Hooman Radfar is the founder and CEO of Collective, a company that supports one-person businesses by setting up entities, handling finances, and managing taxes. Freelancers and small businesses alike are using Collective to grow their operations without the hassle of hiring full-time employees.
Recently, Radfar sat down with Nathan Latka of GetLatka to discuss the advantages of raising over $50M and the strategies the company hopes to employ to grow 30% in revenue this year.
- $14M ARR
- Founded in 2020
- Currently managing 50x more applicants than members
Exiting first company for $200M in 2016
Radfar’s success isn’t a one-time phenomenon but a reflection of the decades of experience he has absorbed helping other companies scale. Before Collective, Radfar helped build Oracle and exited the company for $200M in 2016.
He briefly had a stint with another company after his exit but left that as well in preparation for Collective. While he doesn’t quite have private jet money, the reserve was enough to help Radfar set the foundation for what was to become his latest company.
Raising over $50M from seed to series A
It didn’t take long for Radfar to turn to VCs to raise a seed round of $7M. The decision was decisive, as Radfar and his team had known from previous ventures the amount of effort it would take to reach their goals.
“It’s expensive to start a new business, so you always need outside capital for these types of businesses,” Radfar explains. “We want to build a brand that’s enduring and iconic, and at the pace we want to build it at, it just requires a lot of capital.” On top of that, the economy was uncertain.
Rather than wait for overall valuations to drop in parallel to the economy, Collective took the highest amount they could get despite their consistent 30% growth year over year.
Launching Collective in 2020 with MVP
Although Collective launched in September 2020, Radfar and his team worked for months before releasing their minimum viable product. The SaaS company needed to code its MVP to have it ready for clients.
That’s part of the reason they sought outside investment and raised their $7 seed round. Using VC money also helped the company become more resilient during uncertain economic times when revenue was not predictable.
Focusing on 36% of the workforce to hit revenue goals
Collective’s primary focus is on the small businesses that hire contractors to complete most of their work. This market makes up about 36% of the entire workforce. “We really want to work with anyone who is hanging up a shingle on their own, who is solo,” Radfar adds.
For a time, though, they labeled their clients as freelancers, but they quickly found not all entrepreneurs identified with the label. Instead, they changed their marketing to businesses of one, and that led to more specific targeting.
175 employees in Collective, small business identity
Radfar still considers Collective a small business even though they have over 175 employees. His mentality is based on the fact that they are still in an industry of giants and have yet to reach maturity.
He wants Collective to remain agile and nimble so they can adjust their product quickly when the market changes. That mentality has helped them survive economic downturns, refine their products, and hit their revenue goals.
Collective manages 50x more applicants than members
Collective is a subscription-based service, so all clients must apply to become members in order to join.
Currently, Collective is getting thousands of applicants and about 50x more applicants than they currently have members. The growing customer interest is helping to define Collective’s overall services. “We have some options our members have helped to inspire us to create that we’re going to work on,” Radfar discloses.
Targeting clients with $100k – $1M in revenue
Even though Collective targets small one-person businesses, their sweet spot for revenue from these clients is between $100k and $1M. In total, around 3.5-4 million businesses fall under this category.
To continue growth, Collective is using traditional direct-to-consumer strategies to solve its B2B operations. “I guess you would call us B2B because we’re a business serving other businesses, but our go-to-market motion is direct to consumer,” Radfar explains. Facebook, Google, referrals, and affiliates are how it attracts thousands of applications a month.
Growing 2-3x revenue in one year
Referrals have been a massive part of Collective’s growth, as their current goal is to 2-3x their current revenue this year. Affiliates are another big opportunity to acquire new customers, and the company is currently looking at different reward structures to incentivize influencers. They have a two-tier system paying out $400 and $1000 for specific affiliate referrals.
Famous 5
Favorite book: Self-proclaimed as a little boring, Radfar’s favorite book is Getting Things Done by David Allen.
CEO they follow: Radfar likes to follow several CEOs in his industry but is partial to the Intel family. Radfar appreciates its changing cast of CEOs, including Andy Groves and similar operators.
Favorite tool to build Collective: Hubspot is still the tool Radfar relies on most to build Collective.
Situation: Radfar doesn’t have to guess at the time he sleeps each night; he is clear he averages about 7.3 hours. The 42-year-old is happily married and is “hoping to ship” a new baby out next year.
What he wishes he knew when he was 20: “It’s gonna be ok.”