Guiding your startup through the Valley of Death
Isabelle Depatie Isabelle Depatie
May 24 7 min

Guiding your startup through the Valley of Death

Today’s entrepreneurs and businesses face significant challenges in their search for products and services. Consumption and demand for goods and services shows no sign of slowing down. There is constant pressure to move industries forward and develop technologies that will lead to new products or improvements to existing ones.

Moving from a newly formed concept to a product that is available on the market is very rewarding, and I speak from experience. Yet this transition can also be long, complex, and ridden with obstacles. Many are unable to get past the stage of development known as the “Valley of Death.”

I’ve had the opportunity to participate in almost every stage of company development, from early research to product launches, and in several industries. Recognizing, understanding the key steps, and being able to identify the right mechanisms to get through the “Valley of Death” can mean the difference between success and failure. I have come to understand that this expertise is not shown in school and often learned in the real world through experiences. In sharing what I’ve learned with you, I’d like to help increase your chances of success.

What is the Valley of Death?

To understand the Valley of Death, it is important to understand a few concepts.

First, new technologies cross various stages of development before becoming mature in the market. NASA and the Department of Defense developed a scale to estimate the level of maturity of a technology and to evaluate potential risks. A technology at a low level of maturity would not be deployed on a critical military mission or used on a critical rocket system. On the other hand, it is possible to use a technology with a lower level of technology readiness level to test market readiness.

Second, while early-stage technology often emerges from universities or research centers, industry usually finances innovations that use mature technologies. In the gap between academia and industry, there is a difficult period where a technology isn’t mature enough for the market but too applied to be worthy of academic attention. This transition is known as the Valley of Death.

Startup Valley of Death

It’s during this period that one must invest without being 100% certain that the market exists and without having received revenue from product sales. During this period, the income and expenditure curve is not positive. On the other hand, the progress and learning curve is increasing.

The length of the Valley is determined by the level of maturity of the market and the industry. For example, if you start a new hydrogen cell business, the length of the valley will be longer than if you launched a new type of television. It is also more or less risky depending on the level of investment needed to launch a minimum viable product.

Building a profitable business

As the reality of each industry is different. There is no magic recipe for a company to successfully develop new technologies while ensuring profitability and sustainability.

Software and hardware companies, for example, do not experience the same difficulties. While the software company relies on the talent of its developers, the hardware manufacturer must invest a significant amount of money in state-of-the-art equipment. Yet for most companies, the major steps needed to successfully cross the valley are the same.

First, you must properly evaluate the opportunity, understanding its risks and rewards. Then, you need to contribute to developing the ecosystem around that opportunity. Finally, you need to invest in your most important asset: your team.

Evaluate the opportunity

In order to properly assess a technological opportunity, you need to understand the long-term economic potential as well as the level of maturity of the technologies you’re working on. A bold application with great impact is one that goes beyond current trends. These kinds of applications are inspiring, but be careful to evaluate them well before launching. Indeed, the lower the technology readiness level the higher the technological risk and the greater the market uncertainty. The road will be much longer before getting to profit.

Another important concept to master is Technology Push, in contrast to Market Pull.The push is when a range of products or applications emerge from a developed technological capacity or technical expertise. It is important to note, however, that it does not necessarily meet new needs simply because they are innovative. The pull is when a new technological capability is developed and put in place to offer a range of products or applications that respond to a need.

The latter strategy involves much less risk, but it is difficult to identify. It is therefore crucial to assess needs and the market as quickly as possible before investing too much in research and development of new products or applications. You should make mock-ups and test its responsiveness in order to best define the minimum viable product.

Develop the ecosystem

When a new technology emerges, such as hydrogen fuel cells or artificial intelligence, it is important to consider the ecosystem in which this new technology is developed. It includes several influences that will have an inescapable impact on the development and marketing of these new technologies. For example, one must rely on:

  • A high-quality college and university network
  • Excellent researchers in the field
  • Grant mechanisms to support investors in amortizing the risks associated with the development of new markets
  • Regulations and standards, which are essential to establish a strong market and increase the credibility of players.They are also essential for interacting between actors. For example, having a hydrogen pressure standard for recharging cars, or identifying key elements to protect in order to secure private life in artificial intelligence.
  • Partnerships between the main players
  • Bringing together the academic, governmental, private actors as much from start-ups, scale-ups and big players. These meetings are essential to help us understand this new and evolving industry and move it in the right direction so that it emerges.
  • Educating people and businesses about this technology

All of these actions help in the deployment and marketing phase. When setting up a market, competition is not recommended because it slows down market emergence. Collaboration and mutual aid is the only way to accelerate the development of a strong market.

Invest in the team

To develop a technology and a market at the same time comes with more than simply financial risks. You must build and develop a team that is able to withstand uncertainties. Investing in your team is essential as it will help you understand the technology and the market.

Given that the market and technology does not yet exist, it is important to not underestimate the amount of work that needs to be done. Three major axes must be developed to increase the chances of success for teams.

  1. A culture of innovation for constant improvement
  2. The continuous development of new skills
  3. The implementation of strategic systems that aid in evolution

Each of these themes could be their own individual articles, but for now here are some examples of next steps:

  • Adopt continuous improvement, accept that it is not possible to create a perfect solution immediately and that iteration is necessary.
  • Do not overloaded the team, find the right balance between urgencies and development project. Good time management is key.
  • Be clear about objectives and don’t shy away from modifying them when new information presents itself.
  • Encourage networking, collaboration inside or outside of the team. For example, by having a dynamic environment that creates interactions
  • Establish practices that stimulate interaction between teams and develop an understanding of status. For example, measuring your "baseline" and reporting on its evolution can be motivating.
  • In being creative in the development of skills, we must remember that we are building technologies. Today's needs will not be the needs of tomorrow. A constant effort on the development of skills is essential.

As you can see, the challenge is daunting but it is also stimulating. Working to change the world is fantastic because it is 100% aligned with a universal need that we all have: contributing to our society, to leave our mark! For this reason alone, it is worth it to embark on the challenge of the Valley of Death.