David Cummings on Startups

Blog

  • Disrespecting a Team Member is Never Acceptable

    I was two years in as a full-time entrepreneur and we were meeting a potential customer in a small nondescript building less than a mile from our office. Our startup was still struggling and I, as an eager first-time entrepreneur, was chasing any opportunity regardless of fit. Helping me that day at our sales meeting was our lead engineer, and after a few pleasantries, we started talking shop with the prospect.

    Quickly, as the conversation turned technical regarding product capabilities, our lead engineer dove in regaling all the details. Only I, as a sales-oriented entrepreneur, thought our lead engineer was focused too much on the minutia and not enough on tying the functionality back to the customer’s needs. So, in an expression of poor leadership, I interrupted him mid sentence and took the conversation a different direction.

    Another topic with the prospect, another detailed comment from our engineer, another poor interruption from me going a different direction — on and on it repeated.

    Only after the meeting, as we got into the car, the lead engineer shared with me how little he felt. How I had unprofessionally talked over him. How poorly I had reflected our company in front of the prospect. How miserable I was in the setting.

    It was all true.

    Now, 16 years later, I still remember this lesson. I did an unacceptable job setting expectations with the lead engineer before the meeting. I did an unacceptable job showing respect to the lead engineer in the meeting. I did not lead, I trampled.

    Disrespecting a team member is never acceptable.

    The next time you have the urge to talk over someone, let them finish. Hear them out. Reflect on their position. Treat them with respect — it’s always the right thing to do.

  • Limiting Beliefs, Stop Holding Yourself Back

    Growing up in a small town in Florida, I didn’t know any software entrepreneurs. Not only did I not know any personally, I didn’t know of any at all in my town — not a single one. Of course, I read about famous ones in different magazines and online, but they weren’t relatable. While it’s inspiring to read about someone doing great things a 1,000 miles away, it’s significantly more impactful to see someone doing great things in your town or even neighborhood.

    For me, I let myself down early in life with limiting beliefs. I let myself be a product of my surroundings.

    If I only had X, I could be more successful.

    If I only lived in Y, I could be more successful.

    If I only knew Z, I could be more successful.

    Only limiting beliefs are exactly that: limiting.

    One of the best things an entrepreneur can do is realize that every successful entrepreneur is just another regular person, eating, sleeping, and living life like everyone else. Maybe they were a little luckier. Maybe they tried a little harder. Yet, all are human. All have 24 hours in the day. All have challenges.

    The next time a limiting belief enters your mind, fight back. Recognize it for what it is and override it. Don’t let yourself limit yourself.

  • They Said I Wasn’t Good Enough

    The year was 2009. We pitched Pardot to VCs all over the country. 29 of them to be exact. Rejection after rejection. You’re based in a second tier city. Your market isn’t big enough. Your network effects aren’t strong. You’ve never done this before.

    They said they didn’t want to invest.

    They said I wasn’t good enough.

    Today, as part of Salesforce.com, Pardot is worth billions of dollars of market cap.

    Last week I was reminded of this personal experience when an entrepreneur shared he performs best when there’s a chip on his shoulder. When his back is against the wall, he fights hardest. When things look bleak, he grinds more.

    Most entrepreneurs are the underdog. Society is averse to change. Companies are averse to change. People are averse to change. Yet, the only constant is change.

    Entrepreneurs must recognize the challenge, embrace it, and overcome it. Use adversity for motivation. Find value in having a chip on the shoulder.

    Just because they said I wasn’t good enough didn’t make it true.

  • Most Startups are Self-Funded

    With all the talk about startup financing rounds, it’s easy to forget that most startups are self-funded. Self funding ranges from personal savings to credit cards to consulting with one common theme: resourceful entrepreneurs working through adversity to achieve their goals.

    Just last week, I met with an entrepreneur who’s been working on her startup for several years while still having a day job. She identified a valuable, urgent problem (hair on fire!) and was able to get the future customer to fund development of the product while she retained the intellectual property. Customer-funded startups are often the best.

    Locally, I know an entrepreneur that drove Uber on nights and weekends, especially during concerts and events for surge pricing, so as to work full-time on his startup. After doing this for a year, and getting some initial traction, he then raised money from investors. Traction first, investors second.

    Of course, the best known local success story is self-funded: MailChimp. In the early days, MailChimp was a web consulting firm before morphing to an email marketing platform after a few years. Now, MailChimp will do over $600 million in revenue this year and is one of the most valuable tech companies in the country.

    The next time an entrepreneur laments a lack of funding, make sure they know that funding isn’t a pre-requisite for success. The main pre-requisite for success: grit.

  • 24 One-on-One Meetings in a Day

    Last week I was catching up with an entrepreneur and he shared that he just did 24 one-on-one meetings with his customer success team in a single day. Wow! Each meeting was face-to-face for 15 minutes with a focus on learning about both the business and the person. Time with team members, especially focused, in-person time with people that aren’t on your direct team, is one of the best ways to learn and connect, regardless of size.

    While regular one-on-one meetings with direct reports is a popular best practice, rarely does it extend to skip-level meetings or entire days with whole departments. Staying close to the customer, and close to the culture, are two of the most important things an entrepreneur needs to do. High velocity one-on-one meetings is a great tactic to help with the latter.

    Entrepreneurs should schedule one day per month for high velocity one-on-ones with team members they don’t normally interact with. There’s no substitute for direct, focused communication with people throughout the organization.

  • Podcasts on Startups and Entrepreneurship

    Two years ago, after all the buzz around podcasts, I jumped on the bandwagon and have really enjoyed the content and experience. Like any medium with no marginal cost and a potentially infinite audience (hello blogs!), there’s been an explosion of podcasts of varying quality. After snacking on a number of different ones, here are my favorites:

    • Naval – Thoughtful. Intellectual. I really enjoy Naval’s thinking. It’s more general philosophy around life and business, and less startup specific, although readily applicable.
    • Twenty Minute VC – Crisp. Fast paced. Harry has interviewed thousands of people in the VC and tech entrepreneurship world. Highly recommended.
      Bonus: Harry also runs the excellent SaaStr podcast.
    • Y Combinator – Extensive. Deep. YC’s content is excellent, covering a number of different topics.
    • EntreLeadership – Broad. High quality. EntreLeadership has a number of well-known guests sharing their entrepreneurial journeys.

    For me, podcasts have slotted in nicely when I want something interesting in the background to ponder while driving, walking, etc. If you haven’t tried a podcast or two, I’d highly recommend it.

    What else? What are some other favorites around startups and entrepreneurship?

  • The Entrepreneurial Thrill of Fresh Ideas

    As an entrepreneur, one of the things I get most excited about is fresh ideas. Ideas could come in the form of entirely new businesses, ways to do something better, or just a different take on a scenario I’ve seen before. Because of this, I enjoy reading blogs and books looking for other peoples’ ideas to find ones that I can commandeer for my own use. Within the YPO and EO circles, a favorite question is “what’s a great book or article you’ve read lately?” Ideas act as a currency of coolness, ready to be exchanged at a moment’s notice.

    Just this week I was meeting with a startup and a simple, yet valuable idea, came up. This startup has been in business for 7-8 years and has been venture-backed half that time. For most of it’s existence, banks paid almost no interest on the savings (cash on the balance sheet). And, as part of the “package” from the bank, the current interest rate was 1% on the savings. Well, the startup raised a large round of funding in the last year and casually asked for better terms. The bank now pays 2.25% interest on the savings, but wouldn’t have changed if someone didn’t ask. Because of the large sum of the financing, this has resulted in hundreds of thousands of dollars of interest income — found money. Have cash or working capital for the startup? Ask the bank for a better rate!

    After last week’s post on Continuous Employee Feedback, an entrepreneur shared with me how much they love Emplify to continuously measure employee engagement. A fresh idea! Historically, employee engagement has been an afterthought for most organizations. Now, with modern technologies, it’s easy and seamless. Of course, the tools are only going to point out the challenges and it’s up to the leaders to figure out how to improve them, but knowing where to focus is immensely valuable. Writing, and simply sharing ideas with the world, is another great avenue for learning about fresh ideas.

    Entrepreneurs would do well to develop a system that generates fresh ideas as they go on their startup journey. Whether by reading, writing, peer groups, or other method, the steady flow of ideas is key.

    What else? What are some more ways to generate fresh ideas?

  • Continuous Employee Feedback

    Back in the original days of Pardot, we worked hard to manually solicit feedback from employees. After years of experimenting, we settled into a routine that had a daily, monthly, and quarterly rhythm.

    On a daily basis, during our morning standup, we’d ask if there were any heroes or hassles. Heroes were employees that went out out their way to help someone and made an important contribution. Hassles were challenges or impediments for employees to produce their best work.

    With this daily feedback, we’d talk about it in-person, address it immediately if there was a certain severity of hassle, and have the person who brought it up add it to the respective idea exchange. An idea exchange is much like a message board where people can submit ideas, comment on them, and vote ideas up or down. Finally, we’d we acknowledge the hero of the month and hassle of the month, defined by votes in the idea exchange, at the first weekly all-hands meeting of the first of the month. The winner for each received a $100 bill and a nice lawn ornament from Delta SkyMall to display at their desk.

    In addition to the daily heroes and hassles for employee feedback, we also ran a quarterly anonymous employee survey. The survey was short — 10 questions — that always started with the net promoter question: how likely are you to recommend Pardot as a place of employment to a friend? From there, we’d rotate a mix of questions related to core values, general satisfaction along the lines of compensation, career paths, etc. Results from the survey were taken seriously and we worked hard to make our organization a top place to work (we were rated the #1 best place to work in the city multiple times).

    Today, there are a number of excellent tools that take care of employee feedback and engagement in an automated fashion. Programs like TINYpulse, Officevibe, and Culture Amp are lightweight and incredibly effective at gathering relevant information and presenting it in an actionable manner.

    Entrepreneurs need to incorporate continuous employee feedback into their companies and cultivate an environment for team members to thrive. The stronger the culture, the stronger the company.

  • Crisp, Memorable Startup Origin Stories

    Last week I was talking to an entrepreneur and I went for one of my favorite questions, “How did you come up with the idea for your company?” Now, this question isn’t concerned with the quality of the idea. Rather, the goal is to hear the origin story of the business, the raison d’être. After some meandering, it was clear I wasn’t getting a crisp, memorable origin story. I wanted something compelling, something that would help me remember the entrepreneur and the business.

    At the Tech Village, the origin story is one of the most frequent questions I receive. Here’s my answer:

    When I moved to town following college, I had a hard time finding a community of like-minded tech entrepreneurs. We had so many great startups, but no center of gravity for the region. From that experience, I knew that once I had the time and resources, I wanted to create a place to help entrepreneurs thrive and improve their odds of success — a Tech Village.

    Entrepreneurs should proactively write out their origin stories. Practice them. Refine them.

    Origin stories should be crisp and memorable.

    What’s your origin story?

  • Revenue Financing + Traditional Equity Continued

    Last week’s post Revenue Financing + Traditional Equity as the Future of Startup Funding struck a nerve and resulted in a number of comments and questions. Generally, the big idea is that most regions have sub-standard angel communities because the angels don’t make money on their investments. Without regular, positive returns, angels drop out and the community is constantly treading water. The idea for a revenue financing component is to recycle money back into the community sooner — ideally in less than five years as opposed to today’s 7-10+ years — so that angels have a good experience and stay active.

    Revenue financing plus traditional equity prompted a number of questions. The big question: how might it work? Here’s a hypothetical example:

    • Angels invest $500,000 into a seed round at a $3.5M pre-money valuation ($4M post-money valuation after the new investment is included)
    • When the startup hits $4M in trailing twelve months revenue (the initial seed valuation becomes the revenue target), ideally within five years (that’s what the entrepreneur’s projections said!), the startup pays the original seed investors back, plus 20%, over the next 18 months (paid monthly as a percentage of revenue)
    • The 1.2x returned to the seed investors becomes similar to negative participating preferred equity whereby that amount is deducted from the investor proceeds at time of exit

    Now, 99% of all tech startups never achieve $1M in sales in a calendar year, so most startups, even with six figures of angel investment, will never hit the revenue threshold to trigger payments back to the seed angels. Yet, if some small percentage of angel-backed startups do hit it — say 3% — then more money will flow back to the community faster.

    Changing an entrenched format, like typical startup funding terms, is a tall order. When startup communities with limited angel investors come together to improve the recycling of capital, revenue financing should be a consideration.