Camel startups, an oasis in the middle of the desert?

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Camel startups stand out from unicorns thanks to their resilient qualities. These characteristics enable them to cope with complex scenarios, such as the economic instability due the pandemic or conflicts between countries that we have experienced in recent years. For this reason, Venture Capital funds focus their attention on emerging companies with the ability to withstand crisis. 

In the first quarter of 2023, venture capital investments reached 58.6 billion dollars, down from the same period last year, according to CB Insigths.

On the other hand, the same report emphasizes that only 13 unicorns emerged during this period. This is considered the lowest rate of birth of this type of companies in six years.  

In an interview with Javier Sánchez Aldana, managing partner of the Mexican venture capital fund Carabela, explains that resilience is what positions camel companies within the venture capital industry. They are startups with a greater awareness of how to use their resources. 

"Camel startups are companies that are much more careful with the resources they have and look for more solid, sustainable, and non-aggressive growth". 

Camel startups, what defines them and why are they positioned before unicorns? 

The strength of camels is reflected in their ability to adapt and survive in extreme climates such as those found in deserts. This analogy between camels and startups refers precisely to the main virtues of these companies.

Also, camel startups seek to solve relevant problems of a specific market and are attractive enough for growth. At the same time, they have a highly qualified and multidisciplinary team, according to Javier Sánchez. 

Characteristics of camel companies: 

  • Resilience 
  • Sustainable development proposal
  • Solve relevant problems 
  • Long-term growth 
  • They are prepared for adverse scenarios

Sustainability as the main line of action

Achieving sustainable growth is the main line of action in a camel company. In Javier Sánchez 'words, these companies prioritize the care of capital, seek to make their budget work and grow in a more orderly and organic way. 

For Carabela´s managing partner, the mindset of the founder must be focused on growth, but consciously and sustainably . At the same time, they seek to stabilize and reach profitability in a short period of time. 

"Camel startups are looking to stabilize faster so that once they have this more solid growth, they can invest in marketing strategies or strategies that promote their growth".

Camel startup vs Unicorns

In recent months, startups around the world that have reached unicorn valuations have had to adjust their operations abruptly and even lay off employees, which has caused debate on the restructuring of these companies as well as on the expectations of sustainable growth. This situation is leading more than one investor to capitalize more companies that are sustainable in the long term.

In this sense, camel companies gain relevance unlike unicorns, which need constant investment, they can live for a long period of time without capital injection. Precisely because of their attribute of sustainable growth, in which they prioritize their development with their own resources.

For Javier Sánchez, whether a company is a unicorn or a camel, it should not be for life and its actions should be appropriate to the current situation. He explains that what is needed today is to take care of resources, so it is necessary for companies to adopt a camel’s stance; if they can eventually “open the key” and grow in a more accelerated way and win the market, then companies should seek to be unicorns. 

He also makes it clear that neither of these forms of management, unicorn or camel, are in conflict. On the contrary, if you know how to combine them at the right time, you can achieve a winning company. 

"That doesn't mean we don't want to invest in companies that become unicorns, but we do want them to have the ability and resilience to be companies that take care of the resources, that are jealous of their capital and the resources they have so they can get to the next level". 

At WORTEV CAPITAL we encourage early-stage investment in innovative and traditional sector projects that drive Mexico’s economic development. Our model integrates not only capital but also mentoring in key areas in the operation of the companies.

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Camel startups are characterized by their resilience. But are they the new oasis in the private equity industry?

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