David Cummings on Startups

Blog

  • What are my strengths?

    Recently an entrepreneur was asking me questions about my own entrepreneurial journey. He was interested in learning from other entrepreneurs and potentially modeling his style and actions after others. My advice: play to your own strengths. Only you can be you.

    As for myself, I have a number of strengths and weaknesses.

    I love starting things, but hate finishing them.

    I love dreaming up ideas and getting others excited about them, but have little interest in the detailed execution.

    I love connecting people and looking for ways to add value to others.

    I love seeing trends in the world and guessing where things will be in the future.

    I love finding gaps or opportunities in the market and thinking through potential solutions.

    I love as little process as possible that ensures the organization is running well, but eschew anything that feels like overhead.

    I love challenging people and working to help them grow in their careers.

    I love getting doubted and then proving the skeptics wrong.

    I love trying hard things and just move right along when most don’t work, with no regrets.

    I have plenty of strengths and weaknesses, no different than anyone else.

    My ability to see where markets are headed, recruit people for crazy ideas, and stay out of the weeds are some of my most important strengths.

    What are your strengths?

  • Stories of an Entrepreneur’s Resourcefulness

    Earlier this week I had the opportunity to hear Jewel Burks Solomon share her entrepreneurial journey and it was incredible. Reflecting on the Partpic story, the piece that stood out the most was her neverending resourcefulness. Setbacks, adversity, challenges — no match for her.

    https://twitter.com/davidcummings/status/1069702688227672064

    Within her journey, here are a few stories that stood out:

    • Jewel joined a company’s management training program and was assigned to run a call center. Only, on a daily basis she was bothered by angry customers needing to solve a problem — what’s the name and number for this part? She came up with an idea for a software product that analyzed a picture to determine the part. Yet, management at the company had no interest in pursuing her idea. Hence, the idea for Partpic — a computer-vision system for identifying parts — was born.
    • After investing her lifesavings in the idea, and running out of money, she started entering pitch competitions — anywhere and everywhere — as a way to fund the business. $250,000 and multiple pitch competition wins later, she had cash (bonus: it was mostly non-dilutive!).
    • When she decided to raise money, she pinpointed Joanne Wilson as her desired angel investor. Instead of approaching Joanne directly, she worked her network and met with several entrepreneurs Joanne had already invested in, and then asked them to intro her to Joanne in the same week. Joanne was the first angel investor.
    • Wanting to get on the radar of Amazon.com, she pointed out to the Amazon Web Services conference manager there weren’t enough women speakers, and she had just the person — her technical leader that was a machine learning expert. Amazon.com took her up the idea, her technical leader presented, and Amazon.com’s corporate development team was in the audience during the talk. After the talk, the corp dev team gave their business cards to the technical leader, who then gave the cards to Jewel. Jewel followed up and the rest is history — an acquisition by Amazon.com

    Resourcefulness is one of the most important traits of successful entrepreneurs and Jewel’s story painted one of the most compelling pictures I’ve heard. Special thanks to Jewel for sharing her story and helping the next generation of entrepreneurs.

  • Growing Endeavor in the Southeast

    Earlier this week I had the opportunity to spend a day in Birmingham, Alabama with the Endeavor Atlanta team in an effort to expand the non-profit to other regions of the Southeast. Endeavor, an international organization with offices in 32 countries, is leading the high impact entrepreneurship movement around the world. Think of Endeavor as an organization that supports scale ups (startups post product/market fit in the scaling phase) with mentorship, continuing education, networking, and an all-around high impact entrepreneurship ethos.

    In Atlanta, we have eight Endeavor Entrepreneurs building amazing companies. These companies range from lease accounting software to second home rental marketplaces to Bitcoin payment processing platforms. Endeavor isn’t limited to tech companies. In fact, globally, most Endeavor Entrepreneurs aren’t in tech. The key: high impact entrepreneurship. Entrepreneurship is one of the most powerful forces to help communities through job and wealth creation.

    Now, with Endeavor Atlanta off to a great start, we’re looking to grow the Endeavor footprint in the Southeast with regional offices. These regional offices would support their local entrepreneurs and lean on the Atlanta office to interface with the global network. Once a regional office achieves enough scale, they’d then become their own full office. The Southeast, with 80+ million people, is the fastest growing region in the United States and has a tremendous number of entrepreneurs.

    If you’re an entrepreneur, or supporter of entrepreneurs, in the Southeast, please reach out as we’d enjoy talking about ways to grow Endeavor in the region.

  • Frequent, Quality Communication as Success Indicator

    Recently I was talking to a friend and he asked about indicators of entrepreneur success post investment. Now, pre-investment, entrepreneur personality traits like grit and resourcefulness come to mind, but after partnering with an entrepreneur, it’s a behavior that’s most indicative: frequent, quality communication.

    Frequent, quality communication is an action, not a personality trait, and one that every entrepreneur can do. Only, too many entrepreneurs don’t do it.

    https://twitter.com/davidcummings/status/1065331904919072768

    So, if communication is an indicator of success, why don’t more entrepreneurs do it?

    Easy, prioritization.

    Many entrepreneurs simply don’t prioritize frequent, quality communication. To some, it’s beneath them — simply not worth their time. To others, they don’t understand the benefit.

    Frequent, quality communication with all constituents — employees, investors, advisers, mentors partners — develops more clarity of thought and a vehicle for feedback and help. Just the act of communicating forces an articulation of position, strategy, and approach. More communication, more results.

    Communication comes in many forms. Some of the most effective methods are the weekly update, simplified one page strategic plan, and daily check-ins.  Whether the communication is written, in-person, or virtual, it doesn’t matter. What matters is that it’s frequent and high quality.

    Communicate early and often. Put in the effort. Make communication a priority.

  • 12 Ideas to Strengthen Culture

    Corporate culture is a funny thing. Similar to my favorite definition of brand — how you feel about the last experience with a company — culture is expectations of how people behave, both internal and external, at a company. Only, without intentionality around culture, culture will be inconsistent and corresponding behavior expectations low. The strongest cultures have clear values, repeatable processes, and high expectations.

    Culture is powerful.

    Culture is a unique differentiator.

    Culture is the only thing in complete control of the entrepreneurs.

    Here are 12 ideas to strengthen culture:

    1. Establish the mission, vision, and values
    2. Develop a Simplified One Page Strategic Plan and update it quarterly
    3. Build SMART goals/OKRs and revisit them weekly
    4. Run daily check-ins for active organization of priorities
    5. Organize an interview flow for the desired values
    6. Integrate culture check teams in the hiring process
    7. Ensure quarterly check-ins to review results and areas for improvement
    8. Highlight the hero and idea of the month
    9. Send a weekly update email to keep everyone aligned
    10. Solicit regular employee feedback at all levels
    11. Incentivize internal referrals for people with similar values
    12. Escape the office with regular off-site retreats

    High performing companies have high performing cultures. Use these ideas to build a strong, enduring culture.

  • SaaS Enemy #1: Churn

    At time we sold Pardot several years ago, our monthly gross churn was 1.4%. On an annualized basis, it was roughly an 80% renewal rate. Back then, we had next to no upselling of customers due to a poor pricing model (it was subsequently changed), resulting in a net renewal rate (upsells less downgrades and cancels) that was essentially the same as the gross renewal rate.

    With a growth rate of 100% year over year, we weren’t concerned with plateauing where new customer signings are negated by customer churn resulting in a no-growth business (general ballpark, depending on a number of factors, is that the growth rate goes down 20% per year e.g. 100% year one, 80% year two, 60% year three, etc.). Only, without a much better net renewal rate, ideally over 100%, it was clear that in the next few years the customer base would get so large, and the new customer signings larger, but not large enough, that the business would no longer grow.

    Customer churn is the #1 enemy of SaaS startups.

    So much shine wears off a startup when it isn’t growing fast, and the fastest way to ensure that it keeps growing, is to not have any churn (nearly impossible save for software to large, enterprise customers), or low churn plus upsell, resulting in growth even if no new customers are signed. Everything from custom professional services to great customer support to heavy qualification of the potential customer before they’ve signed should be employed to ensure the highest probability of customer success, and thus the greatest chance of being a customer for life.

    Churn is part of the SaaS experience, but everything possible should be done to minimize it and maximize the chance for net negative churn.

    What else? What are some more thoughts on churn as the #1 enemy of SaaS startups?

  • Start a Startup with Community

    Recently I was meeting with an entrepreneur that’s early in the search for product/market fit. With a few paying customers, he was looking for scalable ways to find people that would both be potential customers as well as provide feedback on the product. Instead of just looking for potential customers immediately, I suggested a different approach: build a community of like-minded people that care about the problems and opportunities he cares about for his startup.

    But how? Create a local meetup.

    Find five people that care about the idea or topic. Don’t worry if they are potential customers or potential competitors. If they care about the common idea, get them together. Invite a guest speaker or develop some conversation starters for the group.

    Meetups like this promote idea sharing, help everyone develop personal relationships, and make great content for future blogs, tweets, and videos. The human connection shouldn’t be underestimated. Even with all the digital interactions, people want to be around other people, live and in person.

    Then, how do you scale this? Go to another city.

    Find a like-minded person or customer in a different location. Setup a dinner at a central restaurant or ask another company to use their board room. Build more relationships, share more ideas, and create more community.

    Community starts with one other person. Then another. And another.

    Like any overnight success many years in the making, community takes time. The best time to start is now.

    What else? What are some more thoughts on starting a startup with community?

  • So you have a startup idea, what’s next?

    Earlier this week I was talking to an entrepreneur that has a startup idea, but is having a hard time making progress. Naturally, he’s intently focused on raising money and believes cash from investors will solve the problems. While cash from investors would help with building his idea in its current form, it doesn’t validate a need in the market. In fact, demonstrating authentic demand would significantly help convince investors to invest.

    So, what’s next? The recommended next step is to read The Lean Startup by Eric Ries. From the book blurb:

    The Lean Startup approach fosters companies that are both more capital efficient and that leverage human creativity more effectively.  Inspired by lessons from lean manufacturing, it relies on “validated learning,” rapid scientific experimentation, as well as a number of counter-intuitive practices that shorten product development cycles, measure actual progress without resorting to vanity metrics, and learn what customers really want.

    Some startup ideas need a go-forward-at-all-costs approach because the market doesn’t know what they want. The vast, vast majority of startup ideas are better off going the “validated learning” approach where the entrepreneur starts with a thesis, works to get ideas and input from potential customers in an unaided fashion (don’t lead the witness!), and then iterates from there.

    With an idea and a vision, the next step is to validate it.

    What else? What are some more thoughts on what to do next when you have a startup idea?

  • Spend Time Producing Content, Not Just Consuming It

    Last week I was talking to a would-be entrepreneur and I recommended he start a blog to share some of his thoughts with the universe while he searched for a business idea. After hemming and hawing, he said he just likes to consume content. True, consuming content is fun and easy, but it doesn’t force thinking through ideas and articulating a position. The act of producing content, even for an audience of one, while difficult at first, gets easier with time.

    Another entrepreneur I met with recently was asking for go to market ideas for her new product. With a focus on small businesses, it was clear that the cost of customer acquisition would have to be low based on the product price point, and that it was going to require a light-to-no touch sales process. I asked about search engine optimization (SEO) and content marketing only to have her lament that they’d tried it without much luck. SEO and content marketing, just like most endeavors, takes a significant amount of time and energy to be successful. The best time to start producing content was years ago. The next best time to start is now.

    Spend time producing content, not just consuming it.

    Whether it’s simple tweets on Twitter, or long-form articles, entrepreneurs would do well to start writing more frequently. Take the time, put in the effort, develop the muscle — it’s not easy, but, ultimately, it’s worth it.

    What else? What are some more thoughts on producing content, not just consuming it?

  • How Much to Raise When Times are Good

    Talking to entrepreneurs lately, it’s clear we’re seeing some of the best valuations in nearly 20 years (hello, dot com days). This is especially true for startups with limited/no metrics as well as ones that have outstanding growth rates. In the middle — a startup with decent growth and decent metrics — times are pretty normal and valuations are much more reasonable.

    Last week, when asking an entrepreneur how much they were targeting for their next valuation, he said he wanted the highest valuation possible along with personality fit with the new investor. On the surface, this makes sense — minimize dilution and enjoy the journey. Only, there’s a piece missing here, and it’s an important one: if you raise at too high a valuation, the business might not be able to grow into it, and the downside can be catastrophic.

    Two weeks ago I talked to a different entrepreneur that’s raised almost 5x the equity as they have in annual recurring revenue, and the business isn’t growing fast (< 30%). Unfortunately, the Rule of 40 has been broken for years in this case. Too much money was raised at too large a valuation and the business hasn’t performed. Now, the cap table is broken. Lots of pain is imminent (cram down, down round, common equity getting wiped out, etc.).

    When times are good, and exceptional valuations possible, find the upper in end of reasonable where the business can confidently grow into the valuation. The valuation might not be as glamorous as possible, but there’s tremendous value in resting easy knowing that even if the business falters a smidge, the last valuation is readily exceeded with time and the existing cash in the bank.

    What else? What are some more thoughts on how much to raise when times are good?