Is your company a unicorn or a cockroach?
Unicorns are dropping like flies in Silicon Valley and being replaced by a more proletarian ruling force: the cockroach
Jesse Eisenberg as Facebook founder Mark Zuckerberg in The Social Network
Starting up: a cockroach refers to a start-up consisting of hard-working founders who keep survival at the core of their business strategy
Nobody liked those snobby, glorified ponies anyway. Now the tech startup narrative is dominated by all-American traits such as staying power, elbow grease and dogged (or in this case insectival) determination. The “cockroach” is the new creature à la mode in Silicon Valley.
A cockroach refers to a startup consisting of hard-working founders who keep survival at the core of their business strategy. At first their rivals ignore them but ultimately fear their presence in or anywhere around their market. Undaunted by long hours and late nights, cockroaches are adaptable, and good collective decisionmakers.
Success stories held up as endorsements of the “cockroach approach” are often found in more uncertain economic periods. Back in 2008, various commentators predicted that the then current economic situation was likely to be longer, harder and more devastating than the economic stagnation experienced in the mid-1970s. You know what else happened in the mid 1970s? Microsoft and Apple were founded.
So in reality, the term isn’t all that new. But it is being used more frequently of late. Partly because of the demise of several high-profile unicorns (a term used to describe tech companies with valuations of $1 billion or more) and, by extension, the welcome realisation that the once-coveted supernatural label isn’t all it’s cracked up to be.
Bring out your dead: unicorn corpses line the streets of Silicon Valley
Dropbox was recently described as the “first dead decacorn” (referring to a unicorn with a valuation of $10 billion or more). Over the last six months, many of its investors have written down the value of their stakes. They’re not the only ones. Online notetaking app Evernote, which received a $2 billion valuation in 2012, recently laid off a fifth of its staff. Snapchat was also just marked down by one of its most high-profile investors.
So what happens after the tech prophets of doom finally get to say “I told you so” regarding the soaring, and unrealistic, valuations of so many private technology companies? Everyone rushes to find examples of other successful startups of a different ilk – the kind that resulted out of good-old fashioned hard work and staying power (the boring ones, basically).
At the Slush 2015 conference in Helsinki – a platform for European and Asian startups to network with international investors – co-founder Caterina Fake of photosharing site Flickr and recommendations engine Hunch criticised the rise of speculative unicorns when there were so many, more deserving, outfits being overlooked. In a recent blog post Fake noted: “There is this accumulation of capital in a very small number of companies and this is very bad for the eco-system in general and there are thousands of very sturdy, hard-working and long-lasting ‘cockroaches’, as I call them – that is companies that will last through difficult times in the rise and fall of economics of tech.”
‘Honoured to be called a cockroach
“This is a great term and far more analogous to what true entrepreneurship is all about than unicorns or anything else,” says Damien McLoughlin, professor of marketing at the UCD Smurfit business school.
“We see movies like The Social Network and think all entrepreneurs are like Mark Zuckerberg. It ain’t like that.
“In reality the ones who succeed are generally involved in multiple businesses, or they get one business off the ground and start multiples from that. One of the major differences between the average entrepreneur and the cockroach is one’s ability to scale.
“For many, the thrill of starting a company is far greater than scaling it. To scale successfully, you need staying power, patience, and a solid shell.
“There are cockroaches in Ireland operating under the radar, who perhaps shy away from the limelight, preferring to focus on starting businesses, scaling them, selling and moving them. These are solid, hard-working business people.
“Most successful entrepreneurs are deeply dissatisfied with how things work, want to change them, and don’t really care what other people think. I’d be honoured to be considered a cockroach.”
Not every thriving startup, that has earned its stripes the hard way, is entirely enamored with the insect comparison.
Upon hearing the news that the chattering classes started referring to his growing software company, Expensify, as a cockroach, founder and chief executive David Barrett pleaded with the media to refrain from referring to his firm in this way. As he put it, “… I’ll admit satisfaction that the mythical creature’s [Unicorn] shine is wearing off, and that there’s enough appreciation of our sustainable, profitable models that startups of our class have finally earned a name of our own. But cockroach? Seriously?”
Barrett is right to be skeptical of the moniker. And given the perceived nature of the cockroach business model – pragmatic, hard working, no frills – one might assume most “cockroaches” will disapprove of being described as such, for two reasons: the first relates to the obvious negative association with bugs, the second being the likelihood that this zeitgeist term will eventually become passé and lead to the negative backlash that inevitably comes from being considered last week’s news.
Labels are fun
Where do terms such as unicorn, thunder lizard, black swan and cockroach come from? Well, they’re usually coined by economic and financial commentators still clutching at some failed dreams of a career in fiction (with the notable exception of philosopher and statistician Nassim Nicholas Taleb, author of The Black Swan).
Then when the economic and financial landscape changes, the once-popular mythical or rare creature analogies are discreetly shelved in order to make room for some more appropriate pigeonhole.
Expensify chief executive Barrett even suggested a list of other names that could be used to describe firms such as his in place of cockroach. To quote the Raven:
“Volcano: They build entire islands by themselves out of the swirling waters. Regardless of the way the VC tides are going, the volcano keeps growing.
“Hobbit: Impervious to the power of the one ring, unphased by the war for middle earth.
“Redwood: Tall and majestic, growing through all weather. And an homage to Silicon Valley!
“Kudzu vine: A terrifying invasive species that disrupts classic ecosystems worldwide.
“Tardigrade: Immune to heat, cold, radiation, even outer space.
“Honeybadger: Just doesn’t give a shit.”
Methinks the lady doth be too much of a nerd to come up with any decent alternatives. So The Irish Times is asking its readers to suggest a few more labels of their own to leave as comments at the bottom of this article online. They can relate to startups of all kinds at any level. Do you think you’re startup embodies the qualities of a centaur, an Aga oven, or perhaps a surly badger? Let us know.
Start-up terms: Rats, vultures, badgers, eels, shrimps The entrepreneur’s zoo Know your entrepreneurial honeybadger from your agile mantis shrimp? Well, here are some more potential new labels for companies – from startups to MNCs – courtesy of technology commercialisation consultant Scott M Akers of Makersconsulting. com
The honeybadger The honeybadger is a company working in a space, which although wrought with insecurity and risk, stubbornly continues. Anyone working in fledgling bitcoin/blockchain startups right now fit the bill. Despite bad press, state suspicion and the international banking system being against them, bitcoin badgers ain’t going nowhere. Why, you ask? Because “Honeybadger don’t care. Honeybadger don’t give a shit.”
The vulture The vulture relates to a firm that takes an old, dead idea and creates a high-flying and efficient company that does the same thing a hundred times more efficiently. Polaroid’s recent turnaround under new CEO Scott W Hardy might be an example.
The naked mole rat They dig through dirt, find some nourishment, and make a portal that people can use for access. Many data-based companies work this way. Through their skill at making sense out of mountains of data, the mole rat, as our friends over at Storyful might put it, “separate news from noise”.
The lamprey eel The Lamprey attaches itself to another huge firm/industry, and bores into its flesh. In business terms the lamprey does provide some value, but is doing so while sucking the bigger company dry. Lawyers, perhaps?
The mantis shrimp Mantis shrimp have a hard exoskeleton, supreme design, specific applications, and pack a punch. They are small, nimble and colour changing. Any company backed by hard research with niche technology – perhaps in the material science realm – but no brand and a small client base might be worthy of mantis shrimp status.