Venture capitalists aren’t just looking for startups that can turn a profit — they’re seeking companies and entrepreneurs capable of overcoming the challenges associated with stagnation. When this doesn’t happen, and growth plateaus, small- to mid-sized firms risk becoming “zombie startups.”
Cointelegraph editor-at-large Kristina Lucrezia Cornèr recently moderated a discussion centered on reanimating zombie startups at Web Summit Qatar 2024. Cornèr was joined by Venture capitalists Michael Lints, partner at Golden Gate Ventures, and Zainab Al Sharif, principal at Plus Venture Capital.
On defining what a “zombie startup” is, Lints had this to say:
“We look at the performance of our portfolio and the performance of our companies and look at how strong their growth is. And you’ll notice that for some of the companies that we had very high expectations in terms of their growth, that growth is flat — not only just for one year but for several years in a row. For those companies, we would define them as […] zombie companies.”
Part of the problem, according to Lints, is that a sideways trend can lull entrepreneurs into thinking they’re not in any trouble. “Having a conversation with the founders at that point in time can really help them understand that the company is still performing but it's not outperforming.”
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The rigor mortis of startup stagnation can affect companies in any field, and for myriad different reasons, but the cure is always the same.
According to Lints and Al Sharif, reanimating a zombie startup requires acknowledging the problem, communicating challenges, turning crisis into opportunity and finding ways to differentiate oneself from market peers.
As Al Sharif put it:
“There are two types of team members or founders, which is one that you mentioned, the ones that would deny that they’re in the zombie phase. And then there are the ones who know that they’re in the zombie phase, but they just need some sort of guidance.”
Al Sharif also pointed out that guidance was something venture capitalists should be capable of providing, adding, “I think that’s where the investor needs to come in and open their eyes on the specific area and brainstorm with them.”