How to be a cockroach startup?

When the startup buzzword is cockroach and not unicorn you know tough times are ahead.

What is a cockroach startup?

Simply put, a cockroach is a startup that focus more on survival than on growth. Or in managerial discipline rather than in the next investment round. Growth used to make up for everything else but the sustainability of growth is now vital.

Bad news is… everything will be harder: low valuations, low salaries, slower growth, etc.

Good news is… if you survive, you´ll thrive: investors will trust you, employees will share the vision (instead of being attracted by high salaries), your growth will be rock-solid and sustainable, etc.

Survive like a cockroach

So you want to show that you are resilient and you will survive the winter, what do you do? Some key points:

Manage cash-flow tightly through product management

Running out of cash is bankruptcy. Negative profitability is not. Cash-flow management is the ultimate survival metric.

This thought can be embedded in the company operations, especially product management.

Cockroaches aim to launch a MVP (Minimum Viable Product) as soon as possible and as cheaply as possible. Then, they make improvements upon it. This is the most effective way to manage cash-flow as you ensure that you won´t run out of cash while building an awesome first version of the product.

Having user feedback early on can also help improve the product faster.

Implement a culture of frugality             

It´s interesting to see the perks that failed startups offered their employees. I guess it´s very easy to see retrospectively why it was a bad idea.

Some companies are frugal and some other would fail if they were. But as a startup with no revenues it´s almost always a good idea to keep the burning rate low. One of the best ways to achieve this, is to encourage a founder´s mentality in employees. Large startups such as Amazon have been successful in going this route.

Attract talent with your vision not with salaries

Shackleton recruiting ad comes to my mind:

Men wanted for hazardous journey. Low wages, bitter cold, long hours of complete darkness. Safe return doubtful. Honor and recognition in event of success.

Recruiting on the vision is difficult but it´s the only way to ensure alignment with the frugal culture of a cockroach startup. Even if recruiting this way is tough, every person hired will be very extremely committed to success and the turnaround should be much lower than other startups. Workers are motivated by what the company is trying to achieve rather than salary or perks.

Don´t forget you are still a startup

Most likely your projections are still a hockey stick and you aim to change the dynamics of a market. Don´t lose sight of the ultimate goal while trying to become profitable as soon as possible.

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