David Cummings on Startups

Blog

  • 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?

  • Product Community Tools

    Continuing with the topic from yesterday on Tools for Product Communities, let’s look at some example products from the different categories:

    Please let me know what other tools you like and recommend.

  • Tools for Product Communities

    One of the challenges for a growing company is to put processes and procedures in place to systematize how the organization operates. The idea is to add some level of reproducibility of what goes on so as to be able to scale to a company size that is many times larger. An area that is especially ripe for putting in tools to generate better economies of scale is that of online product communities. Here are some tools to consider:

    • Knowledge base / articles
    • Frequently asked questions
    • Message board / forum
    • Idea exchange
    • Blog

    I recommend starting with one or two of these types of tools at first and eventually incorporate all of them to engage the product community.

  • Update #2 for Google Spreadsheet KPI Dashboards

    Continuing my posts from earlier in the year on using Google Spreadsheets to manage KPI Dashboards (here, here, and here), there are several areas we’ve been able to improve. Let’s look at them now:

    • Use absolute cell references for the goals so that when you copy and paste a column to represent a new week, the goals are persisted (yes, this is junior-level knowledge for most Excel users, but was new to me)
    • Put the goals in a separate sheet and then insert a new column each quarter reflecting the new goals, so that the previous goals are maintained and can be tracked over time, as well as maintaining existing KPI percentages
    • Incorporate a hidden row that represents the percent complete of the current quarter so that KPIs can be based off that, if applicable (e.g. some KPIs, like number of trouble tickets per week, aren’t time sensitive whereas others like a specific recurring revenue target, are time sensitive)

    We’ve found the Google Spreadsheet KPI Dashboards to be very effective for us and are going to continue using them next year.

  • Sales and Marketing Execution

    This afternoon, I talked with a friend of mine about his web-based startup idea. He has five years of experience running a labor-intensive small business and he’s ready for a change. Naturally, building a web application and using his expertise to improve the industry with his domain experience makes the most sense. We got to talking about the idea, only to realize he had no idea how difficult it is to acquire customers.

    I’m beginning to believe more and more startups are really sales and marketing plays. What I mean is that the winners will be the ones that execute the best with regards to customer acquisition. Yes, the product, support, and capitalization are critical, but if customers can’t be signed up and serviced profitably, there isn’t a business (assuming it isn’t a winner-take-all business).

    My recommendation is to focus on sales and marketing, especially customer acquisition costs, when determining the viability of a business.

  • The Trouble With Yahoo! Mail Forwarding

    As commonly happens, I’m called in to help with IT challenges at my dad’s house over the holidays. I’m happy to help and am always curious about what new issues have arisen. Yesterday, the goal was to help him configure email on his new iPhone 3GS. He had just purchased it the day before due to the battery dying on his first generation iPhone, and it being unusually expensive to replace.

    With a clean slate on his iPhone, I recommended he go with Gmail instead of Yahoo due to the superior web-based interface, no text ads in the emails, and the better integration with other Google services like Google Calendar. Of course, he’d been using Yahoo! Mail for seven years, so he was reluctant to switch. Here’s the trouble with Yahoo! Mail we had to go through to make forwarding work:

    1. Sign into Yahoo! Mail to forward email to the new Gmail account only to find you can’t forward mail unless you pay $20/year for the Yahoo! Mail Plus (we’re now annoyed at Yahoo! and they have a message that the $20/year will auto-renew and there’s no way to not have that take place without canceling the email forwarding)
    2. Go to the Yahoo! Mail Plus forwarding interface and find that it is the static, non-ajax interface with a cheesy apology that they haven’t gotten around to updating the interface
    3. Pay $20 and wait for a confirmation email to the Gmail address required by Yahoo! to forward mail
    4. Click refresh several times in Gmail, looking for the confirmation email, only to eventually think to look in the spam folder — there’s the Yahoo! email
    5. The Yahoo! email doesn’t have a clickable link and there’s a code that has to be copied and pasted into the Yahoo! interface (yes, we’re just trying to get mail forwarded)
    6. The process is now complete after paying $20 and jumping through a bunch of hoops

    This trouble with Yahoo! Mail, actively making it difficult and cumbersome to forward email, shows they are on the defensive, protecting with they have, and not doing the right things to grow. Companies make lots of little choices that all add up to a strategy — Yahoo!’s strategy is to play defense.

  • App Store Top Downloads

    Building on my previous post about the frictionless Apple App Store, another key benefit of the App Store is the top downloads section. The user interface is divided into paid and free apps, making it easy to browse popular applications and try them out (the free ones). Here are some benefits of this strategy:

    • Empower users to consistently find new applications
    • Enable the most popular apps to rise to the top
    • Encourage the iPhone eco-system to help both users and vendors

    I recommend thinking of how a similar approach could be beneficial to your startup.