When we tell people that we have well over million paid enterprise users in 75+ countries most people are impressed. Then we might tell them that our HQ is in Auckland New Zealand and we are bootstrapped. The reaction is usually surprise sometimes followed by the statement “If you had VC funding / moved to Silicon Valley you could become a Unicorn”. Seriously? Is that the gold standard to measure against? Sadly it’s the reality of doing business in today’s hyped up Unicorn world. The news coverage for Unicorns is vastly out of proportion with the coverage of successful bootstrapped businesses. Solving real-world problems for customers in innovative ways, good service and looking after employees is not sexy enough for mass media coverage. It’s a bit like how shark attacks have significantly more media coverage than road accidents do. Which happens more often? Which is the most interesting to read about? Shark attacks are interesting because they are rare but because they get so much coverage perceptions are distorted. People are more scared of swimming in the ocean than driving a car. They also think technology businesses need massive investment funding to be successful.
So I’m putting this out there — to be successful a business does not have to be a Unicorn. In fact, a Unicorn valuation can cause the downfall of a business by driving too much focus on user number growth at the cost of innovation, an ethical culture and employee engagement. Fast/big isn’t always better. Consider Zenefits, it had US$581m funding and “the biggest valuation ever!” Zenefits resorted to cheating because it could not meet the massive growth targets it promised to investors. At the time of writing, Zenefits’ Unicorn valuation (a theoretical number based on a good pitch to investors) had dropped from 4.5 billion to 2 billion and was still falling.
Continuously innovating and committing to long-term customer and employee relationships just isn’t a sexy 10X, heck 100X growth-industry-disrupting-business model. Hundreds of millions of dollars in funding helps you buy expensive PR, land grab customers and place articles in Time Magazine. Customer-funded businesses (who have to have a product that customers are willing to pay for) have real-world resource constraints. One of our values at SnapComms is a “Resource aware and Impact focused”. It might sound restrictive but in fact, it makes you get creative and really think about what you’re doing. We don’t hear much about Yammer today. Yammer had $142m in funding, extensive media hype, grew because it gave its product away free (and then extorted the enterprise for a paid model once security limitations were exposed but that’s another story) and exited in 3 years, a VC’s dream. Now it is just another Microsoft product. It really was just another “me-too” in the great overflowing landscape of Enterprise Social Media. VC funding is really about hype and speculative investment focused on increased valuation with the aim of cashing up via exit or going public. I really hope the world is waking up to the realities of the Unicorn. Unicorns are lovable so how about we call them Dragons instead? Big monstrous beasts, dominating the landscape breathing fire and destroying everything in their path to satisfy a ravenous need to suck up users. Whatever we call them, both disappear in a mythical puff of smoke soon as the VCs are able to force an exit and see better returns on the next mythical creature.
I’d like to bring sexy back to customer-funded businesses, is anyone with me?
Originally published at www.snapcomms.com.