Is Bigger Always Better for Tech Star-ups?
Hyper-growth can be an unrealistic goal for some, but that should not stop investors
Unicorns are SO last year. Now to make the headlines your company has to be aiming for Multicorn status. And if that all sounds a bit on the Green Giant side, or like something out of Legend, you’re not alone.
For those in the know, Unicorns are, of course, technology companies that have reached a billion-dollar valuation. Which would make a Multicorn — you’ve guessed it — those valued at several billion.
Fear not, however, it gets curiouser and curiouser, as my literary namesake would say.
Recently I was treated to an article that nonchalantly referred to a Soonicorn. What’s next, I wondered, Loonycorns? Wait, we’re probably already there.
I recently came across the term Soonicorn. What’s next, then? A Loonicorn?
Is this emphasis on hyper-growth actually constructive? Or does it distort our sense of value to the point where it becomes destructive to smaller, perfectly viable businesses? When asking an entrepreneur friend of mine (who, incidentally, as a female founder, is a rarer beast than any mythical creature) how her latest funding round was going, she told me she was quite pleased at having raised a million in seed funding.
Is this constant emphasis on hyper-growth actually constructive?
Now, depending on where you’re sitting, that either sounds like a decent chunk of money, or very small change indeed. My friend was somewhere in the middle, planning to use the money to grow her business steadily and sustainably to the point where the company was self-sufficient.
“At that rate you’ll never make it to Unicorn,” I joked.
To which she replied that she’d be more than happy with a fraction of that. A mere Corn, perhaps?
This conservative approach towards steady and sustainable growth feels so unnatural in the frenzied whirlpool of technology investments that it might just turn out to be a revolution in disguise.
A more conservative approach may prove to be revolutionary
Many investors and entrepreneurs alike seem to be waking up to the fact that not all companies are suited for meteoric world domination, and that hypergrowth should not be the only yardstick by which success is measured.
Not every product appeals to a mass audience. In fact, much of the beauty of technology lies in its ability to cater for endless niches. Growth for growth’s sake, without the ability to deliver a reliable service, is actually a disservice to users.
Much of the beauty of technology is that it can cater for endless small niches, so expecting every product to appeal to a mass market is, to quote Monty Python, “silly”
Yet companies with perfectly valid business models fail every day because they are pushed into growing too fast, where if they were given time to mature at a slower pace they might have succeeded.
Of course, some companies do take well to hyper-growth, specially those that operate data-based value propositions requiring large user-bases to feed them information. However, it’s naïve to adopt a one-size-fits-all approach to judging the infinite variety of ideas competing for our limited bandwidth.
It’s naïve to adopt a one-size-fits-all approach to judging the infinite variety of ideas competing for our limited bandwidth
We’re constantly told that companies in tech have to either succeed big or fail fast, but finding a middle ground could give investors a whole range of viable options. Betting huge sums on hyper-valuations is a game for large VC funds with deep pockets, but smaller investors might find it rewarding in the long term to enable viable businesses and collect more modest returns.
Betting huge sums on hyper-valuations is a game for large VC funds with deep pockets
It seems to me that there’s room in the forest for everyone. The tech ecosystem is now mature and diverse enough to sustain a much broader variety of mythical fauna, and we should make way for the little guys too. It’s a magical time indeed.
We should make room for the little guys too, it takes all sorts