by Dr Gareth Thompson Founder Solve Earth
A Zebra is a For-Profit and For-Purpose startup that typically doesn’t take investment from Venture Capitalists (VCs). The term zebra was coined in 2017 by Astrid Scholz as a response to the increasing obsession with unicorn startups. A unicorn is a startup that reaches a valuation of $1bn as a private company, and typically achieves this by taking VC investment to ‘blitzscale’ with growth as the number one target. This hyper-growth strategy to build a unicorn is undoubtedly a very powerful and very successful strategy that has resulted in stellar success for an increasing number of tech startups. However, it is not the only strategy to startup success (TechCrunch: Silicon Valley should reward zebras not unicorns), and it is not even the best one if we want to build a better future world using the awesome power of startups (Fin-tech Futures: Why investors must stop hunting unicorn start-ups and start nurturing zebras).
The main reason is quantity versus quality.
Zebras will eventually become 1000X more valuable than unicorns.
Here are 9 reasons why:
Unicorns take Venture Capital funding in order to blitzscale and become a giant monopolist. In popular startup culture this has become the accepted story and is seen as the only way for a startup to grow fast and large. This is simply not true. A zebra startup can also scale rapidly and become a multi-national corporation. Examples of successful zebras. The difference is that a zebra scales holistically, with care for all stakeholders. Alternative sources of investment financing such as impact investment, revenue-based flexi-loans and equity crowdfunding can help a zebra muscle-up on top of organic growth. A zebra can also hit a $1bn valuation.
In contrast to a unicorn, a $1bn valuation zebra startup also has a social or environmental purpose at its core and is therefore much more valuable than the price tag attached to it.
Climate change is the biggest crisis humanity has ever faced. Startups and the tech sector offer the hope to tackle the problem using the scale and power of business. Climate tech startups could choose to go down the route of VC funding to obtain unicorn status. This is a legit strategy. However, zebra startups have a social or environmental mission at their core. Therefore, a climate tech startup is likely to have founders who are holistic in their approach. Money is simply a tool to achieve a higher purpose, and growth may or may not be the best way to achieve this purpose. Climate tech startups need to scale rapidly AND be around for long enough to make a big impact. To these founders it is literally about saving the world, not hitting an arbitrary valuation as fast as possible.
Since zebra startups have purpose at their core — they are much better aligned with environmental sustainability and are therefore best placed for riding the wave of eco-startup opportunities that are surging in the 2020s.
Since zebras have purpose at their core, they are also ideally suited to using alternative forms of company incorporation. They incorporate in this way to embed social and environmental values into the company culture by putting them directly into the legal foundation. This is the strongest way to embed progressive company cultures that don’t just pay lip service to protecting people and the environment. Unicorns funded by VCs are subject to the whims of the powerful investor, leaving unicorn founders with less control to prevent social abuses and environmental damage in the wake of chasing growth at all costs. By contrast, cooperative company structures allow for-profit zebras to achieve multi-stakeholder care.
A new and innovative form of multi-stakeholder incorporation inspired by cooperatives is called the FairShares Commons, and it was created by the visionaries Dr Rory Ridley-Duff and Graham Boyd (for more read Rebuild). The FairShares Commons takes decentralised power and wealth sharing to the next level. In a FairShares Commons zebra, a progressive company culture is embedded legally by giving ALL stakeholders a real voice and a real share in the power and wealth created.
This means a zebra turbocharges the concept of taking care of not just its social/environmental mission, but also its employees and suppliers and every stakeholder group it touches by giving them a share in the wealth and power created.
Not only that, zebras using enhanced cooperative legal structures such as the FairShares Commons are ideally suited to empowering employees and giving them full autonomy to work in self-managing, self-directing teams using dynamic governance methods such as Sociocracy and Holacracy. These future-ready governance concepts allow employees to thrive, and complex decisions to be made at lightning speed across a company org chart that mimics systems found in nature, rather than in the controlling machine hierarchies of 20th century corporates. This kind of environment allows exponential performance to be unleashed by the workforce. Why? Because empowered workers feel a greater sense of fulfilment and are happier. Big surprise- Happy workers are more productive! (Read Humanocracy for more).
Thus, zebra startups running on the latest incorporation structures offer the best bet for the future of happy, fulfilling and dynamic workplaces where workers can be their best selves.
Fin-tech unicorns are becoming a common breed as startups swallow up the banking industry to create a more dynamic financial system. The performance and growth of these startups has been breath-taking (Revolut, Starling). However, consider what would happen if more zebra fin-tech startups were to be created. Zebra startups running on new legal incorporations such as the FairShares Commons protect all stakeholders by giving them a share in wealth created and are also legally bound to protect multiple forms of wealth including natural capital (mother nature) and social/human capital. Until now, we didn’t have the technology to track other forms of capital. With the rise of digital currencies this will not be a problem in the near future.
Cryptocurrencies running on blockchain technology are ideally suited enablers to track multiple forms of wealth across multiple stakeholders. Therefore, zebra fin-tech startups using digital currencies as a way to track all forms of capital including social and natural capitals, could massively accelerate the transition to a decentralised multi-wealth sharing economy. This would enable us to more accurately price the value of mother nature and the contribution created by all people involved in wealth creation of all types, and not just financial capital.
Zebras can usher in a new world of decentralised finance accessible by all to enable tracking of wealth generation of all types for everyone. This includes natural wealth delivered to us from nature which is the ultimate source of all value.
Unicorns are mainly agents of the existing degenerative linear economy in which natural and human resources are converted into wealth primarily for investors and founders at the expense of the natural world and the wellbeing of the majority. Zebras built on new legal incorporations such as the FairShares Commons enable power and wealth to be shared amongst all stakeholders fairly, and strong legal protections for both the natural world and people. These kinds of zebras are true multi-stakeholder businesses that are capable of transitioning the global economy from one of outdated shareholder primacy to true multi-stakeholder care as espoused by the most powerful CEOs in the world at the Business Roundtable in 2019. Why is multi-stakeholder care essential?
Zebras are the beginning of a new business world that places financial wealth at an equal level to natural, human and social wealth. This new business world takes care of all stakeholders, including nature. This is what we need in the first instance to achieve a truly environmentally sustainable circular economy. Sustainability is also enabled by shifting our economic focus away from material consumption and more towards wealth generated through holistic human wellbeing. This allows the economy to ‘do no harm’ to nature. (HBR: We need more startups that don’t prioritise growth above all else). But surely we can do so much more than simply not causing damage?
Zebras are among the building blocks for moving beyond sustainability into a regenerative global economy that goes beyond simply not doing harm, and into the realm of regenerating the natural world. A regenerative economy also generates financial, social and human ‘profits’ simultaneously. This is the stuff of a 22nd century future dream-world that sounds utopian, but is eminently achievable, as envisioned by the brilliant Kate Raworth in her book ‘Doughnut Economics’.
Zebras can generate a triple win across money, people and nature to regenerate the world, and lay the foundations for an advanced human society by helping us to build a new regenerative global economic system that enhances nature instead of destroying it.
When zebras create a regenerative global economy that results in power and wealth sharing, enhancement of nature, and wellbeing for all, a new class of politicians will realise that they no longer have to succumb to binary trade-offs between the economy and human wellbeing and the economy versus mother nature. The new politics will support the regenerative economy by assisting it to generate regenerative triple wealth gains across people, planet and money. Politicians will finally be able to value building human, social and natural wealth at the same or a higher level than the priority given to financial growth. This is a new politics that is not right or left — and it isn’t a compromise in the middle either. The new politics is up — it transcends the binary and finds unity in diversity and diversity in unity.
Zebras can help usher in a new regenerative political system where politicians work hard to protect people and nature and not just money.
Zebras have structural design elements in the company fabric that mean they are far more likely to weather economic shocks. Mondragon is a giant conglomerate of Cooperatives in Spain with global sales of 15bn euros and in the wake of the financial crisis and deep unemployment, almost none of their workers faced layoffs (Guardian: Mondragon Spain’s Giant Cooperative). Mondragon is an ecosystem of zebras where resources are shared across stakeholders and companies group together to shield themselves from economic storms.
Zebras have in-built resilience to the economic shocks that are likely to build in frequency and intensity in the 21st century as we wrestle with global challenges. Zebras do this by designing resource-sharing into the companies’ fabric.
What about the money? There are those who argue that zebras offer poor returns for investors because they are more concerned about their mission than money. This need not be true. Investing in an ecosystem of zebras will eventually result in a 1000X return compared to a portfolio of unicorns! Is that even possible?! There is a deep mathematical answer to this question that will be of interest to highly technical investors (Why ecosystem investing beats portfolios), but the simple answer is that over a large number of business cycles in the long-term, the vast majority of companies go bust. Only a handful of companies have survived from the 16th century to the 21st. Individual companies are exposed to the full magnitude of economic shocks, disruptions and fierce globalised competition. However, a herd of zebras in an ecosystem share resources and have both competition and collaboration baked deep in their DNA (nb: A herd of zebras is called a ‘Dazzle’). This means that as a group they are highly resilient to economic shocks and are able to adapt rapidly to changing and chaotic business circumstances.
There is a strong mathematical basis for showing that a global-sized Dazzle, or global ecosystem of zebras will become incalculably valuable as we build a regenerative global economy fit for the 22nd century and beyond. In fact, 1000X is a gross underestimation of the long-term returns because the continuation of an advanced global society without damaging the natural world is priceless. 1,000,000X sized returns are actually more realistic!
Thus, investing in an ecosystem of zebras will outperform a portfolio of unicorns in the long-term by an incalculable multiple.
Zebras are the building blocks of a better future world, and one that will ultimately leave humanity much wealthier.
Solve Earth is a community of aspiring eco-entrepreneurs who are building zebra startups to enable the creation of a regenerative human society that will thrive for Millennia. Latest Solve Earth events.