Born in darkness, these startups got their start around the time Sequoia Capital published its famous "RIP Good Times" deck. Like roaches, they survived the mushroom cloud and thrived.
In a seminal article titled “The Age of the Cockroach,” Caterina Fake argues that startups, much like cockroaches, can survive a downturn by focusing on the unglamorous essentials.
“Companies that want to outlast the coming funding crisis will need to move fast, cut costs, and plan for a future without much money in it,” Fake writes.
Cockroaches, in our view, are startups born in tough funding environments. They tend to keep their heads down, and they learn to be more creative, gritty, and thrifty in cold venture climates, and so succeed.
The current chill in VC markets conjures up fresh wounds from the last major downturn, the economic equivalent of nuclear winter that the US and global economies suffered in late 2008 and 2009.
When markets turned in late 2008, Sequoia Capital published its now-infamous slide-deck titled “RIP Good Times,” marking the beginning of an extreme tightening within venture capital coinciding with the Great Recession.
To learn from our recent past, we used CB Insights data to identify unicorns that raised their seed or Series A deep in the darkness of the the last major recession and right after that deck (Q4’08 through Q4’09). They include today’s most celebrated startup success stories, including Uber, AirBnB, Thumbtack, and Twilio.
How can companies survive the today’s downswing? There may be lessons to learn from these startups. The full list of cockroaches, below, with screenshots of their sites from darker times:
1. Uber
Total Funding: $8B
Most recent disclosed valuation: $62.5B
- Uber raised its seed in August 2009 at the height of the crisis, and raised again in October 2010, proving good ideas get funding no matter the climate. Months later, founder Travis Kalanick famously linked up with COO (and one-time CEO) Ryan Graves through a Twitter conversation. Uber is known for its sharp-elbowed, hard-charging entry into new markets. The now-powerful company has often remarked on its more humble beginnings: “We’ve come a long way from our first space in San Francisco—a small cube for four people in the Financial District, subleased from another local start-up called Zozi.”
2. AirBnB
Total Funding: $2.4B
Most recent disclosed valuation: $25.5B
- AirBnB raised its seed in January and April 2009. Later that year, AirBnB, desperate for traction, resorted to selling election-themed cereals (Obama O’s and Cap’n McCains) as a promotional tactic.
3. Spotify
Total Funding: $1.3B
Most recent disclosed valuation: $8.5B
- Raised its Series A in October 2008, and ran the business at a net loss of $26M in 2009. Spotify quickly reached 10 million users in September 2010, but recently raised $1B in a convertible note deal that raised eyebrows for its investor-favorable terms.
4. Dropbox
Total Funding: $1.1B
Most recent disclosed valuation: $10B
- Dropbox raised its Series A in October 2008. Instead of selling out in a glamorous exit to Apple (at Steve Jobs’ behest) in 2009, Dropbox decided on the spot not to sell, opting instead to grow it themselves. While the company has since become more known as a startup that had to cut down on staff and perks as it faces growth challenges, Dropbox was definitely roach-like in its lack of dependence on traditional advertising and early creative use of growth hacks such as referrals.
5. Cloudera
Total Funding: $1B
Most recent disclosed valuation: $4.1B
- Cloudera raised its Series A in March 2009, with the whole business threatened by legal risk as it was potentially stepping on Google’s intellectual property. Ultimately, the bet worked in their favor and “[Eric Schmidt] agreed that this technology is not just for researchers, and it’s good for Google to make this pervasive …The more data people create, the more data Google can slurp up.”
6. Credit Karma
Total Funding: $368M
Most recent disclosed valuation: $3.5B
- Credit Karma raised its Series A in November 2009, and made that $2.5M last 4 years until raising again in April 2013.
7. Vox Media
Total Funding: $324M
Most recent disclosed valuation: $1B
- Starting as a humble sports blog SB Nation (which quickly drove the most traffic in the genre), Vox Media raised its Series A in January 2009 and is now a multi-site digital media empire.
8. Lookout
Total Funding: $281M
Most recent disclosed valuation: $1B
- Before raising its Series A in December 2009, to prove their hacking mettle, the cofounders loaded “gear in a backpack and [walked] the red carpet at the Academy Awards in Los Angeles. We demonstrated that many celebrities’ cell-phones were vulnerable to hacking.”
9. SimpliVity
Total Funding: $277M
Most recent disclosed valuation: $1B
- Raised its seed in October 2009. CEO Doron Kempel has long been known to sweat the details: “Kempel personally gives a three-and-a-half-hour orientation to all new employees.”
10. Thumbtack
Total Funding: $273.9M
Most recent disclosed valuation: $1.3B
- Thumbtack raised its seed in June 2009. Their story is the quintessential Valley humble beginning: “We knew we wanted to start a company, so we brainstormed ideas on a weekly conference call for an entire year … We brought an engineer on board, moved into my parent’s basement in Silicon Valley, and the rest is history.”
11. Twilio
Total Funding: $233M
Most recent disclosed valuation: $1B
- Raised its seed in March 2009. To show off the ease of coding with its telephony API on an April Fool’s day Twilio build a Rick Roll app with only a few lines of code. That was the firm’s first major PR coup.
12. Hootsuite
Total Funding: $230M
Most recent disclosed valuation: $1B
- Raised its Series A in December 2009
13. ZocDoc
Total Funding: $226M
Most recent disclosed valuation: $1.8B
- ZocDoc raised its Series A in October 2008. Founder Cyrus Massoumi went door-to-door convincing health practices to enroll in ZocDoc, and in one case security guards had to escort him out.
14. ActiFio
Total Funding: $208M
Most recent disclosed valuation: $1.1B
- ActiFio raised its Series A in July 2009 from Greylock Partners and North Bridge Venture partners, and set up shop in the office space of a failed Greylock portfolio company.
15. Evernote
Total Funding: $204M
Most recent disclosed valuation: $2B
- Evernote has recently run into trouble, but when it raised its Series A in January 2009 it became a startup known for its savviness in hitching its fate to that of the fast-developing app economy. CEO Phil Libin has noted that being app store-ready was the key: “What we did, is we really killed ourselves in the first couple of years to always be in all of the app store launches on day one. Whenever a new device or platform would come out, we would work days and nights for months before that to make sure Evernote was there and supporting the new device or operating system in the app store on the first day … When iPhone launched we were one of the very first iPhone apps, so we were promoted and had a lot of visibility.”
16. CloudFlare
Total Funding: $182M
Most recent disclosed valuation: $1B
- Cloudflare raised its Series A in November 2009, and found free marketing when infamous hacker group LulzSec endorsed their security services. CEO Matthew Prince attributes the success to the company’s focus on building a high-adoption product, focused on the long tail, which no one dared to do before: “As we looked at the market most security solutions targeted those 10,000 largest websites that were out there … We built something that works for everyone else.”
17. Home24
Total Funding: $151M
Most recent disclosed valuation: $1B
- Raised its seed in January 2009, and thrifty Home24 made that last for four years until raising again in November 2012.
Are we seeing the next set of cockroaches emerge today, as VC largesse dries up? Let us know who your nominees are for emerging cockroaches in the comments.
Want more information on top tech companies? Check out our venture capital database below.
All images from the awesome Wayback Machine. If you want to see the world’s worst startup logo…
This report was created with data from CB Insights’ emerging technology insights platform, which offers clarity into emerging tech and new business strategies through tools like:
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