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Unicorns vs. Beavers. Understanding what makes a startup truly special, with the help of a few furry friends

3 years ago, Posted in Entrepreneurship

As unicorns dwindle, reassessing what makes a startup truly special

Once upon a time, companies with billion-dollar valuations needed giant factories churning out millions of widgets a day. Then, suddenly, all you needed to join the club was an idea and some talented young grads churning out code. As of this summer, there were no fewer than 84 U.S.-based unicorns out there by one count: a 115-percent increase over 2014.

But there’s a danger that we’ve admired these beasts for the wrong reason (an oversight all the more obvious now that many are teetering on extinction). Certainly, a billion-dollar company is successful – but all along there’s been far too much emphasis on that number (an arbitrary one, to be sure). What we’ve failed to do is shift the conversation from valuation to value creation.

At some level, success – in business or life – is also about how you impact lives around you. This sounds touchy-feely, but it’s deeper than that. True unicorns actually make things better for consumers and the other people they touch … while also, of course, making a bundle of revenue at the same time.

Now, this isn’t easy, which is what actually makes real unicorns special. In fact, many a corporate empire has been built by doing exactly the opposite: constraining consumers, throwing up obstacles and making life harder for buyers. To understand this all-important distinction, I think it might help to compare unicorns to another furry creature from my neck of the woods: beavers.

Beavers impose an ecosystem. Unicorns make yours better. 

Beavers may be cute, possibly even cuddly – but they want it all. They come into an area, take down the trees and completely transform their habitat to meet their needs. If you don’t want to live in a watershed, well, sorry, Bambi: get moving. Beavers are successful, in their own way, and famously resourceful. But they thrive by dominating an ecosystem and compelling everything else to adapt.

Many traditional billion-dollar companies, and quite a few smaller companies, are beavers. They want you to live in their habitat. The biggest phone and cable providers in the country are beavers, trying to lock you into long-term contracts. The Big Three car companies are beavers, offering APR financing that ties your brand loyalty to monthly payments. Airlines are beavers, trying to entice you with air miles.

True unicorn companies, of course, are very different. They don’t insist that you adapt to their habitat. Instead, they show up – magically, you might say – in yours and make it better: on demand, when you need them. Uber drivers don’t really have a loyalty plan; you just call them when you want a ride. Need a place to stay? Airbnb is there for you when you travel and doesn’t cramp your lifestyle otherwise. Need tunes? Spotify streams exactly what you want, when you want.

Unicorns make life convenient, spawning entirely new industries and business models. They’re here when and how you need them – swooping in to solve problems, not create new ones.

Unicorns improve the customer experience

It was said that unicorns’ horns could purify water. In the same way, unicorn companies aspire to actually leave something better than when they found it. Shopify, the platform that helps businesses set up online shops, is a good example. Right after their IPO, their CEO and $100-million man, Tobias Lutkeexplained that money is “not something that really motivates me.” I believe him. From the start, he’s focused instead on solving problems that had plagued eCommerce since the dial-up days, like next-to-useless customer and order tracking and no real ability to engage with customers online. Shopify now powers more than 175,000 businesses and is growing like gangbusters while helping clients do the same.

At my company, we could have been beavers. It would have been easy to build the online version of a home improvement big box store. It’s a proven business model, but it also just perpetuates all the usual big box store problems: limited selection, long waits for delivery, mega markups. Instead, we took a cue from some real unicorns, Apple and Amazon, companies that found ways to cut out middlemen and connect makers directly with users, putting the power in buyers’ hands. In the end, I think we’ve turned a pretty murky pool transparent, making it much less of a hassle for homeowners to get exactly what they want – on-time, delivered to their door.

Beaver companies just splash around in their ecosystem – because it’s not in their interest to change a habitat they created for their own benefit. Unicorns create something that benefits customers even after the unicorn’s role is complete.

Unicorns charge ahead. Beavers just hunker down and dam it all

In mythology, unicorns were actually fierce animals, not shy at all about using their spiky heads to poke into newer, greener pastures. Successful unicorn companies have that same instinct, piercing the status quo for all the right reasons.

Uber is just that kind of unicorn. The company is well known, of course, for pushing its way into new markets, bringing its ride-sharing service to nearly 60 countries – an innovation that has the beaver-ish owners and drivers of taxi companies grinding their teeth. Has Uber always shown the greatest diplomacy and tact? No, not by a longshot. But the service has been a godsend to consumers.

In true unicorn fashion, however, Uber is setting its sights on something far loftier than just cab rides. They’ve invested hugely in developing and testing the fast-evolving technology of the driverless car. The company is reported to have hired more than 50 senior robotic researchers from Carnegie Mellon to spearhead a robotics lab to be based in Pittsburgh. Rather than complacently damming the niche that they’ve carved out, the company is trying to … well … change the world.

Yes, they’ve got self-interest in mind. (Human drivers, after all, are their largest expense.) But there’s something bigger at work here, something you often see with true unicorn companies: a legitimate desire to push technology forward. In the end, Uber’s profit motives notwithstanding, we all stand to benefit in the form of more efficient, safer and cleaner transit – and there’s something pretty magical about that.

Unicorn companies’ value goes beyond valuations. Yes, they may be worth billions, but that’s just a consequence of what really makes them special: they actually make lives better and have a vision that transcends the bottom line. Beavers, on the other hand – even ones with nine-figure market caps – just want to hunker down and dam it all.

MaddieDavidson

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