Angels, unicorns, centaurs, ponies, dragons, camels… oh my!
Why should emerging market and early-stage investors nurture the camel before getting googly-eyed at a potential unicorn’s sparkles?
Because savvy investors place value on the real thing, not mythical creatures.
While you may hear about the latest “unicorn exits” in the headlines, it’s important to understand how we came about these “pet” names to categorize the best and brightest tech scales on the planet.
Here’s Metiquity’s who’s who in the zoo lingo cheat sheet:
What’s a Unicorn?
In tech and startup language, the most common description of a success story is usually labelled: the unicorn.
When we say the word unicorn, what comes to mind? A mythical beast resembling a horse with a single long-pointed horn between its eyes and wings on its midsection? That type of unicorn is an ever-elusive storybook creature or goal.
In the Venture Capital world, unicorns are companies that successfully reach a valuation of $1 billion or more. The reason these companies are described as unicorns is that it is extremely rare for an early-stage startup to reach such a high valuation, though it is not an impossible goal.
Becoming a unicorn can seem like a daunting journey. And while most advice focuses on raising as much capital as possible, the shortest path to becoming a unicorn is to focus on your customer and the value your company brings. A sustainable business model with a superior product or technology is what private investment firms look for, and that is the most significant defining factor to becoming a unicorn.
Becoming a unicorn is a true testament to the potential of any startup and puts a company in select groups who (usually) go on to achieve incredible things.
Startups that gain valuations of $1 billion or more may not be as exciting or mystical as seeing an actual unicorn. But in reality, they’re almost as rare… so other creatures describe successful startup stories?
In the Prairies and Alberta’s tech ecosystem, there are a few notable unicorns gems, including Benevity and Solium Capital, however – we’re an emerging market, and that means to create more unicorns, we need a beast with consistent tenacity and grit, as well as the strength of character to get us over any and humps (booms and busts, rainy days and most importantly, dry spells – a zone the camel excels in).
Enter the Camel
Stick a unicorn, a dragon and a pony out in the open desert for a week or two and see who survives… Metiquity Ventures’ bet is the trusty camel.
This startup metaphor is based on survival and profitable risk assessment. Camels put the management of resources first. They are focused on the long-haul scaleup. Not speedy exit rounds.
When we hear horror stories – such as the dot com crash of the early 2000s and other Silicon Valley cringers – we know that we don’t want that happening in an emerging market such as Alberta.
When early-stage venture capital investors focus on growth at all costs (creating unicorns) it works best in the strongest bull markets and best conditions (in which only a unicorn could survive). Emerging markets take grit and planning, business acumen and hard work, plus cash flow and careful management of resources and assets.
Emerging markets need Camels
The Prairies and Alberta’s technology sector market need camels. Those founders, early-stage companies and tech startups ready to survive for long periods of growth in the heat and sun, sometimes with little sustenance and watering, because they were smart enough to store their energy and resources for a non-rainy day in their hump.
They execute balanced growth, take a long-term outlook and make diversification a pillar of all business strategies. This allows them to scale on balanced growth. They can survive more market shocks and downturns. Their tenacity over shiny facade is what gives them the advantage.
Camels support efficient and balanced economic growth
Investors that are looking to emerging markets such as that of Alberta and the Prairies tech sector and digital innovation ecosystems are interested in sustainable models of development and business. They should also be looking for mixed portfolios with companies that drive capital efficiency and crisis-resistant models.
Metiquity look at investment in the emerging tech market and asset class from this perspective: where are the camels?
The data is still early, but there are strong indications that this is a strategy for pre-seed investment here to succeed. For one, survival rates are higher in emerging startup ecosystems. At the same time, because they are more capital efficient (and valuations on average are more reasonable), they can generate greater cash-on-cash multiples on higher ownership.
By changing the way VCs search for new investments and by valuing more economically stable companies over longer time horizons, venture capitalists can create healthier and less risky startup business environments. This also allows them to reward well-run startups and mitigate their high risks. It is a win-win-win, and in the face of current market instabilities, it seems like the right time to start adjusting venture capital strategies.
When it comes to animals, we love them all – we’re happy to feed and water potential unicorns, dragons, ponies, centaurs and the like. But we’d be telling you a tale if we didn’t admit that the camel is our favourite of the crew.
The Metiquity team will be the first to point out — much like the desert steed need and deserves a good wrangler, so do companies and founders in the form of their investors.
“Camels commit to a long-term scaleup and aren’t about quick exits. Meaning Camels (founders) should also be critical thinkers when assessing who invests in their company. Not all money is equal. A vetted hands-on investor is almost always the better option than a spray-and-pray fund or angel who is pushing for early exit with no chops for helping guide a company to scale to full potential.”
— Jacques LaPointe MBA, PEng, Director and Co-Founder of Metiquity Ventures
Other interesting creatures include: Dragons, Centaurs and Ponies
- Dragons: You’d think a unicorn would be about as good as it gets – but there’s an even more giant behemoth that rarely shows its fiery breath and impact. That is the dragon, also known as a private company valued at over $12 billion or more.
- Centaurs: The centaurs are companies with a valuation of more than $100 million in annual recurring revenue.
- Ponies: These cute but consistent steeds have a valuation of more than $10 million.
These four-legged categories bring us to the most important animal of all. Have we mentioned how much we love the camel yet?
- Not blitz-scaling
- Measured risk and reward with balanced & sustainable growth
- Long-haul founders and teams passionate about the global challenges they are disrupting
- Strategic growth focus
- Maintain reserves for dry spells
- Focus on strategic movement across the desert, no sparkle bombs (no smoke and mirrors) 😉
Can you think of a more recession-proof animal?