a cockroach and proud

This is definitively neither my definition, nor my idea. Rather it is a principal I have read about in a few blogs and articles with which I am broadly in agreement. I thought it worth penning a quick blog on it myself.

A ‘Unicorn’ is a well used descriptive within the narrow field of tech start-ups. Essentially a young business that accelerates reasonably quickly to a $1bn+ valuation, normally emphasising ‘scale’ over gross profit (and at times revenue). Businesses that endeavour to ‘own a market’ and then back-solve how to become a viable long-term commercial business. Some succeed, a lot are likely to (and are starting to) fail. It is typically a cash hungry growth model (spending to scale quickly) which in part explains the requirement for the valuations to rise so quickly (each investment round needs to happen at a subsequently higher valuation). I am not going to be dismissive of the premise of Unicorns as a) I don’t know how to do it and b) I don’t want to do it. But some people will do very well from it and they will inevitably be the people you read and hear about.

The idea of ‘cockroach’ companies I do adhere to though. It is much less glamorous. Here the general principals are to focus first on the business model and understand how you will make sustainable profit before you start (doesn’t mean you will reach it of course!). In other words, develop a business that from day one has the prospect of a viable commercial model that can ‘survive any storm’. Something that is much likely to collapse in a less favourable funding and economic environment (which is inevitably going to come round again – and soon). A slower but surer way to build. Once you have proven the viability of the business model then, and only then, breed like crazy and disseminate your cockroach business into every crevice and takeover the world. We have never called our companies cockroaches (albeit at times I may have harboured such feelings towards individuals I have met on the journey – lol), but it is the basis on which the majority of the businesses we have been involved in have defined their models and undertaken their fundraisings. The downside is that it is slower, as the World around you seems to be running fast to breed Unicorns, but in theory it has a potentially higher likelihood of building a long-term sustainable business. Watch this space.

Another way to cut the Unicorn vs Cockroach concept would be to parallel it to US vs European venture styles. US is ‘big funds with big pockets’, ‘big market’, ‘get quick big or go home’. European is ‘smaller funds with smaller pockets’, ‘smaller and more colloquial markets’ and ‘inherently more conservative’. The US vs European investment and growth approach has, of course, stemmed from many many years of cultural and geographic differences between the two continents. Europe has also, of course, been around longer and grown to where it is over that time period.

The fact of the matter is that there are rational reasons to take both approaches. The thing that I am liking, however, is that there is a small but growing recognition that building a Unicorn isn’t the only great way to go. Now that is not of course a new thing, merely the cyclical return of an ideology that has been in fashion and out of fashion many times since commerce first started. But today it is becoming okay to be a cockroach, and I like it when common-sense begins to get some coverage alongside ‘glamour’.