David Cummings on Startups

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  • 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?

  • Track Metrics Weekly

    Recently I was talking to an entrepreneur about the critical metrics they track (also called KPIs). As we got into it, I realized they were tracking their metrics on a monthly basis, and not a weekly basis. Hmm, I thought, a month is much too long of a time period for tracking the things that are truly critical to the business. In addition, these metrics are mostly forward-looking items that are a precursor to what shows up in the financial statements (which are backward-looking), so it’s important to know if something is off as soon as possible.

    Here are a few thoughts on why it’s important to track critical metrics weekly:

    • Metrics typically have a relationship with other metrics (e.g. a percentage of marketing qualified leads become sales qualified leads and customer satisfaction scores relate to customer renewal rates) making it important to know if something’s not right quickly
    • It often takes multiple reporting periods to see if something is trending the wrong way, making monthly reporting too long of a time frame
    • Teams usually meet weekly, making a weekly metric cadence timely (and helps foster a culture of accountability)

    Check out the Google Sheet for KPI Dashboards and track critical metrics weekly.

    What else? What are some more thoughts on tracking metrics weekly?

  • Video of the Week: Cruise Automation founder Kyle Vogt

    With the announcement today that GM is buying 40-person startup Cruise Automation for over $1 billion, after it launched only a few years ago in Y Combinator W14, I needed to learn more. The video of the week is an interview with Cruise founder Kyle Vogt. Enjoy!

    From YouTube: What if your car could control steering, braking, and acceleration, all while staying perfectly in lane and stopping at exactly the right time, eliminating fender benders forever? And yes, we do mean YOUR car — not a futuristic, expensive one you’ll need to wait 10 years to buy. In just six months, Cruise Automation developed an add-on autopilot for your auto, and today CEO Kyle Vogt sits down with Jason to discuss its nuts and bolts, along with the charms and challenges of autonomous cars.

  • Traction: Visionary and Integrator Leaders are Required

    Traction: Get a Grip on Your Business has a chapter titled The People Component. In it, the author Gino Wickman, talks about the Visionary and Integrator role. Here’s how he describes them:

    Integrators (pg. 92)

    The integrator is the person who harmoniously integrates the major functions of the business. When those major functions are strong and you have strong people accountable for each, great healthy friction and tension will occur between them. The integrator blends that friction into greater energy for the company as a whole.

    Visionaries (pg. 94)

    The visionary typically has 10 new ideas a week. Nine of them might not be so great, but one usually is, and it’s that one idea each week that keeps the organization growing. For this reason, visionaries are invaluable. They’re typically very creative. They’re great solvers of big ugly problems, and fantastic with important clients, vendors, suppliers, and banking relationships. The culture of the organization is very important to them, because they usually operate more on emotion and therefore have a better barometer of how people are feeling.

    Put another way, entrepreneurs need to know that they aren’t expected to be both the visionary and the integrator. The strongest leadership teams have both a visionary leader and an integrator leader, and they need to work well together.

    What else? What are some more thoughts on visionary and integrator leaders?

  • Atlanta Tech Village Hits 1,000 Active Members

    Today we hit a big milestone at the Atlanta Tech Village: 1,000 active members. Ever since buying the building a little over three years ago, I never thought we’d have 1,000 members. 700 or 800 sure, but 1,000 — that seemed crazy. Here are a few thoughts on the 1,000 member milestone:

    Finally, our amazing Tech Village team makes it all possible. Thank you.