Although we hate cockroaches, they are a staple of today’s startup ecosystem due to their resilience to weather storms. What does this have to do with investor sentiments? It seems that there is a lot to it, and that is why the startup world coined the term Cockroach Startup.
Investors used to throw money at Unicorn companies worth $1 billion or more until 2015. However, it seems that this year it is the turn of Cockroach startups. These are founded on solid business fundamentals and are scalable faster than others. These startups can withstand adverse business conditions, maintain low-quality funding, plow earnings back into revenue growth, and require less funding to operate their businesses.
Practo and NetMeds have been the most talked-about investments in the Indian healthcare sector. Funds like Ratan Tata-backed Tiger Capital, Sequoia, Angel investors, Norwest Venture Partners, etc. Collectively, they have invested USD 300 million in startups in one year. This has helped entrepreneurs to stand out among the established business elite. Some of these investments earned them near-Unicorn status in 2015, valued at more than a billion dollars.
Analysts within the start-up community believe that healthcare is an evergreen sector with great potential for entrepreneurs to turn their business ideas into sustainable businesses. We have seen start-ups in India’s healthcare micro-markets such as appointment aggregation and cloud-based HIS(SaaS), online medicine dispensing, ambulatory health care, cryopreservation, and even genomics.
Startups with the ability to weather turbulence (be flexible and agile to demand), stay afloat, recover investments (if not make profits) although limited resources (limited assets) are likened as cockroaches.
Five Must-Have Attributes for Cockroach Startup
1. Capability to live longer even with minimal capital infusion
There are many things you can talk about, and all of them are useful. However, the attributes I have listed below directly impact the bottom lines and P&L statements of start-ups.
India’s startup scene suffered a severe downturn during the 2014-15 fiscal year. There were many high-profile layoffs, stalled startups, and rumored acquisitions. Due to the collapse of the Chinese stock markets in June 2015 and general pessimism about the world economy, investors were reluctant to reduce their spending.
This scenario is ideal for start-ups that are based on a sound business model and cost-effective value chain. (product ideation and development, distribution channels, delivery, after-sales support, and marketing) that can sustain efficiency and provide steady cash flow that can be reinvested back into the business model.
VC funds can be compared to Seed investors. They will help you realize your excellent business idea. However, entrepreneurs must keep it going.
2. Ability to sustain profitability even at a lower business scale
Forget the Arrive-and-Conquer mindset! Many start-ups dream of scaling beyond their capital and capabilities.
You can’t rely on your ideas to get there. You need funds too. You are likely to be disappointed if you assume that a renowned VC capital firm, a Russian Billionaire, or a Silicon Valley maverick will take your business.
A start-up that is successful should have solid fundamentals such as product demand, a short product development cycle, and controlled capital expenditure.
Long-term, it’s not all about the Turnover (income) for investors; it’s all about the Leftover.
A smaller-scale operation helps to keep things tied at the beginning, builds investor confidence in the business model, and most importantly, gives the start-up team a proverbial pat on the back.
3. Captive market:
Cockroach startups are a long-term, focused business model that relies on a captive market. Fortune stated that the number one reason startups fail is making products that no one wants. After a thorough survey of failed startups, 42% identified the “lack of a market demand for their product” to be the biggest reason for their failure. A foundation for a successful startup is to gauge market demand and cater to it effectively.
4. Focus on the value:
Many startups don’t have a reason for existence. You can’t make the website without its logo and name. It is essential to create a unique value-based proposition that your target customers can understand. Your company’s USP is the business card that investors use to reach out to you.
Startups must develop a unique selling proposition (USP). They must have a unique selling proposition (USP) that makes them stand out from the rest. Investors and customers will be forced to compare them with their competitors.
5. Sound business model:
Startups should have a clearly defined and innovative business model that delivers value to targeted customers and returns to investors (e.g., Investors. A laser-like focus on a specific market is an essential characteristic of a successful cockroach startup. Sometimes called a niche. Attune Technologies, a startup that offers cloud-based healthcare information systems to clinic chains, has adapted a place in healthcare. Qualcomm Ventures recently gave $10 million to the startup.
These attributes, paired with a well-integrated founding group and the ability to adapt to extreme uncertainty, bode well for start-up success.