Zombie businesses Or why is speed important?

Did you know that Venture investors have such a concept as: “zombie business” or “startup zombie”? For them, it's an investment that grows too slowly or doesn't grow at all.

There is enough money to feed the founder and the team. But there is no growth speed that would lead to an increase in capitalization and create the potential for a good exit.

If a business in this state lasts for several years, then for the economy of a venture fund it is a lost investment. It’s unprofitable.

In 2014 the General Catalyst Partners and Accel Partners funds abandoned their stake in the Island hotel booking service. The investors realized that this business was not growing at the desired speed, and it was more profitable to exit it. The economy of the business didn’t add up. So instead of selling their shares, they simply abandoned them.

What are Zombie businesses?

Still, these so-called “Zombie businesses" think for some reason that their economy is different. Yet, it competes for the same money in the same financial markets. The cost of money for a real business is the same, and the rules of the game are the same. The only difference is that VCs can count. Here’s why:

Even though these businesses think they are “too big to fail”. Venture capitalists (VCs) know that these businesses depend on life support from banks and VCs. So if this zombie business does not grow at the speed of a startup, then he will not receive this money.

That’s one of the reasons why the expectancy of a zombie business tends to be highly unpredictable.

If you are not growing, you are dying

As an entrepreneur, you have only two resources to create a business: money and time. If money is not given, then you must invest time. Most small business founders invest all their time in their businesses. Because they haven't got the money. But without the money, the result will never be as good as with.

As a result, you sacrifice spending time with your family and friends without results. Even as an entrepreneur this is painful because you still have one life.

The competition doesn’t end for only finances. If you chose to build with only time as your investment and there will be someone nearby as fast as a startup and invest money like a startup. Then he will take not only your clients, but you would also lose your team and you won’t even notice it.

Think of your business as a startup

What would you do if you were at the age of 40-50?

Many entrepreneurs by this age find that the business they were in is over or about to end. And they crave to start a new business, but there is no longer a resource to start over.

This wasn’t the case in the middle of the last century. Then it was still possible to create a business that would simply feed the family and a certain number of people around.

Till everything changed...

At first in certain areas after the arrival of a transnational corporation. And later when the internet arrived - the playfield changed even more - and it put everyone in a condition of fierce competition.

Small businesses are competing with corporations AND a huge number of more efficient players around the world. As a result, more and more niches will merge and in the end it will turn into a red ocean. The forty-fifty-year-old business owners’ will burn out even faster as collateral damage.

How to prevent becoming a Zombie startup?

The one and only way to avoid this is to grow very quickly. Because if you don't do it, you won't find yourself with the time and energy for another attempt. That's why you have to think of your business as a startup.