We need some alternatives to ‘Unicorns’
Startup Language is broken and we need to fix it
When we launched the founders survey last year, founders told me they were utterly unsurprised by the results while investors and ecosystem partners felt there were quite a few unexpected findings. That disconnect is a problem. It’s a problem with communication, positioning, policy, and openness to engage, but it’s one that I feel Scotland has the unique capability to be a world leader in solving.
Founders often get contorted into showing how their idea can grow into a unicorn from perceived pressure from the local and global ecosystem, and investors feel the temptation of wanting to invest in unicorns but not ones that need lots of additional funding. The government and ecosystem don’t help by holding up unicorns as the ultimate goal of any startup, and feeding into the silicon valley mentality of fly or die without a majority of founders or investors actually wanting that, but feeling like they have to play the game.
It’s all a bit ridiculous, and so utterly wasteful. There are so many founders who may have an idea of a really good, sustainable, highly profitable business, but one that isn’t appropriate for a venture scale path. Likewise there are investors who actually don’t want unicorns, and would far prefer profitable, sustainable businesses. The problem is, we lack the vocabulary to articulate what we want, and we have a fear of closing off opportunities no matter how remote. That thinking muddies the water, and leads to problems that result in failed businesses, failed investments, and founders assuming they should take their ideas elsewhere.
Rob Walling from TinySeed made an excellent point at TuringFest last year - 90% of startups should be bootstrapped (grow predominantly through revenue), 9% should take so-called indie-funding, and only 1% are appropriate for VC. To be clear, that’s not the top 1%. The VC path exists for companies with specific requirements involving a combination of high risk, significant capital need, medium term capital inefficiency to enable rapid market-share growth.
I spoke with one member of the ecosystem who said “It’s the Scottish psyche that’s the problem. We’re too old fashioned and too conservative.” I disagree. Firstly, the survey shows that the ecosystem is as mixed as anywhere else when it comes to risk appetite albeit skewing heavily towards the conservative. Secondly, wanting to invest in sustainable, profit seeking companies that actively want to make money and solve problems rather than chase round after round of investment isn’t old-fashioned, it’s fashionable! Look at the likes of Calm Company Fund (formerly Earnest Capital), TinySeed, IndieVC, the Zebra Movement - it’s completely okay to adopt that posture and there are countless examples to hold up to highlight that the amount raised is just a vanity metric.
The issue comes with the disconnect about these expectations. The Scottish ecosystem, like others, suffers from a double-sided fear-of-missing-out marketplace. That FOMO leads to everything from vague investment theses to un-targeted grant or funding opportunities. If we can’t be clear about what we want to invest in and support, then founders can’t feel empowered to build what they want to build without worrying about appearing too unambitious. And founders need to be honest with themselves about what they want to build and what they need to get there, and not get swept up in adopting role models that advocate finance journeys that don’t make sense for what they want to build.
There’s a great opportunity here to introduce world-leading articulations about what it means to be a successful startup. We mustn’t be afraid to be clear about what we want to build; the terminology will follow.
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