Unicorn Companies vs Zebra Companies: Which One Should You Have
Major Points of the Article
Unicorn companies have a high risk, but are the dream of most young entrepreneurs as it is believed to create the biggest financial return.
Zebra companies are better as you will create a sustainable, growing, and profitable business that will create a great return on your investment.
You shouldn't view these two company types as only for a new business. In fact, it can be for any new spun-off venture, branched business line in your established business, and even when you are expanding into new geological regions.
Whenever you start, grow, or spin off a new venture from your main business, there is going to be risk. And, depending on what strategies you put in place at the beginning will determine if you will be a Unicorn company or a Zebra company.
But which one should you be? Firstly, let's define what these companies are and then establish why one of them is better than the other.
What is a Unicorn Company?
Typically, unicorns are seen as magical and mythical one-horned horses, and in business, they are comparatively the same. They are exceptionally rare businesses that have (appeared to have) magically increased their valuation to over $1 billion dollars in a short amount of time. This term was first coined by venture capitalist Aileen Lee in 2013, and it has become the ultimate goal for most young start-ups.
However, achieving the unicorn title generally comes with specific limitations with what is often seen as unachievable goals.
To grow a unicorn you will need to:
have exponential growth, also called the hockey stick
strategise to have an exit or liquidity event with a 10x return for the investors
be the monopoly of the market (or have the greatest market share)
be a privately owned company
usually, be a tech company or heavy tech solution
focus on growing user acquisition
push the quantity of sales, rather than the quality of sales
and, often are not profitable, but survive on investor money with what is called their burn rate.
The biggest concern of the list above is if you want to achieve a unicorn then you not only need a solution that exists in a monopoly, but you will forever be chasing investor money to satisfy that burn rate. This burn rate is created because your company will spend everything it can to grow user numbers as quickly as possible.
Not only that, you will have to give up very large portions of equity as you gather more and more investor money.
What is a Zebra Company?
Essentially, a zebra is a black and white animal that exists in a herd with others. And, the same can be said for a zebra company. It is a company that is black and white, exists amongst many other players (i.e. part of a herd of companies supplying similar products/services). and has reasonable growth.
To grow a zebra you will need to:
have sustainable growth
strategise to be profitable achieving up to 2x growth
be amongst many other suppliers in the market
be a privately owned company or you can be a publicly owned company
be a solution that people need, and it doesn't have to be a tech solution
focus on growing user success and customer retention
push the quality of sales, rather than the quantity of sales
be profitable
and, you may grow through cash flow, debt, or an IPO.
A zebra company, in this case, is very appealing, as although it will grow slower than a unicorn, it is profitable and much easier to achieve.
How do they compare?
The biggest concern in today's world is the failure rate of new business ventures in Australia. Typically, what is seen is that 20% of all businesses will fail in the first year and around 60% will collapse within their first three years.
So would you like to fail or would you like to succeed? Let's compare:
Seeing the companies side-by-side, and their strategies, you can see that the zebra business is less risky than the unicorn. Meaning the potential to fail is a whole lot less.
Your Next Step
So in order to minimize your risk, it is better to build a Zebra rather than a Unicorn, as you will create a sustainable, growing, and profitable business that will create a great return on your investment. And, you shouldn't view this as only for a new business. In fact, it can be for any new spun-off venture, branched business line in your established business, and even when you are expanding into new geological regions.
Therefore, if you don't have a business growth strategy or you simply aren't growing fast enough, then you should seek out expert help. In fact, the team at Paradelta Strategy creates such plans and usually find up to 8% in savings that can be used in other areas to grow your business.
In fact, over the years, Paradelta Strategy has helped businesses across Australia to grow and expand, nationally and internationally, and grow significantly in profits. To get assistance with your business, simply email us at hello@paradeltastrategy.com.au or schedule a no-obligation discovery call here.
