David Cummings on Startups

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  • HESaaS: Hardware Enabled SaaS

    Last week I heard a new term: HESaaS. HESaaS stands for Hardware Enabled Software as a Service and the idea is that there are new SaaS opportunities that come from the addition of specialized hardware. Put another way, the Internet of Things (IoT) is going to enable a variety of new HESaaS opportunities.

    A local Atlanta Tech Village HeSaaS startup is Gimme Vending (disclosure: I’m an investor). Gimme makes a device that transmits vending machine data to the cloud for more efficient inventory management and product merchandising analytics. Without the hardware to send the data to the cloud, there’s no SaaS business.

    Add HeSaaS to the list of reasons to be Bullish on SaaS Growth.

    What else? What are some other hardware enabled SaaS opportunities?

  • Bullish on SaaS Growth

    When talking with non-tech entrepreneurs, I always like to ask about their software stack as tech entrepreneurs typically have the same lineup: Salesforce, Pardot, SalesLoft, Terminus, Calendly, etc. For the non-tech entrepreneurs, I’m surprised how many don’t have modern, SaaS systems. This opportunity for more mainstream adoption, combined with the growth of SaaS companies I’m involved with, and the growth of public SaaS companies, makes me bullish on SaaS growth. We’re just getting started.

    Here are a few reasons I’m bullish on SaaS growth:

    SaaS as an industry has tremendous growth ahead. Look for many more years of opportunity.

    What else? What are some more reasons to be bullish on SaaS growth?

  • Annual Recurring Revenue Greater than Cash Burned

    One of the metrics I like when thinking about SaaS company efficiency is annual recurring revenue (ARR) being greater than or equal to cash burned all time. Successful SaaS startups suffer from the J-curve where things start out with steep losses while revenue begins to ramp up and eventually revenue grows much faster than losses (hopefully!).

    Here are a few thoughts on ARR being greater that cash burned:

    When considering a SaaS startup’s capital efficiency, look and see if the annual recurring revenue is greater than cash burned. If so, and there’s a good growth rate, it’s likely a sign of a potential successful outcome.

    What else? What are some more thoughts on ARR being greater than cash burned for SaaS startups?

  • The Y Funnel for Sales and Marketing

    When talking about the sales and marketing process, the concept of a funnel often comes up:

    effective-online-lead-generation-with-pardot-5-728

    For marketing, here’s the typical funnel:

    • Visitors
    • Leads
    • Marketing Qualified Leads
    • <hand off to sales>

    For sales, here’s the typical funnel:

    • Sales Qualified Leads
    • Proposals / Opportunities
    • Closed Won / Deals

    Only, this funnel — a path from marketing through to sales — is actually a Y shape where there are two branches that feed the traditional sales component of the funnel. If marketing is one branch, what’s the other branch? Answer: sales development.

    Here’s the typical sales development funnel:

    • List of Target/Named Accounts
    • Conversations/Interest
    • Qualified Demo/Appointment
    • <hand off to sales>

    So, think of it this way: marketing casts a wide net to see what it catches, sales development goes spear fishing after specific targets, and both help each other as well as feed the sales team. Instead of thinking about all the functional as a linear funnel, think about it as a Y funnel where marketing and sales development are separate branches that feed into sales.

    What else? What are some more thoughts on the Y funnel for sales and marketing?

  • Counterpoint on OKRs as Bad for Small Teams in a Startup

    Rand Fishkin, founder of Moz, tweeted out an interesting counterpoint from Steve Olechowski  about OKRs being bad at the micro level in a startup:

    A few notes from the email:

    • OKRs were counterproductive to his small team at Google, felt bureaucratic, and killed productivity one week out of the quarter when people worried about them
    • Macro level OKRs were good for focus
    • When product cycles or iterations are shorter than a quarter, OKRs can incentivize the wrong things
    • Watch the Google Ventures video on OKRs to understand them
    • Overall, he feels small, nimble teams are less nimble with OKRs

    OKRs, wildly important goals, and SMART goals are all great methodologies that have their place. The key, as always, is to apply them intelligently.

    What else? What are some more thoughts on OKRs as potentially bad for small teams that have shorter time frames?

  • Video of the Week: Jack Ma, Alibaba Group

    With the Yahoo/Verizon deal imminent, it’s a good time to better understand the real value of Yahoo: a $28 billion stake in Alibaba. For our video of the week, hear from Jack Ma, the founder of Alibaba. Enjoy!

    From YouTube: At the 38th annual ENCORE Award event on September 24, 2015, the Stanford Graduate School of Business honored Alibaba Group. Jack Ma, Lead Founder and Executive Chairman, discussed entrepreneurship in a fireside chat with Yahoo! founder Jerry Yang, BS/MS ’90.

  • TechStars Mentor Manifesto

    Last night TechStars Atlanta announced their 2016 class. As part of the event, they invited all the mentors and passed out The Mentor Manifesto:

    1. Be socratic
    2. Expect nothing in return (you’ll be delighted with what you get).
    3. Be authentic and practice what you preach.
    4. Be direct. Tell the truth, however hard.
    5. Listen, too.
    6. The best mentor relationships eventually become two-way.
    7. Be responsive.
    8. Adopt at least one company every single year.
    9. Clearly separate opinion from fact.
    10. Hold information in confidence.
    11. Clearly commit to mentor or do not. Either is fine.
    12. “I don’t know” is preferable to bravado.
    13. Guide, don’t control. Teams must make their own decisions.
    14. Accept and communicate with other mentors.
    15. Be optimistic.
    16. Provide specific actionable advice, don’t be vague.
    17. Be challenging and robust but never destructive.
    18. Have empathy. Remember that startups are hard.

    Thanks to @lance for tweeting this out.

  • Develop Investor Relationships Before Raising Money

    Continuing with yesterday’s post Build the Executive Summary for Fundraising, there’s another critical point: entrepreneurs should develop relationships with investors before they raise money. You don’t propose marriage on the first date, and it’s the same with investors. Developing a relationship takes time, and it isn’t always easy.

    Here are a few thoughts on developing investor relationships before raising money:

    • Network with local entrepreneurs and ask for warm investor intros through them
    • Don’t be afraid to cold email investors and briefly share why you’d like to get together — many do take meetings without intros
    • Share short-term goals with investors and state that the next time you get together you’ll share the progress (investors want to see that you get things done and follow through)
    • If the meeting went well, ask to meet with the investor again in 4-6 weeks and work to create a meeting rhythm
    • Don’t be pushy and know that the best investor relationships are ones that have a human connection before a financial connection

    Investors invest in entrepreneurs they believe will make a great return and they have a good relationship with. Too often when raising money entrepreneurs think investors only care about making money. More often than not the human element is just as important.

    What else? What are some more thoughts on developing investor relationships before raising money?

     

  • Build the Executive Summary for Fundraising

    This week I’ve talked to two separate entrepreneurs that wanted introductions to local investors. In both cases, I asked for a shareable executive summary and neither one had it. For entrepreneurs that are raising money, or thinking about raising money, an executive summary is the typical starting point.

    Here are a few things to keep in mind with an executive summary:

    Entrepreneurs that are raising money should build an executive summary and use that when asking for intros to investors.

    What else? What are some more thoughts on executive summaries and fundraising?

  • Going Deep or Broad with the Product

    One of the product questions entrepreneurs need to ask themselves early on is if they’re going to go deep or broad with the application. In general, as customers ask for new features, they have a tendency to be broader requests (e.g. can you add adjacent feature XYZ?). Keep in mind the importance of product focus, especially the part about being opinionated.

    Here are a few questions to ask when considering going deep or broad:

    • Is this product a point solution or a platform (everyone wants to be a platform but point solutions are much more common)?
    • Does this feature request strengthen an existing feature or does it introduce a new concept?
    • Are customers asking for more product depth or more product breadth, generally?
    • Does the product roadmap reflect more depth or breadth? Is that direction intentional?
    • How does depth and breadth reflect reflect the current customer base vs the desired customer base (e.g. entrepreneurs often want to expand upmarket over time)?

    Entrepreneurs would do well to think through their product strategy when it comes to going deep or broad with the application. Deep is the more common successful route.

    What else? What are some more thoughts on going deep or broad with the product?