You should put it behind you as soon as possible, but you should never forget this concept.
When you start a startup, there are endless concepts that you must learn: cash flow, financing round, break even, business angels… And let’s not fool ourselves: they are also terribly boring terms. There’s a term with a much more exotic name, but it should give you a little caution: the valley of death.
What is Death Valley?
Explained very briefly, the valley of death It’s the period when your startup has to work with negative cash flow. Or put more simply, the road to travel until you achieve break even and your company reaches balance in its financial accounts.
The valley, therefore, usually starts at the same time you start your activity, unless you manage to enter positive numbers as soon as possible. Until you get out of there, the slope of the valley can go up or down, and if it rises too much… You can imagine, right? You’ll be closer to the abyss we want you to avoid.
In any case, we could differentiate between two types of death valleys.
- With financing. Having funding but not having reached break even will make you be in the valley of death, but it will be more pleasant, since your investors are fully aware that you have to go through there.
- No funding. If you don’t have financing or you’re running out, be very careful, because there are no options there. If you don’t recover, your company will eventually close.
How to avoid the valley of death?
There are a few things What you can do to get out of the dreaded valley of death as soon as possible:
- Have financing. Be careful, it should be made clear: as we say, having funding will not free you from the theoretical valley of death, but you can make sure that, even if you are not in balance, at least you will not close.
- Reduce your team. When you launch your startup, you should have as small a team as possible. And if it is made up of more founding partners than employees, all the better, since your payroll expenses will be visibly reduced.
- Bootstrapping. If you think your startup may be in too much danger in death valley, don’t risk it unnecessarily: grow as much as you can afford to grow. If you take too many risks, you could end up closing out by choosing the wrong strategy.
- Customers, customers and customers. We all know who really finances a company, right? Go out and sell. Unless you have plenty of funding, there are no excuses: you need to increase revenue and break even as soon as possible.
