How to Bridge the Valley of Death in Deep Tech

Insights from Founders, Investors, Policymakers, and Commercialization Experts

In 2016, Omnirobotic , a Laval, Québec-based robotics startup, had strong backing from top investors and a bold vision to automate industrial manufacturing. But within a few years, it faced mounting financial losses, layoffs, and an operational shutdown. Their story illustrates the "valley of death" — a critical period where many deep tech startups struggle after R&D funding ends but before commercial revenue begins.

Omnirobotic’s story reflects a common challenge for deep tech founders: How do we fund R&D and de-risk our ventures for investors? This article draws on insights from founders, investors, and policymakers who have successfully crossed this valley.

What Is the Valley of Death?

The "valley of death" is the critical period when startups transition from R&D to commercialization. It is marked by a funding gap — R&D grants expire, but Series A investors wait for market validation.

Unlike software startups, deep tech faces higher costs for hardware prototyping, compliance, and manufacturing. This phase can last for years, not months, and requires de-risking both the technology and the business case to secure funding. Bridging this gap is essential for a company’s survival and long-term success.

Why It Is Hard to Cross

1. Funding Gaps

R&D grants like NRC IRAP or early-stage funding from Ontario Centre of Innovation (OCI) help start development, but they do not sustain multi-year R&D. Once grants run out, founders face a gap in funding as VCs seek commercial traction before investing.

This creates a significant financial strain on startups that rely on grants to fund early-stage work. Companies must demonstrate traction or potential market fit to attract private capital, but achieving this with limited resources is a difficult balancing act.

2. Technical Complexity

The gap between a prototype and a market-ready product is significant. Issues like hardware durability, system integration, and addressing edge cases can delay progress and increase costs.

One effective strategy to address this is to focus on modular development. Designing prototypes with scalable modules avoids costly rebuilds when it is time to commercialize, saving time and resources. This approach also makes it easier to implement technical updates as new market demands arise.

3. Regulatory Bottlenecks

Unlike software, deep tech often faces complex regulatory requirements. These requirements can slow down commercialization by months or even years. For example, Real Life Robotics had to engage with city officials at Markham’s Demonstration Zone to ensure delivery robots met regulatory standards.

Proactive engagement with regulatory bodies early in the process can prevent costly delays. Companies that succeed in this area are often those that prioritize regulatory compliance as part of their product development strategy.

How Founders Have Crossed It

1. CarbonCure Technologies

CarbonCure succeeded by running pilot projects with HeidelbergCement, proving the business case for its CO2-reducing concrete. This strategy attracted Series A funding.

Robert Niven, Founder of CarbonCure once mentioned that their first pilot was not about generating revenue. It was about de-risking the opportunity for our investors. Once we had those pilots, funding followed naturally."

By focusing on pilots, CarbonCure established credibility with investors and potential clients. This approach validated the technology and demonstrated commercial demand, paving the way for future funding rounds.

2. Omnirobotic

After early support from Element AI, Real Ventures, and Export Development Canada, Omnirobotic faced an $8.9M deficit in 2023. They restructured, shifted to delivering full robotics solutions, and achieved profitability in 2024.

This transformation highlights the importance of strategic pivots. By rethinking its business model and value proposition, Omnirobotic turned its financial difficulties into an opportunity for growth. Their new approach made it easier to monetize their offerings and increased cash flow stability.

Investor Perspectives

Securing Letters of Intent (LOIs) is one of the most effective ways to prove market interest and build investor confidence.

Matt Roberts, Partner at BDC Capital: "If a founder shows me an LOI from a paying customer, it is a signal they are serious. That is traction, and it makes us pay attention."

LOIs are an indicator of customer demand and market fit, making them a critical part of the investment decision process. Founders who prioritize building relationships with potential customers are more likely to secure LOIs, giving them a strong advantage when pitching to investors.

Actionable Steps to Cross the Valley

1. Run Pilots: Run small-scale tests with potential customers to demonstrate traction and refine the product.

2. Get LOIs: Use LOIs as "soft contracts" that build investor confidence and signal commercial interest.

3. Build Strategic Partnerships: Collaborate with large corporations or industry partners to gain credibility and shared resources.

Pilots are trust-building exercises. By generating real-world data from early-stage pilots, startups can create compelling evidence of product-market fit. This, in turn, strengthens their position with investors and potential partners.

Strategic partnerships are also crucial. Collaborating with industry leaders not only increases visibility but also offers access to technical support, financial backing, and market entry opportunities.

Closing Remarks

Crossing the valley of death is one of the hardest parts of deep tech. It requires managing technical complexity, navigating regulations, and building trust with investors. Every pilot, LOI, and regulatory approval brings startups one step closer to commercialization.

If you are a founder, investor, or policymaker in deep tech, I would love to hear your thoughts. Drop a comment or connect with me !