A Laguna Beach-based ad agency that’s helped numerous entrepreneurs take their brands to the next level is now cultivating its own business ideas. INK launched 2nd & Elm Real Estate, a startup that generates sales leads in exchange for a share of an agent’s commission. It’s also developing a spirits brand it plans to unveil this year.
“We see it as a natural progression from the brand-building work that we’ve done for our clients over the last 11 years and the equity stakes that we’ve taken in other companies,” said co-founder and Chief Operating Officer Megan Lavender. She referred to INK’s 10% ownership of Aerodrome LLC, a Henderson, Nev.-based drone airport that offers unmanned aircraft systems flight training, and an equity stake it took in The Fig, a project in downtown Los Angeles that combines retail, student housing, office space and a proposed 300-room hotel. Both transactions were sort of barters—the agency developed a marketing strategy and materials in exchange for minority stake in the ventures.
“Three years ago we decided to go down the path of taking equity stakes in very select companies that we support,” said INK President Todd Henderson. “Now we’ve evolved that model further where we’re launching our own brands and incubating them from the ground up.”
Real estate is an industry that INK is very familiar with and where it sees “some real potential for positive disruption,” Lavender said. In 2016 it repositioned China-based homebuilder Landsea Group Co. Ltd. for the U.S. audience, and last month helped launch YOUnion, a student-housing brand owned by Ladera Ranch-based real estate investment trust SmartStop Asset Management LLC. Its local real estate clients also include Irvine-based developer Sares-Regis Group, homebuilder Shea Homes and Newport Beach-based developer Trammell Crow Co.
Next Step
2nd & Elm’s powered by “the engine of a 30-person, multimillion-dollar ad agency with a very successful track record” that it can leverage to market and sell homes, Lavender said, adding that the startup launched four months ago and has been well-received by agents, who would rather focus on closing the sale than “spend their time door-knocking for leads.”
Details about INK’s second venture, scheduled to debut in the third quarter, are still under wraps, Henderson said.
“We saw an interesting overlay of opportunity and changing legislation and access to certain assets that gave us a competitive advantage,” he said. “When we looked really sharply at those things, it gave us inclination to take the next step.”
Spirits is a product category INK wanted to “break into for a while, and this seemed like the right time,” added Lavender, who spent the first 10 years of her career working with a number of well-known spirits brands.
And there’s more to come.
“We’re going to keep our focus on maybe two or three launches a year,” Henderson said. “I think we want to keep those launches modest but still relatively aggressive.”
The editors at Inc. Magazine ranked it on its Inc. 5000 list of the fastest-growing private companies four times, most recently in 2014. The magazine estimated INK’s 2014 sales at $4.5 million, with a four-year growth rate of 47%. It employs about 30.
The agency, jointly owned by Henderson and Lavender, says it’s on track to reach $10 million in revenue this year.
Its first stake—the drone airport—is operational and has been “a good investment.” “We are in discussions with potential buyers of the brand,” Henderson said.
Added Benefits
Developing brands diversifies INK’s revenue streams and helps it attract and retain creative talent.
“There’s something very satisfying about building a brand that you have an equity stake in or that we own outright—the sky’s the limit in terms of what we can create,” Lavender said. “There are no guardrails.”
Its new Laguna Beach office may help, too—it has a fireman’s pole, meditation teepee, hammocks, game room and full bar. Then there’s the ocean, and “whales swimming by the windows on a daily basis.”
“We have a lot of millennial employees, and the ability to take a lunch break and go surfing, come back to the agency, shower off and then keep working, I think really allows them to spur creativity,” she said.
INK’s clients include Aliso Viejo-based Quest Software; Ingram Micro Inc. in Irvine; and Yokohama Tire Corp. in Santa Ana. Ingram recently held a “pretty rigorous agency review process,” and hired INK to develop branding for its CloudBlue, a cloud software and services platform.
“That entire brand was developed soup to nuts in 60 days,” Henderson said. “We were really under the gun to get something prepared and ready for launch at their cloud summit event in Boca Raton last week. …We worked on the identity, the logo, landing page, brand video, and now we’re transitioning into things like demand generation, full web development and campaign activation.”
INK’s agency-client relationships also can benefit from its entrepreneurial spirit.
Henderson said the equity-based model usually keeps the agency’s management “involved for a much longer period of time, so instead of it being a transactional relationship, we step in typically in these engagements as a board member. … I think that the team that we have here brings a level of business knowledge and acumen to the work for our more traditional clients in a way that only has an added benefit to them.”
