Mythological Unicorns or Real Zebras?

The idea of starting and growing a successful business has been altered in the last 15-20 years. Everyone wants to become the next Facebook, Instagram, Twitter, Uber or Airbnb, etc. This can put a lot of pressure on most people by setting expectations too high. Ultimately, people are setting themselves up for failure because many factors and variables are out of their control.

In the world of entrepreneurship, it is common to hear about startups, exponential growth, venture capital, and a few other topics. Depending on their focus and results, each venture can be given a name that makes it seem like we are entering a zoo, as they have been given real or mythological animal names.

Depending on the circumstances of each venture, today, we can find from "cockroach" companies to "dragon," "donkey," or "dinosaur" companies, going through a wide range of fauna. But surely the best known are the Unicorn companies. However, the "Zebra" companies are beginning to gain more relevance, a way of doing business that appears as a more viable alternative in the world of entrepreneurship.

The most talked about in the aspirational world is indeed the Unicorns, that level that most entrepreneurs dream of reaching. The problem is that such a category can remain, precisely, a dream. That is why today we are starting to talk more and more about Zebras, which are companies founded on values that allow them to create long-term, sustainable, and financially sound solutions. Their raison d'être is to solve problems detected in communities or ecosystems and make profits.

Some Context

Since the birth of the Unicorn category in 2013 by Aileen Lee, founder of Cowboy Ventures, companies, including those that reach the value of one billion dollars during their capital raising processes, became the new paradigm of the startup universe and the role model for entrepreneurs around the world. Lee used this mythological creature as a metaphor for this type of company since it was practically impossible for a company to reach this monetary value, apart from surviving the first two years of life. A Unicorn also represents the financial prowess of certain venture-backed companies.

Unicorns started to grow rapidly, promote themselves through social networks, work under B2C models, and leverage investment, even if their business model is not always 100% structured. Unicorn companies try to disrupt the mainstream market by introducing something new and innovative like Uber. The issue is that startups that try to become Unicorn companies usually die quickly, and only a small number succeed.

Unicorns can inspire the next generation, but their remarkable businesses can also stifle innovation because people start looking for life-changing solutions that a large global population can use. The aspiration to become a Unicorn prevents seeing problems on a smaller scale.

Four years after the popularization of this trend, and as a response to the growing interest in these companies, Aniyia Williams, entrepreneur, creator, investor, and a group of Silicon Valley entrepreneurs started a new paradigm: Zebras.

Zebra companies emerge by observing market trends and adapting to consumer demands. Why Zebras? These companies have high growth potential, being neither black nor white.

What does this mean? They are not only focused on being profitable above all else, nor on setting unrealistic goals that no one will be able to sustain financially. They have a profit motive and a cause: they seek to improve the world by working to make things better than they were when they found them. That is why it is necessary to do things differently, think differently, and feel differently.

Since most entrepreneurs strive to become Unicorn companies, they often ignore the gold mine that is right in front of them if they sharpen their focus to help specific target markets.

Unicorns can be revolutionary for society at large, but Zebra companies can outperform them and have a greater impact on local communities.

What Are The Fundamental Differences?

A Unicorn venture aims to grow and grow to be valued at more than a billion dollars; therefore, it continuously seeks financing to consolidate itself. Its greatest enemy is the speed with which it must grow and the capacity it has available to finance itself. Therefore, they are companies that think about now and how to find more investors to survive.

Zebra companies seek to be profitable.  Instead of chasing the classic Unicorns, they seek to improve society. They generate annual revenues between $5 million and $50 million, require growth capital of between $100,000 and $1 million, and have five or more revenue streams to serve a customer within a specific niche. They may not be pure technology companies, but they are technology-enabled companies.

Unicorn companies may serve a much broader market. Still, Zebra companies may offer more options to entrepreneurs in underserved markets outside of the mainstream venture capital markets of New York and Silicon Valley. In addition, founders of underrepresented Zebra companies may have better access to capital. Although their execution may sometimes be slower than that of Unicorn companies, Zebra companies may offer more opportunities to more entrepreneurs.

Unicorn companies may appear in various media outlets and generate a lot of buzzes. Zebra companies are well represented on the Inc. 500/5000 list, which lists the fastest growing private companies each year; these are companies that have developed unique value propositions and solutions that delight a very specific set of customers and are rewarded with revenues over $5 million annually.

Most Unicorn ventures flourish thanks to venture capital financing. In contrast, Zebra ventures seek other types of funding, such as debt financing (which can hinder a company's growth from repaying the loan) or revenue-based funding, i.e., a loan with some money each month. All the company has to do is pay monthly with a certain percentage of its revenue. This helps drive the growth necessary for these companies to become Zebras.

Unicorns have a hockey-stick-shaped revenue curve: a short, flat curve that slopes upward in a long, steep turn; the Zebras' revenue curve is like a slow, upward climb to the top, similar to the Nike pigeon.

Unicorns, with impressive sales decks, spend their energy on attracting venture capitalists, their goal is exponential growth, and an initial public offering (IPO) is usually their ultimate goal.

Zebra companies have similarly impressive sales decks, but they use their resources to find funding efforts other than traditional venture capital. Rather than having their sights set on an IPO, most Zebras focus on sustainable prosperity, and, rather than competing with other companies, Zebras often foster a more collaborative spirit.

But undoubtedly, something that defines Zebra entrepreneurs is that they see their organizations as an instrument that adds value to a certain group of people, something that they can do through systematic investments, being faithful to their values and based on the well-being of people and their environment.

Where to go

The pandemic has changed how we work, learn, meet, travel, shop, and invest. But unfortunately, while the gig economy grew rapidly throughout the pandemic (and the trend continues), the pace of venture capital investment slowed from 2020 and has failed to reach previous levels. This may mean that we may begin to see the disappearance of the mythical Unicorn to make way for a real thing: Zebras.

During the pandemic, many small businesses began to find new ways to adapt to the changing environment brought about by the rise of e-commerce. However, many failed to do so and had to close: according to Yelp, 60% of small businesses that temporarily closed in March 2020 had closed for good by September.

Now it's not just the pandemic: the war in Europe is generating inflation in many countries. So entrepreneurs - and many large companies - must work smarter, filling a need and offering value. That's where Zebras are gaining momentum.

Why? Because these types of companies are characterized by doing real business, not aiming to disrupt current markets, achieving profitability and demonstrating it over time, and helping to solve a societal problem. They focus on alleviating social, environmental, or medical problems while taking care of their profitability.

Some examples:

• The digital gaming industry has historically lacked content for women and girls or limited it to a very narrow definition of femininity based on beauty. Toya, a gaming platform designed to motivate and inspire young women to reach their full potential, founded by Anat Sperling and Yifat Anzelevich, is challenging and changing those norms by providing games that put girls in the role of heroes and by offering games unbound by gender (focusing on nature, mysteries, and history, for example). Although it is a for-profit entity, Toya still fulfills a very important social goal: promoting gender equality through its products.
• Mara Zepeda's company, Switchboard, in the United States, provides a platform to build community, help college students and alumni connect about job opportunities under an innovative "ask/offer" model, and collaborates with universities to track donor information. Its multiple revenue streams include assessments, counseling and training, and platform access.
• A company called Hearken, run and co-founded by journalist Jennifer Brandel, aims to "turn the traditional model of journalism on its head" by helping newsrooms shape their coverage based on the questions that matter most to their audiences. Together with Zepeda, they launched DazzleCon, a grouping of Zebra companies to learn and discuss all things Zebra (just as a group of wolves is a pack, a group of Zebras is called a dazzle).

Two Things to Keep In Mind

1. When First Round Capital analyzed its investments in 300 companies over 10 years, it found that those with a female entrepreneur outperformed those with all-male teams by 63% and that investing in women-led companies improved the performance of venture firms.

2. It is verified that the nature of Zebra companies is closely aligned with the entrepreneurial acumen characteristic of women. Once they secure initial funding, women entrepreneurs tend to prefer more security and take less risk. As a result, they grow profitable and sustainable businesses at a slower pace and, potentially, on a smaller scale.

Zebra companies can improve their local communities by creating high-wage jobs while utilizing the resources of their local market.

Thirty-five percent of U.S. jobs are created by Zebra and other small businesses. Zebra companies provide freedom to both founders and their employees, as they do not have to succumb to the struggle of working under a large conglomerate that treats you like a number.

Employees at Zebra companies tend to be happier and feel more fulfilled, as they can use their talents in a useful way. They feel they are important to the company, which increases job satisfaction.

The advantages of working in a Zebra company include smaller, more intimate work environments with diverse groups of people working together toward a common goal.

3. An analysis by CB Insights, a business analytics firm that provides market intelligence, reveals that 67% of ventures that seek to be Unicorns end up dying or becoming self-sustaining, and some continue to stumble around like zombie companies for years before giving up. "Less than 1%, 10 (0.91%) of companies in our seed cohort ended up becoming Unicorns valued at more than $1 billion. Some of these companies are the most publicized tech companies of the decade, such as Uber, Airbnb, and Slack," the analysis reveals.

Why Create Zebras

Given the context described above, the solve. earth portal, an organization whose mission is to inspire and support entrepreneurs to build green start-ups based on a new regenerative model, expresses some of the reasons why entrepreneurs should stop aspiring to be Unicorns and start nurturing their Zebra potential.

Among them: A Zebra startup with a $1 billion valuation also has a social or environmental purpose at its core and, therefore, is far more valuable than the price tag attached to it; a Zebra scales holistically, taking care of all stakeholders, including its funding sources; and, because they have a social purpose at their core, they are far better aligned with environmental sustainability and, therefore, are better positioned to ride the wave of green startup opportunities that are emerging in this decade. They are a vehicle to stop climate change.

Another reason is that Zebra cares not only for its environmental surroundings but also for its employees, suppliers, and all its stakeholders, giving them a stake in wealth and power using new business structures. On the other hand, while Unicorns are subject to the whims of the investor, Zebra company structures take on a cooperative profile and become a vehicle for creating happy, fulfilling. Dynamic workplaces where employees thrive and complex decisions are made at lightning speed because their system is alien to the hierarchies of 20th-century corporate control machines.

But perhaps two of the most powerful reasons are as follows: Zebras are the beginning of a new business world that places financial wealth on the same level as natural, human, and social wealth; a world that cares for all stakeholders, including nature, by moving away from material consumption and closer to wealth generated through holistic human well-being. Likewise, Zebras are resilient to economic shocks (which are likely to increase in frequency and intensity in the 21st century as we face global challenges); a herd of Zebras in an ecosystem share resources and have both competition and collaboration engraved in their DNA, meaning that as a group they are highly resilient to economic shocks and can adapt quickly to changing and chaotic business circumstances.

In Conclusion

Zebra companies are companies that improve the world. Still, they bring a different vision to the ecosystem and the more traditional niches, and they speak of positive social, economic, and environmental impact, which are not just words but their main hallmark of action. Their impact on our society should not be ignored in the Unicorn era of entrepreneurial innovation.

If you are an entrepreneur, you must take note of the economic and environmental success Zebras is having. Anyone can turn their hobby or passion for fitness, health, motor vehicles, music, education, etc. into a Zebra category venture. You don't have to have a full business background to stand out; you just have to become an expert in your field and address the issues that people in that industry face. If you can provide and meet the needs of your customer base, you can succeed quickly.

Now think about these questions:

Do you dream of disrupting the current market with innovation and new technologies, for example? Or would you prefer to contribute to a secure market by making it better for everyone involved in it?

Are you one of those who think that the end justifies the means to grow, or would you rather focus on the quality of your product or service?

What worries you more: winning new customers or winning new investors?

Answering these questions will help you decide the focus you want to give to your company. Consider that while Unicorns tend to be reckless and like the risk and thrill of the hunt, Zebras value security and balance, reaching their goals slowly but steadily.

Just remember that Zebras are the foundation of a better future world, ultimately leaving humanity much richer.