David Cummings on Startups

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  • 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.

  • Feeling the Energy of the Culture in an Office

    Earlier today I had the opportunity to spend some time at the Kabbage office in Atlanta and the energy was electric. As I entered, several people walked by smiling, and enjoying each others’ company. Walking in the kitchen, a number of people were sharing stories while exuding a warm vibe. Culture starts with the core values and permeates through all aspects of the business.

    Here are a few thoughts on the energy of a culture in an office:

    • There’s no one right or wrong culture. Some are formal and some are laid back. Some are silly and some are serious. What matters is that everyone is aligned and buys into the core values.
    • Office environment, style, color, and layout either augment or detract from the culture. Visual cues matter.
    • First impressions, like the receptionist at the desk, set the tone.
    • Subtle things like the way people decorate their desks and leaving private office doors open or closed are important.

    We’ve all walked into offices that have made us happier and offices that have made us more depressed. Energy of a culture in an office matters and it’s important to be intentional about building the best one for the startup.

    What else? What are some more thoughts about the energy of the culture in an office?

  • Keep the Message Simple

    Earlier today I was talking to a successful tech entrepreneur in town. He asked about the Atlanta Tech Village and I jumped right into detailed explanations of the some of fastest growing startups in the building. After listening for a few minutes he said he prefers much simpler startup ideas, ones that can be easily explained. Hmm, I thought, that’s my fault for going in with too much information.

    Lesson learned: keep the message simple.

    If the person wants to learn more, they’ll ask. Don’t assume they need all the details right away. It’s better to provide a message that’s clear, concise, and memorable.

    Don’t make the same mistake I did. Keep the message simple.

  • The Value of the Early Admin Assistant Hire

    One of the best hires a startup can make after raising a full seed round is that of an office manager or admin assistant. While it’s critical to be scrappy and efficient, the reality that there are a tremendous number of things that must be done, and many of these things don’t require the founders to do them. Much like the benefits of a sales assistant, a general admin assistant frees up the limited number of team members to focus on more strategic tasks.

    Here are a few thoughts on the early admin assistant hire:

    • Look for a jack-of-all-trades that loves helping out and supporting other people
    • Certain entry-level functions in sales, marketing, HR, accounting, etc. are readily accomplished by someone who is smart and gets things done
    • Make a Google Sheet of tasks done on a daily/weekly basis that an admin could take over
    • Culture fit is critical for all hires and especially so for someone that interacts with everyone

    Hiring an admin assistant isn’t usually on the list of action items for seed stage entrepreneurs, but it should be — there’s tremendous value.

    What else? What are some more thoughts on the early admin assistant hire?

  • Terminus Raises a $7.5 Million Series A

    Earlier today Terminus announced their $7.5 million Series A round (disclosure: I’m the founding investor). Terminus started in 2014 in the Atlanta Tech Village and has been spreading the flip my funnel message about account-based marketing to thousands of people.

    From before, here’s how Terminus works:

    • Existing leads and contacts from the CRM or marketing automation system are automatically imported using dynamic rules (e.g. take all the leads/contacts with an active opportunity in the pipeline)
    • Based on job titles, additional contacts are retrieved from the targeted companies through multiple data sources (e.g. NetProspex and others)
    • Similar to retargeting, ads based on rules are shown on mainstream sites to everyone identified in the account (e.g. show specific ads based on where the account is in the sales cycle)
    • Ad click-throughs and impressions are tracked to tie results back to effect on pipeline acceleration in the CRM

    Congrats to Eric and team on closing their Series A. Here’s to building an enduring company.

    Know any B2B marketers? Have them take a look at Terminus.

  • 3 Common Term Sheet Terms that Lower the Effective Valuation

    In investing circles, there’s an old saying: you set the valuation, I’ll set the terms. Meaning, the valuation can be any price but the terms actually have a greater impact on who makes what money. When investors model potential investments, they attach a value to the different financial terms thereby lowering the effective valuation (e.g. the term sheet says one pre-money valuation but the reality is that the investor actually views it as a lower pre-money valuation).

    Here are three common term sheet terms that lower the effective valuation:

    • Cumulative Dividends – Much like an interest payment, this amount accrues until the company is sold (e.g. a $1 million investment with a 7% dividend would be a $70,000 increase in ownership in year one, a $74,900 increase in year two, etc. for the investors)
    • Participating Preferred – Many term sheets require that the investors get paid back before other shareholders get any money (non-participating preferred) but if the exit is greater than the investment valuation, everyone splits up the proceeds based on ownership. Some go further and require participating preferred where the investors get their money back (or a multiple of their money) and then split the remaining proceeds based on percent ownership, thereby double dipping.
    • Option Pool Shuffle – Investors typically require that entrepreneurs create a new option pool representing 10-15% of the company as part of the financing event. If the new option pool is created before the investment, as opposed to after it, and the investor buys in at the agreed-upon pre-money valuation, the company is effectively less valuable to the current shareholders since their ownership stake has been reduced (e.g if the entrepreneurs each own 30% and then add a 10% option pool, their ownership stake is 27% at time of investment when the new investors dilute them further).

    These three common term sheet examples aren’t meant to make investors look bad. Rather, the goal is for entrepreneurs to better understand the most common terms that effectively lower the pre-money valuation so that it can be incorporated into the decision making process.

    What else? What are some more term sheet terms that lower the effective valuation?

  • 17 Things Entrepreneurs Need to Know about Fundraising

    Money, money, money. It’s a popular topic, especially amongst entrepreneurs that are out looking for funding for their startup. After talking to hundreds of entrepreneurs, personally trying to raising money several times, and investing in dozens of startups (directly through Atlanta Ventures and Shotput Ventures) I’ve learned 17 things entrepreneurs need to know when fundraising:

    1. Recognize the metrics required to raise a Series A
    2. Fewer entrepreneurs raise Series A rounds than people win million dollar lotteries each year
    3. Raising angel money is very different from venture money
    4. Answer these 8 metrics questions to raise a Series A
    5. For every 1,000 venture-backed startups, less than 20 sell for $100 million or more
    6. Remember that the value multiplier to raise money is 5x
    7. Ensure that it’s a 10x business model
    8. Know that terms are just as important as valuation
    9. Think IPO roadshow when raising a venture round
    10. Determine the desired percentage of the company to sell
    11. Raising money doesn’t equal product/market fit
    12. Add 10 – 15% more dilution to each round
    13. Make the funding last 18 months
    14. Build investor relationships well before they are needed
    15. Valuations are higher at launch before limited metrics are available
    16. Fundraising is a full-time job
    17. Create a competitive fundraising process

    Finally, entrepreneurs need to know that raising money isn’t a given. Many try, most fail. Follow these 17 pieces of advice and better understand the fundraising process.

    What else? What are some more things entrepreneurs need to know about fundraising?