It is possibly one of the worst nightmares for an investor, even worse than having a failed startup in your portfolio. Neither is it a new species, nor a concept of recent creation: startups or zombie companies have years of history. The term was born from a group of banks that remained afloat thanks to public financing with the objective of not falling into insolvency.
Over the years, the concept of zombie was transferred to the popular lexicon thanks to startups. Zombie companies are those companies that “really have completed their business activity (whether due to lack of customers, financial problems … etc), but do not have enough liquid money to close, and address the obligations that entails.” Or what is the same, attractive businesses on paper, but that put into practice, their financial results are disastrous and can not go anywhere. A no-man’s land that is nourished by a large number of companies that smell like zombies and are leaving members along the way, but are not able to close. Many of them hoping that, by chance, a miracle will happen that changes the consumption patterns of the public, the economy or the designs of the destination.
Those who are strong will be able to pivot to a new business model that is capable of changing the conditions of their precarious situation; but most will have to self-destruct. In any case, either of the two options is unpleasant both for the business, and for self-esteem.
Most likely, this term had much more room in the ugly years of the crises: little funding and few resources, in addition to clients in a consumer mood below the average. But in turn, it was this time when a greater number of companies emerged under the protection of self-employment that did not occur in third-party companies; The boom of the technology companies brought another burst even worse. As happened in the 90s with the outbreak of dot com, the bad omen of the entrepreneur bubble has always been around the corner.
The truth is that, although the mood has relaxed in terms of numbers and follies, the outbreak has not been as strong as expected. the new era has resulted in larger and more methodical rounds to certain lucky ones in an increasingly exclusive market. Much better for the ecosystem, but that generates a greater number of companies without possible financing.
That is, more and more potential zombies.