When you think of start-up culture and business growth, the term often used is ‘unicorns. They are the rare corporate structure, product or service that fulfills an essential need overlooked in a consumer or B2B sector. Unicorns rise rapidly, but they are increasingly rare. The overnight success story that investors love to explore for growth opportunities.
But one of the downfalls of a ‘unicorn’ start-up or business entity is risk. The rapid rise in demand, sales or customer adoption also comes with a substantial amount of risk. They are highly valued. Some economists say overvalued, frequently.
The term ‘unicorn’ was coined by Venture Capitalist Aileen Lee in 2013. Lee is the founder of Cowboy Ventures and provides seed funding for businesses that solve work / life balance solutions that optimize productivity. Interestingly, the logo for Cowboy Ventures features a Zebra.
From 2003 to 2013, only 39 start-ups in the United States that qualified to join the “unicorn club”. Businesses valued at over $1 billion by public or private market investors. Overall, the unicorn start-up represents just .07% of all venture-backed enterprise start-ups, according to TechCrunch. But they have become more frequent in recent years. And super unicorns with a valuation of $100 billion or more, are exceedingly rare.
The rules of a unicorn enterprise start-up, or the trajectory and growth of these types of businesses include:
· Exponential growth
· Establishing a fast monopoly
· A focus on quantity (not always quality)
· Elimination of the competition
· Rapid user acquisition
The PitchBook Platform stated there was a high of 302 active unicorn companies worldwide in 2018.There is an average of 60 new unicorn companies funded and launched annually. The majority of unicorn business are founded in the United States, representing approximately 62% of all VC backed new ventures. Only 1 in 10 new start-ups make it past the five-year mark.
What is a Zebra Business Model and Company?
Put best, unlike unicorns, Zebras “are real”. They are a more pragmatic and structured approach to launching a start-up enterprise. Rapid growth is replaced by sustainable development and sales, while building the foundations for long-term success. Not just building a company to sell it for a $1 billion valuation as quickly as possible.
But the culture of a zebra company is quite different than a unicorn start-up model. Start-up circles began to talk about a new model that would be more resilient.Instead of rocketing to success in the shortest period of time with the goal of a selloff, the zebra company methodically builds a foundation. Roots to support growth as a strategy from the start.
Some of the unique characteristics of a zebra company are:
· A commitment to both profitability with non-profit and goals to improve society.Zebra companies have a strong social element that is a commitment to make the world better in a measurable way.And founders of zebra companies do not sacrifice those ideas for the sake of scalability and rapid growth.
· A community orientation.They band together instead of aggressively competing with others in their sector.Not only does this foster strong co-marketing relationships, but it also makes zebra companies more collaborative. They share innovation, solutions and support one another is reciprocal trade, manufacturing or supply chain management.And they protect each other from competition with companies that are external to their local group.
· That they are highly efficient with capital.This is a departure from the traditional unicorn start-up model, where is “big investment, big capital, and big spending to achieve rapid growth”.Funding for zebra companies can be limited compared to the large unicorn start-ups.So, they are more pragmatic when it comes to expenses and capital management.
Unicorn ventures are generally insulated from many of the adversities that face start-ups in developing nations. For example, in Silicon Valley, there is a supportive infrastructure both by the state and federal governments.Geopolitically, unicorn start-ups do not face the same frequency of adverse events. Such as wildly fluctuating currencies, inflation, political upheaval and large-scale natural disasters.
Zebra entities however, plan for this adversity.Which is why they are closely networked with other businesses in their region.Consequently, Zebra companies anticipate disruption. So, at the core of their structural planning is a strategy to overcome expected problems.That can make zebra companies more successful, and resilient in times of adverse economic factors.
The Advantages of a Zebra Structured Company in Latin America
Michelle Arevalo-Carpenter recently wrote an article for Entrepreneur magazine that focuses on the advantages of zebra companies in Latin America. Carpenter writes that this new company structure is one of the key factors to the success and high growth of domestic businesses in LATAM countries.
For some valuable insights, read: “Zebra Companies, Not Unicorns, Will Rebuild Latin America’s Economy in 2021”.
The standout advantage for zebra companies in Latin America, is that they plan for longevity. Those decisions (and staying true to mission and vision for the business) creates a more stable growth.Slower than unicorn style start-ups, but more resilient. And Michelle Arevalo-Carpenter makes the point that LATAM economies should focus on sustaining the growth of zebra companies, rather than attempting to encourage unicorn model start-ups.
Because zebra companies are deeply connected and ingrained with their local communities, there is tremendous support for success. It is like the story of the tortoise and the hare.For investors, there is an opportunity to see long-term returns, with lower risk, than high-risk short-term growth that may not be sustainable.
In 2020, there were twenty-two (22) unicorn entities located in LATAM countries. There is a great resource and infographic provided by contxto, that demonstrates some of the highest-growth start-ups in Brazil, Columbia and Argentina. Companies providing SaaS predominantly, from fintech to fitness, and food delivery apps.