David Cummings on Startups

Blog

  • Is business networking worth it?

    Earlier today, I was talking with a friend of mine and he asked how my schedule looked for next week. I told him I had my EO Forum all Tuesday afternoon, the MIT Enterprise Forum business plan competition (I’m a judge) late Wednesday afternoon, and an EO Accelerator education event all day on Thursday. Of course, this isn’t a normal week for me, but he asked the obvious question: is all the business networking, community involvement, and time out of the office worth it?

    My answer was an emphatic yes. For me, I look at each of these types of events and organizations as learning experiences, which help me be a better entrepreneur. Yes, it is a selfish motivation, but I like to think I give in addition to receive. Let’s look at each of the three events for next week:

    • EO Forum — peer-to-peer experience sharing at it’s finest, this is my most valuable meeting each month, and lasts a full four hours
    • MIT Enterprise Forum business plan pitch — this is a great way for me to learn about four new companies by reading their PowerPoint decks, hearing their pitch, and offering feedback based on the many failures and successes I’ve had over the past decade (I started my company in 2000)
    • EO Accelerator education event — this is an all-day course, taught by a certified instructor, on one of the four education topics (sales, strategy, people, and finance), whereby I get to learn the material myself as well as interact with 10+ other entrepreneurs that are working hard at growing their business — what’s more fun than that?

    So, my recommendation is to find the right balance of work on the company, in the company, and in the community. Balance is the key, and it changes over time. Good luck!

  • Mark Suster’s Entrepreneur Tough Love

    Mark Suster, serial entrepreneur turned VC, has one of my favorite blogs over at BothSidesOfTheTable.com where he talks about his experiences and shares insightful anecdotes. One aspect of the blog that is dissimilar from most startup blogs is that he provides much more tough love for entrepreneurs. What I mean by tough love is that many bloggers talk about how great entrepreneurship is, how people should try it, and frankly, all around glamorize it. Mark sets the record straight and offers some great color commentary. Let’s look at some tough love now:

    I recommend you head on over and read Mark Suster’s blog.

  • Economic Outlook

    In my meetings with entrepreneurs and executives this week I’ve tried to work in asking the question about his or her thoughts on the 2010 outlook. Everyone I’ve talked to so far is optimistic saying 2010 will be a pretty good year, and definitely better than 2008 and 2009. There’s concern that concept stage entrepreneurs will continue having a difficult time finding investors, but that entrepreneurs further along, especially ones with revenue traction, should have an easy time lining up investors.

    Based on our sales pipeline, and other micro economic indicators, I too am optimistic for 2010. Let’s make this a great year.

  • Quarterly Performance Reviews

    We normally do our quarterly performance reviews the last two weeks of the quarter but for Q4 we do them the first week of the new year due to the holidays. I’ve talked to other entrepreneurs, with modern, progressive companies, and I find it interesting that they do bi-annual or annual performance reviews. I have a hard enough time remembering what I did 30 or 60 days ago, let alone six or 12 months ago.

    Another important aspect is having open communication for feedback on a regular basis. Some people don’t feel comfortable bringing up more delicate topics and let them fester. Having a consistent, regular time for face-to-face 360 degree feedback provides a mechanism for this type of communication.

    I recommend quarterly performance reviews for all entrepreneurs once they have at least five to 10 employees.

  • Daniel Pink’s Two Simple Questions

    Daniel Pink has been making the rounds lately promoting his new book Drive: The surprising truth about what motivates us. One of his marketing pieces is a good, short video about two simple questions. Here they are:

    • What simple sentence do you want people to use to describe your life?
    • What did you do today to make yourself a better person?

    I like the thinking here and believe it is important to continually assess personal goals along with lifelong personal improvement. My recommendation is to evaluate these questions in the context of your life and constantly revisit them.

    Bonus: Here’s a video of Daniel Pink’s TED talk on motivation.

  • Hidden Challenges with SaaS

    Software as a Service (SaaS) has been touted for several years now as the promise land for software companies due to rapid application deployment, consistent cash flow, and market growth prospects. Recently, the jargon has changed to be cloud computing but the general idea remains: SaaS is a multi-tenant applications hosted remotely and accessed through the web.

    Now, for traditional software vendors making the transition, or new companies, SaaS has some hidden challenges that should be considered. Let’s look at a few of them now:

    • Multi-tenant applications are more complicated than single tenant applications (multi-tenant means multiple customers share the same application and database)
    • Applications need to be monitored 24/7 requiring more labor
    • Choosing the wrong hosting provider, or a hosting provider that goes down regularly, reflects poorly on you and customers don’t care if the downtime isn’t your fault
    • Billing is complicated — billing schedules, up-sells, credit cards, etc require a fair amount of work to maintain
    • Growing the business is more capital intensive as customers are essentially financed over the life of their involvement since they don’t pay for everything up front

    I recommend evaluating these hidden challenges when evaluating the creation of a SaaS business.

  • The Hulu Experience

    Last week, while I was hanging out with my family on vacation at my dad’s cabin, I had my first Hulu experience. The kids had gone to bed and my brother asked if we wanted to watch a TV show, and to let him know what we were interested in. Knowing that the cabin didn’t have video on demand, I wondered how he was going to pull this off. My brother promptly pulled out his laptop, plugged a VGA cord into the 32″ LCD TV, connected some external speakers to his laptop, and selected the latest episode of The Office. The experience was flawless.

    My brother explained that he didn’t have cable in his campus apartment as he was trying to save money during his four year JD/MBA program. Instead, he used his laptop and university-supplied internet to watch shows on Hulu. He doesn’t miss cable TV at all and has been doing this for the last few semesters.

    This Hulu experience, my first, is a simple glimpse into yet another way the internet is going to profoundly change our lives, one screen at a time.

  • Layering SaaS Revenue

    One of the common themes I’ve heard from software entrepreneurs over the years is that their company hit a revenue ceiling and they were never able to break through it. By software company, I’m referring to installed software vendors, which have the challenge, like most businesses, of having to sell a number of new deals annually to maintain their revenue size. Generally, installed software vendors have a certain percentage of recurring revenue via maintenance and support contracts (invented by MSA of Atlanta in the 1970s) so they don’t have to resell the entire revenue base, but the percent of revenue that is recurring is generally less than half.

    With Software as a Service (SaaS) vendors, assuming a high renewal rate (90% is considered very good), new customers represent additional recurring revenue that is layered onto the existing revenue base. One of the benefits of SaaS, besides the obvious things like more predictable cash flow, growth, etc is that there’s no limit on revenue growth as long as new customers are signed up faster than customers leave (churn). This presents an opportunity for SaaS companies to grow indefinitely — something that was historically much more difficult for installed software companies.

  • Excited about 2010

    I’m excited about 2010. I know there’s significant unemployment, legislative uncertainty, and plenty of other issues, but there’s so much to be excited about in the technology and web world. We’re still only scratching the surface on how the Internet is going to affect our lives. This year, we saw Twitter hit the mainstream, location-aware apps like Foursquare start to take off, and social gaming infiltrate all aspects of Facebook. And that’s just the consumer side.

    The business side of things is seeing even more change with cloud computing (e.g. Amazon’s EC2, Google Apps, etc), marketing automation platforms, and crowdsourcing (e.g. CrowdSpring). 2010, and the next decade, is going to have even more change. I like to think of the 90s as the decade of the Internet while the 2000s was the decade of the social Internet and smart phones. It’s inevitable major change is coming.

    I want to wish everyone a happy new year’s and reiterate how excited I am for 2010.

  • What Motivates You?

    As the new year is almost upon us, my family and friends bring up the ubiquitous New Year’s Resolutions as a good topic for conversation. After listening to some resolutions, it got me to thinking that these are a good proxy for what motivates people. Really, think about it, what motivates you?

    The popular How to Make Wealth article by Paul Graham is a timely one in that it talks about startups and entrepreneurship, as well as clarifying that wealth is more about assets, which is different from money. I bring this up because a good number of people say they are motivated by money, but I don’t believe that’s usually the case. We’ve all heard the studies and articles that say money, as a motivation for employees, is lower priority when compared to things like purpose and recognition.

    My question for the new year is this: what motivates you and how are you incorporating that into 2010?