David Cummings on Startups

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  • 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.

  • The $1 Million Annual Recurring Revenue Milestone

    Continuing with yesterday’s post on Measuring the # of Startups that Raise Money at $10M+ Valuations, there’s another startup community metric worth measuring: the number of startups that achieve $1 million in annual recurring revenue (ARR). Much like the $10M+ valuation is a great indicator of potential success, $1 million in ARR is also a great indicator of potential success. Here are a few thoughts on the $1 million in ARR milestone:

    • Assuming 70-80% gross margins (revenue minus cost of goods sold), there’s enough cash flowing through the startup to maintain a team of 5-10 people indefinitely to grow the business
    • With $1M in annual recurring revenue and a great growth rate, the company has enough traction to raise a small Series A round or another angel round (see Metrics to Raise a Series A)
    • Ability to join a great entrepreneurial group like Entrepreneurs’ Organization (it has a $1 million minimum revenue threshold)
    • Enough continuous feedback and input from customers (product usage is oxygen) to expand and improve the product indefinitely so as to build the customer base

    All first-time entrepreneurs should make it a major goal to hit $1 million in annual recurring revenue. The $1 million ARR milestone represents the financial core of a sustainable business.

    What else? What are some more thoughts on the $1 million in annual recurring revenue milestone?

  • Measuring the # of Startups that Raise Money at $10M+ Valuations

    One of the common questions about the Atlanta Tech Village is how we measure startup success. Of course, we throw big parties to celebrate graduates like Yik Yak and SalesLoft, but it usually takes years before a company has enough local employees to warrant moving out. Long term, we’re tracking the number of jobs created by active and graduated Tech Village companies towards our goal of helping create 10,000 new jobs. One idea, as another metric to track, is the number of startups that achieve a post-money valuation greater than $10 million.

    Here are a few thoughts as to why a $10M+ valuation is worth tracking:

    • Represents a likely level of customer traction that something good is going on past product/market fit
    • Shows that the startup has progressed beyond angel investors and likely has institutional investors
    • Means the startup has raised a meaningful amount of money (e.g. > $2 million)
    • Makes it likely that the startup has a team of 10+ employees and the potential to create many more jobs

    Measuring the number of startups that raise money at a $10M+ post-money valuation is another worthwhile metric for ambitious startup communities.

    What else? What are some more reasons why the $10M+ valuation is worth tracking?

  • 7 Elements of a SaaS Platform Company

    Within the B2B SaaS world, one of the common entrepreneurial aspirations is to build a platform company. A platform company, like it sounds, is one that achieves a level of success and market penetration such that a number of other companies build add-ons or integrations to programmatically interact with the platform. Salesforce.com (owner of Pardot) is the most well known SaaS example.

    Here are seven elements of a SaaS platform company:

    • Large, fast growing customer base (thousands of customers)
    • Publicly available API
    • Mature partner program with hundreds of integrations
    • Major annual user conference and regional conferences
    • Continued thought leadership and innovation
    • Category definer
    • Often publicly traded

    For SaaS entrepreneurs, building a platform company means a tremendous level of success. While there’s no single definition of a platform company, these seven elements are often a good indicator.

    What else? What are some more elements of a SaaS platform company?

  • The Trough of Sorrow

    Paul Graham has a famous graph for new products called “The Process” where things start off with exuberance before quickly cooling down and going through a long low period called the “Trough of Sorrow”:

    The trough of sorrow is real. Startup life is like a roller coaster with high highs and low lows and the product process is closely related. Now, the big question is what do you do when you hit the trough of sorrow. Here are a few thoughts:

    • Celebrate the small wins – Even in the trough of sorrow some things will be going well. Look for these small wins and celebrate them.
    • Find peers in similar situations – Everyone goes through the trough of sorrow on the way to success. Seek out like-minded people and share experiences with each other.
    • Reach out for help – Plenty of other successful entrepreneurs have already persevered through the trough of sorrow and can give guidance on what worked, and didn’t work.
    • Talk to customers – Find the small (possibly tiny) group of customers that absolutely love your product. Listen to them. Ask them for help. Get strength from the fact that they love the product and that there has to be more people like them out there.

    Most entrepreneurs don’t make it through the trough of sorrow. Sometimes the market isn’t ready for the product. Sometimes the product isn’t any good. Yet, sometimes, with enough fortitude and strength, the trough of sorrow is conquered and lift-off happens. Entrepreneurs that make it through this rite of passage appreciate the success even more.

    What else? What are some more thoughts on the trough of sorrow?

  • Video of the Week: Gary Vaynerchuk Vistage Keynote

    In honor of Gary Vaynerchuk keynoting the SalesLoft Rainmaker 2016 conference next week, our video of the week is his Vistage keynote. This talk is much more focused on his entrepreneurial journey compared to the previous talk at USC. Enjoy!

    From YouTube: Gary Vaynerchuk builds businesses. Fresh out of college he took his family wine business and grew it from a $3M to a $60M business in just five years. Now he runs VaynerMedia, one of the world’s hottest digital agencies. Along the way he became a prolific angel investor and venture capitalist, investing in companies like Facebook, Twitter, Tumblr, Uber, and Birchbox before eventually co-founding VaynerRSE, a $25M angel fund.

  • Build a Management Training Program

    Once we hit the scale up phase at Pardot, we made the decision that we wanted to promote managers from within, whenever possible. This meant we had a number of first-time managers, and a need for a management training program. Next, we built a simple management training program that was part book club and part peer discussion.

    Here’s how the program worked:

    The real value was building a culture of experience sharing with a focus on becoming better managers. Entrepreneurs would do well to start a management training program when they experience rapid growth.

    What else? What are some more thoughts on building a management training program?