David Cummings on Startups

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  • Prematurely Scaling Sales Affects More Than Burn

    One of the mistakes I’ve made in the past is thinking we had product/market fit and starting to scale the sales team in an effort to find a repeatable customer acquisition process. Only, by prematurely scaling sales, it created more issues than just increasing the burn. Here are a few reasons why:

    • Product – With a sales team and no product/market fit, when prospects ask for features, the tendency is to add whatever feature request is made to win the deal, but that can create bad habits and a Frankenstein of a product. The key is to be opinionated about the product functionality even when there’s a chance to close an early customer.
    • Customer Happiness – Without product/market fit, the chance of early customers being happy is much lower unless the product is a must-have and solves a real problem. As the product gets closer to product/market fit, customer happiness goes up.
    • Morale – Sales people love to sell. Only, when the product isn’t ready, trying to sell something that doesn’t have product/market fit rarely results in success, and that hurts morale. Teams want to win, and trying to sell something people don’t want makes things worse.

    Prematurely scaling sales affects much more than just the burn rate. It slows the organization down and creates unintended challenges.

    What else? What are some more ways hiring sales people when the product isn’t ready causes problems?

  • Video of the Week: Vinod Khosla – Failure does not matter. Success matters.

    For our video of the week, watch Vinod Khosla: Failure does not matter. Success matters. Enjoy!

    From YouTube:
    “Try and fail, but don’t fail to try,” emphasized Vinod Khosla (MBA ’80) during the Roanak Desai Memorial View From The Top talk on May 1, 2015. Khosla, the founder of Sun Microsystems and Khosla Ventures, also discussed the importance of having a belief system and the “indulgence” of brutal honesty.

  • When the Product is the Sales and Marketing

    Continuing with the theme of SaaS 2.0, there’s another important concept in that it inverts the sales and marketing process. In SaaS 1.0, a tremendous amount of money is spent on sales and marketing to take the potential buyer on a journey where they have to provide their name and email to download an ebook, watch a video, or get a piece of content. Then, inside sales reps start calling in hopes of doing a demo and taking the person through a sales process. Only, after this experience, and signing a contract to buy the software, does the buyer get to use the product. Finally, the implementation coordinators help on-board the new customer and the buyer gets to use the product, often for the first time.

    In SaaS 2.0, the product is the sales and marketing. Everything starts and ends with the product so there are no barriers to begin using the app immediately. Once signed into the free edition of the app (often called the platform), there are marketing videos that explain the benefits of each module. Paid modules are explained and in-app upgrades made clear — the selling is done by the app, in the app. Sales reps are still available, but they’re there as consultants to answer questions and help with change management, not to get contracts signed. There are no contracts to sign.

    The most powerful form of service is high quality self-service, with great people to help as a backup. With SaaS 2.0, the product is the sales and marketing.

    What else? What are some more thoughts on SaaS 2.0 focusing on the product experience as the center of the sales and marketing?

  • Balancing the Short-Term and Long-Term Product Demands

    Recently I was talking to an entrepreneur that’s in the process of changing their data storage architecture as the startup is growing fast and there are increased demands on the database. Only, the app is performing fine and there aren’t any slowdowns right now, but it’s clear that with the continued growth at some point there will be issues. Yet, the team doesn’t know exactly when that will occur, even after some load and stress tests against the system. Now, they’re moving forward with a heavy refactoring of code and changing of the storage architecture.

    Balancing the short-term and long-term product demands is never easy. Here are a few questions to ask:

    • What percentage of current customers will appreciate this change? What percentage of desired customers will appreciate this change?
    • Do we have to implement this change eventually? Why? Why not? What instrumentation will help guide our decision making process?
    • What does the current road map have prioritized? What will have to change to make room to implement this long-term product change now?
    • Is the proposed change a temporary solution or will it support growth indefinitely?
    • What are the risks? What might go wrong?
    • How will this change affect our ability to compete in the market?

    Balancing short-term and long-term product demands is never easy. Ask these questions and make an informed decision.

    What else? What are some more questions to ask when thinking about short-term and long-term product demands?

  • The Power of the Webhook

    Back in the Pardot days, we wanted a way to accept data from a third-party form or application directly into the app, so we came up with the form handler. Basically, it’s the receiving end of a form submission without the front end form fields to go with it. Over time, this practice of sending and receiving data via a specific URLs became popular and is widely know as a webhook.

    Wikipedia has a more technical definition:

    Webhooks are “user-defined HTTP callbacks”. They are usually triggered by some event, such as pushing code to a repository or a comment being posted to a blog. When that event occurs, the source site makes an HTTP request to the URI configured for the webhook. Users can configure them to cause events on one site to invoke behaviour on another.

    Now, webhooks make it easy to share data and trigger features across thousands of SaaS apps, and they don’t have to have formal integrations. The more apps that implement webhooks — both to send and receive data — the more the incumbent apps that aren’t SaaS 2.0 lose their ecosystem integration moat.

    Look for webhooks to continue to grow in importance over time.

    What else? What are some more thoughts on the power of webhooks?

  • JavaScript as the Web’s Integration Fabric

    Ten years ago, I never would have predicted how JavaScript (code to make things more dynamic in a web browser) hosted on third-party sites would become the core integration method for the front-end of the web (see The Three Types of SaaS Integration). In hindsight, it makes sense that interactive elements and analytics would be decoupled from much of the content so that companies can deliver best-of-breed solutions for a variety of functions. Now, tag managers like Segment and Google Tag Manager have taken it one step further and decoupled the loading of JavaScript on a per-page basis to a system that uses JavaScript to load other JavaScript (very meta).

    Many popular webpage features are loaded via JavaScript that comes from a third-party, including:

    • Web analytics
    • Forms
    • Live chat
    • Comments
    • Pop-up prompts that ask for an email address
    • Site search
    • Dynamic content

    Going forward, look for this trend to continue and more functions on the web to be delivered via third-party JavaScript. More sites will deliver real-time personalization and richer, higher quality experiences in a seamless manner via third-party products. JavaScript is the web’s integration fabric, and growing in importance.

    What else? What are some more thoughts on JavaScript as the web’s integration fabric?

  • Atlanta Startup Village #48

    Join us tonight at 7pm for Atlanta Startup Village #48. The event is free and everyone is welcome. Here are tonight’s startups:

    • Atlas Bay: Bring your spaces to life with virtual reality for real estate
    • Shofur: Bus reservations made easy!
    • GATE: Interception-proof authentication and encryption system
    • ReThinkingStartups: Startup whatever! The Whatever Network
    • accessnow: Improves productivity by governing your automated, on-demand elevated access with audit logging

    https://www.meetup.com/Atlanta-Startup-Village/events/239487958/

    See you tonight at ASV #48!

  • Video of the Week: Amazon’s Jeff Bezos on Artificial Intelligence(AI), Cashless Store, and Self-Driving Cars

    For our video of the week watch Amazon’s Jeff Bezos on Artificial Intelligence(AI), Cashless Store, and Self-Driving Cars. Enjoy!

    From YouTube: Amazon CEO Jeff Bezos talks about the “gigantic” potential of artificial intelligence to change everything from shopping to self-driving cars. Bezos also discusses his purchase of the Washington Post in 2013, which he says is transforming from a local to a global institution. He explains why he opposes both Peter Thiel’s campaign against Gawker Media and Donald Trump’s attempts to “freeze or chill” press scrutiny. Plus: Why Bezos’s other company, Blue Origin, is trying to lower the cost of entrepreneurship in space.

  • API-First SaaS 2.0 Single Page Apps

    Two of the core components of SaaS 2.0 products are actually related: API-first platform and rich, responsive user interfaces. Ever since Gmail made the first mainstream Javascript-heavy web experience that feels more like a desktop app, developers have been building open source platforms to make that type of “Single Page App” easier and faster to build. Single Page Apps reload only the portions of the screen that have changed, instead of the traditional way which refreshed the whole screen. And, these Single Page Apps work best against REST APIs, the same APIs that make a product API-first.

    Now, there are powerful Javascript libraries like Angular (MVC framework backed by Google) and React (view framework backed by Facebook) that are popular with strong developer communities and a long list of additional open source projects that plug in nicely. By having quality, proven open source platforms, more apps are going to adopt them thereby applying more pressure to the legacy incumbents. The incumbents are going to have an incredibly hard time modernizing. Just like many software companies couldn’t make the transition from on-premise to the cloud, many SaaS companies aren’t going to be able to make the transition from SaaS 1.0 to SaaS 2.0, and it’ll be most apparent in the user experience.

    Look for Single Page Apps to be a defining characteristic of API-first SaaS 2.0 companies.

    What else? What are some more thoughts on API-first SaaS 2.0 Single Page Apps?

  • The Three Types of SaaS Integrations

    Continuing with last week’s post titled Integrations as Key for Next Generation SaaS Success, there’s a critical point that was missed in that not all product integrations are created equal — not even close. For SaaS 2.0 startups, catching up to the depth and variety of integrations of the incumbents is one of the major challenges. When thinking through integrations, it’s important to understand the three major types:

    • Native Integrations – Integrations that are developed in-house to send/receive data as well as call remote functions and expose additional internal functionality are native integrations. Native integrations are the most valuable as the quality is typically higher and the SaaS company is committed to maintain them.
    • JavaScript Overlay Integrations – Integrations that are done via a Google Chrome Extension or JavaScript to override the user interface of a third-party app are UI overlay integrations. A common example is the industry of Chrome Extensions that add functionality to Gmail through the user interface and not the API.
    • Middleware Integrations – Integrations that are written and maintained by a third-party integration platform to connect two disparate apps are middleware integrations (e.g. MuleSoft or Zapier). Middleware integrations can be more expensive and/or slower depending on the APIs of the products being connected.

    When thinking through the integration landscape, it’s important to understand that there are a variety of integration types and they aren’t equal.

    What else? What are some more types of integrations with SaaS products?