validating a postal address, processing a credit card, finding your friends on Facebook, and many more. What we’re seeing is a proliferation of specialized services that interact with existing apps or provide niche data and tools.

Traditionally, a developer would have to build something internally, most often coupled in a monolithic fashion, and then maintain it over time. Now, with APIs, specialists can do what they do best and other apps can focus on adding value as opposed to writing more code for something that is now readily available. APIs are extremely powerful and need to be understood by tech entrepreneurs.

What else? What are some other powerful aspects of APIs?

May 18, 2011
User Experience Testing with Skype Screen Sharing
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One of the simplest, cheapest, and most effective user experience and product testing things you can do is with Skype screen sharing. It works so well because the person on the other end shares their screen, and with Skype you can’t take control of their desktop, so you can only watch what they do. The key is to ask them to accomplish tasks on a generic level (e.g. create a new blog post) and sit back and watch them work. You’ll be amazed at what you notice and value you gain from the questions they ask — they don’t have the same tunnel vision you do being so passionate about your application.

Here are some quick tips for user experience testing with Skype screen sharing:
- Don’t share your screen with them — make them share their screen and walk through things on their own while you watch
- Ask them to accomplish tasks and take at least 60 seconds after they get stuck before helping — them getting stuck and trying different options is great UI feedback
- Once you’ve had them go through different tasks, then take them through the product and go over the most important features describing the functionality — this is a cathartic exercise in that talking through it out loud with someone who hasn’t seen the app before helps you personally see new issues
- Do this with a new person on a weekly basis and then move to monthly as the product matures
One-way Skype screen sharing is the digital equivalent of one-mirrors for user testing — only it is free and significantly easier. My recommendation is for entrepreneurs and product managers to incorporate this into their product development process.

What else? What are some other tips for user experience testing with Skype screen sharing?
May 17, 2011
Leadership is not Speaking Over Others

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Back in 2004 I was at a prospective customer’s office in Buckhead down by the old Roxy Theater pitching our product with my lead developer. As an excited entrepreneur I was talked a mile a minute going through the minutia of every little feature in the application. The lead developer, proud of his creation, would answer some of their more detailed questions and I would interject with my spin on the response. This continued throughout the meeting and by the end I was proud of myself for answering all their questions. Little did I know me speaking over the developer and cutting him off was disrespectful and poor leadership.

Later in the week the developer approached me and told me what I had done and how frustrated he was with me. Wow, it was a big wake-up call for my lack of respect and leadership. From my point of view I was passionate about the product and wanted everyone to know how much I loved it. I was a poor leader. I didn’t respect his contributions and his passion for our product. I quickly apologized for what I had done and learned a lesson that I still keep with me to this day.

Leadership is not speaking over others. Leadership is being respectful and valuing the contribution from team members. When a team member speaks now, especially in front of a client, and I have the urge to say something that I think might sound a tad better, I bite my tongue and remember that everyone needs to contribute, not just me.

What else? What are your thoughts on leadership and letting everyone speak?

May 16, 2011
External Requests for Your Time
@stammy inspired today’s post with his tweet:

http://twitter.com/#!/Stammy/status/69912461033213952

Once you’ve been fairly active in the tech startup scene for a few years the number of external requests for your time will grow, especially as you help more and more people. Of course, time is your most precious resource. I emailed a high quality introduction to a friend about an entrepreneur that was moving to his city and my friend promptly emailed back that he’s not taking any intros until he launches his startup (which was in stealth mode, which is another story). There’s nothing wrong with that approach as it shows priorities.

Here’s how I handle external requests for my time:
- As a general rule, I only do one morning and one evening event per week (I get lots of requests to attend local events).
- Panels or speaking engagements are usually accepted as long as I don’t have to travel and they are about entrepreneurship or technology.
- Entrepreneurs asking for help I’m happy to spend 10 minutes on the phone as long as they have a warm introduction. 10 minutes truly is enough time to see if I can help or offer advice, and I’m happy to talk longer if I can add value (50% of the time it is all of 10 minutes and done because their time is as valuable as mine and I have nothing to offer).
- Entrepreneurs that have been qualified by a much smaller group of people I’ll meet in person at my office or over breakfast/lunch upon initial intro.
This system is by no means comprehensive but works well for me to keep a balance between my own entrepreneurial pursuits and giving back to other entrepreneurs and the community.

What else? How do you handle external requests for your time?
May 15, 2011