David Cummings on Startups

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A Few Notes on Jury Duty
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Early today I headed downtown for jury duty. In Atlanta it seems that you get called to jury duty every 18 months, or at least I do. The good news is that, like today, I sat around for several hours (five to be exact) and was quite productive due to the limited Internet access. As expected, I came prepared with a fully charged iPhone, iPad (v1 as my v2 is on its way), and MacBook Air (v2).

Here are a few tips for jury duty from my limited experience:
- The summons says to be there by 8am but with such a massive number of jurors (Atlanta’s size, crime rate, or both?) things don’t really start until 9:30am as that’s how long it takes everyone to get in due to metal detectors and individual check-ins. I made it in and was seated by 7:55am but I could have gotten there an hour later and would have been fine.
- Power outlets are at a premium so bring a surge protector if you don’t have a great battery (or two).
- There is limited (read slow and spotty) free WiFi with username “guest” and password “guest”.
- Not really a tip but a judge came and talked to the 300+ jurors for 15 minutes and said that the most beneficial part of having the jurors ready and in-person was that when criminals get to their day of reckoning and know they are guilty, they often enter in a plea bargain in order to avoid making things worse in front of a jury. Basically, knowing that a jury is in the building and ready to go expedites many cases.
Thinking back to this morning it really was super productive. In a giant room with hundreds of people, no friends, no windows, and nearly no Internet makes for a conducive working environment, especially when you’re required to be there by law.
March 15, 2011
1986 Fortune Article on Bill Gates and Microsoft’s IPO
Yesterday Fortune magazine republished their 1986 cover story on Bill Gates and the Microsoft IPO. The article, titled Inside The Deal That Made Bill Gates $350,000,000, does a great job covering the spirit and nuances about Bill Gates and Microsoft leading up to going public on NASDAQ. Here are a few notes from the article:
- Bill Gates owned 45% of Microsoft after the IPO and was only 30 years old
- Bill Gates had an informal rule that employees could sell no more than 10% of their holdings after the IPO
- A price to earnings ratio of 10 at the time in 1986 was expected and was between what personal software companies and mainframe companies were trading at (now Microsoft trades at a 10.9 P/E ratio)
- Oracle went public a few days before Microsoft (now Oracle trades at a 23.8 P/E ratio)
- The stock started at $21/share and ended the day at $31.25
The articles touches on many more of the human elements of the IPO process including emotions, debates, and anecdotes. It is a great read for anyone interested in how an IPO works, technology history, and Microsoft.
March 14, 2011
Push Code to Production on Day One
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More and more startups are instituting a policy to have newly hired software developers push a piece of code (feature or bug fix), albeit small, to the product’s production servers on their first day. The idea is that with web-based apps and software-as-a-service programs the act of making an update should be a simple process unlike the days of shipping a new product release once every year or two on disk hoping that everything was perfect (which never happened). Here are some benefits of having new engineers push code to production on day one:
- Sets the tone for a fast release process (potentially many times a day with continuous deployment), which often results in greater developer satisfaction due to receiving input from users as fast as possible (developers love to get positive feedback on a regular basis)
- Reiterates the fact that smaller changes lead to smaller issues and bigger changes lead to bigger issues (bite size chunks are best)
- Provides a sense of satisfaction to the software developer on their first day that, yes, they will make an impact
- Makes the process of write coding and seeing it live the product no longer daunting
My recommendation is to consider having new developers push code to the production servers on their first day on the job.

What else? What other benefits are there of pushing code to production the first day on the job?
March 13, 2011
The 18 Year Angel Investment
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A few days ago I was talking to an angel investor about his experiences. From a previous conversation I knew he had a nice exit four or five years ago so I asked what he learned from his experience in that deal. After he shared some takeaways I casually asked when he first invested. His answer shocked me: from the time of first investment to selling the company it took 18 years. There’s been talk for a couple years now of exits taking longer and that angels should expect deals to take 7-10 years for an exit. 18 years for an exit seems like an eternity.

Some interesting notes on the 18 year angel investment:
- The angel investor invested in the company three times over the first five years
- The company had several small pivots before finding a market opportunity
- The company was close to running out of money when the founder died and the company had a $1 million life insurance policy which provided it capital to keep going
- A new management team was brought in and was able to make the company successful by signing distribution deals with several large companies
His stories drove home the fact that things take longer than expected and a good bit of unplanned events are part of the journey.

What else? What other stories have you heard about angel investments taking a long time?
March 12, 2011
Understanding Customer Product Usage
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As a product manager one of the nice aspects of web-based software is that you can easily understand customer usage. The idea is to track which modules and features customers use in order to make more intelligent decisions. Here are a few notes when thinking about how customers use a product:
- Consider embedding Google Analytics tracking code in the app (run it in async mode to minimize performance issues)
- Categorize types of customers based on size and vertical industry in order to segment their usage patterns (e.g. small vs. medium vs. large customers with verticals like governments, IT, healthcare, and higher education)
- Client advocates should ask customers directly what modules they use most often and record this information in custom fields in the CRM
- Customer usage information should help in product management to focus development efforts and provide objective information during debates
Accessible product usage information is a valuable benefit of building web-based software. My recommendation is to incorporate product usage information into your startups processes.

What else? What other ideas do you have for understanding customer product usage?
March 11, 2011
Loosening the Purse Strings for Growth
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One of the phenomenons we encountered a year ago was money coming in faster than we had budgeted for in a significant way. Now, yes, it is a high class problem to have and it’s easy to think that that would make for some nice short term profits. Well, we’re focused on growing and building a large business in a small, fast growing market with strong competitors. The interesting thing is that we’re scrappy as part of our company culture but with this market opportunity we had to loosen the purse strings for growth.

Here’s what we did as a result of growing faster than expected:
- Increased our marketing budget substantially
- Started working with recruiters to find additional team members as we’d tapped our existing team for referrals (half our employees come from referrals and we do a $1,000 employee referral bonus)
- Bought MacBooks and giant monitors for everyone
- Added catered Flying Biscuit breakfast every Monday morning
Could we have saved some money and gotten by in a cheaper manner? Yes. Did we feel like with our size and scale we could afford to experiment more and enjoy some of life’s niceties a bit more? Yes. There’s no right or wrong answer but we felt that loosening our purse strings for growth was a great move and we’re already seeing results.

What else? What changes have you made as your business has grown?
March 10, 2011
Alignment of Co-Founder Goals
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It goes without saying that picking the right co-founder is critically important. This is someone you’re going to spend more time with than your spouse and kids for the next 4-7 years, so choose wisely. In the past few days I’ve heard several different stories of co-founders that broke up because they had different goals. Here’s some of what I heard:
- One co-founder was hard charging and focused on growing the business while the other one wanted to maximize short-term profit and put cash in his pocket. The co-founder focused on cash was bought out last year.
- One co-founder wanted to make recent college graduates an integral part of their business model and coach them to be productive members of the company while the other co-founder didn’t like working with junior people that weren’t trained. The co-founder that didn’t like working with junior people was bought out three years ago.
- One co-founder was focused on the product and vision while the other co-founder was supposed to be focused on sales. The co-founder in charge of sales refused to cold call and the partnership broke up 45 days after the venture began.
My recommendation is to make sure co-founder goals are aligned before the company is founded and then to talk about each other’s goals on a regular basis.

What else? What other thoughts do you have on the alignment of co-founder goals?
March 9, 2011
Top 3 Personal Entrepreneurial Strengths
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Recently I was meeting with an entrepreneur (I usually talk with 5+ in a given week) and we ended up talking about what our companies do well and what areas we’re lacking. After talking about our companies, I later began to think personally about my individual strengths not unlike the Unique Ability question.

Here’s what I think I’m good at as an entrepreneur:
1. Building a strong corporate culture – it took me many years to appreciate the value of this but now I hold it as the most important thing I do in my company
2. Getting stuff done – this might seem cheesy but I don’t get bogged down by all the details or unknowns necessary to make a decision and I can figure out what works and doesn’t work quickly
3. Translating between the business and technical world – communicating with business people and technical people comes naturally to me and I help connect the two
Notice I didn’t say my strengths were raising money, writing code, or selling software. Early on I would have said my strengths were working crazy hard, not having fear, and being blissfully ignorant but I didn’t really understand what it takes for a successful startup. Hopefully these three entrepreneurial strengths shed some light on what I’ve found to be valuable to me.

What else? What are your top three personal entrepreneurial strengths?
March 8, 2011
Costs to Furnish a Nice Startup Office
If you’re bootstrapping, you should keep the costs to furnish an office as close to $0 as possible while you get the business off the ground. Once the business starts growing and you move from the seed stage to early stage, and especially growth stage, there’s the tendency to progressively improve the office in an effort to look more credible for recruiting, but especially for egos.

Here are ballpark costs to outfit a startup with mid-to-high-end furnishings:
- Open workspace with “L” shaped desk, cabinet, and electrical – $1,500/person (nice cubicles are $3,500/person)
- Herman Miller Aeron chair – $600/person
- MacBook Air/Pro – $1,500/person
- 25″ monitor – $350/person
- Wired ethernet port – $100/person
- Desk accessories like keyboard, mouse, etc – $150/person
So, for $4,200 per person you’ll have a great, professional environment. Add another five grand for things like a nice coffee maker (a must!), switches, routers, access points, foos ball, ping pong, and more (not counting build-out of the office, conference room furniture, etc). The final ingredient is blazing fast Internet ($2,000/month) and you’ll have a sweet set up.

What else? What other costs are necessary to furnish a nice startup office?

P.S. We’re hiring and have the environment outlined above (apply online).
March 7, 2011
Comparing Inbound Marketing and Marketing Automation
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Inbound marketing and marketing automation are two of the hottest areas in web marketing right now but both still haven’t crossed the chasm and suffer from a lack of mainstream market awareness. On a really simple level you can think of the sales and marketing funnel as follows:
- Top of the funnel – inbound marketing: drive traffic to your site, landing pages, etc through search marketing, blogging, social media, link building, participating in online conversations, and other mechanisms with the goal of generating leads
- Middle of the funnel – marketing automation: convert, nurture, email, track, score, and grade prospects as well as provide insights to sales reps
- Bottom of the funnel – sales: solve prospect problems and turn them into customers
As you might guess, there is some overlap between the top of the funnel and the middle of the funnel, resulting in pieces of duplicated functionality between inbound marketing tools and marketing automation platforms. Will the two eventually converge into one: yes. Right now, there’s so many different features required for each type of product that it’s difficult to do everything well resulting in more specialization with deeper functionality.

Inbound marketing and marketing automation address two different areas of the sales and marketing funnel but provide tremendous business value.

What else? What other thoughts do you have comparing inbound marketing and marketing automation?
March 6, 2011