As far as startup dreams are concerned, everyone wants to become a mythological creature of some description. From centaurs to unicorns, dragons to decacorns, each representing a higher valuation and new levels of success.
While the ability to scale, grow and eventually exit into Newt Scamander’s suitcase underpins all startup dreams, most businesses never get to that stage.
But with a global recession coming our way and venture capital (VC) funding drying up during times of uncertainty, the concept of unicorns might have to take a back seat.
After all, the more immediate problem for businesses during lean times is survival, and there is no better way for startups to navigate a challenging environment than to become a cockroach.
What is a cockroach startup?
Cockroaches are not the most delightful creatures. However, they do represent the never say die attitude, right down to their genetic makeup. Not only can they go a month without food, but they can also survive without a head for an entire week.
A cockroach startup is, therefore, one that persists during times of adversity and overcomes difficult economic conditions thanks to its unique business model that makes financial sustainability its primary goal from day one.
That means spending less on fixed assets like a prime location office for a small team or burning through cash to sell a product below cost to monopolise the market share.
Many startups operate under this model and put the monetisation of their product on the backbench. In fact, one could easily rattle off startups that have remained unprofitable despite their high valuation and popularity.
While that is not a problem during boom times, a dry spell in funding could hit operations hard. And this, is where the cockroach will emerge triumphant against the unicorn.
Rather than spend time and resources pandering to investors for another cash injection and selling a vision based on future earnings potential, cockroaches reject hype for revenue and profitability.
The hardiness of cockroaches is precisely why such startups are an attractive business model for investors in the upcoming year.
The importance of being a cockroach
Within the startup ecosystem, the cockroach is an underrated creature perennially overshadowed by its more magical citizens.
But having said that, 2023 will probably see cockroach startups gaining more prominence as businesses look for ways to survive an economic downturn.
After all, the cockroach startup embodies resiliency, creativity, and resourcefulness in entrepreneurialism. They are determined to stick around at all costs and generate enough profits to never be at the mercy of angel investors for survival.
All of these are traits that help a business survive and remain competitive when times are tough.
Therefore, for startups still struggling with a marketable product or those propped up by VC cash and government grants, embracing the cockroach philosophy can do wonders for the business.
That is because being forced to innovate the business with an actual product that sells will steer them away from becoming a pointless enterprise. Or worse, going down the zombie route.
Remember, mindlessly aiming for a high valuation can often override common sense and cloud sound judgement.
For that reason, startups will do well to remember that actual profits are the key to business longevity and success, not projected returns on a PowerPoint slide. And that is the one thing that cockroach startups have gotten right from day one.
Featured Image Credit: Marketing Mind