Camels vs Unicorns

In his article for Soa­ked by Slush, Chris­tian Owens, co-foun­der and CEO of the sca­leup
Padd­le rai­ses the concern that the met­rics cur­rent­ly used to quan­ti­fy Euro­pean tech
success are due for a chan­ge. The ove­remp­ha­sis on unicorns leads to a tun­nel vision in
which only the gigan­tic exits are valued, and the nume­rous smal­ler ones neglec­ted.
The aut­hor argues that the ove­rall health of the Euro­pean star­tup eco­sys­tem rests on the
hundreds and thousands of small busi­nes­ses beco­ming success­ful and sca­ling up only
when solid foun­da­tions are built, ins­tead of see­king aggres­si­ve growth via big fun­ding

Our team at Goril­la Capi­tal ful­ly endor­ses this view. In our opi­nion, start-ups often try to
jump the growth cur­ve, and end up trying to sca­le a pro­duct which hasn’t yet had time to
morph into its final ver­sion. This beha­viour is often due to the phe­no­me­non men­tio­ned
abo­ve. If a bil­lion-euro valua­tion is seen as the holy grail, many com­pa­nies adopt a
mind­set of aggres­si­ve ear­ly-sta­ge growth wit­hout taking the time to pon­der whet­her their
pro­duct is rea­dy to be scaled.

That is why we actual­ly seek “camels” ins­tead of unicorns. The­se are the com­pa­nies that
are capi­tal efficient, have solid unit eco­no­mics, and focus on buil­ding sus­tai­nable growth.
Admit­ted­ly, the ini­tial growth rate may be slower than that of an aspi­ring unicorn, but the­se
com­pa­nies are more robust and resi­lient than their peers.

In good times, the camels thri­ve, but even under uncer­tain­ty, they sur­vi­ve, unli­ke the
aspi­ring unicorns that jum­ped the growth cur­ve with high valua­tions and wind up with
downs rounds when the ove­rall eco­no­mic cli­ma­te wor­sens and the bubble bursts.

Stop tal­king about unicorns: The way we mea­su­re Euro­pean tech success needs to

Stop tal­king about unicorns: The way we mea­su­re Euro­pean tech success needs to

Startups have different stages

Star­tups have dif­fe­rent sta­ges. Howard Love has well articu­la­ted the dif­fe­rent sta­ges and we have inclu­ded the problem/solution fit, product/market fit and sca­ling “fit” for you to unders­tand how the­se sta­ges over­lap each other.

Whe­re is your star­tup ? What are the KPI’s rele­vant for the sta­ge you are in ? Have you “over­lea­ped” one of the sta­ges ? What kind of veri­fica­tion and facts do you have ?

What are typical exit valuations?

Plea­se note that what gets the media atten­tion are the odd excep­tions, not the median cases – as the median cases are boring. 
Many ent­repre­neurs dream about an exit - in rea­li­ty exits (any kind, even small) are rare and on ave­ra­ge much smal­ler than people usual­ly think.
Only a part of exits are disclo­sed (ie. amount beco­mes public, latest at buyer’s annual report) and as a rule, non-disclo­sed exits are smal­ler (typical­ly <10m€) than the disclo­sed ones. In Nor­dics a median for a disclo­sed exit for a tech­no­lo­gy com­pa­ny is 12-15m€ , for non-disclo­sed less than that. Typical US tech­no­lo­gy exit is esti­ma­ted to be around 5m$. 

How to determine a fair valuation?

Wha­te­ver both par­ties accept is OK, the­re is no book value. As to us, we com­pa­re the sug­ges­ted valua­tion pri­ma­ri­ly against what has been achie­ved to date, secon­da­ri­ly to what the plan is “pro­mi­sing”. The hig­her the price tag, the more you are expec­ted to have alrea­dy, and the more is expec­ted from you going forward. And whi­le the­re is no “List” price, pro­fes­sio­nal inves­tors know what kind of com­pa­nies have been able to clo­se rounds at what valua­tions, which gives a com­pa­rable. Worth noting is that any foun­der with expe­rience in fun­drai­sing will tell you that more impor­tant than the valua­tion, or even the amount rai­sed, is that the process is quick and smooth, allowing you to get back to doing busi­ness as soon as pos­sible. If you try somet­hing that is unrea­lis­tic, you will learn the hard way the wis­dom behind that. 

Gorilla Capital Management Oy

VAT 2827907-4

Maria 01, Building 1, entrance B
Lapinlahdenkatu 16, 00180 Helsinki


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