How To Survive the ‘Valley of Death’ as an Entrepreneur?

On a trip from Vegas to LA in the blistering California summer, I once took a detour towards the Mojave desert and deep into Death Valley (No, that’s not me in the pic above!) and it was a surreal experience to say the least. Completely devoid of life for miles, we were forewarned not to venture too deep while off-roading as its easy to get lost in the vast similar looking expanse and were also given a survival guide in case we did — not many actually survive if on their own, hence the name. Anyhow, more on the trip in another post. Let’s see what Death Valley has to do with business and esp., Start-ups and how an Entrepreneur can survive it.

The Valley of Death is a term used to describe the period between the start of a company’s development and its commercialization, during which it is particularly vulnerable to failure. For startups and entrepreneurs, this is a critical phase as they face significant challenges in securing funding and developing their product or service. The Valley of Death is a complex and dynamic environment, and startups that can navigate this period successfully are more likely to succeed in bringing their product or service to market. The term comes from plotting the shape of a company’s cash flow onto a graph. The valley, predictably, is the part of the graph where cash flow is at an extended low point. The example above shows a visual representation of the valley. The valley of death can be impossible to avoid and difficult to get out of without robust planning. According to?Embroker , about 70% of startups fail during years two through five. Hence the ominous name.

My first advice for new entrepreneurs is to pick a domain that doesn’t have the sky-high up-front development costs, like online web sites and smart phone apps. Leave the world of new computer chips and new drugs to the big companies, and people with deep pockets. For the rest of us, the following suggestions will help you survive the valley of death:

Gather Resources

Planning your business is a good way to minimize risk. Such preparation involves determining how much money you will need to get to the revenue generation stage, and how much money you will need to cover costs in the likely event you fall into a financial hole. The more resources you’ve accumulated beforehand, the more padding you’ll have if you fall on your face. Self-funding or bootstrapping is still the most common and safest approach for startups. After bootstrapping, friends and family are the most common funding sources for early-stage startups. As a rule of thumb, it is a required step anyway, since outside investors will not normally consider providing any funding until they see “skin in the game” from inside.

Commercialise as fast as possible

The more time you take to research, develop, and launch a product, the more money you will spend. If you can speed up the time it takes to bring your idea to market, you will have less money to pay back once you start making sales — and you will therefore spend less time in the Valley of Death.

“Many entrepreneurs wait until the ‘perfect moment’ to launch their product, but this can sometimes be too late,” It’s better to release a slightly flawed version of your product or service now than to wait until it’s absolutely perfect. You can always release an updated version in few months.”

Focus on customer discovery and validation:

It’s important for startups to validate their ideas and make sure there’s a real market demand for their product or service. This requires engaging with potential customers and getting feedback on the product or service. By doing so, startups can refine their offerings and reduce the risk of failure.

Get advice & support

Start-ups should seek out mentors — people they admire and whose expertise they value. They might be entrepreneurs themselves, looking for their next business challenge, or they could be academic minds in their sector. The world-leading MIT mentoring model, has shown us that start-ups are far more likely to thrive when the entrepreneur can draw on the advice and guidance of a team of experienced and highly-talented mentors with a proven track record. Learn from any fellow start-ups who have also been through this. What pitfalls did they face and what are their success tips? This type of advice can often be worth more than the investment and can be a defining factor in whether businesses survive or thrive.

Don’t be scared of the Valley of Death

If everyone avoided the Valley of Death, there would be no innovation. The answer isn’t to stop looking for new ideas and bringing new products to the market

“Don’t be scared of the Valley–instead, look to understand the cycle, be prepared for the dip, and create a plan to keep you moving in the direction of profit and growth.”

A Loan in the World

Somewhere out there is a loan with your name on it. Wallowing in the valley of death can really leave a business owner feeling desperate and alone in the world. So desperate, that is, that they might mess around and apply for a loan. Typically, banks will only approve loans to startups that are cash-flow positive. So maybe this option is best if you’ve succeeded with a few of the aforementioned approaches so much that they helped your company start generating revenue. Once you’ve reached that point, that’s the prime time to apply for a loan or line of credit.

“The phrase “valley of death” is appropriate because it is a death sentence for the vast majority of startups,” That doesn’t mean you go down without a fight.

When Buster Douglas fought Mike Tyson, every fan, expert, and sportswriter counted him out. For the entire fight, they were right. His defeat was inevitable. Then the tenth round happened.

Not only did he not go down without a fight, he won the bout. He beat the champ, and the odds. If you want your best chance at beating the odds, you do everything you can. You fight. Loans, competitions, crowdfunding, joint ventures; whatever it takes.

The valley of death is a formidable challenge that every startup must face. But, like any other obstacle, it can be overcome with the right combination of preparation, perseverance, and creativity. By embracing the right mindset, seeking out the right resources, and engaging in smart risk management, startups can emerge from the valley of death stronger, more resilient, and more poised for success. So, to all the entrepreneurs out there, keep marching forward! The valley of death may be a long, winding road, but the view from the top is truly worth the journey.

Amit is a 25-year+ entrepreneur turned consultant. He is currently the Director,Practice Growth at?Factoryal , a boutique management consultancy helping entrepreneurs in their growth journeys…

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