David Cummings on Startups

Blog

  • Aligning Company and Customer Interests

    At lunch today I was talking with my friend about a new business he was starting. We got into a good conversation about different pricing and business models, especially in relation to what was in the market already. During the conversation, I expressed how passionate I am about aligning the company’s interests with that of the customer. Some common examples come to mind:

    • Have monthly contracts (unlike most cell phone companies)
    • Only charge if a transaction was successful (like Google Pay Per Action or eBay Motors)
    • Provide an unconditional money back guarantee

    By building these types of programs into the business model from day one, the company adapts and grows around them such that in the long run the company’s interests stay aligned with the customers’.

  • Don’t solve a problem that doesn’t exist

    I was at a meeting for a non-profit last week and we were talking about some upcoming projects. One member brought up a potential issue that seemed very unlikely and another member chimed in that we shouldn’t try to solve a problem that doesn’t exist. Wow. That really resonated with me. I think all too often we try to solve problems before they become an issue. Don’t get me wrong, I want to be proactive, but not for unlikely issues.

  • Fun with Incorrect Predictions

    I just finished reading “The New Positioning” by Jack Trout. It was a fun, quick read that provided several salient points on positioning a company and/or product line. The book, published in 1996, included several of the authors predictions about different markets and categories. Of course, it is much more interesting to make a prediction than say nothing at all but I particularly enjoyed this incorrect prediction:

    Consider the problems that Apple encountered with the introduction of their Newton, a product they called a “PDA.”
    …
    PDA, or personal digital assistant, is not a category. Nor is there much hope in its becoming a category. (Pretty Damned Abstract is one tongue-in-check definition of PDA.)

    We all know that PDAs did turn out to be successful (not the Newton) and that the name PDA stuck.

  • Y Combinator for Atlanta – Costs?

    Lance Weatherby has an interesting post titled “Who Wants Seed Money?” in which he discusses the idea of a Y Combinator for the Southeast. I’m a proponent of the idea and was part of the discussions last year with the people he mentions. Mike Landman and I hashed out the idea once again today at lunch and concluded that Atlanta really needs such a program. Mike is heading up the EO Accelerator program for Atlanta which helps entrepreneurs with businesses between $250k and $750k grow to $1 million plus so as to be eligible to join EO (which I highly recommend).

    Naturally, Mike and I dove right into some of the details of doing a Y Combinator for Atlanta. We each have a couple thousand extra square feet at our respective corporate offices to provide a co-working environment. What are some of the other costs? Here are the initial thoughts on costs on an annual basis:

    • Managing Partner – volunteer (~$5k in expenses to talk at regional organizations and schools)
    • Part-time Program Coordinator – $20k
    • 5 teams in one summer class @ $20k investment per team – $100k
    • Office space (2,000+ sq feet for 20 people) – $25k (possibly less)
    • Legal – $5k
    • Accounting – $3k
    • Miscellaneous (food, infrastructure, etc) – $7k
    • Cushion (more people per team than expected, legal/accounting in future years) – $10k

    Total: $175k annually

  • Entrepreneurial Force Multipliers

    I was reading an article about technology in the military/police context and the term force multiplier kept being mentioned. Naturally, I thought it was an interesting term in the entrepreneurial/business world. Here is Wikipedia’s entry on force multipliers:

    A force multiplier refers to a factor that dramatically increases (hence “multiplies”) the effectiveness of an item or group.

    Here are some force multipliers:

    • Product development — not one-off features for a specific client but rather opinionated features that fit a focused vision
    • Investment capital — particularly when you have the basis for a repeatable sales process that is profitable and/or gains market share
    • Search engine optimization — PageRank operates like the Richeter Scale such that each incremental increase results in substantially more credibility

    What are the force multipliers in your business?

  • A Strong SaaS Argument: Labor costs will continue to rise as hardware costs go down

    Jacques Chester over at Club Troppo has a nice piece titled “Shared Hosting is Doomed.” One of the arguments he makes revolves around the idea that over time labor costs for technical administrators will rise substantially while the costs of hardware will continue to drop precipitously. I’m in complete agreement.

    One of the big benefits I see for Software-as-a-Service (SaaS) is that the technical labor costs are spread over a large group of users in a very efficient manner. His argument, as it pertains to the low-end, shared web hosting environment is a positive for SaaS: increased technical labor costs will drive more companies to SaaS solutions.

    SaaS is going to have a greater impact than most people realize. I’m looking forward to it.

  • Include a Written Section during Interviews

    One of the best techniques to employ during the interview process is that of a written portion. For us, we have a series of research questions that aren’t easily answered without effort. It helps us understand the candidates’ writing skills, resourcefulness, and attention to detail.

    In addition, being a SaaS company makes it easy for us to provide a few simple assignments for the candidate to do using our web-based software. This helps us better understand how quickly they pick up new products, their resourcefulness, and their likelihood of success in the company.

    I recommend using a variety of different techniques to assess candidates.

  • Recommended Leadership Books by Patrick Lencioni

    Leadership and managing people is something that you really need to work at and consciously look for ways to improve. For any new managers, as well as seasoned managers, I recommend reading the following books by Patrick Lencioni in their entirety:

    • The Five Dysfunctions of a Team
    • The Three Signs of a Miserable Job
    • The Four Obsessions of an Extraordinary Executive
    • Silos, Politics, and Turf Wars
    • Death by Meeting
    • The Five Temptations of a CEO

    Patrick Lencioni is, in my opinion, the leadership guru of the 21st century. Check out Amazon.com for these books.

  • Thoughts on the Employee Hiring Process

    We’ve been spending quite a bit of time lately doing interviews and hiring new people, as we’re experiencing significant growth in both of our product lines. Here are some quick thoughts:

    • Come up with simple bullet points of the types of characteristics you look for in the person and include those in the actual job posting (e.g. good natured, professional, self-starting, etc. are what we look for)
    • Identify some easy ways to filter resumes (e.g. in-bound emails from @aol.com addresses and those without a full paragraph or two in the email message itself are immediately deleted, without even looking at the resume due to not being tech savvy enough as well as not interested enough)
    • Do phone interviews first, followed-up by in-person interviews, and include the Top Grading techniques if it is a manager position or requires several years of experience

    Good luck!

  • Quarterly Performance Reviews

    I’m a big proponent of doing 360 degree performance reviews every quarter. Many companies do them annually or twice a year. I feel that is too infrequent and that you spend most of your time talking about the most recent quarter, at best. Another benefit of doing it quarterly is that compensation discussions aren’t tied to every review. This makes it less stressful and more useful.

    We follow the advice of Patrick Lencioni and only have four simple questions on our quarterly performance reviews:

    1. What did you accomplish?
    2. What are you going to do next?
    3. How can you improve?
    4. How are you following the values?

    Every employee answers these question for themselves as well as their direct reports and manager. It is an invaluable tool and I highly recommend it.