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What Is A Zombie Startup?
What Is A Zombie Startup
The phrase “zombie startup” probably conjures images of flesh-eating monsters, but the reality might be even scarier—a startup running on fumes, trudging forward without a plan, a purpose, or a path to profitability.
Worse, it is often difficult to identify a zombie startup before it’s too late, since they often resemble any other startup on the surface. Investors are still met with, clients are still taken on, team members are still hired, and for a while the business will likely even see the same kind of linear growth that would expected from any new venture. Startups can scrape by on venture capital and angel investor money for a surprisingly long time—sometimes even years—before the founders realize that the crucial spark is missing and that the business won’t be able to grow fast enough to secure new funding or to negotiate a big exit.
So what are some signs that your startup might just be shambling along?
In many cases, the evidence can be seen in how you and your team are approaching work. It’s not uncommon for the initial excitement of launching a startup to wear off, but if you have reached the point where you’re dreading going in each morning or if you hole up in your office so you don’t have to deal with clients or employees, it’s likely a sign that things are starting to stall.
While it’s much more difficult to spot a zombie startup through metrics alone, there are a few benchmarks that are worth keeping an eye on. According to Danielle Morrill, the co-founder and CEO of a briefly zombie-bound online referral startup called Referly, a few of the major red flags include a failure to hit 10% week-over-week growth on vital metrics such as revenue or active users, or less than 2% week-over-week growth in sign-up numbers for a consumer service. Likewise, she argues that working on the same idea for a year or longer without actually launching is a sign that things have stagnated.
Return of the Living Dead
If any of these descriptions are starting to sound familiar, you’re probably wondering if it’s time to panic. But the good news is that finding out you’ve been heading a zombie startup doesn’t necessarily mean it’s time to pull the plug and abandon ship—by applying some fundamental lean principles, it’s entirely possible to correct course and revitalize your startup.
Embrace the Pivot
The lean startup approach places an enormous amount of value on flexibility and the ability to “pivot,” which involves a fundamental shift in the business model or product based on data and feedback. If you want to salvage a zombie startup, the first and most important step is recognizing that some sort of pivot is going to be necessary, and accepting that it may in fact require making multiple, rapid pivots.
Consider the fact that YouTube, the world’s largest video-sharing platform, started life as a dating site where users were encouraged to upload videos of themselves in order to link up with potential suitors. The idea went nowhere, even when the founders resorted to offering people money through Craigslist in exchange for posting videos. The site floundered, kept on life support by seed money until, in a last-minute act of desperation, the founders decided to let people post any videos they wanted. The rest is history, but the fact that YouTube spent its early days as a zombie startup is often overlooked. And the reason that YouTube survived was because they embraced the pivot, radically altering their product and distilling it into a platform that is now valued at over a billion dollars.
Define Your Vision
Being willing to pivot is crucial, but it’s equally important to define your startup’s vision and stick to it. In the words of Eric Ries, one of the driving forces behind the lean startup movement, it is important to remember that a pivot represents a change in strategy without a change in vision. In fact, he suggests that a business that attempts to change its core vision would be better off starting an entirely new business instead.
Think of the vision as a North Star for your startup—it’s the reason your business exists, and it should guide every decision you make. Your mission is to articulate that vision to team members, investors, and customers, but if the vision is constantly changing, your venture is going to end up in limbo, creeping along without any momentum.
For a zombie startup, this means that instead of reinventing your vision, you will need to re-evaluate your approach to it instead. Is your product bloated or over-complicated? Then it may be time to decide that you’re going to do a “zoom-in” pivot by laser-focusing on one aspect of the product, as in the case of YouTube or Flickr. Do you have a strong product with a niche market that is too small to sustain it? Then it might be wise to explore adjacent markets and see what else those customers are buying and whether you can expand your line of products or services to fill the gap.
Stabilize by Cutting Costs
One of the biggest benefits of a lean startup is just how cheaply they can operate without sacrificing efficiency and flexibility. And if you’ve got a zombie startup on your hands, it’s essential that you have as many resources at your disposal as possible, because survival is likely going to depend on your startup rapidly executing a number of experiments and pivots based on the resulting feedback.
Some founders struggling with growth decide to bring in consultants to diagnose problems with company culture or to help revamp a product, but often times bringing more people on board is the opposite of what the startup needs. Though it is always a difficult decision, you may even have to let some team members or employees go in order to scale back the business and move it in another direction.
Another way to cut down on costs is to take a lean approach to marketing by ditching expensive, cumbersome traditional marketing tactics in favor of using free tools to run fast and simple experiments. Customer surveys, A/B tests, and bare-bones prototypes can all provide invaluable data on the direction you need to take to reach a sustainable and profitable business.
Consider Offering Employee Equity
Though it’s still far from the norm, the idea of offering employees a stake in the startup is beginning to gain more traction, and in the case of a zombie startup, the benefits are magnified even further. A cash-strapped startup that is struggling just to stay afloat will have a difficult time offering competitive market-value salaries, which could also have a knock-on effect on the skill level and performance of potential employees. Similarly, if an employee is motivated solely by their salary, then it’s not hard to imagine that they will be looking for a quick exit if the startup’s growth flatlines and their compensation is jeopardized. Offering equity as part of the employee compensation package not only allows you to stretch limited funding, it also gives employees an incentive to stay on and push through when things get difficult.
At the end of the day, bringing a zombie startup back to life is going to depend on a simple decision: pivot or persevere. In the latter case, the risk of failure is still going to be ever-present, but it’s also worth acknowledging that not every startup needs to break out and experience exponential growth to be successful—it’s entirely possible to operate a business for the long haul, maintaining a modestly profitable strategy aimed at gradual growth. But for people who are determined to turn their vision into a household name or a paradigm-breaking product, or just to experience enough growth to scale their business or negotiate a profitable exit, the lean startup methodology offers an opportunity to breathe new life into a zombie startup by slimming down, experimenting, re-evaluating, and pivoting into something that may look altogether different.
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Nectar is part branding powerhouse, part consultancy, and part digital marketing agency based in Manhattan.
