During the early days of Hypepotamus, we were fortunate enough to host a special Fireside Chat interview with David Cummings shortly after his successful exit from Pardot. A large gathering came together at The Biltmore on a cold December evening to hear David tell the story of how he took his Pardot from an idea to a company worth over $95 million dollars.
At the time of the recording, we had a staff of one and didn’t feel we could share David’s story with the effort we believed it deserved. Fortunately, our friends at SUNO Media stepped forward as our video production partner to capture this conversation for posterity’s sake. Between their edits and the David Seeney’s post-production magic, it’s time for you to see the conversation for yourself.
As you learn more about David Cummings (@davidcummings) the entrepreneur, many motifs in his story began to shed light on who David Cummings is as a person. The entrepreneurial side of David is meticulous and systematic, a data-driven leader who values action over stagnation. The other side of David reveals a loving father who is deeply devoted to the progress and growth of Atlanta. Brick by brick, David built Pardot with the intention to be the best place to work and the best place to be a customer – and that’s exactly what he did.
Now, we have a full media team capable of telling this story and we are excited to release this hour-long exclusive sit-down conversation with David Cummings. In this exclusive interview, David shares his journey from childhood entrepreneur to influential Atlanta tech leader with an in-depth look at how Pardot went from idea to exit. Enjoy. (Audio transcript below)
Transcript services provided by TranscriptsHQ, a proud Atlanta startup (and now a David Cummings-invested company).
Scott Henderson: Welcome everyone to the Hypepotamus Fireside Chat Series. I am Scott Henderson, I am the executive director of the Hypepotamus. We are a new Atlanta non-profit focused on making the Atlanta startup community stronger and we are in the arcade level of the historic Biltmore hotel, the home of many technology startup companies that have come up, and grown up and done wild successful things here in Atlanta, Georgia. I am actually very fortunate tonight, to be sitting here next to David Cummings, who will be walking us through the idea to sale journey of Pardot that exited at $100 million dollars. I do want to say a couple of quick things about why we are here and what we are doing. Hypepotamus, is about one hypothesis which is density is destiny. So, if we have greater destiny in, in physical density of getting startups together, density of media that’s talking about what’s happening here in Atlanta and density of programmings to help startups succeed, then we all will have a better destiny here in Atlanta, Georgia. So, thank you very much for ThundrLizard and Uber Atlanta and SourceUNO for making tonight possible, and for those of you who want to learn more about Hypepotamus, go to Hypepotamus.com and @hypepotamus on twitter and with David Cummings, whose @davidcummings on twitter, as well as you could follow his blog at davidcummings.org, so let’s get started. David, thanks for coming in tonight.
David Cummings: Glad to be here.
SH: David Cummings is a, has been an entrepreneur over a decade now. I mean, he is, early 2001 founded a company called Hannon Hill, which produces a a CMS system for colleges and universities and still is one of the dominant CMSs out there, if not the dominant. And that was the in the 247 fastest growing company according to the Inc. 500. Then in early 2007, he cofounded Pardot and actually the Atlanta Business Chronicle called it the fastest technology company in 2010. And made the Inc. 5000, 500 list in 2012 as number 72, is that correct?
DC: 172 SH: 172, well, 172… 72, that’s still impressive 172. And was acquired as I said, in October for $99.5 million dollars, we’ll call it $100 million tonight. And I’ll say this, he’s also Clickscape, Rigor, SalesLoft, and your new one Kevy.
DC: That’s right.
SH: Fabulous, but let’s start, let’s start, let’s go back into the childhood David. When did you become in your mind an entrepreneur?
DC: So age six, I was trying to figure out how to make money. Come up with a family with two older brothers, a younger brother, and so I had hit on this amazing idea. I put together this giant poster board of different options for myself to be a massage therapist for my family members. Charged them five cents a minute, that was big money back in 1986. Three dollars an hour for those doing the math. SH: This is Tallahassee, Florida money, right?
DC: This is Tallahassee, Florida money.
SH: That’s good. That’s good.
DC: Growing up in a nice little middle class neighborhood and so at age six I was literally putting together programs to figure out how to extract value in exchange for value that I provided. And so that moved on. Once I got a little bit older, I moved in and built out a miniature golf course and charged the neighborhood kids to come play golf at the house. And then by 8th grade, I was on a traveling baseball team. And we traveled all around north Florida, and a buddy of mine on the team, Anthony, he was into computers, just like I was into computers. I couldn’t stop playing King’s Quest and Quest for Glory and Hero’s Quest and all kinds of fun games, Below the Root and Rogue, really old school radio shack games.
SH: Nice. TRS 80 kind of games or…?
DC: I’m not that old.
SH: Alright. Alright.
DC: We’re talking like IBM XT, Commidore 64…
SH: Not, not, that I have a reason for knowing about TRS 80.
DC: And so, in 8th grade a buddy of mine on the traveling baseball team, we were the computer nerds that could play baseball pretty well. He gave me a book, Teach Yourself C in 21 Days. So in 8th grade, I was in geometry class and I was like, ‘Hey, I could write some code here, and it will tell me if my answers to these problems are right’. So, broke out the book, went through the twenty-one days, starting writing code in 8th grade. By 9th grade, I had this Earth Space science class, and in my Earth Space science class, one of my vocabulary words was, was the word Mascon. So Mascon is really an abbreviation for mass concentration. It’s an area of higher gravity on the moon. And so I was like, ‘Man, I love that word!’ I don’t know why I love the word, but at the time I loved the word. And so I named my first company, Mascon Enterprises. When I turned 16, I drove down to the Department of Corporations office in Tallahassee. So I grew up in Tallahassee, in the state Florida, the capital of Florida, and I registered my first company. So I had a legitimate company in high school and so from writing software to solving my homework problems, the next logical thing as a baseball player was to write a program called Statbook. And Statbook was a Windows 3.1 application to keep track of all the baseball and softball statistics as a baseball coach. So 9th grade, I’m hacking away putting together this Windows 3.1 program, and then I put it up on CompuServe, Prodigy, AOL. And before I turned 16, I was receiving checks in the mail for $15.95 from random people around the country, that wanted my shareware code to unlock Statbook, so they could have a whole season’s worth of games. So it started out as, you know, you get your first five games for free and if you want more than five games you pay me $16 bucks but you send a check in the mail, and you cross your fingers, and you hope that some teenager in Florida is going to email you back a code to unlock it. Very old school combined with software. And so Statbook then progressed into… At that time, Windows 3.11 and Windows 95 had just come out and so I started building a series, of what I call the On Startup series. And so the On Startup series was a series of Window applications that every time when the computer started up, because back in the day you actually turned it off at night, you didn’t just close the laptop, you actually shut down Windows. And so it said in the registry such that when Windows booted back up, a little box would pop up, and it would be things like your vocabulary word of the day, it would be, your famous quote of the day, it would be your SAT prep vocabulary word of the day, it would be your Bible verse of the day. And these were all separate, On Startup programs, all using the same engine but just feeding them different data sets, selling them as different products on the different shareware sites. And now I priced more competitively at $11.95. And so in high school, I sold a couple thousand worth of these shareware software programs, and so then this thing called the Internet came along, I started building websites. I could make a whole lot more money in a short period of time building a website charging random small businesses in town, like an auto accessories place, and a private investigator, and an orthodontist. I could charge them $50 dollars an hour in the mid to late 90’s to build a website. And my buddies were working at Publix making six dollars an hour and thinking they were the king of the world because they were making a dollar more an hour than minimum wage. And so I felt like I was on to something. Then I went on to Duke, at Duke I started building websites for sororities, for professors, for local businesses and then that led into the Hannon Hill company and that was my first full time company. So I took a leave of absence my junior year at Duke, I went to my dad who was paying the bill and I said, “Dad, I’m going to drop out and I’m going to go live the dream.” So I took a leave of absence from school and then September 11th hit, September 11, 2001 and everything froze everywhere. So I went back to school, graduated, but I was still working on the business full time. And so that was sort of the path that went from writing some C code to solve my geometry problems, to writing some Windows code to make the Statbook program, to writing the On Startup program and then trying to sell it online in CompuServe and Prodigy, to building my website to sell it, to building a website to say, “Hey, let’s build sites for other people.” And then building sites for thirty different organizations over a few years to, “Hey, let’s build software that make it easy for a non-technical person to update their website,” which is the Hannon Hill Cascade Server software. And then that led to Pardot, and that led to today.
SH: So, let’s go to Hannon Hill, right, how did that start? What was the genesis of, “Hey, I see an opportunity, there’s a problem I need to solve it,” and then how did you attract your first customers to that?
DC: So Hannon Hill from day one, I started, I’ve been building websites for several years, from day one; I wanted to build a software product company. I had done it five years prior in high school and on a really small scale I wanted a real software company. And so from day one it was content management software and so what we did is myself, I went and used some of the money that I had made building websites. I hired four of my classmates to be summer interns, I paid them ten bucks an hour, this is the summer of 2001, and we spent three months heads down just building software to make it really easy for non-technical people to update their website. At the time, in 2001, it was Software as a Service. It was, you put in your FTP credentials into our PHP app, our PHP app would FTP onto your server, pull down all your files and then expose them into a Windows Explorer like interface along with a word processor that followed the Dreamweaver templates, basically HTML comment regions that designated what areas you could and could not edit, and then exposed it inside of a browser based interface so you could edit things in a visual wizzywig, save it, and then when you saved it, it actually FTPed the file back to your production server. And so that was the Software as a Service back in 2001 and that original idea failed miserably but it led us to installed enterprise Java software, which we launched in the summer of 2003 and ultimately became very successful.
SH: So what, did you send out three panel brochures, did you send out postcards, what did you do attract people to what you had built?
DC: So in the summer of 2001, I got on the phone and started cold calling personally local web design companies in the Raleigh/Durham area. And so I started out cold calling them, getting demos, so I would go onside, I would drive over, show them the software, and then they would introduce it to their clients. But there wasn’t enough money there. It would take a small fortune to make a small business product successful at that time. And then the Internet World Tradeshow was supposed to take place the day after September 11 of 2001. And I was taking a leave of absence, I was out of school. My buddies had helped me build the product over the summer, they were back in school. September 11 happened, the Internet World Tradeshow got delayed from September of 2001 to the second week of December of 2001 and that worked out great, because my friends, they literally four of them finished their final exams at Duke, hopped on a plane and flew up to New York city to work a trade show with me for the week at the Jacob Javits center. And I hopped in my brother’s car, a really crappy Buick Skylark, put in the twenty inch CRT monitors, not even LCD monitors, big old giant twenty inchers, and I drove by myself from North Carolina all the way to New York city, unpacked the car at the tradeshow, worked the booth for the week and at that show, two aisles over was a publicly traded company based out of Texas that was actually looking to OEM the kind of software that we had. So went from almost nothing in revenue to licensing this product that we had built to this other company, to then go sell it to their 1.2 million existing customers and we took the money that they paid us from that OEM deal, we shelved the first product, and then built a whole new content management system from the ground up and then that product was ultimately very successful.
SH: So, you’re raised in Tallahassee, school at Duke, you launch Hannon Hill in your dorm room, right? you graduate from Duke…
DC: Just barely.
SH: Just barely, yea, you still got the degree right?
DC: I did.
DC: My grades went like this after I started my company.
SH: I would imagine so, I would imagine so. Why Atlanta? What was the appeal to Atlanta for you?
DC: Atlanta is an amazing city. It has all the natural resources for a great technology company. For me growing up in Tallahassee, Tallahassee is four and a half hours south of Atlanta, and so we would come here for Six Flags, we would come here for shopping, we would come here for a Braves’ game. We would even drive up to Atlanta to get cheap direct flights out of Hartsfield Jackson. So growing up in a family with two older brothers and a younger brother, the six of us, you save a lot of money by driving those four and a half hours.
SH: That’s a lot of kids.
DC: That’s a lot of kids. And so Atlanta, it was a city that I was always comfortable with as the big city that I would go to growing up. And so upon graduation, most of my friends went to New York or Washington DC, those are the really two popular areas out of Duke. And some would go to Boston, and some would go to San Francisco, and so I packed up the car and went to Atlanta.
SH: Interesting. So, in this move to Atlanta, you settle in, you’re building Hannon Hill, where does Pardot come in? How did that come about to you?
DC: So the idea for Pardot, and when I registered the domain name was 2006. So Hannon Hill grew really fast, Inc. 500, and I realized that content management is awesome but there is this other opportunity that I really wanted to pursue, and that opportunity was taking all of the headaches that I had personally running sales and marketing for my own software company and making that sales and marketing process much more efficient using technology. And so in March of 2007, so I registered the name Pardot, Pardot is the Latvian verb for marketing, so it means to market or to sell in Latvian. So in December of 2006, I knew I was going to start Pardot, I went on dictionary.com and typed in marketing, and at the time dictionary.com would show the translation in 29 different languages, one of which was pardot. So I went on GoDaddy, the six-letter .com domain name was available and people in the South like myself could spell it. So p-a-r-d-o-t.com and $8 dollars later, I had secured the Pardot domain name.
SH: That’s cheap real estate.
DC: Cheap real estate. So December of 2006, had the idea, bought the domain name, and then launched it. Went working on it full time in March 2007.
SH: So, let’s talk about this. You’ve got Hannon Hill, you’re running this company. You’re seeing that it’s probably going to start to plateau, and that it’s still going to be a nice steady cash flow around it. What were some of the lessons from that Hannon Hill, you’ve produced a CMS, you’ve got universities and colleges using it. What were some of the things that you pulled from that experience at Hannon Hill that you brought over to Pardot?
DC: Hannon Hill was an amazing experience, awesome team, awesome product, for me the importance of corporate culture really was solidified with Hannon Hill. So you can imagine, not knowing anything, not knowing any better, just building a company and learning on the fly, didn’t have a board of directors, I didn’t do a good job of reaching out to others that had been there before, and so making tons and tons and tons of mistakes. And one of the really, really the most important lesson learnt was that corporate culture is the only sustainable competitive advantage that’s within the control of the founders. You can’t control the government, you can’t control the economy, you can’t control what your competitors do, but at the end of the day you can control who you work with day in and day out. And so Hannon Hill was an amazing learning ground, whereby I could figure out personally that corporate culture really was an invaluable thing to focus on as a business.
SH: You secured the domain name, but it takes a little time before you actually start putting full time effort to it. When, I mean, in that time period, were you thinking a lot about, was it starting to occupy, the mental space of yours and when did you decide to bring in your cofounder?
DC: So in December of 2006, started recruiting my cofounder. Cofounder is a classmate of mine from Duke, and I knew from the Hannon Hill business that my next company I really wanted to have all recurring revenue. So Hannon Hill is a great business, but one month we might sell a couple hundred thousand dollars worth of software but the next month we might not sell anything. And so I knew that I wanted to have all recurring revenue, high growth margin, high renewal rate, and the idea of the Software as a Service subscription business is that assuming that you have a good product and assuming customers renew, every month, every quarter, every year, the revenue continues just keeps layering on top of itself. And so it’s awesome for predictability, it’s awesome for budgeting, and planning and a number of different things. So I knew for the next business I wanted something that had steadier cash flow as one of the core elements of the business.
SH: Okay, so you bring on your cofounder for Pardot. What was that, what was the calculus in your head for who you wanted to join your team?
DC: Sure, so the cofounder that I brought on, classmate of mine from Duke, he was working at Intercontinental Hotels Group as their senior ECRM expert, which is a fancy term for the spam king on behalf of Holiday Inn. So he was blasting out millions of emails a month on behalf of Holiday Inn, and so he had deep domain expertise around digital marketing, around email marketing. And from a personality perspective, really good compliment to mine. So my personality style is tons of ideas and throwing lots of things against the wall and seeing what sticks. And his personality style is much more worrying about the details and thinking through things and being the yin to my yang. And so I didn’t know it at that time, but the business partnership that we had was just unbelievable.
SH: And so, walk us through how you started to build up Pardot. I mean, you started putting full time attention to it. You have your cofounder, who else was part of that original team that when you turned the lights on you had going and what were you focused on?
DC: So March of 2007, Adam and I jump in full time. I’m the full time programmer for the first year. So writing code for sixty hours a week and spending twenty hours a week on Hannon Hill as well, because I still continued to be the CEO of Hannon Hill.
SH: So you took that original learning C and what languages had you developed over the years?
DC: So the Cascade Server product, the Hannon Hill product was all written in Java, so I wrote a bunch of Java code. The original Hannon Hill product was PHP and then the Pardot product is all PHP on Symphony, Symphony is like Rails for the PHP world and then MySQL for the backend. So PHP LAMP stack type product.
SH: So you’re the lead programmer and the CEO. Who else was part of that mix at that time?
DC: So it was just Adam and myself. We had a couple of other guys who were helping us out. Early on in that we realized that it wasn’t a good fit. So we started with four of us, and then 45 days later it was just the two of us. Myself writing code and Adam doing everything else: marketing, product management, support, building the website, just everything from a business marketing support, customer service, all those angles.
SH: And so were you building this in the same physical location as were Hannon Hill was?
SH: And how did Hannon Hill and Pardot interact as you were building up Pardot?
DC: Hannon Hill was the company that Pardot was built for. So Hannon Hill being a 25-30 person software company. Pardot being business to business marketing automation software for the small to mid size tech savvy business. So, Pardot was just a couple of rooms down at the end of the hall. Myself and Adam worked on it for a couple of months and then we brought on a lead engineer to help me on the coding side. And so it was really the three of us building the product and then late summer… so the first week of September we brought on our head of sales to act as a sales person and then as the company grew to become the sales manager and then as it grew more, to become the VP of sales.
SH: So you spent some time building it out and then when you are ready to put it out and really start getting more people using it that’s when you brought on the sales person?
DC: That’s right. The first 45 days we had a slightly different idea where it was going to be a pay per click bid arbitrage platform, where we generate leads and then sell them to different B2B technology companies and so we quickly realized 45 days into the business that the technology that we had built to generate the lead and track it and score it and disseminate it, that technology that we had built was more valuable than the service we were offering. So we went from a bid arbitrage lendingtree.com type business into a true B2B marketing automation platform. So early March start, mid May pivot, slight pivot, and then hire the sales person first week of September but all the while building the product exclusively for Hannon Hill. So Hannon Hill was using it from day one. So powering the forms, and powering the form to CRM integration and powering the microweb analytics that’s tracking all the prospects as they use the website. So from day one building it for Hannon Hill but mid April to September really building it in a vacuum for Hannon Hill. September hire the salesperson, reveal it to the world, and then by December had a few paying customers.
SH: So did you go to a tradeshow like what you did with Hannon Hill or were using Google ads? What kind of things were you doing to track people in?
DC: We were doing all the traditional B2B marketing. So blogging, whitepapers, pay-per-click ads, SEO, SEM. We did do tradeshows by December of that year. So we were just spraying and praying. Just trying whatever we could and seeing what sticks.
SH: Interesting. You mentioned that you had brought over from Hannon Hill this idea that organizational culture is the only true differentiator. And knowing in the five and a half years of Pardot, culture has become, one of, you know, has definitely become center, did you have the magic formula right away? What was that, when did you get that magic formula for culture and what were some of the trials and errors you had?
DC: So we knew that culture was important but we didn’t do a good job of institutionalizing it in the business. And so it took us a couple of years of doing things, and having success in Pardot before we realized that we needed to institutionalize it, we needed to make it a part of everything that we did as a business. And so a couple of, two and a half years into that, so the last three years with Pardot we were just culture first all the way. Everything from the hiring process to the environment, the office space, the benefits, the celebrations, just everything about it.
SH: So two years in, you felt like you found the combination to the lock?
DC: Two and a half years in we started being more intentional about the culture, we knew it was important but we hadn’t made it so that everybody else felt it as strongly as we did.
SH: And it seems to be, in the, preparation for tonight’s conversation that you were doing a lot of what I would call, painting, kind of layering things up, and then you started realizing that you could sculpt out what wasn’t needed and you’re very specific, I mean, when I was asking you earlier in terms of what was the, how would you describe the culture and what was, the ingredients, you’ve got it pretty well baked up, down to just a couple of talking points it seems, like. What are those elements of that successful culture for you?
DC: Sure, so it’s, we have described it and we have repeated it over and over again as being the best place to work and the best place to be a customer. The best place to work and best place to be a customer, and you can use that lens in everything that we did. So all aspects of the business. And with that emphasis every decision we made became an easy decision because we held it up against, “Is this going to help us be the best place to work? Yes or no?”, “Is this going to help us be the best place to be a customer? Yes or no?” And so, overarching we just kept repeating that, over and over again. Best place to work, best place to be a customer. And then we had a sublevel which was we want to be a platform for good work, good people, and good pay. Good work defined as work that is challenging, that is interesting and stimulating, good people which is the most important one, defined as people who are positive, self starting and supportive, and that was what was most important to us. And then good pay, defined as competitive market rate salary with benefits that are in the 99th percentile. So best place to work, best place to be a customer as the overarching theme, the subtheme, good work, good people, good pay. Good people being the most important, positive, self-starting and supportive. And then just institutionalizing it, just pounding it over and over again in all aspects of the business.
SH: And what’s interesting, you started with two, you and Adam, and when the sale happened how many people were there?
SH: And so over that five, five and a half years, you went from two to 105, and you had such a focus on culture. How many people did you hire that either left voluntarily or involuntarily over those five and half years?
DC: So over the five and half years, we ended at 105 people. We only had five people over the five and a half years voluntarily leave the business. So we had almost zero turnover from an employee perspective.
SH: Interesting. But that wasn’t just by chance. You’ve got a, you have a pretty rigorous selection process. I wouldn’t call it recruitment or HR; I would say very much a selection process. Walk us through the system that you were using for finding and hiring?
DC: So from a finding, hiring perspective we would use recruiters, we would use LinkedIn, we would use craigslist, we would spray and pray to…
SH: Fill the funnel.
DC: Fill the top of the funnel, and then we used the resumator.com as an applicant tracking system. And so for the forty employees that we hired in the past twelve months, we had over 4,000 resumes submitted through the resumator.
SH: So the last twelve months of Pardot before the sale…
DC: We hired over forty people.
SH: Forty people…
SH: Okay, and 4,000 people.
DC: And over 4,000 people submitted their resumes through the software and from a hiring process, everybody did a two-page essay. Everybody, even the receptionist. And the two-page essay had five short answer questions. Questions like, “What are three trends in the marketing automation industry?”, “Who are Pardot’s three main competitors and why?” “How does Pardot differ from Google Analytics?” So they were questions we didn’t expect people to already know the answer to but we wanted them to do their own research, we wanted them to get excited about how fast the industry was growing and we wanted them to show their ability to synthesize information that they don’t know and articulate it in a concise, straightforward manner. So everybody did a two-page essay. We did a technical assessment for all positions, so even if they weren’t a programmer they had to go in and follow a thirty step process in the software, build an email template, build a landing page, create a profile, change the scoring on a prospect. And it was really just to get them involved in our actual application, because the software is so core to the business. And then we had a series of culture check teams, so we had three teams of two people per team, and at the very end of the process, after they had been given the thumbs up by the hiring manager and a couple of people on the hiring manager’s team, then they would be interviewed by the culture check team who had to give a thumbs up, and so they were only interviewing to see if the person fit our culture.
SH: So not technical but culturally…
SH: Do they fit.
DC: And if they passed that team then they would interview with myself and my cofounder and it was a required unanimous process through all that. So HR phone screening, interviewing from people from the hiring manager, and the hiring manager’s team, the culture check team and then the co-founders.
SH: So it’s the equivalent of the Toyota assembly line, anyone in the line can pull the red chord and that person would not be advanced?
SH: Interesting. So 4,000… In the last twelve months 4,000 people in the top of the funnel, forty people hired. Was it pretty evenly distributed in each of those steps to the point where people were filtered out?
DC: It was, and some positions were harder to fill. For us, the more challenging ones were sales people and software engineers.
SH: Interesting, and so I want to go back to this idea of top one percent benefits. What were the kind of things that you were doing to provide top one percent benefits, specifics?
DC: So for us top percent benefits was for all employees, we paid for four hours of house cleaning per month administered and sponsored by the company. So every employee, even the receptionist got four hours of house cleaning, totally 100% paid for by the business. We had a full time masseuse on staff double you too (31:04), so we took one of the conference rooms and turned it into a spa and so everyone got fifteen to thirty minutes of massages a week. We catered breakfasts five days a week, so Chick-fil-A, or Corner Bakery, or Panera. We would always have a hot breakfast or a catered breakfast every morning when people came in. We paid for 100% of health, dental, short-term disability, long-term disability, and then 401k with a $4,000 dollar a year match. And then we had a results only work environment where anybody could work wherever they wanted, whenever they wanted as long as they got their results done. And then our vacation policy was “Be Reasonable”. So we never tracked vacation time, we never tracked sick time, people would come and go as they pleased, and at the end of the day what we cared about was results.
SH: So, some people might think that’s kind of outrageous, but I think it’s important to tie that conversation to the revenue growth of Pardot. Because your whole model was selling, get people to using, and get, keep creating so keep people, keep renewing, right?
SH: So what was that like, I mean, as you added quarter to quarter what was, was there a high retention rate and how much of a growth were you seeing quarter over quarter in those five years?
DC: So when the Atlanta Business Chronicle published the pay setters, the fastest growing companies in the year 2010, one of the columns in the newspaper was growth rate, the three year growth rate. And most of them were like, 100%, 200%, 300%, Pardot, coming in as the fastest growing technology company had a 42,000% growth rate. Now that’s dramatic because we started out as a couple of thousand of dollars in revenue and three years later we were over a million dollars in revenue. So the growth rate is very easy when it’s such a small base to start with. But from a business perspective, every quarter, every six months we would sign up more customers on an absolute basis than the previous six months and the average price that each customer paid, monthly recurring revenue, grew every quarter as well. So our average revenue grew and the number of customers we signed per quarter grew, and so on a absolute basis it kept getting better and better. On a relative basis the growth rate kept shrinking but still growing tremendously fast.
SH: And so, since you built it for Hannon Hill, you obviously had kind of a customer profile. What was the appeal, what were you doing, to continue to iterate on what they had already paid for to keep them coming back?
DC: Anybody who has built software knows that you never run out of features, so we built it for Hannon Hill the initial one solved the filling out a form on a website and having the contents of that form flow into salesforce.com, and then also tracking what webpages a prospect visited as well as what white papers they downloaded. So forms, CRM integration, and microweb analytics was the core at the beginning. And then a year after we launched that, we added email marketing to the product, and email marketing was a huge game changer for it. And so then we started replacing the legacy email service providers that they were using with Pardot, so Pardot became the ESP plus the landing page tool, plus the forms tool, plus the scoring and grading tool, and then we added automation rules, and drip programs and really sleek business logic interfaces so that you could automate a lot of these marketing functions, that were traditionally done manually or just not done because it was too labor intensive. So we just kept adding more and more awesome functionality on top of the core platform.
SH: Interesting. And so, ok, this summer, early, like Memorial Day, nowhere in this conversation so far you said that you’re building this thing to flip it or sell it.
DC: Our goal from day one, was best place to work, best place to be a customer, didn’t build it to sell it, we didn’t hire an investment bank to shop it around.
SH: So no board, no investors, just you and Adam building this whole idea out.
SH: Phone rings. Walk us through what happens when ExactTarget out of Indianapolis, says, “Hey, David, let’s talk.”
DC: Sure, so it was the proverbial, “Hey, we want to see a demo of your product,” and we are like, “Great, someone is finally recognizing us,” and we did a demo for them, they really liked it and then they asked to come on site so we did the dog and pony show at the office, showed them around, and then they asked us to come on site to their office and meet with their senior team the next month. So we went on site over there, and we didn’t even show them the products, we spent four hours with their senior management team and the whole entire time we spent talking about corporate culture.
SH: Corporate culture?
DC: Mhmm, and the vision and how we got here and what works and the business and what we like to invest in and it wasn’t about seeing technology, it was about understanding who we are as an organization, what we do well, where we are headed.
SH: So, for those who don’t know ExactTarget, give us a profile of what is Exact Target and why they would be interested in what you are doing.
DC: So ExactTarget is the largest peer play marketing software company in the world. They went public earlier this year and they are just an amazing company. Awesome corporate culture, awesome product. You can just imagine just a really big marketing software company, primarily email marketing for high-end consumer brands. So when HomeDepot sends out millions of emails a month, those emails are sent through ExactTarget.
SH: And in full disclosure they had contracted me in a prior engagement on something completely different but I do know the ExactTarget culture directly, and have seen them grow, and I’m curious, you mentioned four hours when you were meeting was about corporate culture and corporate philosophy. What were you, and not even getting into the nitty gritty of the actual sales demo, right?
DC: That’s right. Yea.
DC: So we took them through our hiring process, we took them through how we focus on culture, we took them through best place to work, best place to be a customer, good work, good people, good pay. Positive, self-starting, supportive, we took them through all that in very very detailed fashion.
SH: And the Orange Culture, as they talk about it, they liked it?
DC: Oh yea, they loved it.
SH: So you’re up there, four hours, how much time went from initial visit to signing the documents and the press release going out?
DC: So we closed the deal the second week of October, and so when we went on site, that was mid July.
SH: So the second half of the summer and the early part of the autumn was spent on negotiations?
DC: Negotiations and mostly due diligence.
SH: Due diligence. So, when they said, the proverbial moment in the movie where someone writes a number on a piece of paper and slides it across the table. Obviously it was the right number, you took it. How did that compare…
DC: Well, it took a little bit to get to that number and saying no many times.
SH: It’s a very clean story in my head. So walk us through that, what was that like? I mean, what was the give and take?
DC: The give and take was, they had a number in their mind, I had a number in my mind, and it was a lot of, “We don’t need to sell, we are in no hurry to sell, we have no investors that we have to return money to and we are building a great business and we are happy to continue on with our merry ways. But if, if you really want to offer us an insane amount of money, we will consider it and here’s the number we want.” And so after a while we got to that.
SH: So you got a pretty healthy valuation. Right?
SH: And, and what was the calculus on their part? Why, what was appealing to them, why would they want Pardot in the ExactTarget ecosystem?
DC: So the Pardot software is very complimentary to the ExactTarget software, so their high-end, mid to high-end email marketing and Pardot’s B2B marketing automation with a heavy emphasis on B2B email marketing. So products are really complimentary, culture, which is the most important thing, phenomenally complimentary, and then from a growth rate perspective, Pardot growing really fast with basically no resources, the idea of being part of the Orange Culture, and having insane amounts of resources, we could take Pardot and grow it significantly faster.
SH: And so, the arrangement was as published, $85.5 million in cash and $10 million dollars in stock in the publicly traded company. And so what happens with Adam, what happens with you, what was the arrangements, did both of you still working for ExactTarget or what?
DC: So Adam runs the Pardot division within ExactTarget, and my role is an advisor through the end of the year, just to answer questions and be there as needed but not as an employee.
SH: And, on your side, I mean, it was really, is it the right cultural fit and it sounds like a healthy valuation that you were able to get them to, so that was really the decision process, on something that you weren’t planning to sell.
DC: That’s right.
SH: You ended up selling because of those two things?
DC: Yea, we felt like the corporate culture fit, which was the most important, was awesome, and then they offered a number that we thought was, you know, representative of the growth rate and what we had built.
SH: And parallel to Hannon Hill, Pardot has a pretty healthy retention rate on customers as well?
SH: Okay. Because and you believe that’s directly associated with the culture?
DC: Culture and value that we were providing our customers.
SH: So for those, for those entrepreneurs who are building their startups and their ventures, what are the resources, what are the, I guess, go to guide books that you’ve been using to build those cultures that got that valuation?
DC: On the organizational health side of things, there is a book that I really like, called The Advantage by Patrick Lencioni. There is another book that I really like, called Mastering the Rockefeller Habits by Verne Harnish. I really like the Jim Collins’ books, Good to Great and Built to Last. Jim Collins is one of the first people to really promote the idea of corporate culture and getting the right people on the bus. And so Jim Collins, Verne Harnish, and Patrick Lencioni are some of my favorite authors.
SH: And for those I would say proto startups, those people that are thinking through, you talk a lot through your blog about Strengths Finder being an important, getting an individual to know themselves as well. Is that something that is accurate?
DC: Yea, I don’t do, yea, I’ve read Strengths Finder, we don’t do it too much but in general the idea of playing to somebody’s strengths as opposed to trying to shore up their weaknesses, I’m a big fan of playing to the strengths.
SH: And so a lot of these ideas and thoughts and observations you’ve putting on. How long have you been blogging?
DC: About 1,300 blog posts, one a day.
SH: Wow, I’m not good with math so how many years is that?
DC: Over three years.
SH: Wow, three years. That’s pretty good. Anyone else been blogging for over three years? Yea, that’s consistency, that’s persistence, that’s great, there’s a lot of good… what’s the URL for the blog?
SH: That’s pretty easy to remember. You’re a non-profit now?
DC: I do own a non-profit now. Yea. It’s a different one though.
SH: That’s right. Alright, let’s walk. Just, close of the sale, announced the sale, you’re not going to the Bahamas?…
SH: You’re not, you’re not retiring to Sun City. You have all these other ventures that you have been investing in, serving on the board, and now you have a new thing. So what, what’s next for David Cummings? What is it that you are continuing to build and what’s the new thing you’re building?
DC: Sure. So for me I’m focused on Software-as-a-Service technology companies. So I have one that I’m working on that we haven’t launched yet, but it’s in the Software-as-a-Service cloud computing area.
SH: And so as you have been successful building businesses here in Atlanta, and you continue to double down basically in Atlanta with what you are doing. What is it that continues to appeal to you as a startup ecosystem for you and what’s missing? What are the gaps? Where could we take ourselves to the next level?
DC: So Atlanta has all the natural resources for tech companies. Amazing engineers and talent from Georgia Tech, really low cost of living relative to other big cities, an an airport where you could take direct flights in a cost effective manner pretty much anywhere in the whole world. Lots of young professionals that want to be in Atlanta as the capital of the South. So Atlanta has all the natural resources for a great great technology community. And then from a gaps point of view, there’s always challenges with fundraising, there’s always challenges with scaling the business, or you know, just the serendipitous interaction that is more prevalent in denser communities, but Atlanta has all the natural resources and I’m really optimistic.
SH: So what are the keys to creating greater density in Atlanta?
DC: Amazing places like Hypepotamus, coworking facilities, tech innovation centers. And so I think it’s important to get lots of people together doing cool innovative things. And they don’t all have to be writing software programs but doing cool innovative things in the same proximity whether it’s across the street from ATDC, or it’s in the same building or whatever the case might be. I think getting people together that are doing innovative, interesting, things, changing the world; I think that makes a big difference as well.
SH: Interesting. So I think we’ve reached a point where I’d like to, we’ve had some very engaged audience members here and I’m sure there’s a lot of questions that are out there. As you have a question for David, you can make yourself available in the aisle and that way you can come up to the microphone. And as you come up to the microphone, please say your name and who you’re with and then ask the question. And I do ask that you do ask a question and not make a statement, so yea. Questions are always welcome. So, alright, first question, who are you, who are you with and what do you have?
CM: My name is Christopher Matts, we’re a startup named Nitchfertising, and my question is around the idea of this, Atlanta being the perfect place for a scrappy startup. I’ve heard you use that term several times and I was wondering if you can maybe, go a level deeper about what scrappy means, maybe from a sales and marketing perspective? So you have a great piece of software and you have to be scrappy with it. How do you, what would you describe that scrappy startup as, in Atlanta?
DC: Sure, so scrappy startup is one that’s either bootstrapped, which means they don’t raise any money, or capital light, which means they raise some angel money but they don’t need to raise $20 million dollars to go to market. So Atlanta with the low cost of living, the awesome young professionals, the engineering talent, Atlanta is especially, uniquely suited, as the best place in the country to do a scrappy tech startup. And so for me scrappy is making every dollar go as far as you possibly can, making it so that you get amazing stuff done with very very limited resources and everything about Atlanta lends itself to being a scrappy startup. So sales and marketing is super important. Most startups fail because they don’t generate revenue. It’s not because they can’t build a product. Most startups do build something, but most startups fail because they don’t have enough sales to cover their expenses and so sales and marketing is one of the most important parts and also one of the most under emphasized parts of building a successful business. So be scrappy. Atlanta is great for it.
CBQ: My name is C.B.Q, it’s what I go by, my initials. I used to own a company called Highgroove, we just recently merged with a company called Big Nerd Ranch and now I’m the CEO. My question to you is about, it’s more like I want to kind of get your idea on a trend. You and I, we were growing up, we’re about the same age, I’m going to guess. We, shareware was big, and then Software-as-a-Service is also big. I was wondering if you have any pontifications about trends in like, payments or other types of, like, is Software-as-a-Service, what’s next after that? Do you know or have any pontifications on that type of business model? Or it seems like you’re going after Software-as-a-Service again. Do you see anything else?
DC: Well mobile is huge, obviously mobile including both smartphones and tablets is massive. I do think that Software-as-a-Service, as a business model and as a game changer for a lot of industries is just scratching the surface. All these companies and verticals and industries that use legacy products, products that aren’t in the cloud, products that don’t work on the web, or the web experience is pretty poor. I think we’re just scratching the surface of how Software-as-a-Service, or really it’s just software delivered over the internet, over the internet to a browser, over the internet to a mobile app, even though the mobile apps they are just pinging APIs in the cloud. So I think the subscription economy and the shared economy is, we’re just getting started there. Huge opportunity.
JM: Hey there, I’m Jesse Maddox from TripLingo. My question is about how you manage your time. Because I read your blog everyday, if anyone here is not subscribed to your blog, then why are you here? It’s an amazing blog. I hear you’re a decent golfer, I hear that, you know, you used to leave work everyday by five or six pm, how do you, how do you manage your time, how do you think about how you manage your time and how do you deal with it, when you know, you need to be at work at 8:00pm? Because, you know, part of the definition of a startup almost is that there is more work than people to do it, so how do you balance all that?
DC: For me, it took a couple of years to get to this point but I purposefully made it so that I had no responsibilities. So no responsibilities when it comes to actually having to be there or to do things for the business to continue to operate. So I typically had two to three special projects that I was working on that were opportunistic, highest profile projects, but from a day to day basis I had no responsibilities. And so that freed myself up to be able to jump in on wherever I could add the most value and because it was something that I wasn’t responsible for but I could contribute to, it gave me a lot of flexibility to be home at six pm for dinner every night.
JM: So a quick follow up to that, you know, it’s probably the same kind of answer that you can’t start of that way. And maybe the same thing with the idea, your idea that it is about culture in the workplace, being the best place to work, and the best place to be a customer. You know, when you’re getting started, you know, everyone has got to work hard and it’s not maybe the best place to work and you’re working toward something else. Would you say it’s the same kind of thing where you didn’t start out day one, saying, “Hey, everyone, leave whenever you want to”, or whatever, and you had to build it to the point where you could start doing that later on?
DC: For us from day one, we didn’t do it, but we could have done it where it was a results only work environment. So, you can still work ten hour days, you don’t have to be sitting next to the person working ten hours, ten hour days together. And so, having that part as part of the culture, “Get yourself done, we trust you, you’re self starting”, and promoting the ideas of mastery, autonomy and purpose as another sort of subtheme as well. The autonomy side of it, is really important. And so you can work long hours but you don’t have to be in the office long hours away from your family, if that’s the type of culture that you have set up.
SH: Next question.
RF: Rob Forman, I cofounded HigherIQ in Alpharetta and am now doing freelance software engineer. My question… you had mentioned the interview process and the initial HR screening and then the technical screening and then the interview with you and your cofounder. The part that I had a question about was the culture fit teams. I find that very difficult to get to the heart of who a person is because they are on their best behavior, what are some of the activities that the culture fit teams would do? Was it, did they sit down with the person in the office or did they go to lunch, or, and what were some of the reasons that they gave to say, it’s a soft rejection, you give a thumbs down, but what were some of those that you guys maybe found as trends?
DC: Sure, well we were interviewing for culture fits specifically around positive, self starting, and supportive and over the years we had developed a number of interview questions specific to each of those characteristics and so, in a period of thirty minutes with somebody, even if they are on their best behavior, we had the questions ready to ask, and we had the experience to do a really really good job. So a lot of it was really gut feel for awhile, and over time, we would sort of stumble upon a really good question that we would add to the archive, and then after awhile we had a series of questions, and we had a series of checks and balances. So when the culture checks were first instituted, there was a period of six months where the culture team might give somebody a thumbs up, but then Adam and I as the cofounders, as the final keepers of the culture, we would give them a thumbs down and then we would huddle and we would talk about what, talk about why that person was a good person but not the right fit for us. And so there’s a lot of the institutional trial and error, checks and balances.
RF: Are these questions that you can share with the community or would it ruin the process if someone came prepared for that?
DC: Pardot is in the process of hiring many many many more people in Atlanta so, if you would like to talk about that afterwards, send me an email. Yea.
Sebastian: “Hey, I’m, my name is Sebastian, I’m a student from Georgia Tech fourth year, and, so my question had to do with the culture functionality issue, aspect. So in your story, you know, with all of this, you talked about, functionality, you had from age six, you know intrinsic value you had to offer the market, right? But then that retroactively only, when you’ve been in the industry for a while, did you look back and value culture and identity and those kind of random issues. So right now, we’re looking at the startup business, and so we have, we’re at the crossroads of we have, we have a good idea, we have a weak model, so our value proposition is weak, and you know, but we’re struggling with where to put branding, where to put identity, where to put culture in those things, because I mean, your vision does education where you go and how you proceed and how you bring people on. But I was wondering if you could speak to, you know, which one would you prioritize and since retroactively culture you found was the big, kind of winner, would you as for startups, do. Should we spend time on that, really focusing on that, aspect or value first?
DC: You should spend all your time sitting next to your prospective customer, getting inside of their mind and understanding their pain points, in a non-judgmental manner. So without leading the witness, you need to do whatever you can do to understand and get inside of their business, their pain points. So I wouldn’t even worry about branding, or culture or anything, I would just worry about delivering value to a small set of customers that you believe represents the type of customers that you would like to scale the business with.
MC: How you doing David? My name is M. Cole, way back where my background has been in marketing so thank you for pointing out the marketing thing but I was wondering if you could share with the group with us, key fundamentals and best practices of being able to effectively and efficiently market your product or solution?
DC: Sure, so we did a lot of marketing, a lot of pay per click marketing. One of our best forms of marketing was actually cold calling. So, mercenaries out there just trying to educate people on the front line as a form of marketing, they say, they say that Germans don’t like to market, their form of marketing is just to beat down the door and sell. And so we took that idea of getting on the phone and just educating marketers, our customers, one to one marketing in the form of cold calling was wildly successful for us. So whatever it takes to succeed and even if it’s dirty manual work, if that’s what works, then by all means.
JB: Jon Birdsong with Salesloft, thanks for taking the time. Scotty, great questions. My question revolves around the city of Atlanta and how do we, the city has traditionally known for real estate and banking, besides major exits, how do we create a culture shift in the city, where Atlanta is looked at as a true startup hub? And I don’t think we want to be the Silicon Valley, we want to be our own and have kind of our own identity, but it seems like the only way to really do that is to build successful companies and then attract the buzz. But do you have any words of advice of how we really make Atlanta even more of a technology hub?
DC: Yea the best thing we can do by far is build more successful technology companies. Whether they are large $100 million dollars exits or whether they are awesome twenty-five person nicely profitable software companies, it doesn’t matter. The best thing we can do as a city is create more successful tech companies, which will create more jobs. With more jobs, it will take up more office space, it will buy more houses. All the different things that happen when you have really good high paying technology jobs. So I think the best thing we can do as a city is kick more butt and have more successful companies. We’re not going to be able to attract more money, we’re not going to be able to attract more venture capitalists, we’re not going to do much different than what goes on now without having a lot more successful tech companies here.
SH: We have time for two more questions. Next.
MJ: Hi my name is Maria Joiner and you talk a lot about company culture and you know, like hire slowly and fire quickly so I have two questions. The first one is, I don’t know if you know this number, but, do you know how many people you guys fired over the five and a half years?
DC: Eight people.
MJ: Eight? Ok, and then the second question is for a new, for a startup that maybe is going through their hiring process and they bring on one or two people, at what point do you recommend firing? Because sometimes we’re like, “Oh, maybe we should give them another month or another week”, like, when did you know, like, this person has to go, was it, like, immediately?
DC: It’s always in the first thirty days. Slow to hire, quick to fire. Repeat that over like a hundred times in your mind. People don’t change. You can create the best environment possible but there’s always an environment out there that is better suited to that person that’s not working out in your environment. So it’s a good thing for them to force them to move on, and it’s a good thing, it’s an amazing thing for your culture to have it be really strong and tight and focused around what matters to you. Our positive, self-starting, and supportive culture worked great for us but it won’t for a lot of other companies because that’s just not what they truly believe in.
KB: Hi, my name is Kiran Bindra, I have a fashion manufacturing company and I’m working on coming back to the tech startup scene. So my question is around, so we talk about, in terms of employees and the culture there. What’s your experience been in terms of clients? Have you also been very selective in getting the right clients onboard and have you had to fire any clients over the years?
DC: We’ve tried to fire several clients. And it’s amazing as soon as you try to fire them, how many of them get in line and no longer become challenging clients. So we weren’t necessarily selective on the front end, but once they were onboard and we realized that they weren’t a good culture fit we had some very tactful words to get them to shape up or ship out and so it worked really well to be opinionated on the client side as well. But it was always after we had signed them.
SH: Well, wonderful questions from the audience. I, have a couple of points that we’ll close at on. You were mentioning that we need more wins. You’ve had wins and you’re reinvesting in this community and you’re putting back into it and setting a really good standard on what you’re doing and I imagine it would continue to grow in the months and years coming together. You mentioned, when we were talking, and it’s more opportunistic at this point. You have contributed, you have invested into a couple of different venture funds and you want to talk a little bit about the venture funds, about the angel, the angel investments that you’ve been making?
DC: Yes, so I’ve invested in a half dozen companies within the past couple of years. A couple of years ago I ran a program called Shotput Ventures in town. We invested in nine companies and then I’ve invested in a couple venture funds that are local as well.
SH: Mostly ventures and Fulcrum as well?
DC: Fulcrum, mhmm.
SH: Alright, well, so we’ll, we’re actually since we’re setting precedent, set the precedent of the closing finishing flurry, alright, you’re ready for three fast questions? They are not easy questions but they are three fast questions. What makes you stand out?
DC: For me, I have a decent ability to see where the markets are going, to see a little bit around the corner as to what’s needed from a business perspective, and then the ability to bring people together and to get process and methodology and structure and culture in place and then let the magic happen.
SH: Who do you need around you to bring the best out of you? What kind of people?
DC: I need people that like to be the yin to the yang, so I have lots and lots of ideas, I need people that will add balance to those ideas. People that like to get things done so I like to take things to get it about 70% done, maybe 80% done and then to take it from like 90% to 100% done, is just wildly painful for me. So I like to get things going and let other people that really like to take something that’s already running and then take it to completion.
SH: Exactly. How do you deal with fear?
DC: Blissfully ignorant.
SH: How do you get to that state of nirvana?
DC: I think it’s a lot of nature.
SH: Nature, getting out? Being away?
DC: Not that kind of nature, I think you’re just born.
SH: I see, innate?
SH: Blissful ignorance.
DC: Yea. Nature versus nurture.
SH: Genetic traits, so I won’t ask you if it came from your mom or your dad. So let’s let’s finish up. This is the hardest one I got. Old school techno ball or Matton?
SH: Good choice, good choice. I want to thank everyone for coming out. David, I want to thank you, it’s been a great conversation. Thank you very much. Congratulations on the sale of Pardot, congratulations on the starting of the new venture and I’m sure it will grow wildly successful and all the other companies that you are investing in. I do want to thank a couple of different folks that made this possible. Our video production has been put together by SourceUno. It’s a great Atlanta startup that is helping individuals find the right fit and so they have been able to underwrite our video production for the night. ThunderLizard, if you have seen Peter present, he has a big inflatable six-foot lizard he walks around. It costs a dollar to sign it. All those signatures have now created a nice kitty so the drinks that we have been serving tonight were underwritten by your signatures for the ThunderLizard, so thank you for that. I want to thank our partners at Uber Atlanta for providing us a great discount code if you need a place, I mean, if you need an easy way to get around town. Uber is a great way, it’s going to make you rethink why you’re driving, and parking and the pain of parking, you can eliminate easily and you can continue to drink nice wine and beer and get home safely thanks to our friends at Uber. I want to thank you all for coming out tonight and definitely stick around and talk. I’m sure David will be happy to take on a couple more off camera questions and conversations. So just sit tight as we say goodnight and clap yourself out, so thank you very much and run applause for yourself. Goodnight.