COCKROACH COMPANIES

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It is a company that never dies, resistant to crises. A cockroach startup is a startup that has slow but solid growth, with special attention to the profit and loss account and a personalised and attentive service to clients. It guarantees long-term profitability and no doubt during the crises, many investors wish they had invested in many of them.

Like cockroaches, these types of startups, are neither flashy nor glamorous, in addition, For investors who are accustomed to investing in the better known ones, this is not in their plans. Even so, as in any good diversified portfolio, it is interesting to take them into account because in times of uncertainty they are very resilient, especially in times of uncertainty. when we talk about the financial and long-term planning aspects.

It is a concept that has been in the spotlight of the Spanish entrepreneurial ecosystem for several years. However, it is only now that many of these cockroaches are coming to the surface. We are demonstrating impressive resilience and an unprecedented capacity to adapt. This is a growing model, which is attracting more and more investors.

Origin of the term

Caterina Fake, co-founder of Flickr, first talked about cockroaches as a term associated with startups in an article called "The Age of the Cockroach", where she argued that these tiny insects may become a plague that will eventually wipe out unicorns. What did Caterina mean? In contrast to unicorns, which are loud, flashy and highly rated, cockroach startups have a solid, sustained and, above all, silent growth. 

Of course, the Flickr co-founder was referring disparagingly to these unicorns, as overvalued startups, associated with valuations far above the real one. Often, the founders of startups, with this lustrous and noisy profile tend to avoid this term because of the negative connotation it can have. However, have the capacity to raise funding with a good message and a business plan ambitious can be a great advantage if this money is put to the right use.

For Caterina, "good things happen slowly", in reference to the ability to survive, adapt and multiply despite having hardly any food. Furthermore, Caterina adds that once the smoke has cleared after the plague (we can apply this to moments of crisis), only the cockroaches will be left standing, thinner perhaps but resisting and eager to eat the world, like any start-up.

Let's name the different types of StartUps:

MOUSE COMPANIES:

They are the other extreme within small and medium-sized enterprises: those that they stagnate and do not advance, they do not grow, nor do they intend to. Maintaining status and surviving in the entrepreneurial ecosystem are their only ambitions. Their capacity to generate employment is practically nil and they make up a large labour force.

Precisely because of the high volume of workers they employ and their natural tendency to become unviable (due to a lack of development). are the ones that in times of economic turbulence destroy a lot of jobs. In the competitive world of technology-based startups - which are playing for their survival in five-minute rounds - it seems that without quick success there are no options.

But it is not true! a company can start its journey, grow slowly to the point of subsistence and then look to make the most of its activity. This is what is known in the startup world as pivot.

ELEPHANT COMPANIES:

They are large, with many departments, with a complex organisation chart, some are listed on the stock exchange and have numbers that are influenced by many factors. They may be newly created, such as the technology giants. Google or Amazonor have a long business history behind them, with acquisitions and ownership changes in the shareholding. What makes them perfectly distinguishable is their size.

But also for these companies, times of change are coming: the big companies corporationsThey have an enormous responsibility, and opportunity, to help create a better, fairer, more just, more equitable, more humane world. To foster community, trust, transparency. They have the resources, the imagination and the intelligence to do so.

CAMEL OR DROMEDARY:

With little money it is able to grow a lot.

What is a camel (besides a hunchbacked, desert dromedary)?

Instead of a startup aiming for huge, investor-enriching growth at almost any cost, it is a company created to deliver real and meaningful innovation and survive in the long term without constant infusions of cash.

At last there are many entrepreneurs who are taking the opposite approach to the unicorn that only numbers and valuations count. The founder of a camel startup has another philosophy for which he wants to create a sustainable economy from the start, manage costs and scale up, but scale up responsibly. The camel company believes that from a risk-adjusted results perspective, it is more successful, more often.

This startup philosophy creates a more resilient and socially meaningful startup model, more camel, less unicorn, seems particularly prophetic but the COVID crisis has shown that they are necessary.

WHITE HORSE:

In an investee portfolio, a portfolio that has. 

UNICORNIO:

Startup with a valuation of more than 1 billion. A unicorn is a mythological creature depicted as a white horse with a horn on its forehead. But in the startup world, the word has a meaning of its own. A 'unicorn' is considered to be any company that which is financed by private equity and whose valuation exceeds USD 1 billion. 

This concept was invented by the investor Aileen Lee, former partner of Kleiner Perkins and founder of the venture capital firm Cowboy Ventures, in an article published in TechCrunch in 2013. According to Lee's calculations, every year four new companies join the list of unicorns. What Lee did was give a 'catchy' name to something that already existed: companies with valuations in excess of $1 billion. The name caught on, but that didn't change anything, perhaps it just made a lot more people set their sights on creating an entrepreneurial unicorn.

The term unicorn was the first, but the 'bestiary' of startups has been growing. 

DINOSAURS:

In mid-2015, the former CEO and controversial co-founder of the 500 Startups fund and accelerator, Dave McClure, added a few more species to this sort of zoo. In an article published on Medium he put unicorns face to face with 'dinosaurs'.

Dinosaurs, according to him, were the large companies that had been floated on the stock exchange, which had public capital, and which in many cases were also overvalued. Above all, he criticised them because shareholders tend to think that these companies that have stepped onto the trading floor will offer them the same profit for the next 15 to 20 years. "The unicorns are going to kick the dinosaurs in the next decade," he predicted.

PONIS:

These are startups that have reached a valuation of at least US $$10 million. The term was introduced by Dave McClure, founder of 500 Startups. The ponies will try to grow into centaurs, and eventually transform into unicorns. Some of the startups coming out of the accelerators have managed to achieve this valuation start with this valuation.

CENTAUROS:

When a startup reaches a valuation of USD $100 million it is considered a centaur. Believe it or not, at this valuation these startups are still considered small by today's standards. For example: "Cornershop, NotCo, Wallapop and ArchDaily".

UNICORNS:

This is where the "big league" startups begin, with a valuation of USD $ 1 billion. There are great cases like Bolt, Uber's competitor in Europe, which was built by a 25-year-old entrepreneur. Other examples: can be Rappi and Wildlife.

DECACORNIOS:

As start-ups have increased in value, there has also been talk of decacorns. Decacorns are those unicorns that have surpassed $10 billion in valuation. As the name suggests, they are startups, which have reached 10 times the valuation of a unicorn. The list of companies that have managed to reach this level is beginning to shrink considerably. They are known worldwide and include Airbnb, SpaceX, Oyo Rooms, Ripple and NuBank.

HECTOCORNIA:

If decacorns are scarce, hectocorns are even scarcer. Keep in mind that this only applies to private companies, so some of the giants you know would not apply as they have gone public, such as Salesforce.

These are companies with a valuation of USD $100 billion. In this range you will probably know: Apple, Google, Microsoft, Facebook and Amazon. The above was the taxonomy used for startups based on their valuation. But, there are other terms, which are based on its capital efficiency. That is, the size of their earnings, burn rate, growth and return on investment.

They are as follows:

DRAGONS:

In 2014, talk of 'dragons' began. Investors John Bacus and Hemant Bhardwaj published another text explaining their definition. Apparently, a dragon would be any unicorn that has fully returned the funds investors put in, a fund creator.

If you do the calculations you will find that dragons are four times rarer than unicorns, said the tandem, who argued that such startups were becoming harder to find as the size of their venture capital funding grew. Bacus and Hemant thought that unicorns were more like window dressing for VC firms, while dragons were the real moneymakers.

Dragons are a favourite of investors who like to make safe bets, as they are startups that return the funds invested without problems. They are much rarer and scarcer than unicorns and not all VCs can claim to have one in their portfolio. Good examples are Uber, LinkedIn y Twitter.

PEGASOS:

These startups skip the financing rounds avoiding dilute considerably in the early stages. They can do so simply because they have staggering revenue figures and growth rates thanks to their product and business model, while keeping a small, well-paid team and their costs well under control. Dyn.com, Kickstarter and Calm are examples of pegasus.

CEBRAS:

What makes them different from unicorns? Well, zebras are real. These types of startups are looking to grow with different financing schemes without the continuous desperation of going from round to round looking to raise large amounts of capital.

They are characterised by trying to make real business solving social problems. They want to be profitable but at the same time improve society and will not sacrifice one for the other. Zebras are much stronger when they are grouped together. They have unparalleled resilience and capital efficiency. Unfortunately, these types of startups have not been the main focus of investors.

The world needs more zebras and less unicornsAs more profitable businesses that solve real problems and fix existing social systems are needed. If you know of such startups I invite you to mention them here.

RINOCERONTES:

This term has been used both negatively and positively. Some say they are startups that "pass themselves off" as impressive unicorns without actually being so.

But others think that they are simply companies that have a lower profile, humble, quiet, and somewhat underestimated.which have also been valued at USD $1 Billion and are therefore unicorns. One example of these is RedDoorz.

COCKROACHES:

Cockroach start-ups are companies that can withstand any crisis. The animals most likely to survive after a nuclear attack are cockroaches, because they are so hard to kill. That's what many people want to be as a startup, initially. Instead of having a big, fragile glass that can break at the slightest blow, it is better to have a small, ugly but very hard to kill cockroach. indestructible.

ZOMBIES:

This is the kind of startups that investors run away from, and that their founders should realise in order to run away from the monster they have created. These are startups that are only kept alive by grants or venture capital funding. They are "non-viable" companies that will never grow and waste resources that could be better spent on other deserving startups.