David Cummings on Startups

Blog

  • 5 Ideas for Prospect List Building

    Back in the very early days of Hannon Hill we had six customers of which two were in higher education. Now, even though it wasn’t enough to be statistically significant, these two colleges loved the product and provided great feedback (usage is oxygen for a product). Sensing an opportunity in higher education, I bought a giant book from Barnes & Noble that reviewed every college and university in the United States (over 4,000 schools). We divided the book in half and started calling people involved with managing all the public facing .edu websites. Today, hundreds of colleges and universities use Hannon Hill to manage thousands of websites and millions of web pages.

    Here are five ideas for prospect list building:

    1. Look for lists of fast-growing companies like the Inc. 5000 or the Deloitte Fast 500
    2. Research tradeshow attendees and exhibitors like Dreamforce or SaaStr Annual
    3. Implement an email finding tool like Email Hunter
    4. Use crowdsourcing tools like Amazon’s Mechanical Turk to flesh out prospect fields
    5. With the lists, run prospecting campaigns on a sales acceleration platform like SalesLoft

    Prospect list building is a critical part of the startup process. Just remember: nothing happens until something is sold.

    What else? What are some more ideas for prospect list building?

  • Video of the Week: Maintaining Success for the Long Term – Michael Moritz

    Our video of the week is actually an audio interview of Michael Moritz from Sequoia Capital sharing how they’ve maintained success as one of the top venture investors for over 30 years. Listen to Sam Altman of Y Combinator interview Michael Moritz on the topic of Maintaining Success for the Long Term. Enjoy!

  • Add 10 – 15% More Dilution to Each Funding Round

    When first-time entrepreneurs set out to raise money, they often consider the tradeoffs of getting on the funding treadmill vs continuing to bootstrap. Once they think the fundraising route is the way to go, I like to recommend they plug the fundraising math in a spreadsheet and see what the different outcomes might look like (e.g. the valuation multiplier to raise money is 5x). Only, this is where many entrepreneurs don’t understand the option pool shuffle.

    Entrepreneurs need to factor in an additional 10 – 15% dilution for each round of funding for new employee stock option pools.

    As part of the pitch to raise money, there’s always the goal to hire X number of new people. Well, to hire those people it requires equity, and the more talented the people, the more equity that’s required. Investors typically want the startup to create a new option pool as part of the financing event.

    Entrepreneurs would do well to factor in 10 – 15% more dilution for each round of funding when analyzing fundraising options.

    What else? What are some more thoughts on the idea that many entrepreneurs don’t think through employee option pools when raising money?

  • 5 Questions to Determine a Must-Have Product

    Continuing with yesterday’s post on the 3 Main Reasons Entrepreneurs Succeed, the idea of a must-have vs nice-to-have product is one of the more difficult things to evaluate. So many product ideas seem great when you hear them but when you actually experience a new product, most fall short of being truly transformative. At Pardot, we pitched a number of different modules and features to prospects but most people didn’t use 50% of the product. At it’s core, the basic functionality of sending tracked emails, understanding user behavior at the one-to-one level, and tieing it all in with the CRM provided the majority of the value. Yet, based on feedback from customers, we knew that the core alone resulted in a “must-have” product.

    Here are five questions to help determine if it’s a must-have product:

    1. If you told your customers tomorrow that you were shutting down the product immediately, how upset would they be?
    2. When you send Net Promoter Score surveys to your customers, how high do they rate you?
    3. If you called up a random customer on the phone and asked if the product unequivocally helps them make more money or save money, would they reply with a resounding “yes”?
    4. When an existing user changes jobs, how hard do they push to get the product in place at their new employer?
    5. When your app goes down briefly for maintenance or a server error, how loud and fast are the complaints?

    Figuring out if a product is a must-have can be difficult early on. As things progress and more customers come on board, hearing statements like “I don’t know how I did my job before using this product” are good indicators of a must-have app. Use these questions to determine if a product is a must-have.

    What else? What are some more questions to help determine if a product is a must-have?

  • 3 Main Reasons Entrepreneurs Succeed

    Earlier today I was talking to a tech investor about different startups in Atlanta. Towards the end of the conversation he asked what I thought were the main reasons why some entrepreneurs succeed and others don’t. It’s a great question that doesn’t have an easy answer. See, there are a number of entrepreneurs that seem to have it all going for them, yet they fail miserably. Conversely, there are a number of entrepreneurs that seem like they have a slim chance of success, yet amazing things happen.

    Here are the three main reasons entrepreneurs succeed:

    1. Market Timing – A seemingly good idea with poor market timing is a bad idea. No matter what the entrepreneur does, if the market isn’t ready, it isn’t going to work out. Market timing matters much more than more people realize (see Bill Gross on market timing).
    2. Resilience – The entrepreneurial journey is a grind, especially the first few years, which are especially hard. I know entrepreneurs that had to pivot multiple times over multiple years before figuring out something that worked. Having the internal fortitude and locus of control makes a big impact.
    3. Must-Have vs Nice-to-Have Product – Too many products, especially tech products, are nice-to-have apps that do something that’s OK but not revolutionary. This is especially hard because it’s not always obvious early on just how valuable and impactful a product can be before it’s fleshed out (see Candy, Vitamins, and Pain-Killers).

    Other aspects like the team are incredibly important but I’ve found these to be the three main reasons entrepreneurs succeed. When a resilient entrepreneur has a must-have product with great market timing, awesome things happen.

    What else? What are your top three reasons entrepreneurs succeed?

  • 5 Common Mistakes Entrepreneurs Make After Raising a Seed Round

    After talking with dozens of seed stage entrepreneurs at the Atlanta Tech Village I’ve come to see a variety of patterns. Now, no two entrepreneurs are the same and no two startups are the same, but there are some general “business physics” that exist. Here are the five common mistakes entrepreneurs make after raising a seed round:

    1. Not doing whatever it takes to get 10 unaffiliated customers as quickly as possible
    2. Not following the 3:1 customer acquisition to engineering spend ratio (depending on the size of the seed round)
    3. Not budgeting to make the money last at least 18 months
    4. Not understanding there’s a Series A crunch before trying to raise the next round and the metrics required to raise a Series A
    5. Not updating the Simplified One Page Strategic Plan every quarter

    The next time you talk to an entrepreneur that has just raised their seed round, share these five common mistakes and help them not make the same errors.

    What else? What are some more common mistakes entrepreneurs make after raising a seed round?

  • An Accountability Hack for Teams

    Following up with yesterday’s post 6 Steps to Build a Culture of Accountability, and the common response that it requires too much effort, there’s a simple accountability hack team managers should employ: run the weekly team meeting with a Google Sheet or project management system like Trello, Basecamp, or Asana. I know one entrepreneur that runs each leadership meeting with Asana open, every key project on display, and a general “Management” project where any action items that come up from the meeting are recorded as tasks. This level of accountability seems so simple yet few managers do it.

    As a starting point, make a Google Worksheet with two sheets:

    • Projects
      • Name
      • Description
      • Owner
      • Status
      • Done? Y/N
      • Due Date
    • Action Items
      • Name
      • Owner
      • Done? Y/N

    The “Done? Y/N” columns in each sheet make it easy to sort that column alphabetically and see what’s open and what’s complete.

    Managers would do well to follow this simple accountability hack and do a better job of holding each team member accountable. Remember the old adage: what gets measured gets done.

    What else? What are some more thoughts on this simple accountability hack for teams?

  • 6 Steps to Build a Culture of Accountability

    One of the challenges most entrepreneurs face is building a culture of accountability. As much as we want everyone to own their results, most employees can’t answer the three basic questions (who’s my boss, what’s my job, how do I know if I’m doing well). After many years of trial and error, here are the six steps I’ve learned to build a culture of accountability:

    1. Start by answering the three basic questions for every employee
    2. Decide on 3-5 operational metrics with goals that each employee owns and reports on weekly (e.g. story points, calls made, appointments set, marketing qualified leads generated, customer satisfaction scores, billable hours, revenue, etc.)
    3. Review the employee’s day-to-day/week-to-week work at a daily check-in or weekly team meeting along with their metrics
    4. Provide a central system (like a Google Sheet KPIs Dashboard) for each department with everyone’s metrics so that there is peer accountability and visibility
    5. Analyze the personal goals on a quarterly basis as part of the quarterly check-ins
    6. Tie everything together with the Simplified One Page Strategic Plan and help each employee understand how their goals align to the company’s goals

    While this process seems straightforward, very few entrepreneurs actually implement this type of system. Why? It’s requires a tremendous amount of ongoing leadership and management, and most entrepreneurs don’t understand the value. The next time an entrepreneur expresses interest in growing faster and scaling more efficiently, ask them about their existing culture of accountability.

    What else? What are some more thoughts on these six steps to build a culture of accountability?

  • Video of the Week: Tools are Bought, Transformations are Sold – Dharmesh Shah

    Dharmesh Shah, co-founder of HubSpot, has a great talk up titled Zero to IPO: Lessons From The Unlikely Story of HubSpot. As he mentions in the post, the most popular slide says “Tools are bought. Transformations are sold.” That’s been my experience as well and prompted the New Product Categories Require Salespeople post.

    Head on over to OnStartups and watch the video of the week. Enjoy!

  • Moving from General Tools to Prescriptive Solutions

    One of the biggest trends for SaaS over the next five years is new products that offer prescriptive solutions in place of general tools. What I mean is that there are a number of well-defined categories like CRM and ERP that are essentially customizable front-ends to specialized databases (e.g. CRMs are mostly contact management databases). These new products are still going to have the specialized database behind the scenes, but the front-end is more of a business process management system that actually tells the user what to do next.

    Let’s take a look at SalesLoft (disclosure: I’m an investor) as an example of a prescriptive solution:

    • Configure a multi-step cadence that outlines the business process (e.g. flow of emails, phone calls, social outreach, etc. over a period of time)
    • Based on the sales rep’s role, the cadence tells them exactly what to do and feeds up the next activity for them to perform (e.g. call this person now and it has an auto-dialer to dial the phone for them — the software holds their hand)
    • Activities are constantly analyzed in an effort to improve the process and make the sales reps more successful

    Now, compare the prescriptive solution to a standard contact management tool. Contact management tools have the specialized database with contact info, lists of people, etc. but they are merely databases where the user has to figure what to do and how to best interface with it, not business process engines. Look for more prescriptive solutions to emerge that make people much more productive at specific functions.

    What else? What are some more thoughts on moving from general tools to prescriptive solutions?