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Is your startup a bear, a pig or a scarab?

Welcome to the zoology of startups beyond the unicorn

By Maija Palmer

We all know about unicorns, the term for a startup company with a valuation of more than $1bn which was first popularised by VC Aileen Lee in 2013.

A unicorn was supposed to describe a truly mythical, rare beast. Eight years ago, Lee identified only 39 unicorn companies, and unicorns were being created at the rate of four a year.

But these days the ranks of unicorns are filling out — there’s now a herd of 672 of them globally — thanks to a glut of investor money. We’ve had to invent the ‘decacorn’ — a startup valued at more than $10bn — and the ‘hectocorn’ — valued at $100bn — to distinguish the standout successes.

But there are other paths to success than VC-backed rapid growth, and not every startup even wants to be a unicorn. It’s worth taking a moment to consider some of the other animals in the startup menagerie:

zoology

Zebra

Zebras, unlike unicorns, are focused more on generating profits than growth at all costs. They are also dual-purpose, both black and white, so they fuse social purpose with shareholder returns.

The term was coined by startup founders Jennifer Brandel, Mara Zepeda, Astrid Scholz and Aniyia Williams in a  2017 Medium post titled ‘Zebras Fix What Unicorns Break’. The article came at a time when the dark side of several celebrated unicorns had been revealed. Facebook had been weaponised to spread fake news, while Uber was under fire for its toxic culture.

The zebra idea grew into Zebras Unite, an international community of founders and investors, who wanted to look beyond the unicorn framework. Now as many startups turn themselves into B-Corps, for example, the zebra ideology is firmly taking hold.

Examples:

Pretty much any sustainability startup.

 

zoology

Rhino

The rhino is a lot like the unicorn — both animals have horns after all. But rhino startups aim to be both big and profitable. In this Tech in Asia article, Nick Nash, cofounder and managing partner of Asia Partners, defines rhinos as companies that have a valuation of $1bn on a price-to-earnings multiple, not on a revenue multiple. Rhinos are actually far rarer than unicorns.

 

zoology

Pig

A pig isn’t an animal that often gets celebrated, but it’s an important part of the ecosystem, and worth acknowledging. Pigs are startups that take advantage of the fact that it has become relatively cheap and easy to make a web product. You can get the development work done at a modest price and even raise some initial capital with a sexy kick-starter campaign.

Pigs aren’t building the company for long-term world domination — they’re aiming to sell to a big corporate or a competitor at the right moment. There’s nothing wrong with being a pig. In many eastern European countries where it was previously difficult to get venture capital, companies would build mobile apps and games in order to finance themselves while they developed more hard-to-market software. Apple and Google regularly shop for tasty pork among companies like this.

Examples:

Snapchat buying Looksery, a Ukrainian face-masking tool company, and Facebook buying Belarussian rival Masquerade are good examples.

 

zoology

Bear

A bear is a solitary, awkward creature that values its independence and therefore doesn’t want to take VC money. The founders of these companies choose the bootstrapping route, which makes life harder for them. But if it pays off, they end up rich AND in control of their companies.

Examples:

Tableau Software, the data visualisation company grew to be a $100m business without taking any venture capital. Go-Pro, the camera company didn’t raise VC funding. Mailchimp, which is now understood to be considering a $10bn sale.

 

zoology

Gazelle

The gazelle company is an older concept than unicorns and zebras, coined by US economist David Birch in the 1980s. The strict definition is a company with revenue of at least $100k, which had increased its sales by 20% each year for at least four years. It’s come to mean any high-growth company and it was what unicorns used to be called before the term unicorn was coined. Facebook, Apple and Amazon would all have been initially seen as gazelles.

 

Camel

Camel

Recently, VCs have been talking more about camel startups. These are creatures that depend less on venture capital to survive. They may raise a few smaller rounds to get going, but can also survive for longer periods in the ‘desert’ of cash-strapped markets.

The term was coined by Alex Lazarow in his 2020 book Out-Innovate, in which he argued that cultivating unicorns was an expensive Silicon Valley pastime that did not translate well to the rest of the world. And since some of the most interesting innovations are coming from what Lazarow terms ‘the Frontier’ (i.e. not Silicon Valley), it is important to understand this model.

Camels aren’t just good at surviving cash droughts but when they do raise investment they raise modest amounts, only what they can productively use. They stay close to profitability, and though they may grow slower, they are ultra-resistant. Survival, rather than fast growth, is the priority. They are a lot like cockroaches (see below), but maybe bigger.

Examples:

Lazarow mentions Qualtrics which declined VC investment for a long time as it scaled and GrubHub, which took 10 years to reach IPO because it prioritised profits over faster growth.

 

Cockroach

Cockroach

Cockroach companies aren’t glamorous, aspirational or exciting. But they are great at surviving. Dave McClure, founder of 500 Startups, is credited with coining the term in 2013 to describe resilient companies that optimise for sustainable, steady growth. Like its namesake, the term lived on to grow in the shadows, popped up here and there, and generally survived without making many headlines.

When you consider that more than 90% of entrepreneurial businesses tend to fail, aspiring to cockroach survival mode isn’t too bad. Small businesses with less than 10 employees make up the bulk of employers in Europe. They’re the mainstay of the economy.

Cockroaches ideally aim for profitability right from the start and can slow down their pace if adversity hits. Sometimes, they’re side hustles for a long time. Sikander Hauser’s opinion piece in Sifted last week had good advice on how to handle cockroach mode.

Examples:

GitHub started as a side hustle for its founders, SurveyMonkey grew at a pace consistent with work-life balance.

 

Mosquito

Mosquito

The mosquito, a term floated by Y Combinator cofounder Paul Graham in 2004, is the opposite of a cockroach. It is a startup that is lean and optimised for nothing other than striking its target. Graham uses the term to describe all startups — remember, this is back in 2004 when the whole startup thing was more in its infancy and had less nuance.

He makes the point: “A bear can absorb a hit and a crab is armoured against one, but a mosquito is designed for one thing: to score. No energy is wasted on defence.”

This mosquito thinking underpins a lot of the unicorn hunting of Silicon Valley today.

 

Donkey

Donkey

A donkey is an overvalued unicorn. As described in this Medium post by Abhas Gupta, it’s a startup that’s achieved a sky-high valuation and great numbers on one metric, say customer growth, but which is struggling on some other important metric. For example, they may be experiencing horrendous churn or the cost of their customer acquisition simply does not match up with the value of those customers.

 

 

zoology

Phoenix

Phoenixes are companies that last more than a hundred years because they rise, fall and then rise again. In this LinkedIn post Reid Hoffman urged startups to think about becoming phoenixes rather than unicorns, shooting for longevity.

To find a phoenix, you usually have to look outside of Silicon Valley and the usual startup ecosystems. Examples tend to be found among family-owned European companies who have managed to reinvent themselves as a third or fourth generation youngster takes the helm.

Examples:

Fiat, and prosthetics maker Otto Bock.

 

Ants

Ant

Ants are smart, organised and could rule the world if they didn’t concentrate on just moving breadcrumbs. Ant startups are often run by smart techies who don’t really focus on marketing themselves because they believe that if you’re good, the customers will come to you. The startups stay small and obscure, and in the end founders pack up and go to work for someone else (who has a marketing budget).

 

Dung beetle

Scarab

The scarab is also known as a dung beetle and spends its day pushing around a ball of dung bigger than itself. This might not sound like a great life, but somehow, the scarab managed to convince the ancient Egyptians that this was a metaphor for rolling the sun across the sky and it became the most sacred animal of ancient Egypt.

A scarab startup is one with a visionary founder that somehow manages to convince investors that a ball of dung is something far more valuable.

Examples:

WeWork, Theranos

Maija Palmer is Sifted’s innovation editor. She covers deeptech and corporate innovation, and tweets from @maijapalmer

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