David Cummings on Startups

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  • Video of the Week: Eric Schmidt, Alphabet Inc. – Just Say “Yes”

    For our video of the week, watch Eric Schmidt, Executive Chairman, Alphabet Inc.: Just Say “Yes”. Enjoy!

    From YouTube:
    Eric Schmidt, Executive Chairman of Alphabet Inc. on how to achieve success: Surround yourself with interesting, ambitious people, and always say “yes” to challenges. Read more leadership insights from the Stanford GSB View From The Top talk on Monday, April 24, 2017: http://stanford.io/2qBewA7

  • Feature Rich vs Feature Niche

    When building a software product, there’s a human tendency to go broad and add every feature a customer requests. Yet, some of the most successful products do a limited number of things well and eschew the bloat found in most applications.

    I call this the feature rich vs feature niche conundrum.

    Feature rich products have dozens of modules and hundreds of functions. Feature niche products have a select number of modules with only the most valuable functions.

    Pardot is very much a feature rich product with dozens of B2B marketing modules. Calendly is very much a feature niche product doing beautiful, simple scheduling.

    Entrepreneurs need to be intentional about their product strategy and consider the feature rich vs feature niche trade-offs.

    What else? What are some more thoughts on feature rich vs feature niche?

  • Taking a Customer Up the Value Curve

    One of the popular startup strategies is getting in the door with a customer at a basic level and then upselling them with more functionality so they get more value. Best known as taking a customer up the value curve or the trojan horse strategy, the key is providing value quickly to start building the relationship before working towards the more complex solutions.

    Here are a few thoughts on taking a customer up the value curve:

    • Start Quick and Easy – The consumerization of IT is real. Companies want the ease-of-use and feel of a consumer app to solve their business problems. Enable the customer to start quick and easy.
    • Provide Real Value – Quick and easy onboarding doesn’t matter if the product doesn’t provide real value. Ensure that it’s a must-have and not a nice-to-have.
    • Make Upselling Product-Native – Once the customer is in and getting value, incorporate nudges and upsells natively in the product. The most common example of this is an “invite people” feature to add more users in the product.

    Entrepreneurs would do well to think through ways to take customers up the value curve and ensure a thoughtful approach.

    What else? What are some more thoughts on taking a customer up the value curve?

  • Professional Services in a Startup

    At Pardot we debated internally whether or not we should offer professional services to our customers. Our services team did an amazing job with implementations and onboarding while our customer success team regularly checked-in with customers to proactively help. Only, customers would ask for more services like custom work with email templates, inbox deliverability, landing pages, and nurture programs. Our recommendation: work with an agency partner.

    In hindsight, we missed out on an opportunity. Startups should have a professional services strategy. Here’s why:

    • Stronger Relationships – Professional services are a great way to build stronger relationships with the customer as it requires more one-on-one time and a deeper understanding of their business.
    • Additional Revenue – Professional services result in a new revenue stream. While not as high margin as SaaS, professional services often has strong margins, especially when done as a true add-on (some services are a loss leader to make a product sale). One key point: services revenue shouldn’t be more than 20% of total revenue otherwise the company doesn’t look like a true SaaS business.
    • Product Ideas – Professional services becomes a day-to-day user of the product resulting in more product ideas and use cases. This internal team acts as a new customer voice.

    Entrepreneurs would do well to develop a professional services strategy for their company, especially when there’s enough scale and existing customer demand to make it worthwhile.

    What else? What are some more thoughts on professional services in a startup?

  • Fast Growth and a Big Market to Raise Money

    As a follow up to Common Investor Questions at The Atlanta Tech Village, one of the questions I received was why do investors have a hard time finding investment opportunities. There are a number of excellent startups with customers, management teams, and decent growth. Only, they can’t raise any money. What gives?

    Just because the startup is making progress, without fast growth and a big market, most investors will pass. Fast growth is an indicator of product/market fit and latent demand for the product. Big markets present an opportunity to build a major business and generate out-sized returns. Investors often require both be present.

    Most startups aren’t growing fast (> 100% year-over-year), even though they are a growth-oriented company (see the definition of a startup). They want to grow fast but haven’t achieved their goal. Most markets aren’t big enough to generate venture-like returns. Entrepreneurs pitch that their product serves a big market, but most of the time it’s a much smaller slice of the market.

    Investors want fast growth and a big market. Startups that don’t have both rarely raise money.

    What else? What are some more thoughts on fast growth and big markets as requirements to raise money?

  • The Stress of a Startup

    One of the hardest aspects of a startup is the constant stress, especially in the early years. Everything is new. Everything is chaotic. There’s no end in sight. Many entrepreneurs give up after six months. Most give up after 12 months.

    Here are a few recommendations for entrepreneurs with the stress of a startup:

    • Pace Yourself – Remember the cliche: it’s a marathon, not a sprint. Create a work/life blend and figure out how to stay in long enough to win.
    • Find a Peer Group – Look to groups like EO and other peer-to-peer organizations to find like-minded entrepreneurs.
    • Stop Reading Startup News – Cut out the noise that talks about how great startup XYZ is and how much money they raised — that doesn’t help and only generates more stress. Read positive stories and seek out quiet places.
    • Focus on What Matters – Write down a few goals. Pick a milestone you need to hit. Clear out the distractions and focus on what matters.

    Startups are stressful. Entrepreneurs need to recognize the challenges of stress and make a plan to succeed.

    What else? What are some more thoughts on the stress of a startup?

  • Customer Discovery to Understand the Problem

    Early on, it’s critical to understand the customer’s problem. Too often, entrepreneurs come up with an idea that’s good to them, but falls flat with the potential customer. Use customer discovery to understand the problem without trying to sell them on the existing idea.

    Here are a few things to keep in mind with customer discovery interviews:

    • Don’t lead the witness —it’s all too common to try and guide the potential customer down a path that’s consistent with the existing idea
    • Ask broad, open ended questions (remember the old adage: humans have two ears and one mouth for a reason — listen twice as much as you talk)
    • Work to understand how things work currently with as much minute detail as you can uncover
    • Find out what the ideal solution would be if time and money were no issue (if you could wave a magic wand and have anything you wanted , what would it be?)
    • Never show any prototypes you might have until after you’ve asked all your main questions (don’t introduce bias!)

    Entrepreneurs would do well to use customer discovery to deeply understand the customer’s problem, and work to ignore their existing ideas.

    What else? What are some more thoughts on customer discovery to understand the problem?

    Note: Read The Mom Test.

  • Video of the Week: The future we’re building — and boring | Elon Musk

    For the video of week watch the latest from TED: The future we’re building — and boring | Elon Musk. Enjoy!

    From YouTube:
    Elon Musk discusses his new project digging tunnels under LA, the latest from Tesla and SpaceX and his motivation for building a future on Mars in conversation with TED’s Head Curator, Chris Anderson.

  • An Emotional Response to the Product

    As part of the search for product/market fit, there’s an element that sounds fuzzy but is very real: an emotional response to the product. The basic growth equation is as follows:

    Top of Funnel (traffic, conversion rates) x Magic Moment (create emotional response) x Core Product Value = Sustainable Growth

    Just because a product solves a problem doesn’t mean that the solution, or experience, generates an emotional response. Most products are nice-to-have and not must-haves. Must-have products are much more likely to generate an emotional response.

    People make the buying decision and people are emotional. Tap into a positive emotional response with the product as part of product/market fit. The best products all have an emotional response.

    What else? What are some thoughts on the idea that an emotional response to the product is important?

  • Common Investor Questions at The Atlanta Tech Village

    Several times a month I meet with investors from out of town that are interested in the Atlanta market and startups at the Atlanta Tech Village. With so much capital that needs to be put to work, investors are eager to find startups that have the beginning of a big business and the potential for strong unit economics.

    Here are some of the common questions investors ask:

    • What startups should we be paying attention to in the building?
    • Any entrepreneurs we should meet with the next time we’re in town?
    • Do you have any startups doing X, Y, or Z (e.g. specific areas of interest like machine learning, health IT, marketing SaaS, etc.)?
    • Any startups growing fast with X to Y range of revenue (e.g. $1 – $2 million in recurring revenue)?
    • What events or programs should we consider for future visits (e.g. Atlanta Startup Village)?
    • Anything we can help with?

    As expected, the questions from investors are fairly consistent as they’re looking for startups that meet their criteria and the opportunity to invest. Surprisingly, investors don’t have enough strong startups to invest in.

    What else? What are some more questions investors should be asking?