Unicorns vs Mountain Goats

by Tim Connors and Jeremy Burton, November 2023

Aileen Lee (Cowboy Ventures) has hit the ten year milestone of her coining the term "unicorn”.

Unicorn was an amazing definition for the startups in the blitzscaling decade we are now exiting: grow a minimum of 3x year-over-year, regardless of burn and unit economics. It yielded some spectacular valuations, and some big exits, but led to lots of flameouts, with big piles of capital burnt along the way.

The blitzscale model put founders on a high-risk trajectory: a chance to have a big big outcome, but running with a very hot burn-rate and needing to stay on the Series A/B/C/D/E funding hamster wheel to keep feeding the monster.

Now that we are currently in a post-blitzscaling era, great unit economics matter again. The focus now is to get to breakeven, and then to grow as fast as possible while staying cash-flow breakeven.

In this new era, will a new term emerge that defines a successful startup?

Camels and Zebras

Some have suggested the terms “camel” and “zebra”.

(See https://vulcanpost.com/836863/unicorn-zebra-camel-startup-meaning-entrepreneur-business-investor/)

The idea is that a camel “is able to survive the desert on little to no water through long periods of time” and that camel startups “do not require a constant stream of investment to sustain themselves.”

We like the idea of the “camel”, but it implies that a startup should move slowly, and simply store up reserves for a temporary period trekking through the desert, after which it will be able to refill (with cash) at the next oasis.

As to the “zebra”, the idea is that such startups are “both black and white” and are both “profitable and improve society.”

We love doing well while doing good. But, we don’t think that the zebra is the right analogy for this new age.

Perhaps these times we find ourselves in now are just a short blip in time, and blitzscaling with easy capital will soon return. We saw the “grow at any cost”, blitzscaling cycles from 1996-2000, 2002-2008, and 2010-2021. Will we return to this mentality quickly after another brief hiatus? Perhaps.

But maybe this time is different. With the rise of distributed teams and remote employees in low cost of living geographies, the cost per employee of startups is going down dramatically.

With tools like Github Copilot, those lower-cost development teams are seeing often 3x productivity improvements. With AI tools helping sales teams be 3x more efficient, we can see ARR growth rates running at breakeven being higher than ever before.

Startups are getting lean to survive, do they stay lean long-term this time even when the growth funders are back?

Enter the Mountain Goat

We believe perhaps the “mountain goat” is the startup of the future.

The mountain goat is fearlessly able to scale seemingly insurmountable hurdles. The mountain goat is happy pausing on the mountain side indefinitely without fear of falling, but moves quickly. The mountain goat is not fussy and will eat anything that's around to survive. The mountain goat is hardy.

It could be great to have Fortune Midas-like awards for mountain goat startups that:

- are at or past breakeven

- are growing at least 1.5-2x year over year

- are over a certain revenue level, say $5M minimum

- have raised under a certain amount, say $25M, or perhaps far lower.

For a mountain goat startup growing 2x organically at breakeven, with a $5M run-rate, it only takes a reasonable number of years to get to $100M and IPO, without any Series A/B/C/D/E dilution. If growing 1.5x organically at breakeven, it still only takes a bit longer. It isn’t the old many-decade bootstrap model where you were trading off less capital for super-slow growth rates.

During the last decade, being branded a “unicorn” helped startups a lot. It helped with recruiting talent and with validation for potential customers, and it was a way in which venture investors “crowned a winner”.

However, with layoffs happening at an unprecedented rate, and many growth stage companies shuttering, the shine is wearing off.

Being branded a mountain goat startup could be the equivalent for the next decades. Talent can join mountain goat startups and not have to worry about the make-or-break cycle of raising venture rounds, massive dilution, underwater options, or risks of waves of layoffs.

We are seeing lots of mountain goat startups emerge in this funding downturn. Perhaps this time is different and they will stay in that mountain goat mode through exit.