Do you hear that hissing noise? Those are the cockroach startups waiting to snap up business when the startup funding boom starts to fade
“What goes up must come down.”
This classic quote from Newton seems to hold true now more than ever in the startup world. Even Unicorns are going out of fashion for many investors. As investors are growing cautious about where they invest, a newer breed of startups seems to be catching their eyes.
It shuns the light, scuttles away from attention and no matter how hard someone tries to kill the thing, it keeps coming back.
Enter the cockroach startup.
Anyone who has dealt with cockroaches would know that cockroaches are by far the most resilient of pests and this seems to be what investors are looking for in the companies.
The exhibit a resiliency to stay afloat as investments dry up, in difficult times they keep the candle burning at a steady rate.
Investors, strangely enough, are no longer looking at how successful or how much money a company makes but rather how long can the product holds on and keeps chiseling away at the market.
But, how can a company know if it is a cockroach startup?
There is no fixed textbook definition for a cockroach startup. But a good, healthy startup with the ability to sustain itself even if the next round of investments never come, is the best indicator. Most startups lose steam a year into business, beginning the real test of sustenance.
Here are some of the indicators which cockroach startups reflect.
When to spend and when not to
A unicorn is characterized by superfast growth, fuelled by VC money.
They are often not profitable, but the idea is that the business will reach ‘scale’ first. Before concentrating on making money it has already won plenty of the market share.
A cockroach, by contrast, is a business that builds slowly and steadily from scratch. A cockroach startup is very judicious when it comes to spending and comprises by utilising a lean team, frugal marketing and shifting focus towards making some real money rather than capturing the market.
The vision and not the salary is the hero
Unlike Unicorns who pay ridiculous salaries to attract and retain talent, cockroach startups usually pay less than market standards.
They attract and retain talent with their vision and commitment to taking their startup to greener pastures. This ideology stems from the deep faith in the startup idea, the product delivery, and the core team.
Investors would be keen to know what salaries people earn in your company and this is a good indicator for them as to how committed the team is to the end goal.
Spends on fixed assets
Most cockroach startups limit their fixed asset spending because the more they spend, the faster the budget burns.
They spend less on office systems like laptops and printers, which have a cyclic maintenance or up-gradation cost and instead of buying many printers, they would buy only the number of printers practically required (which, in the startup world, is probably one).
Live below your means
The difference between a Unicorn and a cockroach startup is the way they conduct business.
Unicorns have swanky offices, employee perks, team outings and other jazzy largesse treats. Whereas, cockroach startups have simple offices or even shared office spaces to save on office rent.
In a cockroach startup, any kind of extravagance should be avoided. Even employees can be either hired on a consultancy basis or on a part-time contract unless they form part of the core operations team or sales department.
The disparity is so high that it is easy to spot the differences.
Focus on the product / service rather than the funds
Value creation for customers — this always had been the core focus of any startup, but somewhere down the line, this focus shifted to ‘total funds generation’.
While generating funding is important, it cannot come at the cost of losing customer focus, as long as customers see the value in the product/service they keep coming. Most cockroach startups are customer-centric and focus on customer requirements.
While every startup dreams to be a Unicorn, the real winner at the end of the day are the cockroach startups.
There is a buzz (or maybe a cockroach-like hiss) in the investor community that unicorns are a bubble waiting to burst.
With the likes of Jeff Bezos taking a keen interest in cockroach startups, the future could be golden for those who waited in the shadows until the Unicorns turned off the lights.
Amit Damani, Co –Founder, Vista Rooms, when not having quintessential talks on anything entrepreneurial, runs one of the fastest growing online aggregator for budget hotels in India.
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