The Patronuses And Animorphs Of Startups

Expecto patronum!?

As 100% of millennials now know, Harry Potter’s video game is out. Hogwarts Legacy is probably the second most played program next to Chat GPT.

It got me thinking: startups have their own patronuses.

If you need a refresher, patronus’ are the animalistic projections of a wizard’s spirit that protect them from evil dementors. Harry’s is a stag. Ron’s is a jack russell terrier. Hermoine’s is an otter. Dumbledore’s is a phoenix. McGonegall’s is a cat.

And come on, startup founders - ego aside, we can think of ourselves as wizards. At least for the metaphor.

Point is: startups have more than just unicorns to cast now - these days, there are several other animal representations for different stages, growth and milestones.

Unicorns are startup companies valued at $1billion within their first decade. Critics say, though, that focusing on this one metric - revenue growth - ignores a lot of other important factors.

So, we have gotten more granular.? Here are the other projections that have emerged:

1. Zebra: a hybrid with stripes of profit AND purpose
2. Camel: survivors in harsh, cash-strapped environments
3. Gazelle: legitimately typically found in Africa, these grow FAST
4. Donkey: an overvalued unicorn
5. Clydesdale: Companies between $1-5mm in annual revenue. Not magical creatures, but majestic.?
6. Mosquito: Designed to score, like the insect. Can be small, but mighty, and are survivors. All startups are mosquitos (or should be).

There’s nothing wrong with magical creatures. But we shouldn’t knock the majestic creatures, either.

When it comes to the animal (or wizarding) kingdom, it’s survival of the fittest. Let’s go on a safari.

Zebras

Show of clicks: who was obsessed with the Animorphs books as a 90s kid? It was the sensational series found at Scholastic book fairs, that validated our inner animal “muses."?

Entrepreneurs seem to have woven this beastly fascination into their businesses - starting with "unicorns." In 2013, VC Aileen Lee coined the term - cue "unicorn" mania, and our first slide into using the animal kingdom as a labeling system. But a “unicorn” is not real - rather, they glorify a mentality and outcome in business that is just not sustainable.

Eyeing unicorn status *exclusively* practically means tanking. Or, if you find one, it means a host of danger and drama (see: Facebook, Uber).

Some of us kids might have made it a "Big Foot" mission to find a unicorn, maybe gunning to this day...but most of us got real. And naturally, the startup landscape shifted to more realistic mascots.

"Zebras" are businesses classified as companies that are financially successful, AND operate with deep purpose.

Dr. Astrid Scholz coined this genius alternative - because they’re “both black and white.” She wrote about the broken venture capital system that chases after “unicorn” companies bent on “disruption rather than supporting businesses that repair, cultivate, and connect.”

What else makes a "zebra?"

• Often they forgo venture funding, shirking the traditional “grow fast or die,” quantity/shareholders over quality/community mentality
• They strive for mutual benefit, plurality vs. monopoly. Think of how the animals travel in herds - they’re stronger together.
• They're more focused on process vs. product

Zebras are NOT necessarily non-profits - though, one of many challenges they face is being stuck in limbo between NPO and for-profit archetypes.

Other reasons they're rare:

• The culture and demands of investors stuck in their toddler years vying for unicorns ONLY
• “Wicked” social problems that many zebra companies are tackling aren’t solved with an app. It takes research and time.
• Many zebra companies have women and other non-white male founders. 3% of venture funding goes to women-founded companies and >3% to BIPOC-founded companies.

Striving to find a unicorn is a horn dream (get it?!)

The work of Scholz to shake the collective delusion and hunt for "unicorns" is something that should be shouted from the rooftops! And what else should be?

The Zebras. Check out the Zebras Unite Coop https://zebrasunite.coop/. It’s a movement to gather zebra founders, philanthropists, investors, and advocates to enlighten the entrepreneurial world - and world as a whole.

Camels

Camel Cigarettes’ branding couldn’t be more off-base. They do the opposite of what “camel” companies do.?

First of all, a “camel” startup company is one that’s built carefully and strategically. They’re built to survive. Oh, the irony.

I’m not done with the “shade.” Our animal camels quite literally can’t get enough of it, either.

Those sought-after “Unicorn” companies? Don't get me wrong, they shouldn’t be compared to nasty cigarette companies…. but let me make the case that “Team Camel” is where our allegiances as entrepreneurs should lie instead.

The term “camel” was stamped by investor Alexandre Lazarow in his book “Out-Innovate.” He also calls them “Frontier” startups, as they’re budding outside of Silicone Valley. He, along with a host of other skeptics like Astrid Scholz, enthusiastically denounces the “unicorn-or-bust” mentality of old.

“Camel” status, on the other hand, shirks that “grow-fast-or-die” ideology at its core. Just like the animals sauntering through the desert minding their own business. It’s about survival and sustainability, not who makes it to market first.

Camels are exclusively found in the wild in Earth’s most damning environments - the desert.

“Camel” companies are built to survive the proverbial “desert” outside of the unicorn’s habitat of Silicon Valley - market and global crises, instability and scarcity of funding.

How? They:

• Prioritize balanced growth, low burn rate and high efficiency over rapid growth. They opt to grow in spurts.
• Maintain reserves for tough times (aka their “humps”), and fill up in good times.
• Are not in a race for venture capital - in fact, they’re aware that funding too soon can sabotage their balance and hopes to meet business expectations.
• Keep tabs on profitability, and are in turn nimble with their processes. Specifically, and prioritize cost management in order to develop scalable operations.
• ?Diversify from the beginning, investing in multiple markets as well as multiple business lines and products. If one flops, there are others to pick up the slack.
• Focus on unit economics before scale vs. splurging millions on marketing and bothering later.
• Highlight hiring the right team and are committed to business-building fundamentals.

“Unicorns” are obviously impactful - but they’re wasteful. I mean, they just flippantly shoot glitter and rainbows like they’ll never run out!

“Camels,” though, are cautious. They’re in it for the long-game. Who needs glitter when you have sand? And when lightning strikes sand…you get glass. Basically magic.

Gazelles

Wholesome fun fact: in Canada, “unicorn” companies are called “narwhals.”

This is geographically appropriate (narwhals are native to Canadian waters)..but it also reflects the humble stereotypical nature of Canadians: they chose an ACTUAL animal vs. mythical.

Unicorns are a) not actually all sunshine and rainbows and b) not the only zoological species of startups. It’s just a fictional one.

There’s zebras, camels, and our star of the section: gazelles.

All of the above overlap some with unicorns. Facebook was once a gazelle before it lost all but one horn and gained magical powers. (but I’d reckon this particular “gazelle” is safe from your average predator).

“Gazelles” have evolved from their original meaning, and the term has been in business longer than "unicorn." Economist David Birch coined the term in his 1987 book "Job Creation in America: How Our Smallest Companies Put the Most People to Work."?

It was defined exclusively quantitatively: a high-growth company increasing revenues annually by >20% for 4+ years, beginning with a base of $100k.

The updated description is broader:

A successful, fast-growing startup generally founded in Africa, a foil for Silicon Valley’s unicorn - defying the sparkles and $$ of its habitat. Usually the burn is slow before robust growth.

They're known for job creation, credited as powerful forces for entrepreneurial economies like the US. They make up ~<4% of American companies, yet 70% of new jobs.

There's no consensus on numerical criteria. Some people subscribe to some adaptation of Birch’s revenue ranges, and for others like Senegalese venture capitalist Marième Diop a “gazelle” might be a company valued at $100mm+ that generates $15-50mm in revenue.

Let’s explore the gazelle’s natural habitat.

Venture funding is scarce in Africa. Context: in 2018 VC investments peaked at $1mm, yet breached $100mm in the US. Despite the odds, Africa has born a few “unicorns” - but as rare as they are in the US, fair to say they're even rarer in Africa.

So, gazelles prance more freely - though some bounce along longer than others.

Other features of a gazelle:

• Often tech startups, but also include other industries
• Typically see their sales pace slow after ~5 years
• According to INC Magazine editor John Case they’re somewhat older than small companies?

I’ll end with a quote about gazelles you might have heard outside of the labelling metaphor:

"Every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. It doesn't matter whether you're a lion or gazelle. When the sun comes up, you'd better be running."

“Gazelle” companies are more than prey for lions. Lions aren't yet a startup species afterall.

Donkeys & Dung Beetles

What do “donkeys” and “dung beetles” have in common in the startup universe? Investors don’t want either of them.

Donkey companies are laughable, jokes, “asses.” (It’s actually unfair to the animals, as they’re pretty hard-working, load-bearing, valuable and even cute. But they get the shit end of the proverbial stick in our society’s metaphorical library and vocabulary).

But “dung beetle” companies? This is definitely an appropriate match. They are just gross, indisputable con artists.

Let’s hee-haw and roll like the mascots above and chat why “donkey” and “dung beetle” companies have no redeeming qualities:

Donkeys:

A donkey is basically an overvalued unicorn. A company that is not profitable, that can’t justify their inflated initial valuations, and can’t hold up their promise. In reality, many “unicorns” are donkeys wearing those unicorn full-head masks.

A fabled unicorn is a startup company valued at $1billion within their first decade.Critics say, though, that focusing on one metric - revenue growth - ignores a lot of other important factors like churn or customer lifetime value vs. customer acquisition cost.

The extreme and exclusive focus on gargantuan scale overshadows basics of economics and reality. They play a dangerous, fictional game framed by capital needs, bombastic valuations, unrealistic expectations and poor judgment.

They are not predicated on revenue or are dependent on indirect revenue. They fail to follow the Fundamental Rule of Growth.

An extreme minority evade the likely fate: the rest eventually squandering or losing access to capital, skidding growth and valuations, and as they fall, their unicorn masks slip off.

Donkeys, then, A.S.S.U.M.E - they make an Ass out of U and Many Entrepreneurs.

Dung Beetles:

There’s a lot to reference in this apropo name - the grotesque insect, as well as “dung beetle” companies, spend their lives rolling around a turd that’s much bigger than themselves. AKA, they’re crocking sh*t.

But another name - an alias - offers a deeper, sinister yet clever insight: dung beetles are also known as “scarabs.” Lipstick on a pig.

Somehow, scarabs were revered by the ancient Egyptians who reinterpreted this inconceivable “purpose” as the sun crossing the sky?? They were duped to worship the sacred scarab despite the truth.

“Dung beetle” startups are defined by a “visionary” founder that dupes investors into believing their bullshit is actually legitimate, meaningful, and valuable. What example comes to mind?

Elizabeth Holmes and Theranos. 'Nuff said.

The Difference Between Dung Beetles and Donkeys:

Dung beetles are insidious, malicious, manipulative, sometimes criminal AND inept. Donkeys might have had the right intentions at the start, and likely have legitimate products/services… they’re are just inept.

Regardless, investors should check out alternative exhibits at the zoo.

Other Mythical Startup Species

I’ve highlighted “zebras,” “camels,” “gazelles,” “donkeys” and “dung beetles” and, for better or worse, they’re all actually very real. Not elusive or fabled as “unicorns.”?

But unicorns actually aren’t? the only mythical species we entrepreneurs have cast in our startup sitcoms. There’s phoenixes, pegasuses/decacorns and hectocorns, too.

The Phoenix:

The “unicorn” OUTSIDE of Silicon Valley, with a much more impressive track record. Yes, its another Harry Potter reference - Dumbledore’s Patronus -? but its actual history and mythology runs deeper.

The phoenix is an immortal bird that dies and rises from the ashes of its predecessor. It symbolizes immortality, resurrection and life after death. The ancient Greeks and Egyptians associated it with the sun god.?

You might be able to guess where this is going.

“Phoenix” companies are those that are >100 years old, but their success ebbs and flows.? Aka they “die,” and ressurect, often when a younger leader takes over and innovates. Aka, they strive for longevity, and reinvent themselves.

Lobsters could be the mortal equivalent - they shed their shells, and are incredibly vulnerable in the meantime of building a bigger, stronger one.

Reid Hoffman created this concept, and underlined why this is the mythical creature to strive for instead of “unicorn.”

The Pegasus & Hectocorn:

Next up, the “unicorn”’s more profitable mythical cousins: Pegasuses (otherwise known as “Decacorns”) and Hectocorns.?

Let’s start with another familiar one: Hercules’ BFF, Pegasus. *not to undermine its mythological importance but let’s be honest, that movie lives rent-free in my generation’s heads*

Investor Jason Calacanis says that the “‘pegasus’ is so profitable that it is able to use its profits to soar high, skipping multiple rounds of funding.” They’re valued at $10 billion or more.

Clearly, beyond the power of a unicorn. They might not have a horn, but they can FLY, dammit! These include Lyft, Stripe, Uber, Airbnb.?

Moving onto “hectocorns”: they can fly higher, shall we say they’re magical astronauts. They are companies valued at $100 billion plus.

We do seem to fancy the magical, mythical, don’t we? That’s part of what make us human. But we have to remember what makes them magical - they are so rare, that they’re beyond reality. It takes a TON of faith to conjure them.

They’re aspirational names, and that’s great. Let’s not abandon our mortal world, though. Here’s a roster of some more earthly metaphors.

Other Mortal Startup Species

Time to give the mortal startup alias’ their microphone. I’ve captured several mortals so far in my previous musings - zebras, camels, donkeys, dung beetles. The former are encouraging animal monikers, the latter half… definitely not.?

As time goes on, we concoct more and more granular animalistic reps. As far as the animal kingdom goes, everything that the light touches is [ours]..

And as we know, all animals are related, all part of the pneumonic device for the scientific hierarchy: Kingdom, Phylum, Class, Order, Family, Genus, Species (sung to the tune of SuperCaliFragiListicExpiAliDocious).

There is overlap in the business application, too. BEAR with me as I summarize these beloved fellow animals:

1. Clydesdale horse: Companies between $1-5mm in annual revenue. Strong, majestic, with an impeccable consistent reputation.
2. Mosquito: A confusingly unsavory synonym for any startup. Designed to score, like the insect.?
3. Cockroach: Maybe we should rename these the much misunderstood east coast, non-sh*t eating Palmetto Bugs. These are focused on profitability rather than growth. They're not pretty, but they’re survivors. Coined by https://www.dhirubhai.net/in/davemcclure/ of 500 Startups, they sustainably grow in the shadows, aren’t headline-makers and pop-up here and there.
4. Elephants: Typically Fortune 500 companies, these are big corporations (think IBM) than can both stomp on AND lift up smaller companies. They have their SOPs and internal structures down and high employment.
5. Mice: These are our mom-and-pop businesses. They have low staff numbers, innovation and growth but pad the economy and are the heart of entrepreneurship.
6. Gorillas: a step-down from elephants, these are non-monopoly specialists with large market share. https://www.dhirubhai.net/in/geoffreyamoore/ coined this, adding they’re fierce opponents with competitive pricing and breadth of product. Think: McDonalds.
7. Rhinos: A mortal unicorn, that differs in that they want to be big AND profitable. https://www.dhirubhai.net/in/nicholas-a-nash/ defines these as companies with $1+ billion valuation based on price-to-earnings, not revenue.?
8. Pigs: Companies that wield how easy it is to make an internet product. They often raise money through kickstarter, with the end goal of selling to a large company like Google or competitor at the right time.
9. Bears: Defined by not taking VC money, they’re loners like the animals. They bootstrap with a high-risk-high-reward: with success, they are loaded AND still hold the reigns.
10. Ants: These are companies that are content with the breadcrumbs - or at least don’t know any better. They depend on being good enough for customers to come to them.

The Animal Kingdom is constantly evolving through natural selection - and this business metaphor follows that formula. Each animal has its place in this world, however obscure, and even the bad ones are there for a reason: to teach us a lesson.

The business-to-zoo pipeline is refining. And this zoo we have curated will hopefully only get more ethical.

#startupzoo #animorphs #startupspecies #startupcreatures #unicorns #zebras #camels #gazelles #donkeys #dungbeetles #theranos #gorillas #rhinos #mice #pigs #bears #ants #elephants #cockroach #mosquitos #clydesdale