David Cummings on Startups

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  • Entrepreneurial Books on Tap

    I’m a junkie when it comes to buying and reading (sometimes partially) entrepreneur books. Part of it comes from me enjoying the process of studying topics on my own before reaching out to others for advice, and part comes from learning new ideas that might be applicable in my company. Here’s a list of the most recent books I’ve purchased:

    I’ll let you know which ones I find interesting and would recommend.

  • Five Habits of a Successful Entrepreneur

    Whenever people ask me the blanket question “What advice do you have for entrepreneurs?” I always hem and haw making up an answer on the spot. I spent a few minutes today thinking about the advice I’d tell myself if I knew what I know now when I started my company nine years ago. Here are the five habits of a successful first-time entrepreneur:

    1. Read one of the Personal MBA books every other week until you’ve finished all of them, and then never stop reading a highly recommended book every other week
    2. Have lunch with an entrepreneur you don’t know well every week and prepare a casual list of questions that you’d like to know his/her thoughts on
    3. Join an EO-like organization immediately for peer-to-peer accountability groups and get actively involved on the board in a leadership role
    4. Improve at least one thing in your business every week and don’t be afraid to try improvements that will fail
    5. Actively re-evaluate your company corporate culture on a monthly basis and continually make it better knowing that your corporate culture is the most sacred thing you’ll spend time on as an entrepreneur

    As you can see, success, in my opinion, comes from doing simple, but time intensive activities on a consistent basis. Notice that I didn’t say spend 100 hours per week on the business, develop a comprehensive business plan, or raise money from VCs. If you do the things outlined above, and apply your insights to your business, you will be successful.

  • Doug Tatum: No Man’s Land

    Doug Tatum, author of the book No Man’s Land, was the guest speaker yesterday at an intimate EO event in Norcross where he talked about his recent research and book. This No Man’s Land is unrelated to my No Man’s Land post from two days ago and is a complete title coincidence. Doug did a great job at outlining his experience building a company from scratch to 1,000+ employees and revealed some of the insights he learned about entrepreneurial companies. The firm he built was an outsourced CFO firm for fast-growing businesses, so his experience makes him uniquely qualified to be an expert on the subject.

    I have not had the chance to read the book but Doug went through a PowerPoint presentation that hit on the major points. The idea behind No Man’s Land is that when a company reaches 20 employees, it has outgrown being completely dependent on the founder(s), and has entered a period where it isn’t big enough to have scale, which is typically at 100 – 150 employees. This transition period from 20 to 100 employees is the most difficult, with many companies never making through it.

    A big theme in the book is how companies outgrow the four Ms:

    • Market
    • Management
    • Model
    • Money

    Doug did a great job presenting thoughtful evidence along with interesting anecdotes. I’ll leave it to you to read the book and learn more.

  • Employease: A SaaS Pioneer

    Yesterday afternoon I had the opportunity  to spend a few minutes with John Alberg and Michael Seckler, two of the co-founders of Employease. Employease, for those who grew up as part of the web-from-day-one generation, was the poster child for delivering enterprise applications over the web. What we now know as software-as-a-service has gone through several naming cycles, with application service provider (ASP) being one of the most well known during the dot com bubble.

    Employease was sold to ADP for $160 million several years ago and John and Mike are now working on their second venture called Euclidean Technologies — a hedge fund that uses advanced machine learning to do value investing in the public markets. John gave me an interesting account of just how difficult it was to do SaaS fourteen years. Here are some of the takeaways from the conversation:

    • Scripting languages like PHP didn’t even exist and their product was originally written in C and server-side JavaScript on the Netscape web server product
    • Load balancers weren’t available and had to be written from scratch
    • Internet access was spotty and would periodically go out for no reason, causing serious consternation from their customers
    • They made a big gamble, which paid off, in porting all their code to server-side Java
    • Being close to the client (a.k.a. customer-driven development) was their unique differentiator, and helped them win in the marketplace

    It was great fun listening to stories of the early days of the web, and I appreciate John and Mike sharing them with me.

  • Marketplace No Man’s Land

    I had one of my weekly entrepreneur lunches yesterday with a gentleman who took his first technology company public in 1995 and is currently in the process of building his second company, while remaining chairman of his original venture. We had a great conversation about our respective businesses and current challenges.

    One of the comments he made stood out to me — he was battling being in a marketplace no man’s land. The idea is that they are still struggling to find their place in a new market that is rapidly evolving. After we left, I spent a few minutes thinking about how to determine if a company is in marketplace no man’s land. Here’s what I came up with, based on my experience:

    • The length of the sales cycle for your goods or services fluctuates wildly on a regular basis (e.g. one deal takes a week while the next one takes six months)
    • The positioning of your product in the market is hard to articulate
    • The last three sales have been to very different companies, and it is tough to find overlapping need
    • The leads being generated aren’t consistent or predictable

    Part of what I’ve described can come from an immature market while part can come from the difficulty of finding a place in an existing market. Positioning is a critical part of success and comes with significant trial and error. If you find your product in marketplace no mans land, I would suggest spending more time talking with customers and letting them guide you. Customer input is invaluable.

  • Weekly Meeting Rhythm

    We recently updated our weekly meeting rhythm by moving our weekly leadership tacticals from Fridays at 2pm to Mondays at 10:15am. After doing Friday afternoon tacticals for several years, we decided that Monday morning made more sense in conjunction with our KPI dashboards. Now, we start the week with our daily check-ins and then go right into our leadership tactical.

    Here are the weekly repeating events on my calendar:

    • Daily – Check-ins
    • Monday – Leadership tactical
    • Tuesday – Sales workshop
    • Wednesday – Manager workshop

    Everything else I do is scheduled on an ad-hoc basis.

  • Entrepreneur Lunches

    One of the best pieces of advice I like to pass on to other entrepreneurs is to reach out and schedule at least one lunch per week, preferably more, with other entrepreneurs you would like to get to know better (or meet for the first time). Looking at my calendar for this week, I have two such meals already in place. My mind is already thinking of questions to ask, similarities or differences in our businesses, and any advice or referrals I might be able to earn.

    Entrepreneurs love talking to other entrepreneurs.

    Groups like the Entrepreneurs’ Organization are so successful because they provide a platform for entrepreneurs to interact and participate in peer-to-peer forums. The new ATDC is working on similar initiatives to foster community and enhance the likelihood of success for Georgia-based technology companies. This Wednesday, I’m attending the first, very informal Atlanta Startup Entrepreneurs (ATLSE.com) meetup lunch for entrepreneurs that want to help mentor or be mentored. Please join us if you can.

    My advice for entrepreneurs: visit with other like-minded individuals in your community, and you’ll quickly appreciate the value of experience sharing.

  • Churn with SaaS Products

    One of the most important, and least talked about, challenges for SaaS products is churn, or customers leaving. There’s so much focus on selling new accounts, and providing a compelling product, that companies often don’t spend enough time addressing ways to increase their client retention rate. While we’re always striving to get better at what we do, here are some of the strategies we’ve found that work well:

    • Use dedicated client advocates to proactively call on customers and help answer questions as well as learn about issues before they are reported (some clients don’t bother reporting anything and let the disgruntlement build up)
    • Schedule weekly webinars for free customer training and vary the topics so that it also acts as continuing education
    • Track which modules are being used by the customer and offer up ways for them to get more value from the system
    • Monitor customer logins and reach out to clients that haven’t logged into the system within a certain amount of time as it is usually a leading indicator they are considering leaving

    I hope these suggestions help. Customer churn is a critical issue for SaaS products, yet doesn’t get as much focus as it desires. Please reach out and share any suggestions you have for reducing customer churn.

  • Defensible Market Positions and SaaS

    One of the topics we debated today was building defensible market positions with software-as-a-service (SaaS) companies. SaaS companies typically don’t have many of the traditional barriers to entry like high development costs, high infrastructure costs, and slow time to market. As we proved earlier this summer, many companies can be launched in 90 days for $20,000 or less.

    Certain SaaS companies like salesforce.com (proper spelling is with a lower case ‘s’) have built defensible market positions due to their proprietary AppExchange marketplace of hundreds of platform plug-ins. Salesforce.com, being one of the earliest and most vocal SaaS companies, required over $100 million in financing to establish their beachhead position and market dominance. They were the first SaaS company to go from $0 to $1 billion in recurring revenue.

    How does a SaaS company answer the defensible market position question? I think the answer lies in explaining that this new generation of products isn’t about defensible positions but rather about first mover advantage and grabbing market share. The barriers to entry are so low that the most important task is to sign up as many customers as possible, while offering such a compelling solution that they won’t want to switch or their switching costs will be too high to warrant making a change. SaaS is about economies of scale with a multi-tenant architecture whereby more engineering time is spent on innovation and less on solving one-off customer issues.

    The number of software companies that are going to succeed due to patents and significant networks effects is significantly smaller than in the past.  Today, it is all about innovating quickly and taking market share.

  • More Thoughts on KPI Dashboards

    We made another round of tweaks to our Google Spreadsheet KPI dashboard today, and I wanted to share them here. As you might remember, I’ve talked about using Google Spreadsheets for KPI dashboards two times before on this blog. My excitement for them hasn’t waned at all. Here are the next set of changes that we made:

    • Added a new column where the rows represent the running average of each of the KPIs so we can see how our average compares to our goal
    • Updated the cell conditional color coding so that values that are empty show up with a light gray background, but only if a value of zero isn’t allowed (e.g. one KPI is the average number of billable hours per person for our services team, which will never be zero)
    • Took the average value from the first few weeks and made that our goal for this quarter, as our main task right now is establishing a baseline for the different KPIs

    I encourage all entrepreneurs to start tracking different metrics in their business and capture them weekly in a color-coded spreadsheet.