The startup world loves a buzzword and now we have a new one. Whilst I understand the sentiment behind it, I’m not sure it’s particularly helpful. Posts by Caterina Fake and Adam Draper about the Cockroach caught my positive attention, but on reflection I’m perplexed. A Cockroach is supposedly the name given to startup that makes it through current economic challenges. The origin of the term lies within a Paul Graham post written in October 2008. about why to start a startup in a bad economy. Since then we’ve moved on to the Unicorn phenomenon. Mark Suster has written about why he Fucking Hates Unicorns. I’ll follow up by saying that I’m not a huge fan of the Cockroach.
The definition of a Cockroach that has been put forward is as follows:
A startup comprised of resourceful founders who survive no matter what. Their competition ignores them but fears they enter their space. They are nocturnal, good at adapting to their environment and good at collective decision making.
Really? Are these not words we would use to define any good entrepreneur that’s built a sustainable business? The differentiation is not clear. What troubles me more is that we now appear to have a word for any business that is built on the basis of enduring value and sustainable competitive advantage. We shouldn’t need a word for this, it’s Business 101.
In responding to a potential investor enquiring about whether his fund has Unicorns, Mark says:
No. We fucking don’t. We have companies that became valuable through founders that sacrificed for years and through hard work — and partly through luck — achieved great things.
Too right. Aren’t these the sort of businesses that any investor worth their salt wants to be investing in?
I’m not a venture investor and I don’t have the experience of people like Mark and his peers. But I know that whilst the global economy remains fragile, funding markets have shown generally positive growth over the last few years, with available cash and low interest rates undeniably helping. The truth as Mark sees it is that:
Many unicorns have reached the status solely because the funding markets have said so. At least for now.
As Caterina points out in the opening paragraph of her post, the markets in general are shaky right now. They’re bearish for all sorts of reasons. Maybe current volatility is a precursor to something big or maybe it’s just de-frothing. No one knows what passage the markets are going to take.
Thank you Om Malik
Om Malik has written a similar article on his blog called Cockroaches, Unicorns, Startups. Enough Already! In his comments on Facebook he pokes fun at reporters who don’t know what the hell they are talking about and are looking for cheap slogans to put on their click bait bull shit headlines. I’m with you Om.
Solid businesses have survived major market fluctuations for years using skill and superior strategy, amongst many other attributes. They anticipate change and manage that risk (rest assured the good VCs have already mitigated their downside risk). They ride the market. They do whatever they can to prevent the market from riding them. That is off course unless they’ve benefited from a system that has allowed them to become over-hyped, over-funded and over-grown.
Markets lose their heads all the time. Once again, the tech world appears to be too. Startups come and go, I get that. But if you’re a business that is genuinely worth, or might one day hope to be worth, a $1 billion+ valuation then you’ve entered a different league. You should be able to work through it. If not, then the market will come full-cycle and call your demise. If you survive this cycle then big time hats off to you, but you don’t get a special name for it.