David Cummings on Startups

Blog

  • The Importance of a Technical Co-Founder

    I was talking with a napkin stage (idea only) entrepreneur recently about his business and we got to the product portion of the conversation. He said he didn’t have a technical person on his two-person team but that they have talked to some programmers that will build the web app application. Immediately, a red flag came up in my mind. It is imperative to have a technical co-founder on the team. Why? Let’s dig into it.

    Here are several benefits of having a technical co-founder:

    • Ability to iterate faster on the product
    • The technical person can communicate directly with the potential customers or users (the company closest to the customer wins)
    • Alignment of incentives and long term interests to build a successful business

    Here are several negatives of not have a technical co-founder:

    • Shows that the entrepreneur hasn’t been able to sell the vision to a technical person to get on board and be a technical co-founder
    • Makes the project timeline and deliverables more suspect as getting a consultant’s help just isn’t the same
    • Results in more narrow-minded thinking of the technical possibilities due to not having someone on the founding team 24/7 to obsess over the future

    I recommend all teams have a technical co-founder. For Shotput Ventures, it is a requirement.

  • Why I Blog

    I’m asked on a regular basis why I even bother blogging. The answer is simple: it helps me clarify my own thinking and document my thoughts to retrieve later. In fact, here are several reasons:

    • Share some insights, and many mistakes I’ve made, with other entrepreneurs
    • Document my thoughts as a form of a diary for my kids to read one day
    • Capture ideas and links so that I can pull them up in the future as well as share them with other people instead of re-creating the content

    I recommend blogging for everyone as a great form of introspection.

  • Frictionless Apple App Store

    For the first time in over a decade I purchased a non-business software program. In fact, I’ve purchased over half a dozen iPhone apps right over the phone. Now, I’m extremely cheap when it comes to buying digital goods (software, music, etc other than on demand movies). What aspect of programs on the iPhone prompted me to spend money? There are several key pieces involved, including:

    • Frictionless purchasing of apps
    • Effortless downloading and installing of the apps wirelessly
    • App Store ability to search and see ratings
    • Publicity on blogs and news articles on apps

    Just like Apple made purchasing digital music mainstream, they’ve done it again with buying software programs. It truly is revolutionary; try it.

  • How Does Your Company Give Thanks

    With today being Thanksgiving in the United States, it makes sense to talk about giving thanks in your company. Giving thanks, and celebrating, go together and should be part of the company rhythm. Here’s what we do to give thanks and celebrate:

    • Whenever we close a deal with a new customer, we ring our gong at 5pm that same day and everyone claps
    • Every Friday we have a catered lunch for the entire office to spend time together and socialize
    • We use an eCrowds Idea Exchange to nominate a hero of the month, voted on by entire team, and then award the winner a $100 bill at our monthly all hands meeting

    I recommend every company give thanks and celebrate on a regular basis.

  • Bottom-Up Forecast for 2010 Planning

    Three years ago I was at a TAG event listening to one of the more accomplished software CEOs talk about sales. Towards the end of the presentation, he made a statement that has stuck with me to today: build your sales goals for the following year from the bottom up based on your existing sales reps productivity in the current year. If your reps aren’t making quota now, don’t expect them to make quota next year without some serious overhaul. If you need to make a bigger number, don’t have good sales reps in your recruiting pipeline, and have a six month ramp up time before a rep is productive, include that in the model.

    As much as technology companies are driven by cool, ground-breaking products, it really comes down to sales and revenues. My advice for entrepreneurs is to only do bottom-up sales forecasts as part of their planning process.

  • Bonuses Don’t Drive Performance

    I’m of the same opinion of The Globe and Mail article “Bonuses don’t mean better performance” where the author cites several examples in the real world as well as academic research of bonuses not improving output in non-manual labor roles. In my company, we don’t do bonuses, but rather we focus on above-average pay, a great work environment, and positive corporate culture. My line of thinking is that people automatically incorporate the bonus into their standard compensation, and don’t separate fixed from variable pay.

    This strategy won’t work for everyone, but I encourage entrepreneurs to proactively decide on their desired type of corporate culture and compensation strategy, and not just blindly follow the plan from their previous employer.

  • Much Ado About Nothing (re: Competitors)

    Too often, I find first-time entrepreneurs are extremely worried about competitors. Yes, every industry and market has tons of competitors (unless you didn’t do your homework) but the reality is that most markets are big enough to support lots of companies. In addition, competitors usually do one or two things well, at most, and leave other areas for your company to focus. Worrying about competitors is typically much ado about nothing.

    Another key to differentiation is to stay the closest to your customers in your market. This means that the entire company is truly geared towards successful customer relationships, service, and results. Successful clients will talk to other prospects, act as references, and provide invaluable feedback. Only once you’ve lost several competitive deals to a competitor should you dig in and start developing a strategy for that situation. Until then, focus on selling and staying close to your customer.

  • Determining a Sales Quota

    One of the strategies we employ to determine a sales quota is to decide on the appropriate on target earnings (OTE) for the type of sales rep that makes sense for the product and market. OTE is the base salary plus commission for hitting quota in a calendar year. Here are some example OTEs:

    • Sales rep that handles mostly in-bound leads for a product that isn’t too complex: $30k base + $20k commissions = $50k OTE
    • Sales rep that cold calls and works in-bound leads with a semi-complex product: $30k base + $50k commissions = $80k OTE
    • Sales rep that sells a complex product face-to-face with extensive travel: $100k base + $100k commissions = $200k OTE

    Once you’ve determined the type of rep, sale, and desired OTE, backing out the quota based on commissions should be a simple math exercise. My advice is to get OTE right and make commissions fair with no cap on earnings.

  • Hurry Up and Wait

    One of the more frustrating aspects of being an entrepreneur is that of moving faster than those around you. This is due to the entrepreneurial mentality of making decisions with limited information and trusting your gut. We’ve all seen it before: hurry up and wait. This phenomenon is present with many constituents including:

    • Partners
    • Investors
    • Customers
    • Employees

    My advice for entrepreneurs is to have several initiatives in motion such that while you’re moving so fast, and waiting, progress is bound to happen due to the law of averages.

  • Salesforce.com’s Dreamforce Tradeshow

    I’ve just finished up my second day of the Salesforce.com Dreamforce tradeshow and must say that I continue to be impressed with the quality of the event. Salesforce.com’s budget is rumored to be $10 million for this one week conference, and it really shows. With keynote speakers like Colin Powell, bands like the Black Crowes, and 19,000 attendees, there’s sure to be something for everyone.

    My advice for entrepreneurs still stands that tradeshows should be used as business development events whereby you schedule as many meetings as possible with partners, customers, press, and analysts. The chance to meet up with people face-to-face should not but wasted and tradeshows still have a big role, even in our internet-enabled world.