David Cummings on Startups

Blog

  • One Page Outline

    One of the tactics I’m a fan of is putting together a one page outline as a basis for a conversation or partnership. The general idea is to just jot down ideas in a bulleted, outline format so that one or more parties are prepared for a discussion, and to use it as a basis for future discussions and accountability. Of course I use Google Docs, making it is easy for everyone to work from the same content and centralize changes.

    Some benefits of the one page outline:

    • Forces the people involved to think through ideas in advance of the conversation
    • Easy to change and update — bullet points are more manageable when compared to paragraphs
    • Requires everything to be less than a page making for a more focused conversation

    One page outlines work for me and I recommend them.

  • International Partnership Considerations

    When a new product shows signs of taking off, inevitably companies and entrepreneurs in other countries will take note and reach out to form a distribution partnership. Having a distributor can really help startups generate revenue without significant capital outlays. Let’s look at a few considerations for international partnerships:

    • Geographic Exclusivity – this is a big one, and needs to be taken very seriously. Ideally, it would be tied to performance metrics.
    • Revenue Split – Variables like who supports the customer, who delivers sales demos, and kickers to accelerate the revenue share should be considered.
    • Training – web-based training programs like GoToMeeting make this an easy consideration. Annual face-to-face training should be evaluated as well.
    • Branding – considerations like usage of the brand and content vs a true independent distributor should be analyzed.

    Partnerships generally fall under the 80/20 rule whereby 80% of the partnerships produce 20% of the results and 20% of the partnerships produce 80% of the results. Regardless, partnerships, and international ones, are great growth opportunities for startups and should be fully evaluated.

  • Cumulative Advantage for Entrepreneurs

    I just started reading the book SuperFreakonomics today and at the beginning they talk about how the success of their first book, Freakonomics, has made finding material for their second book so much easier as readers bring ideas to them. The term cumulative advantage, in the economics profession, describes a situation where previous accomplishments result in seemingly unfair advantages for future situations. Immediately, this made me think of serial entrepreneurs with a win under their belt.

    Some cumulative advantages for serial entrepreneurs include:

    • Previously proven executives and employees to draw from (assuming non solicitation has expired)
    • Relationships with partners and distributors
    • Existing network of trusted vendors like legal and accounting
    • Easier access to capital as investors are more apt to invest in entrepreneurs with a track record

    I recommend working on relationships and expertise that result in building a personal cumulative advantage.

  • Sales Focused Cultures

    I just finished reading the book Jungle Rules by John Imlay and really enjoyed learning about the origins of the technology community in Atlanta. What the book really did was drive home the importance of having a sales focused corporate culture. Here are a few anecdotes that emphasize the type of sales focus of a few companies:

    • MSA, the largest software company in the world at one point in the 1970s, brought in exotic animals, especially tigers, at their annual sales kick-offs, among other events
    • The CEO of Omniture, a company recently acquired by Adobe for $1.8B, had “QBSR” as his car license plate – Quota Bearing Sales Rep
    • Salesforce.com, the largest SaaS company in the world, has approximately 3,000 employees, of which 1,500 are in sales

    I recommend analyzing ways to make sales more top of mind in startup cultures.

  • Bessemer 5 Cs of SaaS Finance

    Continuing my series of posts of on software as a service (SaaS) financials from yesterday, let’s take a look at Bessemer’s great set of slides online titled the 5 Cs of SaaS Finance. SaaS really is a very different business model when compared to traditional software and Bessemer highlights some of the critical metrics. The Bessemer 5 Cs of SaaS finance include the following:

    • CMMR – Committed Monthly Recurring Revenue
    • Churn
    • Cash
    • CAC – Customer Acquisition Costs
    • CLTV – Customer LifeTime Value

    My recommendation is to pay close attention to these key performance indicators and to read through Bessemer’s slides for all the details.

  • SaaS Financials – Cost of Goods Sold

    After reaching out to one of our company advisors today about advice on software as a service (SaaS) financial metrics, I felt it would be prudent to start documenting them in a series of posts. SaaS, being a newer delivery model, when compared to traditional, installed software, isn’t as well understood with regard to financial metrics.

    Generally, cost of goods sold (CoGS) for SaaS companies will include:

    • Hosting and monitoring of the application
    • Licenses and royalties for products embedded in the application
    • Services related to on-boarding the customer
    • Support and account management
    • Credit card fees and commissions to partners

    For more SaaS CoGS info, please see the Dealer Ignition post or the LinkedIn Q&A.

  • Establish a Critical Launch Trigger

    I had lunch with a successful Atlanta tech entrepreneur today and he filled me in his current startup. After drilling into the business for 30 minutes he made a comment I didn’t expect: he’s only going to launch if he has seven key partners on board with signed contracts. He has a critical launch trigger where he’s requiring key distribution partners be in place before completing the product.

    This is a variation on lean startups and customer driven development whereby customers are incorporated into the development process — not after the product has already been built.

    My advice: consider critical launch triggers when starting a new company.

  • Startups Should Practice Direct Marketing

    I was talking to a successful entrepreneur this afternoon and he made a statement that I agree with: most startups should emulate direct marketers and focus on customer acquisition costs from the out set. Companies like Capital One and American Express set the bar for being extremely effective direct marketers. So, why direct marketing for startups?

    Direct marketing, as different from generic marketing, is centered around advertising with specific calls to action, like calling a phone number or filling out a form, and measuring the effectiveness. Most entrepreneurs get caught up in building a great product, which is critical, but there are more stories of inferior products with better sales and marketing teams beating out superior products. Building the direct marketer mindset into the DNA of the company from the beginning helps ingrain the importance of a metrics-driven approach to acquiring customers.

    The product is the marketing. Sales are the lifeblood. Every entrepreneur needs to be a direct marketer.

  • Videos for Entrepreneurs

    Recently, I’ve enjoyed watching entrepreneurial videos online from several different sources. To me, video captures more of the passion and excitement, when compared with more static, text-based content. I’d recommend taking a look at the following:

    I hope these are insightful — my position is that you can never learn enough.

  • Two More Entrepreneurial Blogs

    I’m always looking for new blogs on technology and entrepreneurship to add to the list that I scan daily. Recently, I’ve found two more that I recommend:

    • Derek Sivers — Founder of CDBaby.com, publishes a great blog with thought-provoking entries
    • Fred Destin — VC in Europe, gives great insight into and anecdotes into the venture world

    If you don’t already, I’d start following bloggers on topics near and dear to you as a way to stay up-to-date on trends as well as to glean insight from others.