Editorial Team

The Braintrust: Alex Lazarow (Cathay Innovation) on Camels Over Unicorns and Creators Over Disruptors

The most pressing business story of 2020 has been one of survival in the face of an unexpected and existential crisis. Many startups, including those in the tech space, have been forced to layoff employees and cut costs as the economy reels from COVID-19. Last week, an article in Entrepreneur titled “Forget Unicorns. Startups Should Be Camels” went viral, because it spoke to the need for a paradigm shift in Silicon Valley. The author, Alexandre Lazarow, adapted the piece from a book he’d started writing more than two years ago. But obviously, the message has gained added resonance during the current moment.

Lazarow is an author and global venture investor who spends much of his time studying the FinTech and health care spaces. Over the last few years, he began to notice that the Silicon Valley playbook of growth-at-all-costs just wasn’t an exportable model. He thought someone should be highlighting the more lean and resilient brand of entrepreneurship being perfected on The Frontier — business regions away from the hubs of capital like Jakarta, Bangalore, Nairobi, and Columbia, Missouri. So, he decided to write just that book: Out-Innovate: How Global Entrepreneurs — from Delhi to Detroit — Are Rewriting the Rules of Silicon Valley.

We spoke with Lazarow about the need for Camels instead of Unicorns and Creators instead of Disruptors in 2020.

Unifimoney: Last week, you wrote an article that went viral called “Forget Unicorns. Startups Should Be Camels.” It was adapted from your upcoming book, Out-Innovate. Tell me what spurred you to write the book.

Alex Lazarow: Outside of work, I’ve been teaching a class at the Middlebury Institute of International Studies at Monterey, which is Middlebury College’s graduate program out here on the West Coast. I teach this entrepreneurship class and I was getting really frustrated that I kept assigning my students books on entrepreneurship and always felt that I had to recontextualize them to the reality of the startups that they were gonna build. A lot of them are gonna move back to the midwest or to an emerging market to build a startup, and in those contexts, they won’t have the same depth of capital and of trained startup human capital, or they’ll be operating in markets that face way more macroeconomic shocks. The Silicon Valley playbook that works extraordinarily well in this context of abundance that we’ve had here in the Valley doesn’t translate to the reality of building startups around the world. The best entrepreneurs in Chicago or Detroit or Amsterdam or Bangalore or Nairobi have more in common with the best entrepreneurs in Sao Paulo than they do with those in San Francisco. And yet, no one is telling their stories and so I decided I would. So that’s the genesis of this book.

I wrote the book to start this conversation about what it takes to scale in ecosystems outside the Valley so that entrepreneurs can learn from each other. One of the themes I wrote about was this idea of the Camel. In the Valley, we chase Unicorns. The methodology is this growth-at-all-costs approach. It’s okay to subsidize user acquisition. It’s okay to subsidize two or three products. And it’s okay to burn a lot of capital in service of growth. But around the world, when you’re not in the same ecosystem, I believe that the best entrepreneurs build Camels: businesses that invigorate themselves with sustainability and resiliency. They weave that into the business model from Day One.

Unifimoney: How has that Camel ethos been intensified in the Age of COVID-19?

Lazarow: The concepts of the book are more germane today than they were when I started writing the book two years ago in many ways. Because the context has shifted. When there’s so much capital available and you’re building a business that’s winner-takes-all where every other competitor has a ton of money, approaches like Blitzscaling make sense. But the context in the Valley has changed, and it’s not just Corona. It’s also a lot of the failed IPOs we saw in the Fall. We’re seeing that this growth-at-all-costs, unsustainable approach is showing cracks. And I think collectively we’re looking for another model.

I believe that model is being taught by entrepreneurs that have already been operating in some of these tougher restraints. They were already building businesses that were sustainable and resilient. Obviously, it’s hard to flip on a dime; to go from this growth-at-all-costs methodology to the Camel approach that I’m espousing. But I think that the next generation of entrepreneurs are going to build their startups with this Camel ethos rather than the Unicorn ethos.

Unifimoney: The availability of cheap capital is often credited with the most recent Tech Boom. And it was a VC that coined the Silicon Valley usage of Unicorn back in 2013. How hard will it be to restructure the thinking of founders when the venture capital incentive structure is built around chasing Unicorns not Camels?

Lazarow: I think there are a couple reasons why tech grew like it did. One of the reasons — the jet fuel that was poured on top — was the availability of capital. But I don’t actually think that’s the underlying thing that made it possible in a way that wasn’t possible in 2000. For one: there’s a whole ton of business infrastructure that makes it a lot cheaper and easier for anyone to build a startup and experiment. The cloud is perhaps the best example, where you can rent a supercomputer by the hour instead of buying servers. But also, there’s a culture of entrepreneurship that’s changed things — it’s now much more acceptable as a career path. When I graduated out of business school in 2010, the most popular jobs and the safest jobs were going to work in investment banking. Now, one of the most popular employers is Google. And so I actually think that that’s been a driver, too. The aspirations of people and the zeitgeist culturally have moved toward entrepreneurship. And I think all that will continue.

But today, we have this fallacy of looking at startups and saying, ‘Hey, look. This company was successful. What did they do to be successful?’ The fallacy is that if you repeated that story ten times, not that company wouldn’t have been successful every time. It just happened that we are living in the one version of the story where they had the outcome. Is this just the one time it worked and the nine other times it failed or would it work eight times? I believe that with the Camel approach, the risk-adjusted outcome for your business is better. And one of the byproducts of switching to that approach is that we’ll have some more resilient stable companies that will be able to shift that mix within VC fund portfolios too.

Unifimoney: In your book, you talk about how companies outside the traditional tech global capitals can teach entrepreneurs around the world about how to be innovative. What’s the most unexpected thing that founders in New York or Silicon Valley should learn from those on the “Frontier” in Delhi or Detroit?

Lazarow: One is the approach of being a creator instead of a disruptor. In the Valley, we’re obsessed with this notion of disrupting things. You’re either disrupting or you’re being disrupted. You’re taking these inefficient industries and taking them down with a new product and a new attitude. That works well if you’re trying to solve something where there’s an okay service and you’re trying to bring tech into it. But it doesn’t work well to solve the world’s hardest problems. And outside the Valley, entrepreneurs are disproportionately tackling things like healthcare, education, energy, and financial services, and they’re disproportionately serving customers that are the mass market not the top of the pyramid. They’re also disproportionately building their ecosystems at the same time. That’s what creators do.

The Corona Virus has shown us that we have massive challenges here in America, too. I think it’s great to solve some business things with more efficiency, but I think it’s even greater to figure out how to offer mass-market healthcare in an affordable way by using technology and using new business innovation. I think it’s greater to figure out how to do EdTech at scale. And I’d love for more entrepreneurs to be tackling those kinds of problems.

The second is this notion of distributed teams which is also very germane today. It’s no surprise to me that the best companies in the world at building remote and distributed teams have grown out of ecosystems where that was needed by nature. Even in the US, it was Missouri that gave us Zapier and Chicago that gave us Basecamp. The best remote companies did it because they had to; because they were tapping the best talent wherever it was available. In the Age of Corona, we’re all working from home and we’re realizing what it takes to do it well. To do it well is challenging. And it’s a best practice that is solidly in the Camp of the Frontier.

Unifimoney: How has this new global entrepreneurship affected FinTech specifically? Can any lessons of smaller international neobanks or financial startups be brought back to the United States market?

Lazarow: One of the ideas I talk about in the book is the innovation supply change: that the best ideas are emanating from everywhere and getting improved over time. One example that’s particular germane to the Unifi story is the digital banking model. In some ways, the early success came out of the UK. But then that model got adapted and evolved in a ton of different ecosystems. In the US, it’s nuts — there are 1,500 Series A funded FinTechs that are doing every little bit of the Unbundling story. I think that there’s room for this Rebundling story and that was one of the reasons that I invested in Chime and Neon. I think that we’re going to continue seeing that.

That model doesn’t look the same in every ecosystem — some things inspired it, other things were adapted, other things are actually going to go back and inspire the originals. So, we’re seeing these ideas emanate from everywhere — it’s no longer the model where Silicon Valley comes up with the idea and it gets copied elsewhere. Now, the ideas are coming from everywhere and getting adapted and then those adaptations often even come back and inspire the original. I’m seeing more and more of that.


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