David Cummings on Startups

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  • 5 Great Resources for SaaS Entrepreneurs

    SaaS is an amazing business model: fast product iteration cycle, recurring revenue with strong gross margins, and great growth rates industry-wide. In addition, the business model is well understood across the different functions – sales, marketing, customer success, engineering, support, and finance – such that there are a number of excellent blogs for entrepreneurs. Here are five great resources for SaaS entrepreneurs:

    Read and study these blogs, now. Learn what the experts learned, minimize common mistakes, and grow faster.

    What else? What are some other great resources for SaaS entrepreneurs?

  • Atlanta Startup Village #36

    Join us at the Atlanta Tech Village tomorrow night for Atlanta Startup Village #36. Atlanta Startup Village is the largest monthly gathering of entrepreneurs in the Southeast. Five startups give five minute pitches followed by five minutes of audience questions. Here are the presenting startups:

    • Funding University – a better way to finance their college education.
    • Incubate – the time delay messenger.
    • ClientSide – electronic signature system for law firms.
    • PRIVET – Ask. Tell. Anonymously.
    • Sequr – Steroids for your call box.

    RSVP at the Atlanta Startup Village Meetup and come by the Tech Village tomorrow night.

  • Why Didn’t Salesforce.com Get Into Marketing Automation Sooner?

    Back in late 2009 we pitched dozens of VCs in an effort to raise money for Pardot. When asked the common question “who are your likely acquirers?” we’d always answer that Salesforce.com was perfect — the market leader with 100,000+ B2B CRM customers needed a complementary B2B marketing automation platform. Then, of course, we’d get the expected follow up question: why doesn’t Salesforce.com just build a marketing automation product now and compete directly?

    Immediately, we’d respond with the answer every entrepreneur should give when asked why doesn’t big company ‘X’ get into their market: it’s not worth their time. Of course, this is a confusing response. As entrepreneurs trying to raise money, we’re arguing that marketing automation is a great market worthy of millions of dollars of investment. Yet, we’re also arguing that the most logical player to get into the market shouldn’t do it because it’s not worth their time. Well, what is it?

    Here are the two reasons why Salesforce.com didn’t get into marketing automation sooner:

    • Strong Core Business Growth – When the main business is growing at high double digits, it doesn’t make sense to take resources away from it to address a related market. As long as the core business is experiencing major growth, stay the course.
    • Market Too Small, For Now – Startups often help create new markets that are small but fast growing. Marketing automation back in 2009 was too small for anyone to care about, especially Salesforce.com with their amazing growth. Put another way, if the related market can’t immediately add substantial revenue (e.g. > 5% of current company revenue), it isn’t worth their time.

    Salesforce.com was smart not to get into marketing automation 7+ years ago as their core business was growing fast and marketing automation was too small a market. Eventually, it became clear that marketing automation was a bigger market than expected with growth much greater than the CRM market, making the acquisition of ExactTarget + Pardot a strong strategic move.

    What else? What are some more reasons Salesforce.com didn’t get into marketing automation sooner?

  • Video of the Week: Dharmesh Shah – Why Company Culture is Crucial

    Corporate culture is one of my favorite topics (more here). For this week’s video, listen to Dharmesh Shah talk about Why Company Culture is Crucial and read his famous Culture Code deck. Enjoy!

    From YouTube: Dharmesh Shah, co-founder and CTO at the marketing and sales software firm HubSpot, distills his 128-slide presentation on company culture down to its essence, describing it as a business’s “operating system” that lets people do their best work. Shah says entrepreneurs must create a company culture they love, because one will eventually emerge no matter what.

    http://www.slideshare.net/HubSpot/the-hubspot-culture-code-creating-a-company-we-love

  • Entrepreneurs: Rich or Royal

    Yesterday I was talking with a couple founders that had bootstrapped their company to a great spot and were debating whether or not to raise money. Having had this conversation dozens of times, I brought up the Rich or Royal concept. Simply put, there’s a tradeoff between raising money (going the “rich” route) and maintaining control (going the “royal” route). Most entrepreneurs that want to raise money don’t think through how having other investors changes things, and in most cases, reduces their control.

    Here are a few questions on rich or royal:

    • How much of being an entrepreneur is about controlling your own destiny and being your own boss?
    • How much of being an entrepreneur is about making a large amount of money as quickly as possible?
    • How much of being an entrepreneur is making a major impact on your industry or city?
    • How much of being an entrepreneur is about creating a certain lifestyle or quality of life?

    There’s no right answer to the rich or royal question. Yes, some entrepreneurs get to be rich and royal, but that’s even less common. My recommendation: think through the rich or royal question and be intentional about it.

    What else? What are some more questions on rich or royal?

  • Quick Math to Determine if Inside Sales Makes Sense

    When talking to seed stage SaaS entrepreneurs, a common question is “should we do inside sales?” Naturally, it’s important to take into account factors like average sale price (e.g. new committed monthly recurring revenue), average sales cycle, complexity of sale (e.g. can junior inside sales reps sell it or does it need more specialized expertise), and more. Here’s the quick math to determine if inside sales makes sense:

    • Take the gross margin of the product (SaaS is typically 70-80%)
    • Use the average deal size in the first year (e.g. $5,000 in new annual recurring revenue)
    • Decide on the cost of salary and commission for the desired type of sales person (e.g. $35k base and $75k on target earnings)
    • Run the math for the example above:
      $75,000 + taxes for the sales rep = $85,000
      70% gross margin times $5,000 per deal times X number of deals = $85,000
      24 deals at $5,000 per deal = $120,000 times 70% gross margin = $85,000
      24 deals are required for the sales rep to make sense.
      With 12 months per year, the rep needs to sell two deals per month.
    • Note: this assumes the rep does all the work and doesn’t require leads from marketing. When you add in heavy marketing costs, the number of deals the sales rep has to sell often doubles.

    Inside sales makes sense when the average ticket price and deal volume are high enough to warrant the expense.

    What else? What are some factors to determine if inside sales makes sense?

  • P.T. Barnum’s 20 Rules for Making Money

    Earlier today Kottke published a great list on P.T. Barnum’s 20 rules for making money from the book The Art of Money Getting published in 1880. Every entrepreneur would do well to study and follow these 20 rules:

    1. Don’t mistake your vocation
    2. Select the right location
    3. Avoid debt
    4. Persevere
    5. Whatever you do, do it with all your might
    6. Depend upon your own personal exertions
    7. Use the best tools
    8. Don’t get above your business
    9. Learn something useful
    10. Let hope predominate but be not too visionary
    11. Do not scatter your powers
    12. Be systematic
    13. Read the newspapers
    14. Beware of “outside operations”
    15. Don’t endorse without security
    16. Advertise your business
    17. Be polite and kind to your customers
    18. Be charitable
    19. Don’t blab
    20. Preserve your integrity

    While a few aren’t applicable to tech startups, almost all of them are still relevant and useful 130+ years later.

    What else? Which one of the P.T. Barnum’s rules is your favorite?

  • Maintaining a Sense of Urgency at Scale

    Last week two different growth-stage entrepreneurs brought up the question of how to maintain a sense of urgency at scale (e.g. > 50 employees). When it’s a small team toiling away, it’s easy to maintain a sense of urgency just by constantly talking about the challenges and opportunities by motivating the team directly. As the company grows beyond the founders, that same passion and energy has to be translated through the culture. Peter Drucker came up with the famous phrase “culture will eat strategy for breakfast.”

    Here are a few thoughts on maintaining a sense of urgency at scale:

    Maintaining a sense of urgency at scale comes down to the culture and communication. Set the foundation and reiterate the message.

    What else? What are some more thoughts on maintaining a sense of urgency at scale?

  • Simplified One Page Strategic Plan for Every Team

    While the Simplified One Page Strategic Plan is great for the entire company, it’s also a tremendous leadership tool for departments and teams. In fact, every team should have one. The strategic plan has purpose, values, goals, metrics, and projects — everything you’d expect from a team that’s aligned and high functioning.

    Here are a few thoughts on one simple one page strategic plan per team:

    • Make it simple and use a Google Doc for each team that’s copied quarterly
    • Develop a coaching and mentoring process where senior managers spend time each quarter helping other managers refine their strategic plan
    • Include the team when building out the plan and get buy-in throughout the process
    • Keep it a living strategic plan that’s referenced and updated weekly (e.g. the metrics and project progress should be kept current)

    Every team should have a plan yet most startups struggle with this. Start with the simplified one page strategic plan and ensure everyone is aligned. 

    What else? What are some more thoughts on every team having a simplified one page strategic plan?

  • Video of the Week: A First Drive in the Google Driverless Car

    Following up on last week’s video about Cruise Automation and their story building driverless car technology, let’s take a look at Google’s driverless car in their video called A First Drive. Enjoy!

    From YouTube: Fully autonomous driving has always been the goal of our project, because we think this could improve road safety and help lots of people who can’t drive. We’re now developing prototypes of vehicles that have been designed from the ground up to drive themselves—just push a button and they’ll take you where you want to go! We’ll use these vehicles to test our software and learn what it will really take to bring this technology into the world.