Why you should build your startup to sell like Radian6

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By Alexandra Reid

The acquisition of the social media-monitoring platform Radian6 by enterprise cloud computing company Salesforce for $326 million made headlines this week as a major win for the Canadian venture capital and startup community.

Radian6 is a prime example of how a startup can be successful by establishing itself as a leader in a relatively unknown and risky space. Social media monitoring platforms are still far from perfect and were in their infancy when Radian6 entered the market. The huge acquisition also supports the argument that entrepreneurs should build their companies to sell, even if they haven’t the slightest ambition to do so.

Allow me to elaborate.

Building a company to sell means developing a product or service that lasts. It requires risk, a brilliant business model, strong team and scalable idea. The entrepreneur must have a long-term mentality and consistently bring to the table those core characteristics that are crucial to building a successful company: passion, ambition, leadership, adaptability and coachability. Focusing on a long-term business strategy compels the entrepreneur to look in the mirror and ask that pivotal question: Am I willing to sweat blood and stick through the daily grind to carry this company to the edge of possibility?

I am not arguing that built-to-flip and lean startups are inferior. In fact, the goal of these companies is to create a promising product to sell and therefore requires the same long-term thinking to convince buyers of its value and scalability. The factors that make a business attractive to potential acquirers are the same ones that make a business successful to begin with.

I am arguing that all entrepreneurs must build their companies with the purpose of creating something that is groundbreaking, globally valuable and scalable. As Anthony Lee, general partner at Altos Ventures and co-founder of the C100 told us in a previous post, while building a globally competitive company may not be the right objective for everyone, a venture will only succeed if its founders have a vision that stretches the boundaries of what they know and challenge what they believe is attainable.

Building companies to last does more than just benefit the company directly, it benefits the startup community at large. I can’t go a day without reading a post that argues that we are in another tech bubble because too many startups are building flawed and unsustainable products and services.

Former CEO of AOL and entrepreneur Steve Case defended the argument that entrepreneurs should build their companies to last at his Leader lecture at Stanford University. According to Case:

“[Entrepreneurs] are taking little risk with more of a “build-to-flip” mentality as opposed to a “build-to-last,” “change-the-world” mentality, which troubles me a bit. The barriers to entry have come down. Now, anybody can create a website. But as a result, there is significant competition … and there are relatively small amounts of money going into these companies.”

What does this mean for bringing technology to market?

Entrepreneurs should build companies that last to improve the market into which they may, one day, sell. As a result of Radian6’s success as an independent company, Salesforce was determined to enter the social media monitoring market, which triggered further investments in this area. For example, Salesforce has already invested in Seesmic and Hubspot. Instead of diluting your market with transient products and services, why not build your company  over the long-haul and support your market at the same time? Maybe, if you wait long enough, a multimillion-dollar offer will come knocking at your door.

Photo: Oracle ThinkQuest

/// COMMENTS

6 Comments »
  • Leo

    April 01, 2011 11:40 am

    Great post, Alex. On @theC100 panel at #AccelerateMTL yesterday, @chrisalbinson, @chrisarsenault @rsimon and @fdestin made great points about how Radian6 demonstrates how where a company is doesn’t matter. Instead, Radian6 was focused on building a world-class company out of Fredericton, confident that it could attract the talent and resources it needed on the strength of its technology without having to locate to New York, or Toronto or the Valley. It didn’t see a border. It went out and gathered what it needed and tapped into the people who could make it a success, rather than sit back and say, ‘oh, woe is us stuck here on the east coast.’ It was attitude and vision, not location, that mattered.

    In his talk, @davemcclure hammered this point home by saying, “you don’t have to be in Silicon Valley, but Silicon Valley has to be in you.”

  • Chris Arsenault

    April 01, 2011 12:28 pm

    Every Entrepreneur have a common denominator when they launch and build their business: They have the “choice” to choose who they want to work with and where! Think how you’ll be the Best and make it worth it!

    Great post Alexandra and great comment from Leo!

  • Alexandra Reid

    April 01, 2011 1:34 pm

    Thank you both for your comments.

    Leo, indeed you do not need to be in the Valley to succeed. It’s the “entrepreneurial spirit” that is the real driving force for success. I read a lot of posts from Fast Company that list the various places in the North America that are considered to be the “new Silicon Valley” because of their concentration of these great minds. I hope these stories inspire entrepreneurs to build great companies that support their local economies.

    Chris, thank you for stopping by and reading. I completely agree with you that every entrepreneur should have a common denominator. Well said.

  • David Alston

    April 01, 2011 11:59 pm

    Thank you Alexandra and all for the thoughtful article and comments. You really hit the nail on the head. I have often talked about passion for a common mission the created the powerful glue that drives innovation and powerful bonds between a team and with it’s customers/community. I feel that everyday and I thrive off of it from those around me. We were also very fortunate to find a suitor with that same passion and we are looking forward to the thrill of creating the next chapter together.

    Cheers
    @davidalston
    Radian6

  • Alexandra Reid

    April 02, 2011 9:57 am

    Hi David.

    So nice to have a voice directly from Radian6. It’s hard proof that you guys practice what you preach. I called your company to see if someone would offer their comment about what it took to develop from a startup to such a success. I imagine you are all very busy over there right now! Would you be willing to share some advice for other startups in the comments here?

  • David Alston

    April 04, 2011 8:00 am

    Hi Alexandra,

    Thanks. Definitely at some point but its totally heads down on our conference this week http://social2011.com Thanks for the offer though.

    Cheers. David

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