Brexit Turning Unicorns into Cockroaches

cockroach

2015 was undoubtedly the ‘Year of the Unicorn’ as far as tech start-ups were concerned. Unicorns being the term given by the tech fraternity to describe private tech-driven start-ups which reached or exceeded a $1 billion valuation. But in today’s economically turbulent times, resilience has become the buzzword on the lips of investors and start-up CEOs. And there is no creature more resilient than the cockroach – capable, it is argued, of surviving nuclear war.

This year however, with the global economy as tumultuous as it has ever been on the back of Brexit, ‘resilience’ has become the new buzzword on the lips of start-up CEOs and their investors.

Hence nature’s great survivor, the cockroach, being used to describe the new wave of 2016’s start-ups, who are looking to minimize risk and see out the storms of financial uncertainty rather than scale up to the magical $1 billion mark as quickly as possible. Indeed, now the UK has decided to leave the European Union, UK tech firms have been left wondering what the future holds for what has become a huge contributor to the British economy.

The rise of the tech unicorn

Fuelled by huge amounts of venture capital, unicorn start-ups market aggressively and focus on superfast scale-up rather than long-term stability. The profit for unicorns comes once the market share has been completely gobbled up, with Uber being perhaps the most high-profile example of this approach.

2015’s tech unicorns

Uber

Lyft

Zenefits

TransferWise

Prosper

FarFetch

The free-and-easy funding for ambitious tech start-ups is now drying up in the wake of global economic uncertainties, with the UK’s vote to leave the European Union viewed by many as a crash landing for Britain’s tech start-up economy. Gone are the days when tech start-ups would expect bloated and unsustainable valuations just days after their launch, as factors such as a shaky stock market, a weaker China and now Brexit take their toll on an increasingly cautious industry.

Overfeeding unicorns

At the recent Finovate Europe conference in London, where 60 fintech start-ups were invited to pitch their businesses to an audience of investors, potential customers and interested tech journalists, the overriding feeling from the crowd packed into Old Billingsgate was that the vast amounts of VC funding poured into the sector over the last couple of years has led to a lot of froth in the market, with even the sketchiest of start-up businesses receiving backing.

And so it seems the age of the unicorn is now over as investors begin to rein in their funding, with guaranteed revenues and failsafe market share becoming more important than just glossy ideas and potential.

With these new, leaner funding streams from VCs and a more cautious approach to investments, many of the new-wave of tech start-ups have gone into ‘survival mode’ as they look to outlast the funding crisis by cutting costs, downscaling to the cheaper end of town and re-learning to ‘eat what they find’ in marketing terms. In essence, the funding slump is forcing tech start-ups to go back to their roots and find their inner-cockroach.

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>