David Cummings on Startups

Tag: business

  • Incredibly Narrow to Start

    Last week, I was catching up with some entrepreneurs who are off to a fast start. They’ve cobbled together a solution using a mix of off-the-shelf technology, proprietary technology, and human-in-the-loop services. However, the leads coming in have been for a variety of different use cases and ideas.

    It’s a high-class problem to have—clearly, the market wants what they’re offering. But as entrepreneurs with limited resources, it’s critical to focus on the most acute pain in the market. There’s an old adage in startup land: more startups die from indigestion than starvation. This means that startups often fail not from a lack of opportunity but from trying to do too many different things for too many different customers, ultimately taking on more than they can handle.

    So, how do you figure out where to focus when you’ve found an unmet need in the market? Here are a few ideas:

    • Quantify the value. How much are prospects willing to pay? Which ones have the most urgent need?
    • Timeline. Who can roll out the technology the fastest? This can also serve as a proxy for urgency and value.
    • Size of market segment. Looking beyond these initial leads, which market opportunity has the most long-term potential? Getting a wedge into a small but fast-growing market that will eventually be large is one of the best ways to build a business.
    • Customer-funded development. Is a potential customer willing to fund new features and solutions to address their needs? In an ideal scenario, customer pain aligns with the entrepreneur’s vision, and development is funded by the customer.
    • Willingness to partner. Is the prospect interested in joining a customer advisory board and influencing future development? Some people enjoy being influencers, even for B2B products. These individuals are incredibly valuable to startups as they provide testimonials and answer reference calls—don’t underestimate the importance of having a customer who cares.

    Ultimately, it benefits the entrepreneur to zoom in and focus on the use case that both fits their vision and has the potential to build the foundation of a business that matches their ambition. Entrepreneurs would do well to start unbelievably narrow, nail it, and then expand. Starting small is the way to go big.

  • 45 Pre-Interview Questions from Brad Jacobs

    One of my favorite hobbies is reading autobiographies of entrepreneurs. The most recent one I read is by Brad Jacobs, the founder of United Rentals, United Waste Systems, and XPO Logistics. Brad’s style and journey differ from the ones I’m accustomed to reading, where the entrepreneur invents a new product and shares the stories of building a huge business. In Brad’s case, his specialty lies in identifying large markets that need consolidation and technology. He focuses on building great teams, raising tremendous amounts of capital, and rolling up the market.

    His strategy and approach resemble a mega search fund, where the idea is to secure a pool of capital and then enter a market by acquiring existing businesses. One of my favorite takeaways from the book is where he talks about the importance of hiring executives. His process involves spending 8 to 10 hours with each candidate and gaining buy-in from the rest of the executive team through interviews and exercises. As part of this process, he has candidates fill out 45 questions before the interview.

    After reading these questions, I realized they are ones every entrepreneur should consider incorporating into their recruiting process. Here are the 45 pre-interview questions from Brad Jacobs.

    Strengths

    1. List some adjectives or phrases that sum you up, that get to your essence.
    2. When you look at your professional self in the mirror, what do you see?
    3. What motivates you? What are you trying to accomplish at this point in your career?
    4. What do you consider to be your biggest career accomplishment(s) so far?
    5. What are your biggest professional strengths?
    6. What’s been the high point of your career so far?
    7. What parts of your jobs have you liked the most?
    8. What’s your favorite professional activity?
    9. Name five reasons for your professional success.
    10. What do your subordinates think are your strengths?
    11. Who was your favorite boss and why?
    12. What positive things might your bosses and colleagues say about you?
    13. What’s the most significant praise you’ve received in a performance appraisal in the last five years?

    Areas for Improvement 

    1. What are some of your biggest professional weaknesses or areas for improvement?
    2. What’s been the low point of your career so far?
    3. What have been some of the biggest mistakes you’ve made, and what did you learn from them?
    4. What’s the most significant criticism you’ve received in a performance appraisal in the last five years?
    5. Who was your least favorite boss and why?
    6. What negative things might your bosses and colleagues say about you?
    7. What do your subordinates think are your weaknesses?
    8. What have been the biggest frustrations or failures in your career?
    9. If you could change on thing about yourself, what would it be?

    Miscellaneous

    1. Describe your character.
    2. What quality do you admire most in people?
    3. What parts of your jobs have you enjoyed the least?
    4. What was the toughest decision you’ve ever had to make in business? How did you handle it? What did you learn from it?
    5. What was your favorite job and why?
    6. What was your least favorite job and why?
    7. What defect should a professional never allow themself to have?
    8. How do you manage your personal/professional balance?
    9. Who in the business world do you admire and why?
    10. Explain the reason for your separation from each one of your jobs.
    11. In an ideal world, describe your perfect job.
    12. Name three of your biases.
    13. What your working habits (a typical day and week)? How many hours do you usually work? How much do you travel for work?
    14. What do you think it takes to be successful in the job you’re applying for?
    15. On a scale of 1-10, how well do you think your skill set matches what’s required to succeed in this job?
    16. What would it take to make your answer to the previous question a 10?
    17. On a scale of 1-10, subject to acceptable compensation, how much do you want this job?
    18. What would it take to make your answer to the previous question a 10?
    19. What are the top three reasons why you’re interested in this position?
    20. Would you accept this job if it were offered to you?
    21. What more do you need to know in order to decide if this role is right for you?
    22. What questions or comments do you have for us?
    23. Why should we hire you?

    Bonus ending question: What have been one or two of the happiest moments of your professional life so far?

    As an entrepreneur, the next time you’re hiring for a key position, consider using some or all of these questions as part of your process. Entrepreneurs are wired to move fast and get things done, but hiring is one area where it pays to slow down just a bit and get it right.

  • When It’s Time to Move on From a Successful Startup

    One of the harder conversations I have on an infrequent but recurring basis is meeting with entrepreneurs who are gung-ho, motivated, and excited about their stalled startup. Of course, they don’t want it to be a stalled startup. They want to keep growing and expanding, but for whatever reason, it’s not in the cards.

    Last month, I had one such conversation with an entrepreneur who had built a small business with many customers. Yet, no matter what he tried, the growth wasn’t there. Over the course of many years, he had willed the business to a sustainable size with a dozen employees, but the ceiling had been reached. Unfortunately for entrepreneurs, this is one of the most challenging situations. After years of blood, sweat, and tears to build a business with paying customers who love the product, and a strong desire to grow, it becomes clear that, at this moment in time, with this product and this team, further growth isn’t going to happen.

    For this particular entrepreneur, I asked a series of questions:

    • If you weren’t working on this business, what would you do?
    • If you stepped away from the company, what percentage of your growth plans for next year would be achieved?
    • If you found a buyer and sold the business, what would the acquirer do with it?
    • If you could wave a magic wand, what would you change about the business?

    Knowing I will never know as much about the startup as the entrepreneur does, my goal is to get them thinking from a first-principles perspective about where the company is headed, what’s best for the business, and what’s best for them at this stage of the journey.

    As expected, this is often a difficult and awkward conversation for the entrepreneur. Everyone—rightfully so—tries to be supportive, encouraging, and focused on helping them continue to grow the business. However, sometimes the entrepreneur has done everything in their power, and it no longer makes sense to continue down the same path.

    As an entrepreneur, operating in these gray areas, where there’s no perfect information and judgment calls must be made, is part of the journey. Sometimes, the call that needs to be made is to move on and find a home for the startup so the entrepreneur can make things right by the employees, partners, and investors. Then, the entrepreneur can start their next journey.

    When further growth and new milestones are no longer achievable, it may be time to evaluate all opportunities and consider whether it’s time to move on from a successful startup. 

  • Daily Check-in Amongst Entrepreneurs

    Back in 2011 and 2012, Pardot was experiencing rapid growth, generating millions of dollars in recurring revenue. As an entrepreneur who enjoyed starting new ventures and identifying potential business ideas, I regularly engaged with other aspiring entrepreneurs. By that point, I was collaborating with several excellent entrepreneurs, including Craig Hyde on Rigor, a web performance monitoring platform, and Kyle Porter on Salesloft, a sales engagement software platform.

    One of our early initiatives was a daily check-in among all of us. This simple yet effective practice involved gathering for 10 minutes each morning to answer three straightforward questions: What did you accomplish yesterday? What are you going to do today? Are there any roadblocks?

    This approach resonated with us as it should for any team or business stage. However, it was particularly valuable to our group of entrepreneurs working on their own ventures. Entrepreneurship is a rollercoaster of ups and downs, with highs and lows that are best shared with people we trust. But by having a small group of like-minded individuals check in with each other daily, we created an accountability network.

    We shared ideas faster, identifying what was working and what wasn’t. We calibrated the different components of our businesses, exploring how they could complement each other. There’s a lot of talk about remote and hybrid work when the goal is to grow as quickly as possible, both for the business and for the individual. While navigating the challenges of starting from scratch, entrepreneurs would benefit from finding a cohort of other entrepreneurs, preferably a small group of those who genuinely enjoy helping each other.

    At that stage of our careers and entrepreneurial journeys, maintaining a standing daily check-in proved invaluable. It allowed us to meet, share our experiences, and grow together as a group. Entrepreneurs should find a peer group and look for ways to grow faster with activities like a daily check-in.

  • The Unknown Entrepreneur Arc

    Last week, I met an entrepreneur for the first time and asked one of my favorite questions: why did you start your company? He shared his journey, which began with participating in a college engineering organization that exposed him to an industry. From there, he became heavily involved and achieved some success among the school competitions. This led to job in the field, which quickly revealed an emerging gap in the market. Recognizing this, he decided to start a business to solve the problem. Now, he has millions of dollars in revenue and a tremendous market opportunity ahead of him.

    Hearing his story reminded me of my own journey. I started by building small PC apps followed by websites. Over time, I identified an opportunity for a new class of software that made it easier to update and manage websites. This led to the idea of creating software to make B2B marketing more productive, which eventually inspired a whole host of other ideas.

    Reflecting on both his journey and my own, my biggest takeaway—beyond the clear influence of luck and timing—is that the best thing a potential entrepreneur can do is to put themselves out there. Observe trends, find ways to get involved, and do interesting work. You never know where it might lead.

    Potential entrepreneurs would benefit from studying the stories of others. It quickly becomes clear that much of entrepreneurship involves trying new things, experimenting, failing, and maintaining a mindset that opportunities are abundant. The world is always changing, with new trends and tailwinds constantly emerging.

    While it’s popular to say, “Follow your passion,” it’s better for potential entrepreneurs to develop an eye for how the world is evolving. Becoming a student of what’s changing and why will lead to opportunities.

  • Beware of Throwaway Comments as a Founder

    Last week, I caught up with an entrepreneur who shared one of his recent lessons learned about the unintended consequences of throwaway comments as a founder. In the early days of a startup, everyone is involved in everything—from frontline tactics to strategic initiatives. However, as the startup grows, more team members are brought on, and specialization gradually increases. Over time, teams and individuals are assigned to implement and manage different projects within the organization.

    This transition—from everyone doing everything to a more mature, scalable organization—requires founders to pay closer attention to their comments and ideas. It’s easy to be the loudest voice in the room, especially in a small team, but this often leads to other team members holding back their thoughts or feeling that enough has already been said. Over time, this dynamic can escalate. Eventually, founders may find that their casual comments or quick ideas are taken as urgent directives, leading to unnecessary or premature actions.

    I’ve experienced this myself. For instance, I might casually say, “Why don’t we try this approach?” or “We should add this feature,” without fully thinking it through. A week or two later, the team might come back with the suggestion implemented, and I realize I didn’t weigh the pros and cons carefully. What I thought was an offhand remark turns into completed work—work that may not have been the best use of time.

    This disconnect often happens because expectations weren’t clearly set. To address this, I’ve learned to encourage team members to speak first and make a point to speak last in group settings. Additionally, when I share ideas or suggestions, I preface them by saying they’re just ideas, part of a brainstorming session, or potential directions to explore. Over time, I’ve become more mindful of setting expectations—clarifying whether I’m sharing an idea for consideration or giving a directive that requires action.

    Of course, how and when these distinctions are communicated may vary depending on the personalities and work styles within the team. Repetition and consistency are often necessary to ensure clarity. As a founder of a growing organization, it’s inevitable that a throwaway comment will sometimes be taken as a high-priority order. This makes it all the more important to communicate clearly and distinguish between brainstorming and actionable plans.

    In the early days, throwaway comments might not seem like a big deal. But as the company scales, founders need to be deliberate in communicating their ideas and recommendations, ensuring their intentions are understood. A clear distinction between casual brainstorming and actionable directives helps the team prioritize effectively and avoid wasted effort.

  • The Quality of Entrepreneur Interactions

    Last week, I was talking to an investor about an entrepreneur he really enjoyed working with. Hearing the joy in his voice, I inquired about what made the experience so delightful. He said it was the quality of the entrepreneur’s interactions.

    This idea has been on my mind ever since: the quality of interactions. After asking more questions and exploring the idea myself, here are a few examples of quality interactions between an entrepreneur and an investor:

    1. Timeliness of Response

    Whether it’s a phone call, email, or text, responsiveness matters. Of course, there’s always a lot going on, but some people manage their responsiveness better. Even if they don’t have time for a full conversation, a quick message like, “I’m tied up for the next few hours (or the day), but here are some good times to catch up,” or “I’ll get back to you by [specific time],” goes a long way. Quick, clear communication builds trust.

    2. Thoughtfulness on Unknown Questions

    Investors frequently ask entrepreneurs questions they might not immediately know the answers to:

    • What does this customer cohort look like?
    • How has this spend changed over time?
    • Where is the market headed in this sub-segment?

    It’s normal not to have all the answers. However, some entrepreneurs try to answer everything, even when it’s clear they don’t know. It’s much better and more thoughtful to respond with something like, “Great question. I don’t know the answer to that, but I’ll research it and get back to you.” Acknowledging what you don’t know and committing to follow up shows maturity and professionalism.

    3. Enthusiasm and Passion

    While entrepreneurs are generally optimistic—sometimes to a fault—those who demonstrate genuine passion and excitement are more enjoyable to interact with. That said, entrepreneurs shouldn’t fake enthusiasm, but ramping up energy and excitement within a natural spectrum of authenticity can make a big difference.

    4. Effort in Materials

    Investors often request board decks, data room access, financial models, etc. Everything an entrepreneur sends to an investor reflects their leadership, even if they didn’t create the document themselves. Typos, grammar mistakes, or low-quality work can reflect poorly on the business. With today’s AI tools, it’s easier than ever to ensure high-quality output. Taking the time to deliver polished, accurate materials builds credibility.

    5. Rhythm of Communication

    Investors value reliability and consistency in communication. Regular updates, such as a weekly email or monthly snapshot, can keep investors informed and confident in the business’s progress. Unfortunately, most entrepreneurs don’t take this proactive approach, leaving investors to request updates. Entrepreneurs who develop a consistent communication rhythm—showing transparency and reliability—provide peace of mind and demonstrate that these habits will continue as the business grows.

    People like to work with others who are thoughtful, conscientious, and care about the quality of interactions. This dynamic is especially important in relationships between entrepreneurs and investors, which often span many years or even decades.

    Recognizing the importance of timeliness, thoughtfulness, enthusiasm, effort, and consistent communication can significantly strengthen these relationships. Entrepreneurs would do well to evaluate their current level of interaction and look for opportunities to enhance or improve it.

  • Thiel’s Seven Questions Every Business Must Answer

    I always enjoy when entrepreneurs share their favorite books. Personally, I gravitate toward entrepreneur biographies, books about startup ideas, and general human interest. When Peter Thiel’s book Zero to One came out 10 years ago, I devoured it and recommended it to all my friends. Since then, I hadn’t re-read it, as I believed it was better to focus on books I hadn’t read before. However, I’m changing that approach and starting to revisit books I haven’t read in many years.

    Among the lists of popular startup books I regularly see, Zero to One is consistently included, so I decided to give it another read. It’s incredible and remains highly recommended. For all entrepreneurs, the section on the seven questions every business must answer is invaluable (pg 153):

    1. The Engineering Question
      Can you create breakthrough technology instead of incremental improvements?
    2. The Timing Question
      Is now the right time to start your particular business?
    3. The Monopoly Question
      Are you starting with a big share of a small market?
    4. The People Question
      Do you have the right team?
    5. The Distribution Question
      Do you have a way to not just create but deliver your product?
    6. The Durability Question
      Will your market position be defensible 10 and 20 years in the future?
    7. The Secret Question
      Have you identified a unique opportunity that others don’t see?

    Entrepreneurs would do well to answer these questions not only before starting a business but to revisit them on a regular basis in the context of their current direction and initiatives. Products and business models are dynamic, just like most things, and it’s easy to get in a rut without zooming out and asking the big questions consistently. Every business must answer these seven questions both for today and tomorrow.

  • Why Atlanta for Startup Investing

    Last week, I was asked to speak at a friend’s limited partner investor meeting. We covered all the usual topics, like what to look for in a founder and in a startup. Then, she asked me to share why investors should care about investing in Atlanta. Easy.

    Let’s look at what makes Atlanta a great place for startup investing:

    #1: Population Growth

    For decades, one of the best indicators of a region’s vitality is when people “vote with their feet” by moving there. Atlanta has been one of the fastest-growing metro areas in the country and is now the sixth-largest in the United States, recently surpassing Washington, D.C., Miami, and Philadelphia in size. Compared to these other regions, Atlanta is growing much faster and will continue to outpace them in population growth. People flock to areas with ample personal and professional opportunities, and Atlanta wins purely based on population growth.

    #2: College Town

    Atlanta is a college town with hundreds of thousands of students, led by Georgia Tech. Georgia Tech is one of the most highly regarded universities in the country, with every engineering discipline ranked in the top 10 nationally and more graduates per year than Stanford, MIT, and Carnegie Mellon combined. When it comes to a continuous pipeline of top-tier technical talent ready to invent the future, Georgia Tech is unmatched. Add to that the graduates from Emory, Georgia State, Spelman, Morehouse, and other esteemed schools in the great region like the University of Georgia, Clemson, and Auburn, and it’s easy to see why Forbes ranks Atlanta as the most educated city in the country. Demographics are destiny, and Atlanta’s are top-notch.

    #3: Development in the City Core

    Over the last 10+ years, two economic miracles have been taking place within Atlanta’s city limits. First is the urban revitalization of Midtown Atlanta, an area immediately adjacent to Georgia Tech and between downtown Atlanta and Buckhead. This several-mile stretch has seen $10 billion worth of new developments, creating a modern live-work-play urban core with dozens of new skyscrapers. The second economic miracle in the city has been the development of the Beltline and new construction around it. This project has also seen $10 billion in new developments, creating an urban trail that reconnects dozens of historic neighborhoods and has contributed to Atlanta being the fastest-growing large city in the country. The Beltline will remain a critical economic driver for the next 20 years and will play a major role in moving Atlanta residents beyond a car-centric lifestyle. Combine that with billions of dollars being invested in downtown Atlanta to revitalize it, and you have a playbook for continued growth while maintaining 50% tree canopy coverage.

    #4: The World’s Busiest Airport

    Last year, Atlanta’s Hartsfield-Jackson Airport had 105 million passengers, making it the busiest airport in the world. From a regional perspective, this translates into direct flights to every major and mid-sized market in the United States, as well as international routes to every major city worldwide. For both business and personal travel, frequent direct flights are a real advantage and continue to fuel the region’s growth.

    #5: Positive Can-Do Attitude

    Atlanta has been punching above its weight class for the ~180 years of its existence. Originally a point where railroad lines intersected to ship goods from the Northeast to the Mississippi River, Atlanta has grown into the sixth-largest metro in the United States. This growth is largely driven by a warm, inviting culture that embraces progress and ambition. The city’s “can-do” attitude is much like the little engine that could, continuously moving forward and defying the odds. The past is the best predictor of the future, and Atlanta’s continued growth is a great bet.

    From population growth to college students to recent developments and a major airport, Atlanta has everything needed for startups to thrive. Startup investors should invest both their time and money in Atlanta.

  • Event Attendance Yields and Quality Product Feedback

    Last week, I spoke with an entrepreneur who volunteers for a local tech nonprofit, helping with event planning and securing speakers. We discussed events in general and shared best practices we’ve learned over the years. He pointed out something I’ve also observed: events that require payment, even a nominal fee like $10, tend to have a significantly different attendance yield compared to free events.

    In some cases, an organization includes events as part of its annual dues, but many groups choose to charge for events individually. What I’ve noticed on the attendance side is that when you charge for an event, the attendance rate (the percentage of people who actually show up) is often over 90%. In contrast, for free events—especially larger ones or those without a special draw—the attendance rate is typically around 60%. So, while people sign up for events in both cases, charging even a small fee increases the commitment and effort to attend.

    In this unscientific example, the attendance yield for paid events is roughly 50% higher than for free ones. How does this relate to startups? In the startup world, entrepreneurs are eager to get new products into the hands of potential customers. The most common approach is to give products away for free in the early stages to encourage usage and gather feedback. While this might work for a small subset of premium products, in most cases, entrepreneurs are better off charging something, even if it’s less than the eventual market price.

    By charging for the product, the bar for customer commitment is raised. When customers pay, they are more likely to use the product, and the quality and quantity of feedback improve significantly. The relationship becomes a true vendor/customer. 

    Entrepreneurs should consider the example of event attendance yields when comparing free versus paid events. Paid events, as expected, have a higher yield, which implies a greater level of commitment—even if the amount paid is minimal. Similarly, when entrepreneurs charge for a product, the customer’s seriousness is much greater, resulting in higher-quality feedback. Feedback is the lifeblood of products, and the most valuable feedback comes from customers who are invested, even if minimally.