3 Start-up Lessons From New Radix HQ

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There’s something to be said about the slow-and-steady approach to building a business. After working with start-ups for nearly 20 years, you learn a thing or five.

Three of the biggest roadblocks for emerging companies are:  1) a lack of focus  2) developing sustainable diversified revenue models and 3) living beyond their means.

Let’s examine these points in further detail:

Lack of Focus: I have seen more start-ups than I can count go through an identity crisis. This is not to be confused with company’s who go through a few name changes but keep their product the same. I’m talking about companies who take money and start building on a “hunch” and assume things will sort out as the company gets going. The companies that are the most successful are the ones who know who they are, who they are building for, and what they need to build to serve that market – and then laser focusing on developing and bringing the solution to market.

From day one, Radix’s mission is to be an infrastructure and support for the independent PR market. This was an emerging trend I noticed 9 years ago and had been toying with until 2012, when I finally took the plunge to formalize ideas around building a company focused on this market. For almost four years we’ve been heads down testing theories and models specifically aimed at independents and the clients they serve. Our findings (and the response) have consistently validated the direction and only proven further why the Independent PR market is a great place to be for the long term. More on that in the coming months.

Developing Sustainable Diversified Revenue Models: As a jumping off to the prior point, building a client service business to sell is, frankly, a total nightmare and often not worth the years of toil. From the little data I’ve seen, most firms are lucky to get a 1x/revenue exit. It’s certainly not the 2-3x that some of my peers have intimated. To that end, we knew that to not just survive but to build something lasting and attractive, we needed MORE than just a client service arm. Many start-ups today don’t even have ONE revenue model, let alone two or three. A lot of eggs are put in the “we’ll figure out how to make money later” basket. Maybe that’s easier to say when it’s not your personal money that’s being spent.

Diversified revenue streams have been part of the strategic road map since day one but knew it would take time and patience, something a lot of start-ups and their investors don’t have. We spent three solid years focusing and testing before starting to pursue new revenue models that support the underlying Radix mission (read: infrastructure and support for Independent PR). For us this means moving into product development (more on that in coming months) and creating a physical space for Radix members to gather to share energy and ideas. Working at home wears on you and there’s something to be said about the collective energy missing from that office environment most Indie’s were happy to leave on a day-to-day. Our decisions to expand in this direction is also a direct result of our FOCUS (see point 1) on our mission, road map and goals. Which leads us to the last point…

Living Beyond Your Means: I was just listening to an angel investor question what one of his start-ups was spending their investment money on. Then I talked to a scrappy start-up that’s the epitome of doing it right the past four years – head’s down, only recently closed their A round, and focusing on customers not vanity attention in the marketplace. Yes, it’s sexy to have the fun office and razzle dazzle from the jump but, as a start-up, it’s not feasible. Where you spend your money should be as important to you as every little product decision. Too rapid of hiring, crazy expensive furniture, and over-the-top perks is a common downfall for start-ups. Burn, burn, burn, baby. Combine that with little in terms of desirable product solutions, zilch revenue models and you got the impending bust that’s about to happen to hundreds of start-ups that got funding 18-24 months ago. Taking that lesson to heart, we’ve focused first to build our base and are just now starting to diversify. To reach that comes at a capital cost, including adding overhead we’ve avoided for a long time – formal office space. 

This isn’t a decision we took lightly but given our long-term goals it was time. We were very scrappy the first three years. The first year we were a vagabond office, wherever we could grab space, and working from couches and kitchen tables. Then we moved into back bedrooms at my house that we dedicated to office space. We began testing the theories of our other potential revenue streams before a personal formal investment was made to expand. We focused, saved our pennies, built our network and client roster, and are aiming to grow in a big way in 2016 – starting with our first official Radix HQ in downtown Los Angeles.

There’s much much more to come but in the mean time, if you’re in DTLA, come on by and check out our new digs.


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