While the startup ecosystem took time to take off in India, the country is now the fastest growing and third largest startup ecosystem in the world. In the last few years the country has seen the fortunes of many entrepreneurs change overnight with new unicorns coming to the fore and hogging the limelight. However, as the dust begins to settle, the worldwide shift in focus from unicorn startups to cockroach startups is now becoming more and more evident in India as well.
Unicorn startups and Cockroach startups
Unicorn startups are generally ventures with a valuation of $ 1billion and more. As the name suggests, these ventures are mostly considered as mythical in nature mainly because of the fact that unicorn startups, in reality, created more hype than revenues. While these high valuation companies were the blued eyed boys for venture capitalists till about a year ago, investors are apprehensive about putting more money in these companies now.
Cockroach startups, on the other hand, are built to last (just like a cockroach, which is among the longest surviving species on Earth). Their prime focus is sustainability, and hence they adopt a more frugal approach in their operations, keeping costs low and focusing on the product, so the revenue stream is in place. These startups are not at all exotic; they are actually quite run of the mill and don’t really fly high and don’t chase high valuations. But that doesn’t make them any less worthy f hogging the limelight. These entities too have the potential to scale up and grow.
When did cockroach startups come up?
It might seem that the startup ecosystem only spoke about Flipkart and Snapdeal for the longest time, mainly because the foundation for the ecosystem had to be built on strong pillars. However, there are few who would have missed the news of these companies having been overvalued.
In the period that these two (and likely even more unicorn startups) became the flavor of the corporate world, there were many other budding startups which worked in a lean manner and have been able to avert all storms and are still present in the ecosystem. Hence, it wouldn’t be wrong to say that cockroach startups have been part of the system for quite some time now. It’s just that investors, analysts and customers alike didn’t quite notice them since their focus was directed at the charming and mythical unicorns. In the process, they ended up missing the silent yet steadily growing cockroaches that chose real action over making noise to make their presence felt.
Defining qualities of Cockroach startups
While there are many qualities that a cockroach startup possesses, the fundamental quality is that it is a business venture that is built over a significant period of time, slowly and steadily. Remember, the key is ‘slowly’ and ‘steadily’.
If I were to list down 5 defining qualities of a cockroach startup, they would be:
- Focus on revenue instead of spending
Since, this a cockroach venture looks at building itself over a period of time and is in no hurry to become the flavor of the season, the focus of the company and the founders is always on increasing revenues as well as profits, and therefore, the having a strong product is the key for them. They believe that to be able to sustain the roller coaster ride of being a startup, keeping the cash flow coming is always important. That is why cockroach startups are generally bootstrapped and keep their spending in check at all levels.
- Team members and employees are ‘sought’ not ‘bought’
The newspapers and Internet are flooded news of startups offering lucrative salaries to draw top talent. However, sustaining them thereafter becomes a challenge in itself. A Cockroach, on the other hand, introspects what kind of people they really need to scale up their venture and only seek people who are in sync with their vision and growth trajectory. Normally, people who join these companies are looking at challenging positions and are able to associate themselves with the company’s vision and culture, and hence, join them.
- Product/ service is the prime focus
The reason why someone looks at starting something new is because they believe that their product or service would bring about a difference to the consumer ecosystem. However, down the line when business starts picking up, founders forget about the product or service and start focusing on scaling up and getting funding. While these are also essential for a startup to exist, what would a company do if the essence of the product or service is lost? Cockroach startups are sensible enough to always focus their energies and resources on nailing their product or service. After all, it the essence of the business and if you slip on this front, it’ll have a domino effect on all aspects of the business, thus spelling doom.
- Avoid spending on fixed assets
Building any startup requires capital. That said, not every venture needs huge capital to be able to make it big. As a startup, one should always look at cutting down costs; especially fixed costs. One can always buy a swanky office when there is enough revenue coming in and the business is stable. For the initial stages, a co-working space or a small rented facility is good enough to begin. These are smarter and cheaper option. While there is no escaping some expenses, such as those on good internet and capable hosting servers, the point is that cockroach startups don’t get lured by the fancy things until the time is right and prefer to go the ‘frugal way’.
While making more money may be the driving force for many entrepreneurs, when this force starts blinding them, it becomes a problem. As a founder, one must all learn to live within the means for the sake of the company to do well. A BMW forgone in 2015 would mean a higher valuation in 2017 for your own venture.
It wouldn’t be wrong to say that cockroaches are pretty much the underdogs in the industry. They prefer to do their thing silently, with their focus on all the right places and steadily build a strong foundation for the business. Obscurity doesn’t make them uncomfortable. They are more concerned about ‘getting things right’ rather than ‘getting there fast’. Not lured by anything fancy along the journey, they prefer to work their way steadily to the top, often unaffected by the glamour and glitz associated with being a startup in today’s age.
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