What Can Startups Learn From Camels?By Alejandro Zecler | Tue, 08/23/2022 - 09:00
Much has been said about the Latin American startup ecosystem in recent months. The situation is impossible to ignore: the rise of emerging companies with accelerated growth thanks to technology made room for new industries that changed business models and economic sectors forever. Fintech, proptech, and healthtech are just a few examples.
With the arrival of global venture capital funds in the region, investment started to flow. The ecosystem flourished and it was then that the first unicorns appeared - companies valued at more than US$1 billion that are not listed on the stock market, often with the mentality of “growth at all costs.” Soon, Latin America became fertile ground for these mythical creatures, which currently number 33 companies distributed in countries such as Argentina, Brazil, Colombia, Uruguay, and Mexico.
However, despite the digital wave that accompanied the pandemic, the recession that followed, high inflation rates, and the effect of the war in Ukraine changed the macroeconomic scenario to a much more unpredictable one compared to the 2021-2022 period. Uncertainty became a currency, and the “parties” that had accompanied the large investment rounds disappeared in the face of a “bull market.” Companies pursuing unicorn status had to confront limited resources and more responsible growth.
Today, the context is very different from a couple of years ago. Unfortunately, the wave of massive layoffs has hit the Latin American technology sector hard, and also impacted more solid markets such as North America or Asia. However, far from painting a hopeless scenario, this new normality has resurrected a simile, which, although not as fantastic as a unicorn, is more resilient: the camel.
A camel is a resilient animal, a fundamental characteristic of startups but one that seems to have been forgotten in recent years. Let us remember that camels are capable of surviving in the harshest environments with little supply of water, yet with a more developed sense of adaptability than other animals. Faced with a more unpredictable macroeconomic reality, companies (and not just startups) must adopt a camel-like approach, an approach that’s more far-sighted based on three elements.
First of all, startups should focus on seeking sustainable growth. The mandate now is to move away from “growth at all costs” and get back to basics. This means that they must design a long-term vision, in which diversification and resilience are essential. It is not about abandoning ambitious goals, but about developing a more humble and realistic vision and considering that the road will be longer.
Just like camels, the strategy for tougher times should focus on efficiency over the reckless chase of speed and leave unrealistic growth plans aside. Again, this does not mean sacrificing ambition, but going for a more balanced approach. In other words, prioritize balance instead of an excessive burn rate.
Secondly, startups must understand that what characterizes them is offering a product that solves a specific problem; therein lies its added value. Again, to reduce the burn rate, it is necessary to sell technological solutions or products at a fair price and avoid subsidies. Although it can be very tempting to cheapen the product to get customers, the reality is that an effective solution will speak for itself. This also sends the right message to the market about the quality of those solutions and their credibility with those customers.
Finally, managing expenses and adapting them to the current context is crucial; especially if the projection is long-term. It is not realistic to spend the resources hoping that more rounds of investment will come easily. Like camels, startups must have the ability to go through difficult times without compromising their business; that is the most challenging part of having healthy finances.
While camels might not be as visually appealing as unicorns, their resilience, humility, and survival skills mark them as excellent survivors. If we translate these characteristics to a business, it is clear that the combination of these elements can be useful for startups, and for any company that seeks to survive a more adverse environment.
At the end of the day, we shall remember that for a business to be profitable, it takes time and patience, a team with the right profiles (and commitment), and a reliable product that customers would recommend. These characteristics are what will lead startups to reconnect with the entrepreneurial and resilient spirit that characterizes them, and that also characterizes camels in their quest for survival.