David Cummings on Startups

Tag: startup

  • 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.

  • 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. 

  • 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.

  • 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.