The expression "Valley of Death" is well known in the startup market for describing a critical phase in the business lifecycle. Usually, it is the period when companies are most vulnerable, that is, between the product development stage and the point at which the startup begins to generate revenue to cover operational costs.
A study conducted by Fundação Dom Cabral on the causes of mortality of Brazilian startups indicated that at least 25% of them cease to exist in the first year and 50% are already closed by the fourth year of life. But why does this happen?
SecondMarilucia Silva Pertile, startup mentor and co-founder ofStart Growth, which supports visionary founders on the journey to the next level, combining expertise, capital and experience, the “Death Valley” or “Death Valley”, is the phase of a startup's life cycle in which high financial challenges are faced, making the startup very prone to failure. “We can say that the valley of death is almost all or nothing; after all, the high criticality of this period is what will determine whether the business will survive or not," he states.
According to Marilucia, during the Valley of Death, the startup has already spent a significant part of its initial capital; however, it has not yet achieved stable or profitable revenue. "The Death Valley phase usually occurs after the first investment, when the product is already developed, market analyses have been conducted, and the idea has been validated with customers. However, the startup still does not generate enough revenue and profit to sustain itself. In other words, it is a phase where it needs resources," he explains.
The executive emphasizes that, although it may seem frightening, it is important to consider that every entrepreneur goes through the Valley of Death when starting a startup. "It's a natural process that is part of the business maturation cycle. The secret is to have the rational and financial capacity to go through this phase quickly and with the least amount of risk possible," he/she/they assess.
Preparation for the Valley of Death, according to Marilucia Pertile, requires the awareness that it will take a lot of work, dedication, and resilience. "It is necessary to bring in people who can help and also to handle some flexibility to consider a plan B or C. Additionally, seeking mentors and investors should be part of the process," she says.
To overcome the Valley of Death more quickly, the co-founder of Start Growth suggests that the startup seek partners who can help with non-financial compensation and also look for a significant client who is willing to learn and who can help validate hypotheses in search of market fit.
