David Cummings on Startups

Tag: entrepreneur

  • 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.

  • 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.