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In Silicon Valley, the entire ecosystem is geared toward one thing: growing unicorns —Beginnervalued at more than $1 billion. Unicorns were once a rare breed, but in recent years the stable ofbillion dollarsPurebreds have grown to around 350 unicorns worldwide.
In today's world, unicorns represent more than one rating. Rather, they represent a philosophy, an ethos, and a process for building startups. If the goal is to be a unicorn, very rapid growth is the method. The tools are ample venture capital, a rich and ready talent pool, and a supportive startup ecosystem. This approach has worked well in Silicon Valley for a while. But after failed IPOs, resistance to technology models, and the array of social ills that plague the Valley, that approach is losing its luster. And for the 99% of entrepreneurs out of the Valley, where capital is much less plentiful and the context is day and night, the goal was never viable to begin with.
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An alternative playbook is increasingly coming from what I call the frontier - the ecosystems that operate outside of Silicon Valley and other major centers like New York, London and Shanghai. At the frontier, whatever the cost, the growth model does not translate to the reality of the burgeoning startup ecosystems outsideSilicon Valley.
For these startups, camels are the most appropriate mascot. Camels adapt to many climates, surviving for months without food or water, and when the time is right, they can run fast for long periods of time. Unlike unicorns, camels are not imaginary creatures living in fictional lands. They are real, tough and can survive in the toughest places on earth. While the metaphor might not be that flashy, these startup camels prioritize sustainability and therefore survival from the start, balancing strong growth and cash flow.
Here are four important lessons you can learn from these hardy creatures:
Don't subsidize.
In Silicon Valley, entrepreneurs are willing to subsidize their products because they have capital and are judged on the growth of their customer base with less attention paid to costs or paths to profitability. However, this approach can backfire.
Entrepreneurs operating in less developed markets do not share Silicon Valley's obsession with offering free or subsidized products in the service of growth. They charge their customers for their products. Grubhub, a Chicago-born grocery delivery startup, tooka reverse waylike its wasteful Silicon Valley competitors and is now a publicly traded company with multi-billion dollar sales. As Mike Evans, a co-founder, succinctly explained the dynamic to me: “I'm building a business, not a hobby. Businesses generate income, but hobbies don’t.”
Related:5 of the coolest startups we found at CES
Camels understand that the price of a product is not a barrier to acceptance, but rather reflects its quality and positioning in the market. In emerging markets, existing solutions are either non-existent or so dysfunctional that customers are willing to pay, often at a premium, for reliable, safe and efficient products. Despite lower returns, customers are not looking for free products. To win customers, innovators must offer a solution that is worth paying for, and they are rewarded when they do so.
manage costs.
The best frontier innovators manage costs throughout the lifecycle of their businesses and do so to better align them with their growth trajectory. New hires must be justified by increases in sales and operations. Marketing investments need to be scaled at a reasonable pace. Expense levels are modulated to keep the company from going too far down the hole in the expense curve. As Jason Fried, founder of Basecamp, a successful Chicago-based company, explained to me, “There are few excuses for not being profitable as a startup. A big part of this is managing your cost structure. You've heard enough you're not managing expenses, you're not building a business. You are building a financial instrument that is not healthy.
It also helps that frontier innovators often enjoy an important cost advantage. For startups, the biggest cost is people, especially in the early days. The current cost of hiring a software engineer in Silicon Valley is twice the average salary in Toronto, seven times that in São Paulo and eight times that in Nairobi. The rents and other operating costs are also significantly cheaper in the latter cities.
Related:9 sales and marketing tips for startups
The combination of leveraging this cost advantage and managing expenses means a startup in a lower cost bracket has a longer road to travel for a similar investment. This gives them more time to grow revenue and build sustainability, as well as increase their resilience to shocks.
Collect only the money you need
Venture capital is a powerful tool (full disclosure: I'm a venture capitalist). However, it doesn't work for all types of entrepreneurs and not all businesses require venture capital. Venture capital isn't the right vehicle for every round either, and some startups use alternative instruments, includingRevenue sharing models, instead of.
Even when camels raise venture capital, they raise appropriate amounts for specific purposes. As a result, business owners can maintain greater control over the business and end up with a larger slice of the pie. Qualtrics, for example, was founded in 2002 in a Utah basement as an online survey company. The founders used the company's profits to finance growth. Despite being approached by many venture capitalists, they turned down investments as the company grew. They finally raised venture capital a decade later, but they did so on their terms when they were already a multi-billion dollar corporation.
Of course, that doesn't mean that entrepreneurs should avoid venture capital. In fact, the vast majority of camels depend on foreign investment. However, camels can afford to decide whether to raise capital, from whom and on what terms.
Take a long-term perspective.
Frontier's founders understand that building a business is not a short-term endeavor, and indeed some of the greatest breakthroughs for businesses occur later in their lifecycle. Survival is Strategy #1. This gives time to evolve the business model, find a product that resonates with customers, and develop a machine that can deliver at scale. There can be competition. The race isn't always about who gets to the market first. It's about who survives the longest.
A long-term perspective reduces the trade-off between growth and risk and enables resilience. As Grubhub's Mike Evans notes, “It took us ten years to complete the IPO. We could have reduced it to eight if growth had been prioritized over profitability. But we would have increased the risk sevenfold. We chose sustainability.” Grubhub took longer than it could have taken to produce an output, but it did so with greater resilience; the company knew how to manage risks and challenges along the way.
Of course, building a sustainable business doesn't mean frontier innovators shy away from growth. However, their path to scale may not exhibit the same life-and-death exponential growth curve that startups in Silicon Valley aspire to. The cash curve doesn't go that low, and camels are softening what some call the "valley of death," where companies bottom out on their cash flow. Instead, camels grow in controlled spurts with a balanced growth strategy, choosing to accelerate growth and invest in growth when opportunity calls for it. The key difference here is that camels retain the ability to modulate growth and return to a sustainable business if needed.
Of course camels still grow at impressive rates when the time is right, but at the same time they are strategically managed to survive and withstand market shocks. By adapting to the harsh environment, they've braced themselves for tough times, and Silicon Valley startups can learn from their strategic approach. The world needs more camels.
FAQs
What is the difference between camel and unicorn? ›
Unlike unicorns, camels are not imaginary creatures living in fictitious lands. They are real, resilient and can survive in the harshest places on Earth. While the metaphor may not be as flashy, these startup camels prioritize sustainability, and thus survival, from the get-go by balancing strong growth and cash flow.
What does unicorn mean in startup? ›Unicorn companies are those that reach a valuation of $1 billion without being listed on the stock market and are the dream of any tech startup.
What is the difference between unicorn and startup? ›Can only a startup be a unicorn? The answer is yes. Unicorn is a term given only to 'startups' who have a valuation of over a billion. The startups that exceed the valuation of $10 billion are grouped under the term called decacorn (a super unicorn).
What is a camel startup? ›A camel, when referring to startups, is essentially a company with the following characteristics: Resilient–they are preparing for the future through thoughtful, strategic growth. Cautious–they maintain reserves to help get through tough times and replenish during the good.
Why is it called a unicorn? ›Borrowed into English by the early 1200s from French, unicorn comes from the Latin unicornis, “having one horn.” This root joins uni-, meaning “one,” and cornu, “horn.” (The Latin is a loan translation of the Greek monokeros, its equivalent of “one horn” and passing into English as monoceros.)
Is there unicorn in real life? ›No one has proven the existence of a unicorns. Scientists would say that unicorns are not real and that they are part of mythology.
What is the unicorn strategy? ›WHAT IS UNICORN MARKETING? It is all about applying the best strategies that drive more engagements for your campaigns. It is by Studying similar accounts to your accounts and finding content that outperforms everything else.
Is Amazon an unicorn startup? ›Amazon E-Commerce Boom Births Unicorn With $2 Billion Valuation - Bloomberg.
What makes a company a unicorn? ›Coined in 2013 by venture capitalist Aileen Lee, the term “unicorn startup” refers to a private company valued at or over $1 billion — because just like the mythical creature, the statistical rarity of such a successful business venture is improbable, but not impossible.
What are the 4 types of startups? ›- Small business startups.
- Buyable startups.
- Scalable startups.
- Offshoot startups.
- Social startups.
How often do unicorn startups fail? ›
Unicorn companies: 99.9% failure rate
Among all startups, companies that consider unicorn status of a $1B+ valuation to be success are exceedingly rare, at 0.00006. Only a fraction of a percent of all startups make it to this tier.
Airbnb and Uber are both unicorn companies that went public with vastly different results. Airbnb opened at $146 per share on its first day of trading; the following day it more than doubled the $68 per share price set for its IPO the day before.
What are the 4 core elements of a startup? ›There are four components that startup founders and entrepreneurs must pay attention to. These include market acquisition, human resources, intellectual property, and efficient capital management.
What are the 3 stages of a startup? ›- There are three startup stages: early-stage, venture-funded (growth) stage and late stage.
- Moving from early-stage to venture-funded (growth) stage is well delineated, but other phases are only loosely defined.
What is a unicorn? Unicorn is a term used to describe a human who is interested in meeting a couple. This person might be looking for one great night, something more serious and longterm, or anything in between.
Can a woman be a unicorn? ›While the word unicorn can technically be for a person of any gender, they are usually a woman, or occasionally a nonbinary person. When a man wants to join an existing couple, they may refer to themself as a "dragon" rather than a unicorn.
What is a unicorn in the Bible? ›A re'em, also reëm (Hebrew: רְאֵם), is an animal mentioned nine times in the Hebrew Bible. It has been translated as "unicorn" in the King James Version, and in some Christian Bible translations as "oryx" (which was accepted as the referent in Modern Hebrew), "wild ox", "wild bull", "buffalo" or "rhinoceros".
Who invented unicorns? ›The first written evidence we have for unicorns appears in ancient Greece, not (as you might expect) in writings of mythology but in 'natural history' writings, once again on the ancient Near East. The earliest accounts come from the writer Ctesias in the 4th century BCE.
When did unicorns go extinct? ›The unicorn might not be very old at all, and might have still been kicking until 39,000 years ago. This places its extinction “firmly within the late Quaternary extinction event”, between 50,000 and four thousand years ago, in which nearly half of Eurasian mammalian megafauna died out.
Why are unicorns so popular? ›Part of the reason why unicorns are so beloved is that they remind us of our childhood, and they help people escape from reality. Just like creatures such as vampires or werewolves were popular when times were more joyful, unicorns became popular during a time when politics and culture were dark and oppressive.
What is unicorn mindset? ›
Unicorn startups thrive on transformational ideas that revolve around other people's needs and how they will affect them positively. Transformational businesses create products and solutions that everyone will benefit from and use regularly, and are given out freely.
What makes a unicorn company successful? ›In order to become a unicorn, companies must have an innovative idea, a clear vision for growth, and a solid business plan, as well as a viable way to get their message to venture capitalists and private investors.
Is TikTok a unicorn company? ›At present, it is the largest unicorn company with a valuation of $353 billion. The annual revenue in 2021 is about $58 billion, a year-on-year increase of 70%. ByteDance's Douyin and TikTok Earned over $258 Million in February.
Was Apple a unicorn company? ›...
Get the PDF: Unicorn Trends Report.
| Company | Market Cap | Ratio |
|---|---|---|
| Apple | 657.2 | 0.71 |
| 452.2 | 1.04 | |
| Microsoft | 373.8 | 1.25 |
| 265.4 | 1.77 |
Ideally, when a company becomes a unicorn i.e. achieves a valuation of $1 billion, then there shouldn't be any chances of failure. However, surprisingly even unicorn companies fail. Many times, they end up causing a lot of damage to the investor's funds as well.
What does unicorn stand for? ›With its white horse-like body and single spiralling horn, the unicorn is a symbol of purity, innocence and power in Celtic mythology. Legend also tells that their horns can purify poisoned water, such is the strength of their healing power.
What are the characteristics of a unicorn? ›Unicorns are mythical creatures that typically resemble a horse with a long, straight horn on it's head. In western culture they're traditionally completely white, but in recent years they're often embellished with a rainbow-coloured mane and tail, as well as a variety of other colours.
Is a unicorn still a startup? ›...
Unicorns by Industry.
| Software | 373 |
|---|---|
| Retail | 40 |
| Media | 38 |
- Vision. A strong core starts with a strong vision. ...
- Values. Entrepreneurs need to have a central value to their company. ...
- Product and Engineering. Effective sales and marketing used to be the foundation of great companies. ...
- Feedback Loops. ...
- Resilience. ...
- Source.
- Assuming Virality. ...
- Obsessing Over Funding. ...
- Chasing Investors Instead of Befriending Investees. ...
- Dwelling on Things. ...
- Getting Distracted By Feedback. ...
- Not Having the Right Co-Founder. ...
- Trying to Win Over Everyone. ...
- Not Listening to Current (or Future) Customers.
What is the #1 mistake startups can make? ›
Whether you're running a small startup or a large enterprise, you need to articulate your goals. One of the common mistakes entrepreneurs make is not setting clear and specific goals. You can't just settle with a vague idea of “making a profit” as your goal for your startup.
What is the #1 reason why startups fail? ›Lack of financing or investors. The study notes that 47% of startup failures in 2022 were due to a lack of financing, nearly double the percentage that failed for the same reason in 2021, based on CB Insight's data. Running out of cash was behind 44% of failures.
Is it true that 90% of startups fail? ›Startup Failure Rates
About 90% of startups fail. 10% of startups fail within the first year. Across all industries, startup failure rates seem to be close to the same. Failure is most common for startups during years two through five, with 70% falling into this category.
...
Zoom Video Communications.
| Zoom headquarters, Downtown San Jose | |
|---|---|
| Area served | Worldwide |
Unicorns are late-stage startups that have a valuation of more than $1bn, and are either private or have gone through an IPO. In our definition, these are private startups that go from $1bn to listed companies such as Paypal (the granddaddy of Fintech).
Is DoorDash a unicorn company? ›And DoorDash and Airbnb are not the only unicorns expected to test the public markets before the end of the year.
What are 4 key elements of a successful company? ›- 4 Elements of a Successful Business. Niki Blois. ...
- They provide value. Let's be real—the competition out there is intense, regardless of your industry. ...
- They have great employees. A company is a reflection of the strength or weakness of the team behind them. ...
- They take risks. ...
- They have a plan.
A successful small business must have 4 things in their corner – product, market, money & people. Whether you're a startup looking for venture capital or you want to become a successful small business all on your own, there are a few basic – but important – components every business must have.
What are the 3 important factors to start a business? ›- A great idea. “No business can develop in the absence of a great idea. ...
- Funding and budget. ...
- What is your business plan? ...
- Legal documentation. ...
- Passion. ...
- Find the right equipment. ...
- Know when you need help.
- idea,
- launch,
- growth and.
- maturity.
What are the 5 steps of start up life cycle? ›
- Solving the problem. Running a successful business is all about producing something that solves a problem. ...
- 2. Development. This is where it starts getting serious. ...
- Entering the market. ...
- Scaling. ...
- Maturity.
Common startup problems include poor planning, poor leadership, failure to differentiate a product or service from others that are already available, ignoring the needs of customers, and not learning from failures.
What are the keys to startup success? ›- Be passionate. Starting and maintaining a successful business is hard work. ...
- Test your concept. Intuition is good, but it's not enough. ...
- Leverage startup programs. ...
- Create a business plan. ...
- Hire wisely. ...
- Set goals. ...
- Have a well-defined niche. ...
- Be agile.
The unique book about entrepreneurship and innovation, has the 4-Gate Model of Prosperity: the need for Preparation, Marketing, Execution and Self-Leadership.
What is higher than a unicorn? ›It is a term for a company valued at more than US $10 Billion, while hectocorn status is used for a company valued over US $100 Billion.
What animal was mistaken for a unicorn? ›As you may have guessed by now, many people in the Middle Ages believed that narwhal tusks were actually unicorn horns.
Is a unicorn just a rhino? ›In case you haven't worked it out, unicorns are mythological creatures and are not related to rhinos…
What is the closest animal to a unicorn? ›Part of the antelope family, the Arabian oryx is probably the animal that most closely resembles a unicorn – it can even magically detect rainfall. From the side, it also looks like it has just one slender horn.
Is TikTok a unicorn? ›TikTok owner ByteDance is the world's largest unicorn with a market valuation of $353 billion (RMB 2.25 trillion), according to a Monday unicorn ranking list from the Hurun Research Institute.
What is a unicorn analogy? ›It's not clear when English speakers decided that a combo of "rare and highly desirable" was enough to earn unicorn status. Now unicorn has a new metaphorical meaning: it's a start-up valued at a minimum of one billion dollars.
What year did unicorns go extinct? ›
The unicorn might not be very old at all, and might have still been kicking until 39,000 years ago. This places its extinction “firmly within the late Quaternary extinction event”, between 50,000 and four thousand years ago, in which nearly half of Eurasian mammalian megafauna died out.
Why do unicorns not exist anymore? ›Demand for their beautiful spiral horns and loss of their rainbow-spangled habitat has led to a catastrophic fall in unicorn numbers, to the point where these incredible animals now exist only in our imaginations.
What is the myth of the unicorn? ›One of the earliest such interpretations appears in the ancient Greek bestiary known as the Physiologus, which states that the unicorn is a strong, fierce animal that can be caught only if a virgin maiden is placed before it. The unicorn leaps into the virgin's lap, and she suckles it and leads it to the king's palace.