David Cummings on Startups

Blog

  • 5 Controllable Factors in the Pardot Story

    One of my favorite questions to ask is “why are you an entrepreneur?” I like to understand the motivation and drive for the person. Also, I’m interested in entrepreneurs that want to control their own destiny (an answer that resonates with me!). Of course, you can’t control much of anything in the world other than the most important things — your attitude, your actions, and your behaviors.

    Entrepreneurs that I meet with like to tell me they want to build the “Pardot of X” where X is some industry or type of product. I’ve come to primarily understand this to mean they want to build a SaaS company that doesn’t involve raising money and does involve selling it for a meaningful amount of money. While that’s a worthwhile goal, I like to share the controllable factors in the Pardot story.

    Here are the five most important controllable factors from the Pardot experience:

    1. Employees-First –
      Our focus on culture was maniacal. Employees came before customers and all other constituents. Everything we did internally was focused on our core values of positive, self-starting, and supportive. The ultimate reason we succeeded was because of our people.
    2. In the Path of Revenue –
      Our product unequivocally helped our customers make more money. We showed return on investment. We showed value. Our product helped turn marketing from a fuzzy role to a metrics-driven role.
    3. Must-Have Product –
      Our product was the core of the majority of the B2B marketing functions. If you ripped it out, many of the marketing channels stopped working (email, lead forms, etc.). It was not a nice-to-have.
    4. Complementary Co-Founders –
      Adam and I are very different yet complemented each other incredibly well. We knew our strengths and weaknesses and built an awesome organization.
    5. Focused Solution –
      Our product delivered the most value with the best experience possible at the $1,000/month price point. We were focused on providing the most bang-for-your-buck in the SMB market, and we executed well. This was especially important as our market was so noisy.

    Notice that timing is nowhere in these factors, even though it‘s easily one of the most important considerations. We didn’t know if we had good timing. We didn’t know when to start. We did know that by entering the arena, we gave ourselves a chance. And we got it right.

    Control what you can control. Everything else is noise.

  • Quarterly Review Formats for Employees

    Last week I was reading the excellent Iacocca: An Autobiography of Lee Iacocca — one of my favorite book genres is life adventures of people who created or changed an industry. Here, the stories are superb, and one of the comments by Iacocca caught my attention. The author writes:

    If our stockholders had a quarterly review system, why shouldn’t our executives?…I’ve asked my key people a few basic questions:

    What are your objectives for the next ninety days?

    What are your plans, your priorities, your hopes?

    And how do you intend to go about achieving them?

    Now, the book was published in 1984. 1984! When I started my entrepreneurial career full-time in the early 2000s, people were still talking about annual reviews. Annual reviews never made sense to me. A year was much too long of a time frame with most of the review comments being the current, top-of-mind items.

    When we were building Pardot, and working towards establishing our company as one of the top market automation platforms, we modeled our quarter review process based on a variation of Patrick Lencioni’s recommendations. Everyone answered the following questions in a simple Google Doc and shared it with their manager and direct reports:

    What did you accomplish last quarter?

    What are you going to accomplish next quarter?

    How can you improve?

    How are you following the values?

    Simple. Effective. Repeatable. Regardless of the quarterly review format used, it’s important to develop a rhythm that aligns the team and focuses everyone on the mission.

    Figure out what your team needs and consider these two different approaches to the quarterly review process.

  • 19 Ideas for Workplace Covid-19 Upgrades

    Floor signs indicating hallways that are one-way

    For the last month we’ve been researching and implementing ways to make the physical space at the Atlanta Tech Village safer for everyone in light of the Covid-19 pandemic. While any building carries risk, there are a number of ways to make existing spaces better. We consulted several resources with two of our favorites being the Back to Work Toolkit and the Black Sheep Restaurant.

    Here are 19 ways we upgraded our workplace due to Covid-19:

    1. Free re-usable masks for everyone
    2. Requiring masks be worn entering the building, the kitchens, and while riding the elevators
    3. Napkins to be used instead of skin to touch elevator buttons and open certain doors that can’t be automated
    4. Hand sanitizer with reminder signs in every community area
    5. Health declaration signs at building entrances asking people to not enter if they have any exposure or symptoms related to Covid-19
    6. Signs throughout the building reminding of the need for physical distancing
    7. Addition of HEPA air purifiers in all common areas
    8. Installation of automatic door openers activated by a contactless hand motion for dozens of doors
    9. 3D printed door handle modifiers to make certain doors openable via the elbow
    10. Removal of community doors, where possible, to minimize touching of shared resources
    11. Floor signs indicating one-way hallways and direction of traffic flow
    12. Stairwell signs indicating one-way walking (one going up and the other going down)
    13. Circles on the floor six feet apart in any area where a line might form like the coffee machines and the check-in iPads
    14. Circles on the floor in the elevators indicating where to stand and limiting elevator occupancy to no more than three people
    15. New side screens for desks that can’t be moved six feet apart in private offices
    16. Removal of certain chairs in conference rooms to promote physical distancing
    17. Removal of certain desks in co-working areas to make the remaining desks six feet apart
    18. Increased building cleaning frequency to multiple times per day
    19. Added non-toxic disinfecting misting once per day

    We’ll continue to upgrade and make changes as more people use the building and new best practices emerge. Right now, we believe the enhancements make the Tech Village safer for everyone. We’re eager to continue helping entrepreneurs increase their chance of success through community.

  • The Canada Rule in Startups

    Yesterday I finished reading That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea by Marc Randolph, the founder of Netflix. Told through the format of a live narrative, Marc does a great job capturing the ups and downs of the first five years of the Netflix journey. One of the recurring themes throughout the book is the importance of the Canada Rule.

    The Canada Rule was originally introduced by Marc when they debated at Netflix whether or not to expand to Canada. Netflix was small, but growing fast domestically. Canada, at roughly 10% of the size of the United States, was obvious for geographic expansion, but would add significant complexity. The Canada Rule, simply, is to focus on the core business and not get distracted by expansion ideas. Do one thing, and do it well.

    The old adage still rings true: many more startups died of indigestion than starvation. 

    The next time someone brings up a great expansion idea, but takes away from continuing to improve and optimize the core business, invoke the Canada Rule. Focus, focus, focus.

  • SaaS Valuations Holding Strong

    While SaaS valuations have gone down a bit from their all-time highs, they have held up well in this era of global pandemic. According to the BVP NASDAQ Emerging Cloud Index, the average public SaaS company is trading at 12.7x their enterprise value to revenue. What gives?

    Talking to a variety of SaaS entrepreneurs, I’ve heard everything from the pandemic isn’t going to affect our growth rate to we’re expecting a 50%+ reduction in bookings this year and a 30%+ increase in churn. One SaaS entrepreneur in the ecommerce area said while many customers had sales fall off a cliff, other customers are seeing Black Friday-like volumes making the overall sales across the customer base even better than forecast. This gives a hint as to why SaaS valuations have held up so well.

    The global pandemic, while hurting growth for many SaaS businesses in the near-term, is believed to have accelerated the growth of SaaS over the mid and long-term. With so many layoffs across the entire economy, and a tremendous amount of working from home, companies are going to invest in making their current workforce more productive with greater urgency than before. Now, companies are more focused on metrics like revenue and profit per employee. Investing in SaaS is one of the best ways to improve a business.

    Just look at how fast people adopted SaaS products like Zoom and Calendly as the pandemic spread. Virtual meetings were steadily growing, and now without in-person meetings, they’ve become the norm. Fully 25% of meetings scheduled on Calendly are for Zoom meetings.

    Of course, SaaS adoption is going to take time. There’s too much uncertainty in the world, too much expense cutting, and tremendous fighting to hold onto customers. But, this too shall pass, and when it does, upgrading systems and tools is going to be high on the list.

    SaaS is well positioned for long-term growth and the pandemic accelerates the shift to the cloud. SaaS valuations have held up well and should continue to do so, especially with a variety of government programs propping up the economy.

  • Strategies in Our Control and Scenarios Outside Our Control

    While many startups have already done brutal layoffs and expense cutting, there’s still the same amount of uncertainty, if not more, in the world. Sequoia Capital has an excellent post up titled The Matrix for COVID-19 with a visual way to think through potential strategies in the control of the entrepreneur vs macro scenarios outside the control of the entrepreneur.

    Entrepreneurs generally have a strong locus of control and extreme uncertainty exacerbates the desire to control things. The best course of action? Develop multiple plans to address potential scenarios. In the example matrix above, it references three scenarios with lockdowns ranging from three months to 12 months along with three plans range from no change in operating expenses to cutting operating expenses by 25%. For many startups, cutting expenses by 25% won’t be enough, and a more aggressive plan is necessary.

    Entrepreneurs should develop multiple plans under different scenarios and do their best to control what they can control.

  • Digital Simplification in Time of Crisis

    As the crisis continues with an indefinite timeline, I’ve been looking for ways to simplify digitally. Now that I’m doing multiple Zoom calls per day, and not getting the same variety of face-to-face interactions, I’ve been more conscious of regular screen time outside the professional context.

    Here are a few of my changes:

    • Turn off all iPhone notifications, including the Lock Screen, Notification Center, Banners, and Badges for all apps. The only notifications allowed? Texts and calls. That’s it. Removing my Slack and Gmail notifications greatly simplified things.
    • Turn on Do Not Disturb for all hours outside normal working hours and enable Allow Calls from Favorites. Shut everything down when you aren’t working. Everything. We don’t need more interruptions.
    • Remove distracting apps like the News app. I found myself constantly reading the news, and with much of it was about the crisis, I was hurting my focus even more. Eliminate noise. 
    • Combine the email inbox and to do list into one. I use my Gmail Inbox and the excellent Snooze function to constantly prioritize what’s important, and when. New to do list item? I email it to myself and then Snooze it to when I focus on it. If I have extra time, I visit the Snoozed folder in Gmail and look at the outstanding items. Constant reprioritization.

    With time, I’m sure more ideas to simplify digitally with emerge. I’m pleased with the progress so far and recommend these easy changes. And, of course, these changes should have been done prior to the crisis.

    What else? What are some more ideas to simplify digitally?

  • Culture Deck in Time of Crisis

    With the continuing health and economic crisis, one of the areas that needs even more attention is the culture of the organization. With layoffs, furloughs, and other dramatic changes, people are hurting, both inside and outside the organization. One of the areas to resort back to, or create fresh, is a culture deck.

    The most famous culture deck is from Netflix, having been viewed nearly 20 million times (also, an updated one is available).

    https://www.slideshare.net/reed2001/culture-1798664/4-Seven_Aspects_of_our_Culture

    Here are notes from the Netflix culture deck:

    • Seven aspects of the culture
      • Values are what we Value
      • High Performance
      • Freedom & Responsibility
      • Context, not Control
      • Highly Aligned, Loosely Coupled
      • Pay Top of Market
      • Promotions & Development
    • Values the following nine behaviors and skills
      • Judgement
      • Communication
      • Impact
      • Curiosity
      • Innovation
      • Courage
      • Passion
      • Honesty
      • Selflessness
    • Adequate performance gets a generous severance package (meaning, people that are OK get fired)
    • A team, not a family
    • The Rare Responsible Person
      • Self motivating
      • Self aware
      • Self disciplined
      • Self improving
      • Acts like a leader
      • Doesn’t wait to be told what to do
      • Picks up trash lying on the floor
    • Netflix Vacation Policy and Tracking – there is no policy or tracking
    • Netflix Policies for Expensing, Entertainment, Gifts & Travel: Act in Netflix’s best interest
    • Managers: When one of your talented people does something dumb, don’t blame them. Instead, ask yourself what context you failed to set.

    For another excellent example, check out the HubSpot Culture Code: 

    https://www.slideshare.net/HubSpot/the-hubspot-culture-code-creating-a-company-we-love

    Use this crisis to think through the culture, and what it should be with time. A culture deck is a great way to communicate the ideas.

  • Startup Cash Considerations in Crisis

    With most startups in crisis mode, one of the top considerations is cash management. The ability to raise capital has been greatly diminished and things are likely to get more challenging before they get better.

    Steve Blank has an excellent post from Jeff Epstein titled Action Today for CFOs with recommendations like:

    • Evaluate your when you run out of cash in a worst-case scenario
    • If you don’t have 24 months worth of cash, consider the following:
      • Draw down your lines of credit and view the interest payments on them as buying insurance
      • Sort all vendors by how much you spend and call each asking for a discount or loan to spread out payments further into the future
      • Cut marketing programs that don’t have a demonstrable ROI
      • Implement a hiring freeze
      • Let people go
      • Cut all salaries by a certain percentage
      • Tightly monitor collections and mitigate problems

    Some more cash saving ideas:

    • Eliminate all discretionary expenses (require any purchases over X to go through the CFO or CEO)
    • Remove any subcontractors or consultants
    • Determine which vendors you much have and which ones are nice-to-haves
    • Suspend the 401 (k) match
    • Ask employees to take unpaid time off, convert to part-time, or a leave of absence

    Entrepreneurs are generally optimistic, glass-half-full people, and now is one of the most challenging economic climates we’ll see.

    Cash is always critical, especially so in a crisis.

    The number one reason startups die is that they run out of cash.

  • Weekly Communication

    In Patrick Lencioni’s latest book The Motive, he writes that leaders make their organizations healthier by “reducing politics, confusion, and dysfunction and increasing clarity, alignment, and productivity.” In today’s turbulent world, the need for strong organizational health has never been more important.

    Entrepreneurs often struggle with a lack of clarity and alignment due to weak communication.

    The more turmoil, the more communication required.

    The more uncertainty, the more communication required.

    The more chaos, the more communication required.

    Regardless of the times, entrepreneurs should send a weekly email update to their constituents — employees, advisors, mentors, and investors. People want to know what’s going on. People want to help. Regular email communication is the most repeatable, and scalable, method.

    As for the format of the email, go with something simple:

    • Purpose of the company (repeat it every time!)
    • Recent customer story
    • Recent culture story
    • Goals with current progress
    • Any other highlights (employee, team, department, etc.)

    That’s it. Communicate in a variety of manners, repeat the message, and make the foundation a weekly email.