Do you know such companies?
Types of Startups
This article will focus on two opposing concepts that coexist in the entrepreneurial ecosystem nowadays: Unicorns and Cockroaches.
- Unicorn startup: manages to reach a value of more than one billion dollars.
- Cockroach startup: startup that has been profitable for some time but without big numbers and without attracting too much attention.
There are, however, a number of important differences behind this simple distinction that are worth remembering for the non-professional investor.
On the one hand, a Unicorn startup is one that currently does not have a profitable business model (it is in losses) and survives due to the successive rounds of investment received. However, the expected future potential of the startup is so strong that its economic-financial situation does not really matter.
The Unicorn investor expects a large fund to come in by buying all the shares of the company that allows him/her to obtain returns of 10 or 20 times the initial investment. Do you think that investing in Unicorns is a rational investment? Do you think that speculation can exist? How can it be determined that the valuation of the company is adequate at the time we invest and is not already overvalued? What if the fund that the investor buys never comes in?
On the other hand, a Cockroach startup is one that takes care of its business model and bases it on obtaining a profitability, adjusted but necessary in any company. It also pays special attention to its processes and its relationships with suppliers and customers (main sources of financing). This model of startup considers that size is not everything, but that flexibility and efficiency are more important.
The Cockroach investor should not expect strong shocks or even millionaire revaluations, but an adequate return via dividend. Do you think that investing in Cucarachas is a rational investment? Do you think that a stable but recurring dividend is not attractive enough? Do you think that it will be difficult to establish an adequate valuation of this type of startup if we join as shareholders?
We will be introducing our investors to many cockroaches and some possible unicorns in the future, always applying the same standards that inspire Fellow Funders: Trust, Transparency, Security and Follow-Up. Fellow Funders offers individual investors the same tools that have traditionally been used by professional investors:
- Adequate valuation of the invested company.
- Diversification in terms and business models.
- Long-term monitoring of the investment.
- Partner agreements.
Fellow Funders do not despise Unicorns, but really like Cockroaches: the only animal that would survive in the event of a nuclear disaster on our planet.
We believe that to reindustrialize Spain it is necessary to have thousands of cockroaches, which in fact are nothing more than SMEs with a high technological content. You, as a potential investor, can decide if you want Unicorns or Cockroaches.
Fellow Funders continues to believe that equity crowdfunding investment is an interesting product. However, we always keep in mind the need to diversify your portfolio and the risks you assume.