David Cummings on Startups  Over 2,500 posts on entrepreneurship and startups

davidcummings.org

David Cummings on Startups Over 2,500 posts on entrepreneurship and startups

Once a startup has product/market fit, one of the best things they can do is a Simplified One Page Strategic Plan and update it on a quarterly basis. The concept is easy: put the most important high-level things about the business on one side of one sheet of paper and ensure everyone in the organization understands allaspects of it. Nothing more, nothing less make it a simple doc. Here are the contents of the Simplified One Page Strategic Plan(Google Doc templateand example plan): Purpose Core Values Market Brand Promise Elevator Pitch 3 Year Target Annual Goals Quarterly Goals Quarterly Priority Projects Entrepreneurs would do well to implement the Simplified One Page Strategic Plan(Google Doc template,example plan) and update it on a quarterly basis. What else? What are some more thoughts on the Quarterly Simplified One Page Strategic Plan? Whenever a startup raises money, one aspectof the conversation is around employee stock option plans and equity. Investors want to know that the company has equity set aside for employees while founders often want todelay their ownership dilution until they know theyre going to hire new employees and need to allocate new equity grants. When raising money,investors will often require an increase in the size of the stock option pool to ensure theres equity for new hires that are part of the funding plan. Only, some investors arent clear upfront whether the dilution for this additional option pool comes from the existing shareholders prior to financing or if itll come post financing and be shared across the new and old investors. The option pool shuffle is when new investors ask for an increase in option pool size,recommend a target size (e.g. add 15% of the company of the option pool), and then make the existing shareholders take the dilution for this increase (effectively reducing the pre-money valuation). Entrepreneurs should think through their hiring plans and only increase the option pool based on their projected needs (e.g. add 10% of the company to the option pool instead of 15%). When lower than what the investor requests, the pre-money valuationeffectively increases, and if the option pool is increased in the future, everyone shares in the dilution. Increasing the option pool size and requiring it prior to funding is normal and shuffles the dilution to the existing shareholders. The key is to make the increase in size reasonable and to calculate that dilution when thinking about the effective pre-money valuation for the round. What else? What are some more thoughts on the option pool shuffle? In last months post Why Not More Startup Success Stories, reader Jeff offered an interesting idea where institutional investors would be encouraged to buy 10% of the equity from the angel investors, assuming theyd be interested in selling. For most startup communities, there are very few exits resulting in long/indefinite delays before angel investors receive a return on their money and thus the rate at which returns are recycled back into the community is limited. If institutional investors more routinely bought a small stake from the angel investors say 10% thatd generate angel returns faster and allow institutional investors to buy a larger piece of the startup. Heres how it might look: The institutional investor would want the angels equity reclassified as the same type of equity as the Series A otherwise there might be a discount. By encouraging institutional investors to buy a small piece of the existing equity held by the angel investors, angels are more likely to invest in other startups and capital will be recycled faster in the community. Entrepreneurs should consider asking institutional investors about this when raising capital. What else? What are some more thoughts on the idea of encouraging institutional investors to buy a small amount of equity from existing angel investors? With exits for tech startups rare, especially outside of the largest tech startup hub, most entrepreneurs anticipating a great exit are going to be disappointed unless they are on pace for$100 million in annual recurring revenue (ARR) or $5 million inearnings before interest, tax, depreciation and amortization (EBITDA). Why those numbers? $100M in ARR is often the requirement for a successful IPO and $5M in EBITDA is often the minimum to getprivate equity firms interested in buying the company. Strategic buyers are often the most desirable buyer for startups as theyll have both a complementary product or service thats much larger and theyll pay a much higher price, all things considered. Only, there are so few exits to strategics. In order to have options, the startup has to reach significant scale (> $100M ARR) or significant profitability (> $5M EBITDA). Most startups wont achieve either and need to recognize the financial benchmarks required, especially in the context of fundraising. Entrepreneurs would do well to think through what success looks like for them and plan accordingly when evaluating different funding opportunities for the company. What else? What are some more thoughts on the $100M ARR and $5M EBITDA targets to have strong exit opportunities? For our video of the week watch Where good ideas come from | Steven Johnson. Enjoy! From YouTube: People often credit their ideas to individual Eureka! moments. But Steven Johnson shows how history tells a different story. His fascinating tour takes us from the liquid networks of Londons coffee houses to Charles Darwins long, slow hunch to todays high-velocity web. Culture is one of my favorite topics as its so critical to successful organizations. Ive seen OK cultures and Ive seen amazing cultures the amazing ones always grow faster and outperform their peers. Only, scaling a strong culture is hard as theres much more complexity. Here are a few thoughts on scaling culture: Once the team grows beyond the co-founders, its time to start thinking about culture. As the startup finds product/market fit and a repeatable customer acquisition process, culture needs to be intentional. What else? What are some more ideas for scaling culture in a fast-growing startup? Earlier today I had a chance to talk at the Geek Out on Marketing Technology event and one of the topics was MarTech trends. With 4,000+ marketing technology companies, there are a number of excellent trends in the market. Here are threetrends discussed: Its a great time to be in marketing technology and look for these three trends to grow in importance over the coming years. What else? What are some more trends in marketing technology? Enter your email address to subscribe to this blog and receive notifications of new posts by email. Join 42,104 other followers Menu May 3, 2017 Entrepreneurship, Operations Leave a comment May 2, 2017 Entrepreneurship 1 Comment May 1, 2017 Entrepreneurship, Investing 2 Comments May 1, 2017May 1, 2017 Entrepreneurship 1 Comment April 29, 2017 Entrepreneurship Leave a comment April 28, 2017 Corp Culture, Entrepreneurship 2 Comments April 27, 2017 Entrepreneurship, SaaS, Sales and Marketing 2 Comments Previous Search for: Cancel Follow Customize Follow

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Menu DAVID CUMMINGS ON STARTUPS [https://davidcummings.org/] Skip to content * Home [https://davidcummings.org/] * About [https://davidcummings.org/about/] * Investments [https://davidcummings.org/investments/] * Now [https://davidcummings.org/now/] DAVID CUMMINGS ON STARTUPS [https://davidcummings.org/] Skip to content * Home [https://davidcummings.org/] * About [https://davidcummings.org/about/] * Investments [https://davidcummings.org/investments/] * Now [https://davidcummings.org/now/] [https://davidcummings.org/2017/05/03/quarterly-simplified-one-page-strategic-plan/] May 3, 2017 [https://davidcummings.org/2017/05/03/quarterly-simplified-one-page-strategic-plan/] Entrepreneurship [https://davidcummings.org/category/entrepreneurship/], Operations [https://davidcummings.org/category/operations/] Leave a comment [https://davidcummings.org/2017/05/03/quarterly-simplified-one-page-strategic-plan/#respond] QUARTERLY SIMPLIFIED ONE PAGE STRATEGICPLAN [https://davidcummings.org/2017/05/03/quarterly-simplified-one-page-strategic-plan/] Once a startup has product/market fit, one of the best things they can do is a Simplified One Page Strategic Plan and update it on a quarterly basis. The concept is easy: put the most important high-level things about the business on one side of one sheet of paper and ensure everyone in the organization understands allaspects of it. Nothing more, nothing less make it a simple doc. Here are the contents of the Simplified One Page Strategic Plan(Google Doc template [https://docs.google.com/previewtemplate?id=1Qmdy6hRLV5yOSpZculmjh1YGVnBbvE9ARVFx31KsL6s&mode=public]and example plan [https://davidcummings.org/2016/01/17/example-simplified-one-page-strategic-plan/]): PURPOSE * One line purpose CORE VALUES * General fit on one line * People fit on one line MARKET * One line description of your market BRAND PROMISE * One line brand promise ELEVATOR PITCH * No more than three sentences for the elevator pitch 3 YEAR TARGET * One line with thegoal ANNUAL GOALS * 3-5annual goals in table format withthe start value, current value, and target value QUARTERLY GOALS * 3-5quarterly goals in table format with thestart value, current value, and target value QUARTERLY PRIORITY PROJECTS * Three one-line priority projects withthe percent complete for each Entrepreneurs would do well to implement the Simplified One Page Strategic Plan(Google Doc template, [https://docs.google.com/previewtemplate?id=1Qmdy6hRLV5yOSpZculmjh1YGVnBbvE9ARVFx31KsL6s&mode=public]example plan [https://davidcummings.org/2016/01/17/example-simplified-one-page-strategic-plan/]) and update it on a quarterly basis. What else? What are some more thoughts on the Quarterly Simplified One Page Strategic Plan? [https://davidcummings.org/2017/05/02/the-option-pool-shuffle/] May 2, 2017 [https://davidcummings.org/2017/05/02/the-option-pool-shuffle/] Entrepreneurship [https://davidcummings.org/category/entrepreneurship/] 1 Comment [https://davidcummings.org/2017/05/02/the-option-pool-shuffle/#comments] THE OPTION POOLSHUFFLE [https://davidcummings.org/2017/05/02/the-option-pool-shuffle/] Whenever a startup raises money, one aspectof the conversation is around employee stock option plans and equity. Investors want to know that the company has equity set aside for employees while founders often want todelay their ownership dilution until they know theyre going to hire new employees and need to allocate new equity grants. When raising money,investors will often require an increase in the size of the stock option pool to ensure theres equity for new hires that are part of the funding plan. Only, some investors arent clear upfront whether the dilution for this additional option pool comes from the existing shareholders prior to financing or if itll come post financing and be shared across the new and old investors. The option pool shuffle is when new investors ask for an increase in option pool size,recommend a target size (e.g. add 15% of the company of the option pool), and then make the existing shareholders take the dilution for this increase (effectively reducing the pre-money valuation). Entrepreneurs should think through their hiring plans and only increase the option pool based on their projected needs (e.g. add 10% of the company to the option pool instead of 15%). When lower than what the investor requests, the pre-money valuationeffectively increases, and if the option pool is increased in the future, everyone shares in the dilution. Increasing the option pool size and requiring it prior to funding is normal and shuffles the dilution to the existing shareholders. The key is to make the increase in size reasonable and to calculate that dilution when thinking about the effective pre-money valuation for the round. What else? What are some more thoughts on the option pool shuffle? [https://davidcummings.org/2017/05/01/encouraging-institutional-investors-to-buy-10-of-the-angel-investor-equity/] May 1, 2017 [https://davidcummings.org/2017/05/01/encouraging-institutional-investors-to-buy-10-of-the-angel-investor-equity/] Entrepreneurship [https://davidcummings.org/category/entrepreneurship/], Investing [https://davidcummings.org/category/investing/] 2 Comments [https://davidcummings.org/2017/05/01/encouraging-institutional-investors-to-buy-10-of-the-angel-investor-equity/#comments] ENCOURAGING INSTITUTIONAL INVESTORS TO BUY 10% OF THE ANGEL INVESTOREQUITY [https://davidcummings.org/2017/05/01/encouraging-institutional-investors-to-buy-10-of-the-angel-investor-equity/] In last months post Why Not More Startup Success Stories [https://davidcummings.org/2017/04/03/why-not-more-startup-success-stories/], reader Jeff offered an interesting idea [https://davidcummings.org/2017/04/03/why-not-more-startup-success-stories/#respond] where institutional investors would be encouraged to buy 10% of the equity from the angel investors, assuming theyd be interested in selling. For most startup communities, there are very few exits resulting in long/indefinite delays before angel investors receive a return on their money and thus the rate at which returns are recycled back into the community is limited. If institutional investors more routinely bought a small stake from the angel investors say 10% thatd generate angel returns faster and allow institutional investors to buy a larger piece of the startup. Heres how it might look: * Angel investor buy 10% of the startup for $150,000 resulting in a $1.5 million post-money valuation * Startup achievesstrong traction and raises a $3 million Series A at a $7 million pre-money ($10 million post-money) * Institutional investor thats buying ~30% of the company (less the pro-rata from any existing investors that want to invest more) is willing to increase their investment up to $3.14million such that the existing investor that owns 10% before the financing round can sell up to 20% of their stake which represents up to 2% of the company (10% ownership of the $7 million pre-money represents $70,000 forone percent) for $140,000 thus nearly recouping their initial investment while still having 8% of the company remaining (pre Series A investment) * Post Series A investment, and after selling 20%, the angel investor now has 5.6% of the company (8% diluted by 30%, not counting a potential increase in option pool) The institutional investor would want the angels equity reclassified as the same type of equity as the Series A otherwise there might be a discount. By encouraging institutional investors to buy a small piece of the existing equity held by the angel investors, angels are more likely to invest in other startups and capital will be recycled faster in the community. Entrepreneurs should consider asking institutional investors about this when raising capital. What else? What are some more thoughts on the idea of encouraging institutional investors to buy a small amount of equity from existing angel investors? [https://davidcummings.org/2017/05/01/100m-arr-or-5m-ebitda-target-for-strong-exit-opportunities/] May 1, 2017May 1, 2017 [https://davidcummings.org/2017/05/01/100m-arr-or-5m-ebitda-target-for-strong-exit-opportunities/] Entrepreneurship [https://davidcummings.org/category/entrepreneurship/] 1 Comment [https://davidcummings.org/2017/05/01/100m-arr-or-5m-ebitda-target-for-strong-exit-opportunities/#comments] $100M ARR OR $5M EBITDA TARGET FOR STRONG EXITOPPORTUNITIES [https://davidcummings.org/2017/05/01/100m-arr-or-5m-ebitda-target-for-strong-exit-opportunities/] With exits for tech startups rare, especially outside of the largest tech startup hub, most entrepreneurs anticipating a great exit are going to be disappointed unless they are on pace for$100 million in annual recurring revenue (ARR) or $5 million inearnings before interest, tax, depreciation and amortization (EBITDA). Why those numbers? $100M in ARR is often the requirement for a successful IPO and $5M in EBITDA is often the minimum to getprivate equity firms interested in buying the company. Strategic buyers are often the most desirable buyer for startups as theyll have both a complementary product or service thats much larger and theyll pay a much higher price, all things considered. Only, there are so few exits to strategics. In order to have options, the startup has to reach significant scale (> $100M ARR) or significant profitability (> $5M EBITDA). Most startups wont achieve either and need to recognize the financial benchmarks required, especially in the context of fundraising. Entrepreneurs would do well to think through what success looks like for them and plan accordingly when evaluating different funding opportunities for the company. What else? What are some more thoughts on the $100M ARR and $5M EBITDA targets to have strong exit opportunities? [https://davidcummings.org/2017/04/29/video-of-the-week-where-good-ideas-come-from-steven-johnson/] April 29, 2017 [https://davidcummings.org/2017/04/29/video-of-the-week-where-good-ideas-come-from-steven-johnson/] Entrepreneurship [https://davidcummings.org/category/entrepreneurship/] Leave a comment [https://davidcummings.org/2017/04/29/video-of-the-week-where-good-ideas-come-from-steven-johnson/#respond] VIDEO OF THE WEEK: WHERE GOOD IDEAS COME FROM | STEVENJOHNSON [https://davidcummings.org/2017/04/29/video-of-the-week-where-good-ideas-come-from-steven-johnson/] For our video of the week watch Where good ideas come from | Steven Johnson [https://www.youtube.com/watch?v=0af00UcTO-c]. Enjoy! From YouTube: People often credit their ideas to individual Eureka! moments. But Steven Johnson shows how history tells a different story. His fascinating tour takes us from the liquid networks of Londons coffee houses to Charles Darwins long, slow hunch to todays high-velocity web. [https://davidcummings.org/2017/04/28/scaling-culture-in-a-fast-growing-startup/] April 28, 2017 [https://davidcummings.org/2017/04/28/scaling-culture-in-a-fast-growing-startup/] Corp Culture [https://davidcummings.org/category/corp-culture/], Entrepreneurship [https://davidcummings.org/category/entrepreneurship/] 2 Comments [https://davidcummings.org/2017/04/28/scaling-culture-in-a-fast-growing-startup/#comments] SCALING CULTURE IN A FAST-GROWINGSTARTUP [https://davidcummings.org/2017/04/28/scaling-culture-in-a-fast-growing-startup/] Culture is one of my favorite topics as its so critical to successful organizations. Ive seen OK cultures and Ive seen amazing cultures the amazing ones always grow faster and outperform their peers. Only, scaling a strong culture is hard as theres much more complexity. Here are a few thoughts on scaling culture: * Implement a culture check team [https://davidcummings.org/2012/05/16/culture-checks-to-help-scaling-a-startup/] to interview every potential hire * Run a culture-oriented hiring process [https://davidcummings.org/2014/07/27/the-culture-oriented-7-step-hiring-process/] * Reinforce the core values with each quarterly check-in [https://davidcummings.org/2011/03/24/updated-quarterly-check-ins/] * Design career paths [https://davidcummings.org/2014/10/14/career-paths-in-startups-with-limited-visibility/] for every team member * Put the culture front and center with the Simplified One Page Strategic Plan [https://davidcummings.org/2011/12/17/simplified-one-page-strategic-plan-from-rockefeller-habits/] Once the team grows beyond the co-founders, its time to start thinking about culture. As the startup finds product/market fit and a repeatable customer acquisition process, culture needs to be intentional. What else? What are some more ideas for scaling culture in a fast-growing startup? [https://davidcummings.org/2017/04/27/3-trends-in-marketing-technology/] April 27, 2017 [https://davidcummings.org/2017/04/27/3-trends-in-marketing-technology/] Entrepreneurship [https://davidcummings.org/category/entrepreneurship/], SaaS [https://davidcummings.org/category/saas/], Sales and Marketing [https://davidcummings.org/category/sales-and-marketing/] 2 Comments [https://davidcummings.org/2017/04/27/3-trends-in-marketing-technology/#comments] 3 TRENDS IN MARKETINGTECHNOLOGY [https://davidcummings.org/2017/04/27/3-trends-in-marketing-technology/] Earlier today I had a chance to talk at the Geek Out on Marketing Technology [http://www.tagonline.org/events/geek-out-marketing-technology/] event and one of the topics was MarTech trends. With 4,000+ marketing technology companies, there are a number of excellent trends in the market. [https://davidcummings.files.wordpress.com/2017/04/marketing_technology_landscape_2016_3000px.jpg] Here are threetrends discussed: * MACHINE LEARNING Take large amounts of data and find patterns and actionable insightsthat just werent possible before. Machine learning is the ability for computers to learn without being explicitly programmed [https://davidcummings.org/2017/01/25/machine-learning-and-the-startup-world/]. Think of all the applications in marketing from improving campaigns to targeting the best-fit accounts [http://leadtime.com/]. * ACCOUNT-BASED MARKETING Target named accounts with the right message at the right time. With account-based marketing [http://terminus.com/], marketers are able to proactively engage with accounts that havent come through the traditional channels. * CUSTOMER DATA PLATFORMS Marketing is more than campaigns to attract prospects. Marketers are now expected to help guide the entire customer experience from first touch to signing as a customer to renewing at a future date. Customer data platforms pull in data from all the customer facing functions sales, marketing, support, customer success, etc. and provide a holistic view of the account as well as next actions to take. Its a great time to be in marketing technology and look for these three trends to grow in importance over the coming years. What else? What are some more trends in marketing technology? POSTS NAVIGATION Previous [https://davidcummings.org/page/2/] EMAIL SUBSCRIPTION Enter your email address to subscribe to this blog and receive notifications of new posts by email. Join 42,104 other followers TWITTER @DAVIDCUMMINGS [http://twitter.com/davidcummings] * RT @jeffhilimire [http://twitter.com/jeffhilimire]: Classy goodbye from YikYak. blog.yikyak.com/blog/thank-you [http://blog.yikyak.com/blog/thank-you-yakkers] 6daysago [http://twitter.com/davidcummings/statuses/858122988390100993] * RT @kyleporter [http://twitter.com/kyleporter]: For reals. Style and soul. What an amazing Atl tech founder fireside chat this could (& will hopefully) be. Ride on! https: 6daysago [http://twitter.com/davidcummings/statuses/858122945968865281] CATEGORIES * Community [https://davidcummings.org/category/community/] (419) * Corp Culture [https://davidcummings.org/category/corp-culture/] (176) * Entrepreneurship [https://davidcummings.org/category/entrepreneurship/] (2,459) * Investing [https://davidcummings.org/category/investing/] (96) * Leadership [https://davidcummings.org/category/leadership/] (165) * Operations [https://davidcummings.org/category/operations/] (272) * Product Mgmt [https://davidcummings.org/category/product-mgmt/] (178) * SaaS [https://davidcummings.org/category/saas/] (248) * Sales and Marketing [https://davidcummings.org/category/sales-and-marketing/] (397) * Strategy [https://davidcummings.org/category/strategy/] (375) * Tech [https://davidcummings.org/category/tech/] (127) Search for: BLOGROLL * Atlanta Tech Village [http://atlantatechvillage.com] * Calendly Beautiful Scheduling Software [https://calendly.com/] * Dragon Army Mobile Development [http://dragonarmy.com] * Gimme Vending IoT for Vending Machines [http://www.gimmevending.com/] * Hannon Hill Web Content Management [http://www.hannonhill.com/] * Leadtime Faster, Smarter Prospecting [http://leadtime.com] * My Startup Upstart Book on Amazon.com [http://www.amazon.com/Startup-Upstart-Evolution-Idea-Company/dp/1468194569/ref=sr_1_1?ie=UTF8&qid=1360465991&sr=8-1&keywords=david+cummings] * Rigor Web Performance Management [http://rigor.com] * SalesLoft Sales Engagement Software [http://salesloft.com] * Sequr Physical Access Control via Mobile [https://sequr.io/] * Terminus Account-Based Marketing [http://terminus.com/] * Trustfuel Customer Success Management [https://www.trustfuel.com/] * WideAngle Agile Performance Management [http://www.wideangle.com/] * RSS - Posts [https://davidcummings.org/feed/] * RSS - Comments [https://davidcummings.org/comments/feed/] META * Register [https://wordpress.com/start?ref=wplogin] * Log in [https://davidcummings.wordpress.com/wp-login.php] * Entries RSS [https://davidcummings.org/feed/] * Comments RSS [https://davidcummings.org/comments/feed/] * WordPress.com [https://wordpress.com/] Blog at WordPress.com. 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