David Cummings on Startups

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  • Non-Compensation Sales Rep Recognition

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    Sales are the lifeblood of most organizations and sales reps are an integral component of success. I love sales people as they are typically out-going, passionate, and easily carry a conversation. Yes, money is a primary motivator for sales people but it is also important to have non-compensation recognition. Here are a few of the ways we do that:

    • Hero of the month award voted on by other team members (any department, not just sales)
    • Mentor program for senior reps to help junior reps
    • Million dollar club (once a sales reps has sold $1 million in total recurring revenue)
    • Priority choice for tradeshows (e.g. shows in San Francisco are more desirable)

    My recommendation is to consider ways to recognize sales people beyond financial remuneration.

    What else? What are some other good ways to recognize sales people?

  • Google Tips to Gauge Industry Competitiveness

     

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    So you’re thinking about building a new product and are in the due diligence phase of the research. You’ve found a few companies in the space but you don’t have a good feel for competitiveness in the industry. Here are my top three Google tips to help with your research:

    My recommendation is to employ these three tips whenever you’re researching a potential industry.

    What else? What are some other Google research tips?

  • Don’t Ask Yes or No Questions in Sales

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    Continuing with our sales theme from yesterday, the next topic I want to look at is asking questions during the sales process. We’ve been trained by our parents to be polite and ask yes or no questions (e.g. can I have a second piece of cake, can I go to Jimmy’s house, etc). The problem with yes or no questions during sales is that you’ll do all the talking and prospects will quickly close out the conversation. The most important thing you can do during sales is to get the prospect talking by asking quality, open-ended questions that start with the following words:

    • Who
    • What
    • Where
    • Why
    • When
    • How
    • Which

    A great question to always have handy is “How so?” That way, the prospect can continue explaining whatever it is they were talking about and go into greater detail. The best sales people are great listeners and ask great questions. Sales is about listening more than selling.

    What else? What are some other tips related to asking questions in sales?

  • Features, Benefits, and Advantages

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    At today’s EO Accelerator education workshop on sales, one of the comments the facilitator, Jim Ryerson, said really caught my attention: every company needs to quickly explain their features, benefits, and advantages. Most startups talk about features and benefits, but rarely explicitly get into their advantages. Let’s look at simple definitions in the startup context:

    • Features – product functionality and abilities
    • Benefits – the outcomes from using the product features
    • Advantages – differentiating factors compared to other competitors in the market or traditional methods

    For the advantages, stating the competitor’s name isn’t required, but a nice sales tip when a prospect says they use a competitor is to ask how they accomplish some task or provide some service that the other company doesn’t do, without being condescending. For example, say your competitor doesn’t offer quarterly strategy calls you might ask, “How did your most recent quarterly strategy call go?” Of course, since the competitor doesn’t do those you’ll get the prospect thinking as to what else the competitor doesn’t do.

    My recommendation is to have scripted messages around features, benefits, and advantages while making sure everyone in the startup is on the same page.

  • What’s your FOTS plan?

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    Sometimes startups need to engage in good old fashioned hand-to-hand combat and hit the streets to get customers. Twitter and Foursquare launched this way at SXSW. A friend of mine introduced me to FOTS recently which stands for Feet On The Street and the idea behind it is to set up a points system for your team members along with relevant goals (e.g. 100 points per quarter). Here are some examples:

    • 1 point for each business card collected
    • 3 points for each scheduled meeting
    • 3 points for each targeted referral
    • 5 points for each book delivered
    • 10 points for each face-to-face meeting completed
    • 40 points for serving on a panel

    Now, activities should not be confused with results, but this is the right idea. These types of activities are more closely associated with professional services firms but can be applicable to a variety of startups.

  • Ask Prospective Investors About the Ideal Exit

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    Yes, the ideal exit for a prospective investor is going public and having a $170 billion market cap like Google. In reality, the more likely exit is via acquisition by a larger company at a much smaller value. It is critically important to find out and align expectations with a prospective investor as to what the ideal return looks like as well as the minimum exit value for it to be worth their time. Here are some questions to ask:

    • What type of cash on cash multiple do you shoot for? Minimum acceptable?
    • What internal rate of return do you shoot for? Minimum acceptable?
    • What percentage of your total fund do you look to return to your limited partners (LPs) on any single deal?

    That last question is especially important as the larger firms result in a larger amount. As an example, say the fund is $200 million and the investor looks to return a minimum of 10% of the fund on any one deal, that’s a minimum of $20 million for the investor’s stake in the company. Say the investor will have 25% of the company, that means that the company needs to sell for $80 million for the investor to return the amount of money that is meaningful to their LPs.

    My recommendation is to ask these three questions when talking to potential investors to learn about the type of returns that will make it worth their time.

  • Position a Product to Grow Into or Out of It

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    One area that first-time entrepreneurs often give little thought to is how they are going to position their product. Generally, the desire to start a company and build a product is driven by the goal to “scratch an itch” and fix a problem or grab an opportunity. I’d like to divide product positioning into two super simple categories:

    1. Little to no learning curve and you eventually grow out of it
    2. At least some learning curve and you grow into it

    Yes, there are many more nuances than this but for many entrepreneurs this provides a simple framework with which to use, especially for the many 37signals inspired simple web apps out there that fall into category 1. Once you’ve chosen a category, next you should find a product that falls into the other category relative to your product. Typically I’m against paying too much attention to competition and instead focusing on customers and prospects, but the competition works well in this case. Now with a deep understanding of the competitor that falls into the other category, make a list of the differentiation points that serve as a transition between the products and use that as a guide when building the product.

    What else? What other points would you add with regard to growing into and out of products?

  • High Class Problems in Startups

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    Recently a startup founder was asking me questions about how to architect his new web application so as to scale with millions of users. I told him that’d be a high class problem and he shouldn’t even worry about it right now as a minimum viable product is most important focus. Here are some high class problems in startups:

    • Scaling the web app due to so many users
    • More qualified job applicants than you can hire
    • Funding round oversubscribed by investors
    • More leads than your sales team can follow-up with in a timely manner

    My recommendation is to not worry about high class problems and instead focus on what you can control and warrants attention.

    What else? What are some other high class problems for startups?

  • Customer Intimacy and Product Management

    (13/365) Things you need as a product manager
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    At today’s Atlanta technology community lunch the featured guest was Promod Haque, one of the most famous VCs in the world. One of the stories that stood out to me was when Promod recounted when it was first emphasized to him that customer intimacy was a major key to success.

    10 years ago Promod was chairman of a company where the CEO was actively recruiting a VP of Engineering. The VP of Engineering was almost ready to join the company but stipulated that he had to talk to the chairman in person first. Promod, curious about this request, met with the prospective VP of Engineering, and was posed one single questions: is there money in the budget to hire a VP of Product Management? After saying, yes, of course, that they were actively recruiting a VP of Product Management, Promod inquired as to why this gentleman was concerned. The prospective VP of Engineering said that he can build anything but that he needs a VP of Product Management that is truly connected to the customers and can distill down what needs to be done. The yin to his yang would be critical to the success of the company.

    My recommendation is for one of the company co-founders to own product management and make it one of his or her top priorities. Product management is one of the more difficult skills to hire for and is best done by someone who is truly passionate about the product and builds great rapport with customers.

  • Burnout in Startups

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    Many people talk about how much hard work it is to build a company. I particularly enjoy the phrase “an overnight success takes 10 years.” One aspect of entrepreneurship that isn’t talked about very often is burnout in startups. Michael Arrington, the founder of TechCrunch, recently cited burnout as one the of main reasons he just sold his company to AOL. A startup is often all-consuming, and after five years, can be difficult to maintain the pace.

    After the company has achieved a level of success and stability I believe it is important to start moving towards a work/life balance. Here’s a few of the things I’ve found useful:

    • Daily thinking time (I walk a mile every other day)
    • Weekly date nights with your significant other
    • Monthly peer group meetings (see EO or YPO)
    • Quarterly off-site celebrations with the company
    • Quarterly vacations

    What else? What are some other ideas for work/life balance to help with burnout in startups?