David Cummings on Startups

Blog

  • I Don’t Know

    Here’s one of the most important phrases entrepreneurs need to be able to confidently say: I don’t know. Too often, the reaction of confident entrepreneurs is to shoot from the hip and offer the first thing that comes to mind. I know I’ve been guilty of that many times. The key is to immediately follow-up and say “but I’ll find out and get back to you.”

    It doesn’t matter if you’re talking to employees, partners, customers, or investors — tell it like it is if you don’t know. The most important thing is to say you’ll follow up and to actually follow through on it. Give it a try — you’ll be amazed at its effectiveness

  • New Company Top Priority

    When starting a new company, one of the top priorities should be to get a simple website up and to start publishing new content on a daily basis. Why? This is so important because there’s a lag time from when you submit a site to Google to get indexed and when it’ll finally appear in search results. There’s an even longer lag time to get a PageRank from Google, resulting in less traffic and awareness in the interim.

    Once you have a site up with content, you should do the following:

    Of course, all of this is predicated on the desire to drive leads to your business and build brand awareness using the web. It is well worth the wait.

  • Moving from Consulting to Products

    I had lunch with a friend today that is working on shifting his company from being a consulting business to being a products business. No, it isn’t the same entrepreneur that I mentioned before, so there must a theme here: when the economy goes south, consultants think the grass is greener for recurring revenue software-as-a-service companies.

    Here’s the advice I gave him:

    • Cost of customer acquisition is going to be your number one challenge
    • Plan for the software process to take twice as long and cost four times as much as you think
    • Several employees that like the consulting business will be alienated by the software business — it is hard to shift the corporate culture to support the new way of thinking
    • Build metrics about everything that goes on from day one — Salesforce.com, or something similar, makes it easy to track many of these

    It’s going to be a challenging transition but well worth the effort.

  • Employee Hiring Tips

    Hiring is one of the hardest things an entrepreneur does on a regular basis. The actual act of hiring isn’t hard, rather, it is the difficulty of hiring the right people for your team. Building a great team is the number one priority of an entrepreneur. Here are a few tips that we’ve found to be successful for us during the hiring process:

    • Have an essay portion of the hiring process whereby the candidate has to answer five short answer questions that are specific to your industry
    • If you’re a software company, have an exercise for the candidate to complete certain tasks in the application and demonstrate technical proficiency
    • If it is a very senior position, go out to dinner with the candidate and his/her spouse so that you can see how they interact with their significant other
    • If anyone on your team objects to the candidate, immediately discontinue the process and move on — everyone needs to be on board 100%

    Hiring the right people is incredibly difficult. I hope these tips help.

  • Sales Data Augmentation

    Sales data augmentation, where information from third-party sources is used to better qualify prospects by sales reps, is invaluable. As you might have guessed, the latest generation of web applications provide even higher quality data with which to make sales teams more effective compared to legacy services. Some of the more popular ways to get additional data on leads include:

    • LinkedIn – the number one professional social networking site
    • Jigsaw – the number one user generated content site to buy business card information
    • ZoomInfo – crawls the web looking for lead information and making it readily accessible

    If your sales team isn’t using services like those listed above, they are missing out on effective data. I recommend they start using them.

  • Startups as Deer Hunters

    Mark Suster published the blog post Most Startups Should be Deer Hunters last month. It is, without a doubt, one of the five most important startup blog posts of the year. Every entrepreneur needs to read it.

    Here’s the general idea: startups need to focus their energies on deals that are big enough to be worthwhile but not so big that they overwhelm the company. Think of it this way:

    • Rabbits – Not much meat and they can be get away quickly
    • Deer – Enough meat to be worthwhile and once knocked down, aren’t going to get away
    • Elephants – Difficult and expensive to capture, and if you are lucky enough to get one, might be too much for the team to handle

    Go read Mark’s post right away.

  • End of the Year Planning

    It’s that time of the year to start planning for 2010. Our process is pretty loose right now and is continually evolving. Here are some of the steps we take:

    • Update our One Page Strategic Plan
    • Change our financial models using Google Spreadsheets
    • Revisit our KPIs and decide what to keep, what to remove, and what to add
    • Plan any major initiatives or projects

    Personally, I like doing tasks more than I like planning, but I realize the importance.

  • Resetting Revenues and Growth

    One of the hardest lessons to learn, and one that isn’t talked about much, is that as an entrepreneur of most types of businesses, your revenues reset each year. What I mean is that you have to sell a certain amount of your products or services the following year just get to the previous year’s revenues, and then some amount more to grow. Resetting revenues make growth difficult in tough economic climates.

    This is also one of the reasons why business models with subscriptions, like software as a service or required maintenance and support contracts, are so desirable. Assuming a high retention rate (90%+), each deal sold in a new year represents growth as your revenue base is already the revenue from the previous year, if not higher due to more recurring revenue at the end of the year compared to the beginning of the year.

    My advice for entrepreneurs is to look for businesses with a recurring revenue component.

  • Quick Thoughts on Angel Investing

    A gentleman reached out to me to get my advice on angel investing in companies that are pre-revenue and/or pre-product, of which I have very little. He’d heard about Shotput Ventures through the Atlanta community. I told him that I didn’t have much experience other than the eight companies Shotput funded this past summer. Of course, I had to give him something, so here’s what I came up with:

    • Don’t expect to make money
    • It isn’t for the feint of heart
    • Whatever you invest, save 3x that for later rounds
    • Look for a strong product/market fit
    • Make sure there’s a personality fit with the team (e.g. you should want to see them once a month for lunch indefinitely)
    • Valuations are a shot in the dark
    • There’s intrinsic value in giving back and helping others

    I’ll revisit this post in 10 years and have even better advice to give.

    Note: This advice is for pre-revenue companies.

  • Celebrate the Small Victories

    In a startup, there are so many moving pieces that change on a daily basis it is easy to spend all your time putting out fires and being reactive to what’s going on in the company. One of the more important things I underestimated is the value of celebrating the small victories. I’m talking about progress-type victories as opposed to serious, signed-on-the-dotted line victories.

    It is important to stop everything, get the team together, and do some cheerleading.

    As much as technology like IM, Skype, and email make it easy to not do things in person, nothing beats the emotional connection of being face-to-face. I recommend teams get together once a week and celebrate the small victories.

    Note: Celebrating the small victories is separate from an accountability-type weekly tactical.