The expression "Valley of Death" is well-known in the startup market to describe a critical phase in the business lifecycle. Typically, it refers to 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 the Dom Cabral Foundation on the causes of mortality among Brazilian startups indicated that at least 25% of them cease to exist in their first year, and 50% are already closed by their fourth year. But why does this happen?
According to Marilucia Silva Pertile , startup mentor and co-founder of Start Growth , which supports visionary founders on their journey to the next level by combining expertise, capital, and experience, the "Valley of Death" is the phase in a startup's life cycle where it faces high financial challenges, making the startup very prone to failure. " We can say that the valley of death is almost an all-or-nothing situation; after all, the high criticality of this period is what will determine whether or not the business will survive," she states.
According to Marilucia, during the Valley of Death, the startup has already spent a significant portion of its initial capital; however, it has not yet achieved stable or profitable revenue. “The Valley of Death phase generally occurs after the first investment, when the product is already developed, market analyses have been done, and the idea has been validated with customers, but the startup still doesn't generate enough revenue and profit to sustain itself. In other words, it's a phase where it needs resources,” she explains.
The executive emphasizes that, despite seeming daunting, it's important to consider that every entrepreneur goes through the Valley of Death when starting a startup. "It's a natural process that's part of the business's maturation cycle. The secret is having the rational and financial capacity to get through this phase quickly and with the least amount of risk possible," she assesses.
According to Marilucia Pertile, preparing for the Valley of Death requires an awareness that a great deal of work, dedication, and resilience will be necessary. "It's essential to bring in people who can help and also to be flexible enough to have a plan B or C. Furthermore, seeking mentors and investors should be part of the process," she says.
To more quickly overcome the Valley of Death, the co-founder of Start Growth suggests that the startup seek partners who can help with non-financial contributions and also look for a significant client who is willing to learn and help validate hypotheses in the pursuit of market fit.
