David Cummings on Startups

Blog

  • Alignment of Co-Founder Goals

    Cover of The Founder, Issue 4
    Image via Wikipedia

    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?

  • Top 3 Personal Entrepreneurial Strengths

    The young and talented entrepreneur of danC En...
    Image via Wikipedia

    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?

  • 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).

  • Comparing Inbound Marketing and Marketing Automation

    A typical kitchen funnel.
    Image via Wikipedia

    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?

  • Managing to the Number or Opportunity

    logo entrepreneurs
    Image via Wikipedia

    Talking with many entrepreneurs I get a sense that too many of them are managing too much to an arbitrary number and not enough to the opportunity at hand. Some categories of numbers I’ve heard:

    • Company value at time of exit
    • % of revenue allocated to sales, marketing, or some other function
    • % difference from projected budget
    • Required cost to acquire a customer

    Entrepreneurs I talk to are most often at the idea or seed stage and don’t have enough operating history or scale to know what their business will become. There’s no crystal ball. I believe it’s much more important to build an agile, data-driven company that stays close to the customer as opposed to correctly guessing in advance the value of a number. Startups are about testing hypotheses, learning, making changes, and doing it all over again. Learning quickly is much more important than guessing perfectly.

    What else? What are some other examples of managing to a number instead of an opportunity?

  • Understanding the Power of Promoted Tweets for B2B

    Image representing Twitter as depicted in Crun...
    Image via CrunchBase

    Earlier today I was meeting with a successful entrepreneur talking about customer acquisition and more specifically the top and middle of the funnel. Late in the conversation he mentioned that he’d had success advertising on Twitter, so, naturally, I wanted to learn more since we hadn’t done that yet. One of the main ways to advertise (if you get a beta invite) is to do promoted tweets.

    Promoted tweets show up as a tweet based on searches of keywords that the advertiser purchases. One niche, but powerful example is to do a promoted tweet with content related to a conference currently happening and then buy the hashtag of the conference as the keyword. More and more conferences have a hashtag (e.g. #Shotput2011) so that people tag their tweet with it and then other people can read all the tweets with the tag to see the collective conversation. Imagine paying for a promoted tweet that is associated with the keyword hashtag. Now, when people at the conference look to read other tweets at their event they’ll see your tweet as well. That’s strong contextual marketing.

    Here are some possible promoted tweet ideas:

    • A tweet from a happy client (social proof from a third-party)
    • A tweet to download a white paper or do a free trial
    • A tweet to join a meetup either in-person or via a webinar

    This is a great example of where social media will be effective for B2B lead generation and a nice business model for Twitter.

  • 2011 Southeastern Venture Conference Day Two

    Day two, much like day one at SEVC 2011, proved to be very worthwhile. The morning was composed of a keynote followed by two panel discussions. After the lunch keynote from the GM of the Atlanta Falcons, Thomas Dimitroff, the rest of the day was spent hearing (and giving) startup pitches.

    Here are some notes from the second day of the conference:

    • One i-banker from the first panel said that SaaS companies really start to see economies of scale at $20 million in revenue
    • The same i-banker said that the strategic multiples for $20+ million revenue companies has been 7-10 times revenue over the past 18 months
    • The majority of presenting companies violently violated the 10/20/30 rule of PowerPoint
    • 1/4 of the presenting companies didn’t get to their value proposition within the first two minutes of their pitch, and many went over their allotted eight minutes
    • My favorite startup and pitch was from Spoonflower – design and print your own fabric

    Overall, SEVC was a great event.

  • 2011 Southeastern Venture Conference Day One

    Neocolonial Style House, Buckhead, Atlanta
    Image by StevenM_61 via Flickr

    Today I attended the Southeastern Venture Conference for the first time and came away impressed. The program, now in its fifth year, brings together investors from around the country with startups from the Southeast. Each year it rotates to a different city and this year it’s at the Ritz Carlton in Buckhead. Here are a few notes from the conference:

    • Several VCs expressed their opinion that there’s a bubble in the market with the valuations for Facebook, Twitter, and Groupon causing startups that don’t have as high a profile to have unrealistic valuation expectations
    • The increased activity from angels and super angels, especially in the Valley, is viewed as a blip on the radar compared to the the dot com days because of the small amounts being invested
    • There’s a good mix of companies from North Carolina, South Carolina, Georgia, and Florida (not much from the other Southeastern states)
    • IT and healthcare represent the majority of the presenting companies

    The SEVC conference is well done and does a great job bringing investors and entrepreneurs together.

  • Edge Cases in Startup Products

    Game-ending edge-case
    Image by wools via Flickr

    Last week I talked a bit about successful startups that from the outside appear to have an easy business to duplicate. Once you pull back the covers you might find that they are spending over a million dollars per year on pay-per-click ads to generate customers, creating a barrier to entry for most startups. There’s another less obvious aspect of successful startups that you don’t quickly see when peering in: product edge cases required for happy customers.

    Edge cases are scenarios the product has to handle that aren’t common or intuitive when first building the software. Here are some tips to think through regarding edge cases:

    • Most edge cases come from customer feedback requiring you to get the product into the customer’s hands as quickly as possible
    • Use edge cases as a way for your sales team to differentiate against upstarts (e.g. talk about the many different unique scenarios you’ve already had to solve that new companies wouldn’t have mastered yet)
    • When encountering a potential edge case ask yourself how important it is to the product and stay extremely opinionated about what does and doesn’t get into the application

    Edge cases can be one of the more challenging aspects of building great software but they also can result in happy customers when successfully addressed.

    What else? What other tips do you have about edge cases in startup products?

  • Sales Development Reps in Startups

    Sunday textile market on the sidewalks of Kara...
    Image via Wikipedia

    When most first-time entrepreneurs think of hiring their first sales rep the immediate thought is a traditional sales person that will do deals. In reality, most entrepreneurs are better off with sales development reps — a fancy term for cold callers and appointment setters. The idea is that the entrepreneur should be on the phone or in person selling the deal for the first 10 customers with the sales development rep coordinating appointments.

    Here are some thoughts on sales development reps:

    • Typically junior people that are much more affordable than sales reps
    • The goal is to cold call, handle inbound leads, and schedule appointments
    • Compensation is typically a base (e.g. $35k) plus variable pay (e.g. $175 per completed appointment)
    • Great when paired with an entrepreneur early on as well as paired with team lead sales reps once the sales team starts to grow
    • Helps develop a separation of specialties as well as provides a career path to be promoted to sales rep (acts like a farm system)

    Sales development reps should be seriously considered by entrepreneurs as a cost effective way to help with sales early on and as a way to more efficiently acquire customers once sales reps are in place.

    What else? What other thoughts do you have about sales development reps in startups?