Yes! Unicorns, but what about Camels?
When the economy gets hot, you alight the unicorn and ride the camel
In the tech space, there are variation of terminologies assigned to different concepts, situations, and phenomena. During the tech boom in 2020, we frequently heard of the term “unicorn”. This word, which originally is associated with a unique creature that is rarely seen was coined for startups that achieve a value of over $1 billion as their valuations. Due to the relatively easy access to funds, many tech startups were able to achieve this status (or many firms were conferred this title). Nigeria was not left out of the trend as we had Interswitch and Flutterwave emerge as unicorns.
Now for everything that goes up, it is bound to come down. From the business cycle, we note that as an economy or in this case an industry experiences boom and periods of prosperity, recession is lurking in the corner for its turn. Notably from current data, there is a high probability of recession in the global and domestic space. In a paper by BusinessDay, released on December 19, 2022, the World Bank gave a prediction of a 2016-style recession. This, they attributed to some key things, one being Nigeria’s inability to maximize global oil prices due to low production, the increasing fiscal deficit and its burden on the economy, and increased unemployment rates.
This inevitable cycle has resulted in the rise of the term camel. Literally, a camel is an animal that is able to survive the harshness of the desert, basically going through an entire journey without the need for constant water. It was coined by Alex Lazarov from the Cathai Investment when he predicted a decline in activities in the tech industries at the Silicon Valley in 2017 . This was due to issues of scandals such as #DeleteUber. From an article released by The Guardian, Om Malik, a venture capitalist said “The big companies have been so obsessed with growth that there’s been a lack of social responsibility”.
Startups that are given this term “camel” are recognized for their ability to survive without constant stream of funding or investments (water). Major characteristics of firms that are classified as camels are the changes in their priorities. Although they do not entirely denounce their focus on rapid growth, they begin to shift majority of their focus to profitability and survival. By building such priorities with the funding from their peak periods, they are able to build tenacity and resilience against the harshness of a recession.
On the goal of profitability and survival, a camel startup manages resources effectively and efficiently. They are able to identify major cost areas and pick out areas that need to be discontinued during the period of the recession. Because the camel startups are now survival oriented, they make decisions with a long-term perspective. Overall and specific decisions of the firm are critically analyzed on their long-term impact to the firm.
One major example of a camel startup is Zoom. In 2020, during the first heat of the lockdown, companies had to rapidly shift to an online workspace and Zoom was the platform for that. So, it led to rapid growth due to increased customer base. But as the lockdown eased and companies were given the go ahead to begin physical meetings, the demand for video conferencing services such as Zoom dwindled. This is when the company changed its focus from growth alone to survival and profitability during the shift in demand and is now still acknowledged as a giant in the tech space. The change back to the norm did not bring the company to its knees as one would have assumed, rather it is currently valued at $9.2 billion.
So what?
So, while most startups are being praised for being unicorns-hitting the $1 billion mark, priorities should now be shifted to how to survive the harshness of the recession that is coming to prevent closure of startups in the tech industry. Venture capitalists and founders of these startup should begin to think long-term and strategize on the necessary systems that need to be in place to “protect” the business. It is said that unicorns are mythical creatures while camels are as real as they can get, so startups should shift from being praised as being mythical and align to what keeps them in reality-profitability and survival.