Recently, in the world of impact investment, there has been a tendency for investors to look for unicorn startups that have exponential growth. This is not in line with most social enterprises which are zebra-type startups that have slower growth yet are still sustainable and impactful. This was stated by Romy Cahyadi, CEO of Instellar at IDEAFEST on Friday, September 29th 2023.
What’s the difference between unicorn and zebra startups and what investment model is suitable for both?
Unicorn vs Zebra
The most striking difference between the two lies in the company’s goals. Unicorns focus more on fast and massive growth. Meanwhile, zebra prioritizes sustainability, impact on communities, and environmental, social, and governance responsibilities.
If we look at the approach to funding, unicorns are very dependent on venture capital, whereas zebras usually go for alternative funding from the community, fundraising, and impact investing. This is what makes zebras not only prioritize profit, but also company goals and their impact on the environment. An example of a zebra startup is a social enterprise.
Current Funding Mismatch with Zebra Company
Seeing the current situation, social enterprises find it difficult to find funding that is in line with their vision and mission. Sometimes they insist on getting funding from venture capital which focuses more on unicorn companies.
If this condition continues, it will have a negative impact on both investors and investees. Investors will feel that their expectations are not met and appear as though they force investees to fulfill their wishes. Meanwhile, investees will start to lose their identity. From a company that cares about their impact on surroundings and sustainable growth, into one that only pursues growth and profit, for short-term goals.
On the other hand, there is also a gap between impact foundations and later stage impact investors which makes many social enterprises go bankrupt and unable to continue their business due to limited access to funding. This phenomenon is called the valley of death.
The Right Investment Model for the Zebra
A suitable investment model is needed to address the concerns and current investment trends faced by zebra startups or social enterprises.
Instellar with Instellar Investment wants to create a bridge for social entrepreneurs to grow their business and stay true to their mission until they are ready to receive investment from later stage investors.
Instellar Investment is committed to being the financial arm for social enterprises in Indonesia to create impactful, sustainable, and responsible businesses. Instellar invites social enterprises and investors alike to realize this mission for a better Indonesia’s business ecosystem. For more informations on Instellar Investment, visit instellar.id/investment.
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