Grow Like a Camel, Not a Unicorn

September 26, 2023

Dilys Chan

For the past decade, becoming a “unicorn” has been the ultimate aspiration for many new, ambitious, and growing tech companies. The term, coined in 2013 by venture capitalist Aileen Lee, is used as shorthand for a privately held startup company that has achieved a valuation of US$1 billion or higher.

An aspiring unicorn follows a set of guiding beliefs to get to its goal. Typically, its leadership is chasing a path of hypergrowth, often seeking to reach a billion-dollar valuation only a few years after being founded. That path of intense growth goes like this: Seize first-mover advantage, expand aggressively, nab market share, and increase revenue—no matter how much cash you have to burn.

Unicorn growth often means acquiring as many customers as possible and quickly, even if that means losing money in the process. It could possibly take many more years before the unicorn can figure out how to become reliably profitable.

The unicorn’s path of growth has been especially well-trodden in the unique ecosystem of Silicon Valley and other large global tech hubs, where access to venture capital and a steady supply of incoming talent help enable success. Unicorn growth can work particularly well in a bull market. But this growth model can also show its flaws, especially when the market is more volatile.

The unicorn growth model isn’t all rainbows

While some unicorns achieve spectacular success, many more can fail to live up to their lofty valuations. Common problems can include unsustainable growth, excessive spending, and high levels of debt. In a hypergrowth environment, the employee experience can equate to grueling working schedules and a disorganized corporate culture or governance structure.

In a post-pandemic environment of higher interest rates, borrowing has become more expensive for businesses. The current economic cycle has slowed momentum for the unicorn model of growth, which often relied on high levels of debt. Instead, lenders and investors are taking more interest in businesses that can achieve profitability sooner. Business leaders are being advised to focus closely on their unit economics.

Since the rapid growth path of a unicorn can be single-minded and focused on the short term, it can also be fraught with risk. Their growth path may be thrown off course by stricter regulation or an increase in capital costs, especially if leadership hasn’t developed plans to manage such risks.

An extreme, high-profile example of a failed unicorn is WeWork, which at one point reached an astonishing US$ 47 billion valuation. However, after releasing a public prospectus in 2019 ahead of its planned initial public offering (IPO), investors began to scrutinize the company’s governance, business model, and ability to become profitable. The company’s efforts resulted in a failed IPO. In the turbulent years following that, WeWork had to downsize and make changes in leadership. Then in 2023, WeWork treaded in penny stock territory—seeing its share price dip below US$1 before the company warned it may need to file for bankruptcy protection.

A better growth model? Behold the camel

Perhaps the more fitting animal for an entrepreneur to identify with is the camel, not the unicorn. The “camel” startup was coined by Alex Lazarow, a venture capitalist and author of Out-Innovate: How Global Entrepreneurs – from Delhi to Detroit – Are Rewriting the Rules of Silicon Valley. Unlike the mythical unicorn, the camel is an animal that is firmly grounded in the real world. A camel is looking for lasting success, rather than a quick exit.

The camel provides a more down-to-earth growth trajectory for many businesses, whether they are startups or more mature companies. Camels are working animals that have adapted well to their harsh habitats. They are known to be able to manage their resources efficiently, like the desert animals that can endure long journeys without food or water.

Similarly, “camel” companies focus on the long term. Like the animals they are named after, companies following this growth path are slow but sturdy, patient, and focused on achieving sustainable, steady growth over a long period of time. Prioritizing financial stability, profitability, and resilience helps them mitigate risks such as market volatility and economic downturns. They may even diversify revenue streams to make them less vulnerable to disruptive forces. By managing their finances carefully, they are able to grow in manageable spurts when the timing and opportunity are right.

The camel company and Volaris

As we have seen through acquiring hundreds of companies, many startups eventually grow into mature companies that Volaris is interested in speaking with. When we acquire businesses, we never sell them, and that means we are forever invested in the success of the businesses we hold and will support them with our resources and knowledge. We help our businesses assess risks and opportunities in their markets so that they can thrive.

On the spectrum of growth philosophies between a “unicorn” and “camel”, we identify more with the sustainable growth journey of a camel. If your company’s leadership feels the same, you may find that Volaris could be a good fit for you.