David Cummings on Startups

Blog

  • Terminus as #1 Best Place to Work

    Yesterday, Terminus won the local Atlanta Business Chronicle award for being the #1 best place to work in Atlanta. Awards like this are great external validation for the amazing culture and team that makes up the organization. And, there are several benefits:

    • Employees and other stakeholders have a greater sense of pride and ownership being part of one of the best organizations in the region
    • The workplace surveys, done by a third-party, provide valuable feedback as to areas for improvement (even after coming in 1st place there are ways to get better)
    • Recruiting gets easier as people actively seek out organizations that are best places to work

    Winning a best place to work award is a real honor and Terminus deserves it. Congratulations to Eric and the team!

  • Notes from the Coupa S-1 IPO Filing

    Coupa, a SaaS spend management platform, just published their S-1 IPO filing to go public. Seeing the filing makes me sentimental as I first learned about them in 2009 when they become one of our early Pardot customers and we were at similar stages with our respective startups. Now, with over $100 million in recurring revenue and a strong growth rate, Coupa is positioned for a solid IPO.

    Here are a few notes from the Coupa S-1 IPO filing:

    • Mission – Our mission is to deliver “Value as a Service” by helping our customers maximize their spend under management, achieve significant cost savings and drive profitability. (pg. 1)
    • 460 customers, 1.5 million users, and 2 million suppliers (pg. 1)
    • We refer to the process companies use to purchase goods and services as spend management (pg. 1)
    • Revenues and net losses: (pg. 2)
      • Revenues
        • 2014 – $50.8 million
        • 2015 – $83.7 million
        • 1H 2016 – $60.3 million ($120.6 million annualized divided by 460 customers makes for an average of $262,000/customer/year)
      • Net losses
        • 2014 – $27.3 million
        • 2015 – $46.2 million
        • 1H 2016 – $24.3 million
    • Competitive strengths: (pg. 7)
      • Easy and Intuitive User Interface that Enables Widespread Employee Adoption.
      • Unified Platform With Powerful Functionality.
      • Independence and Interoperability.
      • Powerful Network Effects.
      • Cloud Platform.
      • Rich Partner Ecosystem.
      • Results-Driven Culture.
      • Higher Supplier Adoption.
      • Proprietary Data Enables Superior Insights.
    •  Accumulated deficit of $147.2 million at July 31, 2016 (pg. 16)
    • In general, the upfront costs associated with new customers are higher in the first year than the aggregate revenues we recognize from those new customers in the first year. (pg. 19)
    • We have funded our operations since inception primarily through equity financings and prepayments by customers. (pg. 30)
    • Equity (pg. 121)
      • CEO/Chairman (non-founder): 5.8%
      • VCs – 59%
      • Mutual Funds – 5.1%

    Congrats to the Coupa team on building a meaningful, fast-growing SaaS company. My guess is that Coupa has a strong IPO and gets acquired by someone like Salesforce.com, Oracle, or Microsoft in the next 24 months as they look to expand their SaaS portfolio.

  • No Product Roadmaps

    Continuing with yesterday’s post on Quarterly Product Themes, another area we struggled with at Pardot was product roadmaps. Early on, we tried to map things out for the product. We’d come up with an idea to do Z, and in order to Z we first needed Y, and everything was laid out beautifully. Then, a week later, this other idea/request would come up, we’d debate it vigorously and decide it was more important than an item on the roadmap. Staying close to the customer required a short feedback loop and necessitated rapid product iteration.

    It was time for a change. It was time for no product roadmaps.

    Instead, we had a Google Sheet with a separate tab for each department in the company and their product requests along with a GetSatisfaction idea board for customer requests. Finally, there was a Google Sheet tab for the priority product items and that constantly changed as we moved requests in and out as well as implemented new features and fixes. When a prospect or customer would ask about our product roadmap, we’d say we don’t have a detailed roadmap due to the need to stay nimble, but we’d share big broad ideas about our general strategy and product direction. The product roadmap was no more.

    What else? What are some more thoughts on not doing product roadmaps?

  • Quarterly Product Themes

    One of the challenges we had at Pardot was balancing the different requests from our constituents. Sales wanted one set of features while customer success wanted a different set of features. Then, support had their own desires separate from engineering which wanted to make a number of behind-the-scenes improvements. What to do?

    We eventually arrived at doing a product theme every quarter where we alternated between heavy market-facing improvements (lots of shiny bells and whistles for sales) and heavy back-end improvements (lots of infrastructure work, fixing of nagging issues, and general product polishing). This process worked well in that it was clear to our different stakeholders where the emphasis was for the quarter, along with the expectation of what we’d do the following quarter.

    Consider using product themes for each quarter as the startup grows and product demands increase.

    What else? What are some more thoughts on quarterly product themes?

  • Recruiting Executives in a Startup

    While there’s significant talk about recruiting great software engineers and sales people, even harder is finding key executives to join a startup. Like anything important, it requires tremendous time and effort to do well. Yet, with so few qualified candidates, it can be even more challenging than expected.

    Here are a few thoughts on recruiting executives in a startup:

    • Build a candidate pipeline well in advance of the hire and work to nurture the relationships (go ahead, set up a recurring quarterly calendar notification just to nurture the relationship)
    • Bring the board and advisors in to the executive recruiting process to help identify potential candidates as well as meet with identified candidates
    • When a qualified candidate has been identified, and is interested, run a Topgrading chronological in-depth survey (plan to spend 4 – 6 hours on interviewing each candidate)

    Recruiting key executives to a startup is incredibly hard, and one of the most important things an entrepreneur will do. Invest the time to do it well and build out a great team.

    What else? What are some more thoughts on recruiting executives in a startup?

  • Tod’s 7 Lessons Learned at BrightRoll

    Tod Sacerdoti has a great post up titled 0 to $640M: Non-obvious Lessons Learned at BrightRoll. While the saying “you learn more from your failures than from your successes” rings true to me, there’s still plenty to learn from successes. Here are the six non-obvious lessons learned at BrightRoll:

    1. Overspend
    2. Don’t Innovate
    3. Focus on Edge Cases
    4. Be An A** Hole
    5. Get a Low Valuation
    6. Be Tribal
    7. Love Being Last

    Want to know more? Head on over to 0 to $640M: Non-obvious Lessons Learned at BrightRoll and read the whole thing — it’s worth your time.

  • Video of the Week: Seth Godin on the Difference Between Leadership and Management

    For our video of the week watch Seth Godin on the Difference Between Leadership and Management. Seth has one of the most prolific blogs ever and is a well known author. Enjoy!

    From YouTube: Bestselling author Seth Godin says that “Management and leadership are totally different things. You think you are being a leader, but you are probably being a manager.” He goes on to say, “Managers figure out what they want done and get people to do it. Managers try to get people to do what they did yesterday, but a little faster and a little cheaper with a few less defects.” But this is not leadership. What is leadership? You’ll have to watch this seven-minute video to learn more.

  • Overestimating the Short Term, Underestimating the Long Term

    One of my favorite quotes comes from Bill Gates:

    We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. (source)

    Entrepreneurs are an optimistic bunch, as such they’re always overestimating what can be done in the short term. Just think of all the revenue forecasts showing hockey stick growth up and to the right. Only, it rarely happens.

    Then, talk to any entrepreneur that’s built a successful company and they’ll always talk about how the amount of change and success exceeded their expectations. And, they did it in less than 10 years.

    As an entrepreneur, the next time you’re feeling the grind, remember that we overestimate the short term and underestimate the long term. Stick with it.

    What else? What are some more thoughts on overestimating the short term and underestimating the long term?

  • Three Ways VCs Value Investments for LPs

    Scott Kupor of Andreessen Horowitz has a great post titled When Is a “Mark” Not a Mark talking about a recent WSJ article and the different ways venture capitalists internally value their investments for their investors. One of the biggest challenges being an investor in a private company is that there’s no market to readily sell the shares, thus it’s hard to know the value, and even harder to turn value into cash (ready about the Dry Bubble).

    Here are three ways VCs value investments when reporting their data quarterly to the limited partners:

    • Last round valuation/ waterfall – Take the valuation for the last round of financing, take the percent ownership, and report the value of that percent ownership.
    • Comparable company analysis – Take the current metrics of the business (especially revenue), take publicly traded companies that are similar, and base the valuation off those comparables with a ~30% discount for being private
    • Option pricing model (OPM) – Run the different potential exit scenarios through a complicated statistical model (made easy by software) and use the resulting output

    Go read When Is a “Mark” Not a Mark and better understand some inner workings of the venture industry.

    What else? What are some more thoughts on three ways VCs value investments for LPs?

  • Capabilities in a Startup

    Another popular topic of conversation for growth stage entrepreneurs is capabilities on the team. Capabilities, like it sounds, is a fancy way of talking about the talents and skills of people in the organization. Often, the term capabilities is used in the context of more specialized or difficult to find skills, especially when there are gaps or deficiencies.

    Here are a few thoughts on capabilities in a startup:

    • Think about the capabilities needed over the next three years. What’s in place now? What’s going to be needed? When?
    • How do capabilities align with future fundraising? Need a CFO before raising the next round?
    • What team members can their existing capabilities? What team members need someone brought in above them?

    Capabilities is a critical element of scaling a startup. Start planning early and be proactive about growing the team as the company grows.

    What else? What are some more thoughts on capabilities in a startup?