Houston, United States, September 20th, 2024, FinanceWire
- People naturally gravitate toward unicorns in business for the potential payoff, but only 1% of startups ever attain unicorn status.
- Businesses that value slow and steady growth (so-called donkeys), on the other hand, have to have a solid business plan to secure funding, which makes them a more stable bet for long-term growth and success.
- Donkeys in the business world also often offer a healthier workplace culture because sustainability is prized over rapid growth.
- Enhance your business acumen at University of Phoenix, which offers a variety of online business degrees.
Silicon Valley was founded on a culture of innovation, entrepreneurship and hope for the future. But to a significant extent, it was also built upon delusion. Legendary examples of astronomical growth and overnight wealth have created an environment where investors, entrepreneurs and workers often buy into the allure of the “unicorn” startup — new businesses that rapidly grow to a billion-dollar valuation.
At University of Phoenix, students learn to critically analyze these business trends and understand the realities of both unicorn- and donkey-type business models.
The dream of the unicorn is appealing, but the reality is that it’s rare. Far more common are businesses that have come to be known as donkeys: sturdy and dependable and far less prone to spectacular failure.
A dangerous cocktail of survivorship bias, the gambler’s fallacy, and outright wishful thinking have led much of the business world to forget the basics of growth and profitability and take a leap of faith to grab for the brass ring of the unicorn exit. The last six months have stripped that delusion of its finery — again. The early 2000s saw a massive flameout of unrealistic startup plans that left millions of workers and investors in the lurch when the dot-com boom went bust.
The startup world eventually came back stronger, but history has a way of repeating itself. Venture-backed startups are now being plucked off on the cheap by private equity firms, and Silicon Valley Bank, once a stalwart of the venture funding fantasy, has collapsed in spectacular fashion.
Now more than ever, job seekers should be looking for healthy business basics when evaluating their next employment opportunities and beware of shimmering unicorns. Here’s why.
1. Only 1% of Startups Become Unicorns
Betting your future on a unicorn opportunity is innately risky. According to CB Insights, only 1% of startups achieve the billion-dollar valuation that constitutes “unicorn” status. So the odds are 99:1 against you, and it’s extremely difficult to evaluate all the strategic elements that give a company the winning edge while you’re interviewing for a job.
University of Phoenix prepares students to navigate these complex business landscapes, offering insights into both high-growth startups and more stable business models.
Having a CEO who played a role in a unicorn once before doesn’t mean it’ll happen again. New startups touting former Google, Apple, or PayPal executives aren’t necessarily more likely to achieve Google- or Apple-like growth in today’s market. The tech world has changed. Investors and consumers are more sophisticated, there’s more competition than ever, and it’s no longer that easy to deliver PayPal-esque innovation in the 2020s.
2. Startup Growth Rates Have Slowed
Twenty years of success stories have generated an atmosphere of survivorship bias, convincing us that if we emulate the qualities of those who succeeded, we will achieve the results they achieved. In reality, the changing market conditions, technological baselines and buyer expectations have made the growth rates of prior decades more difficult to achieve.
The old, back-of-the-napkin math of the unicorn world held that companies growing 100% per year to an annual revenue of $100 million could sell for 10 times that multiple, making it a unicorn. It was a repeatable formula long enough that most people in the software-as-a-service world believed it to be achievable for their companies.
But during that time, growth rates across the industry began to slow. Now, the reality is that almost nobody is seeing the kinds of revenue retention and new-business metrics that gave rise to so many unicorn exits over the past decade. If unicorns were generally rare over the last decade, they’re likely to be even rarer now.
3. Most Would-Be Unicorns are Donkeys Anyway. They Just Don’t Know It
While the failure rate of startups overall is about 70%, the attempt to intentionally create a unicorn is inherently riskier. Taking on $10 million in venture capital to build a business, and fueling that with multiple nine-figure rounds, creates intense pressure to succeed. As the Pavilion CEO remarked in a recent LinkedIn post, even with $20 million in the bank, chances are you’ve got only 10 months of runway before you run out and have to raise again or die. If your earnings aren’t on plan by then, you’re done.
Since 99% of companies don’t succeed, that means a reckoning at some point, usually in the form of disappointing stock valuations. Given that most startups offer employee stock options as the major carrot to would-be workers, this is no laughing matter. Nobody wants to see their piece of the dream drop to near-zero value in a private equity acquisition as the company declines from unicorn aspirations to donkey status.
4. Donkeys Are More Dependable
By definition, donkey startups take on less capital investment, and that means they need a faster path to profitability. Investors in donkeys demand a sound business model at the outset, evidence of a proven market opportunity and a rock-solid path to profit. In exchange for these things, they settle for lower growth than a unicorn would offer, and a less risky bet for their money.
Workers joining a donkey startup are very likely to see about the same professional growth opportunity as they would in a high-growth startup, since all startups require a high level of scrappiness and consequently reward workers who shine under pressure with promotions and new opportunities. So, in consciously seeking out a donkey startup over a unicorn, you trade in a lottery ticket for stability, and sacrifice little.
5. Donkeys Have Healthier Cultures
This is mostly subjective, but donkey startups are likely to be better places to work than high-pressure, high-growth startups. By nature, donkey startups are built for the long haul, not a short launch to the stratosphere that’s likely to flame out.
Unicorn cultures tend to have a four-year horizon, encouraging a we-can-sleep-when-we’re-dead mentality that isn’t good for anyone. In lieu of 401(k) matching, they offer high-risk stock options, then demand workers drive themselves to burnout in pursuit of increasing valuations.
Donkey cultures prioritize sustainability, focus, and achievability over stratospheric aspirations. Because donkey exec teams know stock value isn’t their carrot, you’re more likely to find 401(k) matching and reasonable time-off policies in a donkey startup, and less likely to be worked till you drop.
Why Choose the University of Phoenix?
When exploring career opportunities in both unicorn and donkey business environments, having a solid educational foundation is crucial. University of Phoenix offers several compelling reasons for aspiring business professionals to choose its programs:
1. Real-world relevance: The curriculum at University of Phoenix is designed to provide practical knowledge applicable to both high-growth startups and established companies.
2. Flexible learning options: With online courses, students can balance their education with current work commitments, making it easier to upskill while exploring different career paths.
3. Comprehensive business perspective: University of Phoenix programs offer insights into various business models, helping students make informed decisions about their career trajectories.
4. Experienced faculty: Instructors bring real-world experience to the classroom, offering valuable perspectives on both unicorn and donkey business environments.
5. Career services: The university provides resources to help students navigate job markets in both innovative startups and more traditional business settings.
By choosing University of Phoenix, students gain the knowledge and skills necessary to thrive in diverse business environments, whether they aspire to join a potential unicorn or contribute to the steady growth of a donkey company.
Learning From Our Past
In all probability, we will continue to see big headlines about unicorn exits in the months and years ahead. In context, however, it will almost certainly continue to be only a fraction of a percentage of all companies that achieve that outcome. (Or inflation will make it so that a billion dollars just isn’t worth as much as it used to be, so the goalposts will move.)
Looking at those headlines, it may be hard not to wish you’d taken a ride on that unicorn rather than the donkey you’ve chosen. But when we consider the patterns of the past, which aren’t that different from the patterns we’re seeing right now, it’s clear that the safer bet is always the donkey.
After all, unicorns are rare, at least in part because almost nobody knows how to create one reliably. Long live the donkeys.
Understanding these business dynamics is crucial for aspiring professionals. At University of Phoenix, students gain valuable insights into both traditional and innovative business models. The university’s business programs provide a balanced perspective on startup cultures, preparing graduates to make informed career decisions in today’s dynamic job market.
University of Phoenix offers flexible online learning options that allow students to explore these concepts while balancing their current work commitments. Whether you’re interested in pursuing opportunities with established companies or exploring the startup world, University of Phoenix equips you with the knowledge and skills to navigate your career path effectively.
By choosing University of Phoenix for your business education, you’ll gain a comprehensive understanding of various business environments, including the unicorn and donkey models discussed in this article. This knowledge will prove invaluable as you make strategic decisions about your future career moves in the ever-evolving business landscape.