"What goes up must come down." This classic quote from Newton seems to hold true now more than anything else 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. Enter the cockroach startup!
Now, what's a cockroach startup, anyone who has dealt with cockroaches would know that cockroaches are by far the most resilient of pests and this seems to what investors are looking for in startups. Resiliency to stay afloat as investments dry up, in difficult times while one is burning at a steady rate. Investors, strangely enough, are not looking at how successful or how much money you are making, rather they want to know how long can you hold on and keep chiseling away.
How do you know you can be a cockroach startup?
There are no fixed textbook definitions for a cockroach startup, but a good, healthy startup which can sustain even if the next round of investments may or may not come, is a good indicator. Most startups lose steam a year into business and then the starts the real test of sustenance. We bring you 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're not profitable, but the idea is that the business will reach "scale" first. Before concentrating on making money it's won plenty of 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 spends and comprises of a lean team using frugal marketing, their focus would be more on making some real money and less on capturing the market.
The vision and not the salary is the 'Hero': Unlike Unicorns who pay ridiculous salaries to attract and retain talent, cockroach startup's usually paid lesser than market standards. They attract and retain talent with their vision and commitment of taking their startup places. This stems from the deep faith in the startup idea, 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.
Spends on fixed assets: Most cockroach startups would keep their fixed asset spends to a limit, considering the more the spend, the faster the burn. They would spend less on office systems like laptops and printers which have a cyclic maintenance or up-gradation cost. So instead of buying many printers, they would buy only the number of printers practically required.
Live below your means: The start difference between a Unicorn and a cockroach startup is the way they conduct themselves. Unicorns would have swanky offices, employee perks, team outings and other jazzy stuff, whereas cockroach startups would be having simple offices or even shared office spaces to save on office rent. In a cockroach startup, any kind of extravaganza would be avoided. Employees would be either on consultancy mode or on a part-time basis unless they form part of operations or sales. 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 has always been the core focus of any startup, but somewhere down the line, this focus shifts to funds generation. While generating fund is important, this cannot happen at the cost of losing customer focus. As log as customers see the value in the product/ service they would keep coming, most cockroach startups are customer-centric and focus on customer requirements.
While every startup dream would be to be a Unicorn, the real winner at the end of the day could be a cockroach startup. There is a buzz 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 of cockroaches.