Gone are the days of the highly valued and well-funded unicorn startups that leapt high but fell later. Having burnt their fingers with unicorns, investors are now shying away from them and turning their attention to cockroach startups that are slowly, but steadily focussed on building a robust business that can stand the test of time.
They are expected to perform where the unicorn startups failed to live up to investors and market expectations. Of late, many renowned unicorns have either been devalued, or have failed to raise sufficient funds, and have thereby scaled down operations. Quite a few other promising startups, as many as 1,000, which were founded in the prolific years of 2013 and 2014, have not been able to survive.
In view of this fact, the conservative, frugal, resilient and reliable cockroach startup seems to be the beacon of hope in the Indian startup industry which is still reeling from the after effects of their flashier predecessors.
Here’s what cockroach startups should do to not just woo back investors but also create real value in building a fundamentally strong business model:
It always pays to be original. True entrepreneurs are always fired by a unique vision to change how things are done and are able to spot a problem to be solved. It doesn’t always have to be necessarily a totally new invention or cutting edge innovation, but it should fulfil and solve the total problem of a consumer and not in parts.
Startups like BYJU’s are successfully running both offline and online/app tutorial classes in ed-tech formats, typically suited to Indian students. Ritesh Aggarwal of OYO Rooms initially wanted to start the Airbnb of India with Oravel stays, but realising the lack of quality and uniformity in the service standards offered by guest houses, he decided to switch to aggregating hotels with a standardised experience rather than focusing on home stays.
Related Article: Era of Cockroach Startups
Get Your Basic Business Economics Right
“Look well before you leap” should be the mantra of cockroach startups. Between a brilliant idea and the ground reality there’s a lot to be learnt about running a business. Cockroach startups should be thorough with the cost of launching and manufacturing a technology or product, the cost of acquiring customers, cost of delivery, warehousing and logistics, well before the starting block.
Unless the unit economics make sense and are viable, there is no point starting up a venture regardless of the novelty of the service, product or availability of funds. Well funded grocery delivery and food delivery startups like PepperTap floundered for this reason. In the words of the founder/CEO Navneet Singh, “We operated on a negative margin per delivery, and in such a scenario, the path to profitability looked very distant – at least two to three years.”
Understand Consumer Preferences, Understand Timing
The Indian market is still evolving and similar concepts successful in developed countries may not take off at all, no matter how good. It may be due to the availability of cheaper, convenient, and more familiar alternatives. Cultural mindsets and traditional practices can also come in the way of allowing a novel concept from being accepted by the users. Cockroach startups should study their customer profile and preferences well before launching new products.
An online, used high fashion clothing rental site Klozee shut down within six months in spite of funding. “We felt that the market is not prepared for this. We did not see demand shaping up the way we expected”, said co-founder Arman Haji. Translation, Indians didn’t have the cultural mindset to borrow used clothes.
Give Sufficient Time For Your Business To Grow
Remember the adage – “Rome wasn’t built in a day”? A startup should scale up or expand only when they are sure they can handle it without disturbing unit economics. If expansion means going into the financial red zone, lasting the whole distance will seem difficult. Investors too are now looking for sustainable and profitable business models.
Don’t Go Overboard Seeking Funding
Big investments always come with riders and dilute the control of the founders. The reckless cash burn during scaling up by ecommerce startups in the past years was partly dictated by investor interests. For cockroach startups to retain controlling interests in the company and have a say in the long-term, taking minimum needed investments is a better bet.
Working lean with less baggage and more care will fetch better results in the future for cockroach startups. It’s no surprise that most of the founders and founding teams are no longer in the picture for unicorn startups like Flipkart or Snapdeal.
There are no well-defined, textbook type definitions for a cockroach startup. But, if one looks closely, a cockroach startup is one that works within the aforesaid boundaries and should be able to sustain itself till the next round of investments are forthcoming or never arrive. It’s all about becoming self-sustainable eventually rather than depending on investors or others to fuel your growth.Start