David Cummings on Startups

Blog

  • EO Accelerator in 2010

    With the new year upon us, it is a good time to get involved in an entrepreneurial peer-to-peer group. One that I’m involved with locally, and has chapters around the world, is then non-profit Entrepreneur’s Organization (EO). EO is for entrepreneurs with company revenues over $1 million US dollars. EO has another program designed for entrepreneurs with revenues under $1 million US dollars called EO Accelerator. The three main tenants of EO Accelerator are as follows:

    • Quarterly education events from a certified facilitator on topics like people, money, strategy, and sales (three years worth of content)
    • Monthly accountability group meetings to share experiences in a small group setting
    • Workshops with the local EO chapter

    I’d recommend all entrepreneurs look into programs like EO or EO Accelerator in their local city.

  • The Scrappy Startup Mindset

    All startups, funded or not, should start from day one with a scrappy mindset. Every penny needs to be conserved due to the many zigs and zags, and time, required to find success. That’s not to say every penny needs to saved to the detriment of proving a thesis, but rather, where logical, go the cheap and frugal route. Let’s look at some ways to be scrappy:

    • Seek out office sub-leases to save 50% off the market rates as well as enjoy shorter lease terms — shorter leases are key because you don’t know how many employees you’ll need in two to three years
    • Purchase used furniture from Goodwill, or look for a local company that is downsizing — most companies that are downsizing will give you furniture for free because they’ll have to pay to have it removed (no used furniture dealers are buying furniture in this market)
    • Purchased refurbished laptops and monitors off TigerDirect.com or Craigslist — never buy them new, and purchase laptops instead of desktops so that employees have mobility
    • Use a VoIP phone systems like Vocalocity or Cbeyond instead of a traditional analog line as they are considerably cheaper and much more feature rich

    Here are a few things you should not skimp on: a good coffee machine, natural light/lighting, a location people want to come to, and the fastest Internet you can buy.

    One more benefit of establishing the scrappy mindset at the beginning of the business is that this will continue to persist as the business grows. You want everyone to treat the company’s money as if it was their own money.

    My advice to entrepreneurs: incorporate a scrappy mindset at time of incorporation and increase your chances of success.

  • Why Most Tech Entrepreneurs Should Talk to VCs

    Most technology entrepreneurs should talk to VCs, even if they  aren’t planning on raising money in the near term, or possibly ever. Why? Well, there are lots of reasons why. Let’s take a look at a few:

    • Developing rapport with VCs now helps in the event you do decide to raise money in the future as the fundraising process can’t be rushed, and typically takes twice as long as expected
    • VCs regularly encounter hundreds of businesses, thereby offering a sounding board, insight into trends, what’s working, and what’s not working
    • VCs are generally well connected, offering introductions to prospects, partners, etc. which can be invaluable
    • VCs ask the tough questions, forcing you to more critically analyze your business, and better understand key metrics

    My recommendation is to reach out to VCs and start developing relationships, even if you don’t have current fundraising plans.

  • The Seed Stage Entrepreneur’s Sales Assistant

    I’ve talked with many seed stage entrepreneurs, generally with revenues of $50k – $500k, that say sales is their biggest challenge — not raising money, not product development, but rather, selling their stuff. Of course, I like to drill in and find out how they currently sell their product or service. Inevitably, it is from word-of-mouth referrals or a partner that brings in business. It is almost never from outbound marketing and lead generation.

    When I probe deeper to find out how they meet people, the response is usually trade organizations, chambers of commerce, or general business networking events. My recommendation for these entrepreneurs: hire a sales assistant to set up and manage sales appointments. No, the sales assistant isn’t the subject matter expert that is pushing the product. His or her only responsibility is setting up appointments, in-person or conference call, for the entrepreneur. Entrepreneurs have a fear, rightfully so, that if anyone other than them tries to sell on their behalf, they’ll misrepresent the business and potentially embarrass the entrepreneur. It is unfounded. With the right value proposition, and demeanor, a good sales assistant can set up relevant appointments and help start the process of taking the business to the next level.

    Many entrepreneurs fear hiring sales people. The idea that someone likes to sell means they can sell themselves well, so sales people come across as someone who will be successful, and the entrepreneur can’t tell which ones will actually succeed. Most sales people fail. A simple solution is to hire an intern for $10/hour to set up appointments and then pay some performance compensation of $50 to $100 for every completed appointment with a prospect that fit the ideal customer profile. If this works, great, hire someone full-time and invest in it. If it doesn’t work, read The Ultimate Sales Machine and try some different ideas.

    My advice: hire a sales assistant to set and manage appointments to facilitate growth during the seed stage.

  • 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.