David Cummings on Startups

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  • Daily Active Users in B2B SaaS

    Continuing with assessing product/market fit, one of my favorite metrics is daily active users (DAUs). Now, DAUs are more commonly associated with B2C products like Twitter and Facebook, but they’re directly applicable to B2B SaaS products as well.

    Why are they so important for B2B SaaS? The best indicator of success for most SaaS products is the fact that the customer continually uses the application. In most applications, this is signing in and using the platform. In a limited number of applications, this is using the API programmatically on a regular basis (e.g. integrating it into another application or workflow). Regardless, product usage equals product value. And, product value is a key element of product market fit.

    Entrepreneurs should monitor their daily active users and understand the correlation between product usage and startup success.

    What else? What are some more thoughts on daily active users in B2B SaaS?

  • The Best Time to Raise Money

    There’s an old saying in the startup world: the best time to raise money is when you don’t need it. Too often, entrepreneurs, being ever optimistic, wait too long before starting the fundraising process. Only, a limited timeline often results in limited funding options, which results in a poor situation for the entrepreneurs. No options, no leverage.

    When things are going well with a startup, other investors take note. At Pardot, we had tremendous in-bound interest from investors for a number of reasons. One major reason is that many VC portfolio companies started using Pardot such that it’d come up in board meetings as part of the marketing presentation. When executives shared how much value they received from Pardot, investors took note. And, since we bootstrapped and didn’t need money, investors were even more eager to invest (simpler situation, clean cap table, no baggage).

    Another common occurrence is as soon as a startup announces they’ve closed a round, other investors reach out asking if they can put in some money. Clearly, the startup doesn’t need to raise money since they’ve just closed the round, but opportunistically they often take it. Raising money is much easier when things are going well and the money isn’t needed.

    The best time to raise money is when you don’t need it.

    What else? What are some more thoughts on the idea that the best time to raise money is when you don’t need it?

  • A Bumpy Ride for the First 10 Customers

    Continuing with the post Assessing Product/Market Fit, there’s a related point that the first 10 customers of a startup often have a bumpy ride. As part of assessing product/market fit, if numerous customer requests and product issues are signs that product/market fit isn’t in place yet, it follows that it’s common for early customers to have problems as product/market fit is so hard to attain.

    Here are a few thoughts on the challenges of the initial customer experience:

    • Work to be overly accessible and available as customer feedback and quick resolution of issues are critical
    • Know that problems and bugs are common as it’s nearly impossible to test every use case (it’s more important to move fast and iterate than try and be perfect)
    • Understand how the customer interacts with the app using a product like FullStory or Hotjar
    • Proactively reach out to the customer on a regular basis (e.g. weekly), eventually using a cadence system like SalesLoft or Trustfuel

    The first batch of customers almost always have a bumpy ride. Entrepreneurs should recognize that this is normal and work hard to still provide the best experience possible.

    What else? What are some more thoughts initial customers having a bumpy ride?

  • Video of the Week: Blitzscaling 19: Jeff Weiner on Establishing a Plan and Culture for Scaling

    For our video of the week, watch Blitzscaling 19: Jeff Weiner on Establishing a Plan and Culture for Scaling. Enjoy!

    From YouTube:
    This is session 19 of Technology-enabled Blitzscaling, a Stanford University class taught by Reid Hoffman, John Lilly, Allen Blue, and Chris Yeh. This class features Reid Hoffman interviewing Jeff Weiner, the CEO of LinkedIn.

  • Software 2017

    Battery Ventures put out a great slide deck on the state of the software industry in 2017 as part of the recent CloudNY event.

    https://www.slideshare.net/Battery_Ventures/software-2017

    Here are a few notes from the slide deck:

    • 18.3% expected compounded annual growth for SaaS companies over the next four years (compared to 6.9% for general software)
    • Software industry in the United States supports 10 million jobs
    • The Five Forces of Software’s Accelerating Growth
      • Existing software markets are growing over time
      • Software is infiltrating what were once niche markets
      • Software is displacing hardware
      • Every company is becoming a software company
    • 60% of organizations to increase spending on cloud applications
    • The global software industry is $500 billion per year
    • Continuing at a 5% compounded annual growth rate, software will be $1 trillion/year by 2030
    • Category kings consistently captured more than 70% market share
    • Tactical considerations:
      • Software innovation is now global
      • There are competitors in all segments of the market
      • Product now drives software sales
      • Network effects and ecosystems build moats and drive stickiness
      • AI and machine learning are enabling applications
      • Microservices architectures and rapid product delivery are now must haves
      • Culture is paramount and employee feedback is public
      • Find a wedge and change the market dynamic
      • Grow fast or die slow

    Check out the slide deck on the state of the software industry in 2017.

  • Assessing Product/Market Fit

    One of the never-ending startup discussions is around assessing product/market fit. Product/market fit is the idea that the product’s form and functionality meets the needs of the market. Fit isn’t an on/off item, rather it’s a continuum with various dimensions. And, for entrepreneurs without product/market fit, not much else matters.

    Here are a few ideas for assessing product/market fit:

    • Passionate Customers – If you told your customers that the product would be shut down tomorrow, how loud would they complain?
    • Customer Requests – How well does the product solve the customer’s problems today in it’s current form as opposed to needing further customizations?
    • Customer Referrals – Of the last 10 customers signed, how many referred another potential lead?
    • Limited Product Issues – Of the last 10 customers signed, how many ran into product issues or bugs?
    • Daily/Weekly Active Users – Do the customers use the product in a consistent daily or weekly fashion over an extended period of time (e.g. 4-6 weeks)?

    Ultimately, assessing product/market fit is about assessing how much value customers are receiving from the product and the actions they are taking (e.g. regular usage, referrals, etc.). Product/market fit is the first critical milestone in the entrepreneurial journey.

    What else? What are some more thoughts on assessing product/market fit?

  • SingleOps Announces $1M Seed Round

    Earlier today I closed on a $1M seed round in SingleOps (see the Atlanta Business Chronicle article on the SingleOps funding). SingleOps is a SaaS platform for mobile field workforces like tree care services, landscaping, pest control, healthcare — anyone who regularly coordinates employees in the field. The platform combines estimates, scheduling, time tracking, CRM, invoicing, and QuickBooks syncing with a mobile-first interface for teams on the go. Think of it as a cloud-ERP solution like NetSuite, but much easier to use and geared towards field service companies.

    Sean McCormick and his team have built the foundation of a great business over the last three years achieving product/market fit last year and a repeatable customer acquisition process this year (see the four stages of a B2B startup). Now, it’s time to accelerate the growth and build a category-winning company.

    I’m thankful to Sean for letting me be part of the journey and I’m looking forward to helping SingleOps realize its potential.

    Interested in learning more? Check out SingleOps.

  • Benefits of Sales Territories in a Startup

    After the post on Startups Should Avoid Sales Territories, several people reached out and offered reasons why they like sales territories for startups. Here are a few benefits of sales territories in a startup:

    • Face-to-Face Selling – With up-market, enterprise deals, prospects often expect some amount of face-to-face meetings, and that’s easier being in a specific territory.
    • Coordinating In-Person Meetings – Even with an inside sales team, some companies do quarterly trips to major population centers for relationship building (e.g. hey, I’m going to be in Atlanta next week for two days, do you have time to get together at your office for 30 minutes?). With reps working specific territories, it’s easier to meet with multiple prospects on the same trip.
    • Reputation in the Local Community – Another element of sales territories is to have field sales rep that lives in the territory. By living in a major population center, it’s easier to build a reputation in the community and work through a variety of civic and philanthropic channels to build rapport.

    Overall, sales territories still should be avoided for most startups. Startups that have significant scale and/or large deal sizes that warrant face-to-face selling are good candidates for sales territories. Otherwise, it’s better to take advantage of the latest sales and marketing technologies to achieve greater levels of sales productivity without territories.

    What else? What are some more benefits of sales territories in a startup?

  • Terminus Raises a $10M Series B

    Earlier today Terminus announced that they had closed their $10.3M Series B financing from Atlanta Ventures and Edison Partners. Terminus is the pioneer of account-based marketing (ABM), one of the fastest growing areas of marketing technology. Here’s how Terminus describes the value of ABM:

    ABM enables B2B marketers to target key accounts, engage decision-makers, and accelerate marketing and sales pipeline velocity at scale

    As marketers look beyond inbound lead generation and become more focused on the account, they need corresponding tools and systems to orchestrate engagement across multiple systems, trigger the right ads to the right people, track behaviors across the account, and understand account-level analytics.

    Terminus created the FlipMyFunnel movement and is building a large, category-defining ABM company. Now, they have the resources to grow even faster and help more companies achieve ABM at scale. Congratulations to Eric and the entire Terminus team on their next milestone in the journey.

    Want to learn more? Check out Terminus.

  • Startups Should Avoid Sales Territories

    Recently I was meeting with an entrepreneur who’s startup is growing nicely. They just raised a round of financing and will be expanding the sales team. After catching up for a few minutes, he asked about implementing sales territories and I recommended against it.

    Here are a few reasons most startups should avoid sales territories:

    • Distribution of Best-fit Accounts – While sales territories are often divided based on certain states and their corresponding population centers, in actuality the ideal customer profile isn’t evenly distributed. Apps can automatically find the total addressable market and build smart lists of the best-fit accounts. Having each rep work a set of named accounts ensures all best-fit accounts get worked, not just the best in a certain territory (e.g. 250-500 accounts per rep is recommended).
    • Growth in Sales Reps – As the startup grows, and hires more sales people, territories for existing reps must shrink to make room. Shrinking territories results in disillusionment for the existing reps and creates ongoing realignment challenges.
    • Inbound Lead Distribution – Just as the ideal custom profiles aren’t evenly distributed across territories, quality inbound leads aren’t evenly distributed either. By not having territories, inbound leads can be qualified and parsed out in a more dynamic fashion.

    Sales territories are a relic of the pre-internet era and no longer make sense for most startups. Entrepreneurs would do well to avoid sales territories and take advantage of the opportunity to target the best accounts anywhere, not the best accounts in a certain territory.

    What else? What are some more reasons startups should avoid sales territories?