David Cummings on Startups

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  • SaaS Products with the Same Name as the Company

    One of the many exciting decisions to make when starting a company is the name of your first product. For many software-as-a-service (SaaS) companies, the product is synonymous with the company and is referred to as the same name as the company. Depending on if you’re taking a multiple product approach vs a single product approach, it is important to think through the product naming convention.

    Some companies like GE name every division using the company name followed by a word specific to what they do e.g. GE Energy, GE Capital, etc. Other companies like P&G have different brands for their products and don’t co-brand them with the P&G label e.g. Tide, Bounty, Duracell, etc.

    My recommendation for SaaS companies is to call your main product the same name as the company and keep it simple, or add a generic term after it like “App”, “Suite”, or “Platform.” Once you are successful your customers and users will identify with the company and not the individual product.

  • Buy/Sell Agreements for Startups

    One of the more important legal documents startups should have in place, especially between co-founders, is a buy/sell agreement. A buy/sell agreement basically outlines an arrangement for the company to buy back stock when an equity owner leaves the business, especially businesses that haven’t raised money from outside investors.

    Think about it: if you and a co-founder go into business together planning on building a company for the next five or more years, and he/she leaves after the first year (no longer interested, passes away, retires, etc), you want to be able to buy back his/her equity. It is better to negotiate those arrangements when you are on good terms and not after a problem has arisen.

    A few ideas around buy/sell agreements:

    • Include one or more formulas for the value of the shares (e.g. some minimum return on investment, a multiple of revenues, a multiple of profits, etc)
    • Consider the option that if one founder offers to buy out the other founder, the non-originating offer founder gets the right to buy out the originating founder’s offer (this keeps things honest and is called a “shotgun” term in the real estate investor world when two partners are at odds)
    • Think though having a cliff and vesting schedule as part of the co-founder equity considerations

    What else? What other considerations do you recommend for buy/sell agreements?

  • Passionate Customers with Kids Consignment Sales

    Each time in the Fall, for the past two years, my sister-in-law has attended a kids consignment sale in Durham, NC near the RDU airport. I’ve heard her talk about it several times, and every time you can literally hear the excitement in her voice. The consignment sale has tons of great kids clothes and toys at awesome prices. For her, one of the best parts of it is the priority access she gets where you get to go through and purchase stuff during a private pre-sale only available for certain people.

    Now, this is where it gets interesting. Inquisitive as I am, I asked how she gets access to the pre-sale. One way to get access is to bring 10 items, only from specific brands, a week in advance to put up for consignment at the show. Once those items are evaluated and approved, then your name gets put on a list. That’s for one day before the show begins.

    The even more amazing thing is how to get access to the show two days before it begins. How, you ask, do you get such early access? Glad  you asked. Here’s how: you volunteer for 20 hours helping the show producers sort items, put on price tags, and generally do whatever they need help with. Wow, 20 hours of labor to get access to a consignment show? Oh, and it is a for-profit event. That’s right, the people who put on the show get moms to work for free for them so that they can then buy stuff from them where the stuff they buy is from someone else on consignment, hence the owners of the show don’t have to carry any inventory.

    If that’s not some of the most passionate customers, I don’t know what is — and, yes, my sister-in-law is one of the ones who donates 20 hours of labor to get first dibs access to the goods.

    What do you think? What are some similar stories you’ve heard of regarding passionate customers doing things that are hard to believe and loving it?

  • The 60/40 Time Allocation Rule

    Lately I’ve seen the 60/40 time allocation rule appear in a few different books and blog posts. The general idea is as follows:

    Spend 60% of your time doing proactive works towards your goals and 40% of your time doing reactive work that you have do (e.g. paperwork, responding to emails, etc).

    This coming week I’m going to try and be more cognizant of where I spend my time. Last Fall I outlined how I get things done at a simple level but I haven’t done a good job of thinking about time allocation towards goals vs things I have to do.

    With news sites and communities like Facebook, Twitter, etc it has become so easy to spend time in the non-strategic 40% category. I don’t know where I stand with my strategic/non-strategic time allocation but I’m interested in finding out.

    What do you think? Do you subscribe to the 60/40 time allocation? What’s your time split?

  • More Domain Name Searching Tips

    Yesterday I had lunch with a friend and we got into the typical domain name searching discussion. My friend’s friend was starting a new company and having a hard time coming up with a name. In addition to my previous domain name searching tips, I had a few new ones to add:

    • Find a few technology companies that list their customers and take words from the customers’ names and plug them into BustAName.com.
    • Add colors or numbers to go with a word (remember to not have more than two words for a total length of 10 letters or less). As an example, the domain jetblack.com would be cool, but the asking price on sedo.com is $450,000. Only 20x overpriced, but I digress.
    • Use sedo.com to search the domain name marketplace and include the following in your search: only .com extension, exclude hyphens, numerals, and IDN, and finally sort by bids (important!).

    What else? What are some other tips for finding a good domain name?

  • #1 Paid Search Marketing Tip

    Continuing the sales and marketing theme from yesterday, I was recently reminded of the number one paid search marketing tip for B2B companies. Are you ready? Good. Here it is:

    Use your competitors’ names as keywords in pay per click (PPC) campaigns.

    There, that wasn’t too tough. It’s true. The best thing you can do is buy the names of your competitors and create PPC campaigns specific to each competitor. Now, please remember that you can’t use your competitors’ names in the actual ad as that would be trademark infringement and Google will take the ad down, but you’re free to buy the trademarked keywords all day long.

    What else? What are some other good paid search marketing tips?

  • The Technical Co-Founders Chasm: Sales and Marketing

    Earlier today I was talking to a Shotput Ventures company that just launched an awesome product and is starting the transition to the hardest part: building a customer acquisition machine. You see, for most technical co-founders, writing code and creating a product is fun — it’s easy and natural. The hardest thing is making the change over to focus on sales and marketing. There’s a chasm.

    Here’s how to figure out if you’re in that chasm:

    • You know you need to talk to prospects but you find yourself adding more features to the product
    • You need to work on landing pages for a pay-per-click campaign but you find yourself adding more features to the product
    • You realize writing content for your blog is needed to drive traffic but that one more feature in the product is where you spend your time

    Do you see the patten? It is more fun to work on the product, as it comes naturally. Sales and marketing is tough. But, at the end of the day, building a company is even tougher. Revenue is the life blood of the company. It’s time to sell.

    What do you think? Have you seen technical co-founders get stuck in the chasm not being able to make the shift to building a customer acquisition machine?

  • #1 Startup Challenge: Lack of Market Awareness

    The number one challenge for startups is the lack of market awareness. Lack of market awareness is another way of saying no one knows about the startup or the product. This is especially challenging when the startup’s product is in a new market which doesn’t have much demand yet — it hasn’t crossed the chasm.

    When starting a new company, my recommendation is to spend more time than you expect on the following:

    • How will companies learn about your business?
    • How will you convince them you’re different in 30 seconds?
    • How will you explain what you do in 30 seconds?
    • How will you acquire new customers?

    What else? What do you think is the number one startup challenge?

  • Example Outsourced Website Advice

    Recently I was at the Caribou Coffee in Buckhead reading a business book and three people sat down at the table behind me. Naturally, I didn’t think anything of it until I heard them talking about building a website. They started getting into who would do what, what would go where, and how long it would take. At that point I had a hard time concentrating because I was curious about the conversation.

    It turns out that a married couple was meeting with the third person, a lady, who was a web developer so that she could build an ecommerce site for them to sell soccer jerseys online (think of “proper football” teams outside the U.S.). This is a great example of hiring a consultant that is happy to do what is asked without offering up best practices. Some of the choice quotes:

    • Client: Can we add music to the site?
      Developer: Yes, of course, and I won’t charge you for it!
    • Client: Are you a full-time web designer and developer?
      Developer: Yes, and I’m also a tattoo artist.
    • Client: How did you learn web development?
      Developer:  I bought a book five years ago and taught myself.
    • Client: What are your thoughts on social media?
      Developer: I’m not a fan of Tweeter but I like Facebook (yes, they both pronounced it Tweeter and not Twitter)

    There wasn’t a single minute spent on driving traffic to the site, measuring ROI, etc. Unfortunately, and in many cases, you don’t know what you don’t know. If you outsource the work without understanding it, you’ll get someone who is accustomed to saying “yes” over and over.

  • Offer Free Tools and Great Content for Lead Gen

    David Skok, a VC with Matrix Partners, has the best blog for B2B technology companies that care about sales and marketing (which ones don’t?). In fact, his Sales Funnel article is a must read for entrepreneurs generating leads online. Here are two great takeaways:

    • Offer free tools with as little friction as possible for people to try. As an example, Pardot offers the free VisitorID product so that you can learn what companies are on your website and what pages they are visiting.
    • Provide great, compelling content in the form of blogs, white papers, and other online content to build credibility and trust with your target audience. Education is the highest form of marketing.

    My recommendation is to read the Sales Funnel blog post and to start building a sales and marketing machine.