When it comes to startups, whether you’re familiar with the terms “cockroach” and “unicorn” or not, your initial instinct would probably be a unicorn, not a cockroach. In both the startup and non-startup sense of the word, unicorns are magical creatures. Cockroaches sound decidedly less so.
In startup vernacular, a unicorn is a company valued at a billion dollars. A very cool amount of money, if The Social Network is to be believed. In highly competitive industries, rushing for that level of funding and recognition might seem like the only way to succeed. But unicorns, or companies that build their corporate strategy around attaining unicorn status, are often unprofitable and incredibly prone to failure. The candle that burns a billion times as bright, and all that.
So what’s a cockroach startup, and why should you want to be one?
What Is A Cockroach Startup?
A cockroach startup takes its name and philosophy from the idea that cockroaches are the most famously unkillable member of the animal kingdom. Cockroaches can survive just about anything, including a nuclear blast, and so should your company.
In more direct terms, a cockroach is a startup that focuses on profitability and sustainability from day one, rather than counting on a hypothetical future market share to make them profitable.
Cockroach startups keep initial costs low, often lack or consciously eschew venture capital funding, and are able to adapt quickly to market needs and opportunities.
It’s a model that focuses on making sure your company is still there tomorrow, and the next day, and the next day, and the next.
If you believe in your product and your company, and want it to be more than an outlet for investors to gamble millions of dollars on, you should try to make your company a cockroach.
How To Be A Cockroach
A company that turns a profit quickly, and sets foundations to stand the test of time sounds great, but it’s still easier said than done. Once you’ve decided that’s what you want your business to be, here’s how to go about doing it.
Profit Comes First
In order for your company to be sustainable, it needs to be profitable. Starting out, all of your decisions need to be made with short-term profits in mind.
This might run contrary to what you’ve heard about spending money to make money or looking at the big picture, and you should still do that. But you should also be asking “how soon will this bring in money?” about every spending decision.
Think about it this way: you don’t have a business until your business turns a profit. Once you’re making money, and know that your company can and will exist tomorrow, then you can focus on upgrading your workspace, and all the peripheral stuff that people think of when they think of startups.
Have a Product That Works
This might be a little obvious, but if you’re looking to make a profit as soon as possible, you need a product that you can sell. The idea or promise of a product might attract VC funding, but until you have it, your business isn’t going to make any money. Period.
Silicon Valley’s ultimate cautionary tale, Theranos, is a perfect example. Theranos gained a $10 billion dollar valuation on the promise of a miracle product. That product didn’t work. Theranos crashed and burned shortly after this was revealed.
The key to profitability for a cockroach startup is to take a fully functional product to market as quickly as possible.
Charge Money For Your Product
If you offer a physical product, this is hopefully an obvious step. If you’re offering some kind of software or service, you may be considering offering the core product for free, and making your money back on add-ons, ad revenue, and other outlets. It’s the model a lot of “successful” companies use after all, but many of them operate at a loss and you’re looking to make a profit right away.
If your product has value (which should be a given) then there’s no reason you can’t charge money for it. Set a price that accurately reflects the value of the product and the cost of producing it, and charge your customers that price from your very first unit sold.
Build Your Market Now
Some companies spend millions or billions of dollars on advertising, hoping to capture a hypothetical future market. Your ad campaigns should be focused on bringing in new customers right away, within the same quarter, month, or even billing cycle.
Brand awareness is a good thing, but if it doesn’t translate into enough customers to pay for the marketing expenditure, then you’re not thinking like a cockroach.
Consider promotions that will attract new customers in a concrete and measurable way. Referral discounts, free trials (not the same as offering free product), targeted ad campaigns, and SEO optimization are all ways to generate immediate results from your promotional budgets.
Hire Employees Who Understand and Invest In Your Mission
Without millions or billions of dollars in VC funding, your starting salary might be a bit on the meager side, and you’re probably not going to have all the bells and whistles around the office that big companies can offer. You might not even have a ping-pong table or a soda machine.
To start out, you want to hire people who believe in what your company does, and are willing to invest their time to be a part of it when it gets off the ground. These people should be in it for more than the money, or at least willing to defer a big payday to make sure your company is successful.
Be Prepared to Grow Quickly
Starting out, a cockroach startup is going to be fighting to gain and keep every single customer. The key to becoming successful with the cockroach mindset is knowing when the opportunity exists to grow rapidly.
Make sure your product, staff, and infrastructure are all prepared to take on a huge influx of customers. You may have started small, but you need to be ready to expand exponentially the second the opportunity hits.
Getting hundreds of millions of dollars in VC funding was never the only way to have a successful startup, and more and more it’s looking like it’s anything but a formula for success. By starting small, and focusing on profit and sustainability, you can create a company that can dominate where the unicorns have failed.