Bootstrapping to $95 Million


We sat down with serial entrepreneur and Endeavor Atlanta board member David Cummings. He founded the Atlanta Tech Village, Atlanta Ventures, and bootstrapped Pardot which he eventually sold for $95 Million. David shares insights about his entrepreneurial journey, the Atlanta ecosystem, and why he joined Endeavor Atlanta.  


How did you first get in to entrepreneurship?

I was always looking for a different product, idea, or business as far back as I can remember. I started programming in middle school and by 9th grade had Microsoft applications for sale on AOL, Prodigy, and CompuServe. These sites were precursors to the mainstream internet. My early applications all had a “word of the day”; It could be Spanish, French, a famous quote, or an SAT word. Towards the end of high school the .com craze was taking off, and I transitioned from building windows apps to building websites and doing web design. As far back as I can remember I was always looking for inefficiencies in the market or ways to delight customers. Teaching myself programming in eighth grade and putting up my first app for sale in 9th grade was really the start of it.

What made you want to continue to pursue entrepreneurship after college?

In my mind there was no other way. Even in college I kept doing web design which sparked the idea for a content management software. I pitched one of my professors to be an investor, and after he said yes wrote a check for $20,000. I used that money to hire a bunch of classmates. We built one of the first content management systems the summer before senior year. This led me down the entrepreneurship path. Quite honestly there was no other path forward after graduation. I was 100% hooked.

Can you tell us what it was like at Pardot in the early days while you were really scaling?

They say the ones that work out well are the ones where it feels like you can do no wrong,  whereas that ones that don’t work out are where you learn the most. We learned a ton at Pardot, but in hindsight so many things were executing in our favor. The big takeaway from the Pardot experience was knowing that our product was revolutionary not evolutionary. Marketing teams that bought Pardot were clearly ten times better than before. We started the company three years before the market really exploded, so we had enough time to get the business going, refine the product, and hire the right people. Most importantly it gave us time to find 100 early adopter customers who consistently gave us feedback. By year three we had the foundation set and the market just exploded. Pardot was certainly in the right place at the right time with the right product. If we had started five years earlier we would have been too early. Who knows if we would have had enough stamina, energy and team at that point. In hindsight the timing was great.

Why did you choose to bootstrap Pardot?

At Pardot we pitched 29 VCs up and down the East Coast and California, including famous ones like Battery Ventures, Sequoia, and Benchmark Capital. We received interest from two different east coast firms and one other in California. As we went through diligence we realized that the math to raise venture capital didn’t make sense. We looked at how fast we were growing on our own, the cost of customer acquisition, and future dilution. For the math to work the business needed to become $5 more valuable for each dollar invested because of dilution, a bigger employee stock option pool, and expected future rounds of financing. We decided that it didn’t make sense to raise money, so we said no to the VCs that were interested. We kept bootstrapping the business and it worked out great.

What advice do you have for entrepreneurs deciding to either bootstrap or raise money?

A business is a system to put money to work and generate value. You shouldn’t raise money and then figure out how to generate value. I think bootstrapping is more conventional than people think. There are many more companies bootstrapping but don’t get recognized in today’s day and age. Here’s the way I look at it. If each dollar of investment turns into $5 of enterprise value then it absolutely makes sense to raise money. There are a small number of markets that are winner take all or winner take most. Uber needed to scale and needed money to do that, but most markets don’t operate this way. If you look at marketing automation there are tons of winners: Pardot, Hubspot, Marketo, Eloqua, Act-On, the list goes on and on. It wasn’t by any means a winner take most. As an entrepreneur you should recognize what type of market you’re in because in a winner take all market you either win the market or you lose. And losing it is worthless. Sometimes it makes sense and sometimes it doesn’t.

Why did you start the Atlanta Tech Village?

During the Pardot experience we were growing fast. We were typically doubling or tripling revenue every year with no signs of slowing down. We started playing “sublease roulette” where we’d need more space every 18-24 months. We had this high belief in our culture and we wanted to have the best place for our team members to work. Unfortunately every space I toured was old, stale and uninspiring. We had to bounce around from office to office hoping there would be a cool sublease with the right terms. No entrepreneur wants to sign a 5-7 year lease. After going through that experience, I figured there had to be a better way for a startup to go from two entrepreneurs to 40 employees. So first off, my reason for launching ATV was to solve the inefficiency problem of office space for startups, but secondly, I wanted to create more community for entrepreneurs. When I moved to Atlanta after college there were a few meetups, but they were mostly “old boys clubs”. You couldn’t go to the meetups unless you had a million dollars of revenue or knew someone. It was hard to find like-minded tech entrepreneurs all under the same roof. I believe ATV solved the office space problem and the community problem in one fell swoop.

Why did you start Atlanta Ventures?

Our goal with Atlanta Ventures is to help other entrepreneurs start and grow their business by either incubating it or writing a check to help take it to the next level. Even during the Pardot days we were incubating companies inside of the office. Once Pardot started going well, we incubated Clickscape, Rigor, and Salesloft. We were always working on new business ideas with other entrepreneurs in the office, partly for the community function and partly to support brilliant ideas from Atlanta entrepreneurs. Atlanta Ventures is just a formal name for something that had been going on for years at Pardot.

What do you think Atlanta does well as a startup entrepreneurial ecosystem?

Atlanta has great people, a can do attitude, and awesome technical talent. Georgia Tech is one of the best technical universities in the world. Typically for enterprise software you need lots of great product development, product management, customer support, marketing, and sales people. As the business capital of the southeast, Atlanta has hundreds of thousands of people that are in some type of sales job. Thousands of companies have regional sales offices or headquarters in Atlanta. We also have great software engineers in spades. Atlanta is the perfect place for building a software startup.

What are some of the challenges the Atlanta entrepreneurial ecosystem faces?

Business software doesn’t get written about as much as consumer software, so Atlanta doesn’t have as big of a reputation as it should. Consumer, social, and mobile apps get way more hype and press. Atlanta doesn’t have as great of awareness as it should, based on the level, volume, and quantity of success stories. That’s partly a function of Atlanta not telling the best story or being more boastful like some other markets. Atlanta has great ingredients and great success stories, but telling that to the world is something we can continue to improve.

If you could have a billboard in Atlanta with one piece of advice for entrepreneurs what would it be?

Take the risk. Put yourself out there and just try it. There are so many entrepreneurs that I talk with that frankly were scared starting their business. It doesn’t always work out and it's not always pretty, but every single one of them says they learned a ton. Obviously the ones where it worked, it changed their lives. The ones where it didn’t work are always grateful they gave it a shot. You might fail and there is nothing wrong with failing. If you are a motivated self-starter that loves to learn and has a good attitude, you can find a job no problem. You don’t have to be a genius to be a successful entrepreneur, so give it a shot!

Why did you decide to join Endeavor Atlanta’s board?

The idea of being able to help the scale-ups and growth-stage entrepreneurs that are already succeeding really resonated with me. This market is often underserved but these are the companies employing a great deal of people and changing the landscape of an ecosystem. I think entrepreneurship is one of the greatest forces for good in society. Entrepreneurs who build great businesses can treat their employees well and provide a great place to work which funnels back into the community through wages or quality of life. Happier work life translates to happier life everywhere else.

In terms of being an underserved piece of the market, we typically see a ton of startup events, most of which are geared towards the idea or seed stage. Very few events are geared toward helping growth-stage companies 10x there business. I think Endeavor can really be key in supporting this segment of the market.

Lastly, as the community grows and as we have more scale-ups, it is clear that we need the best entrepreneurs to give back and help the next generation. Endeavor’s mission aligns perfectly with this.  

What are you reading right now?

I’m on a kick right now reading business scandal books. I’m currently reading The Smartest Guys in the Room. It’s the Enron story and talks about them being a high flyer and then blowing up. It has tons of fascinating details, anecdotes, and stories. I recently read Barbarians at the Gate and Den of Thieves. Barbarians at the Gate is about the fall of RJR Nabisco which was one of the largest leveraged buyouts in history. Interestingly enough, the firm was headquartered in Atlanta when it was taken private. Business scandal books are my current genre.