A span of time from the moment it receives its initial capital contribution until it finally begins generating revenue, is called valley of death for startups.
During this window, it can be difficult for firms to raise additional financing since their business model has not yet been proven
What are the reasons for facing difficulty in fundraising: weak business models, poor planning, faulty customer insights, or lack of original ideas, focus, agility and tech capability, apart from leadership gaps. Nearly 80% of venture capitalists feel startups lack unique business models, as the majority simply copy successful models from elsewhere without unique local insights.
The core idea is innovation & implementation rather than creating an expensive, risky plan for an uncertain venture, one must break it into stages. At each stage, identify and test assumptions, ideally at lowest possible cost and time. That will de-risk ventures and make an early exit possible if things don’t turn out as expected. Instead of fearing failure, one can then turn the question into: ‘What is it worth to our organization to learn something?’ Whatever the outcome, if the answer is found to be worth the investment, it need not be written off as a failure. Analyse how resources are being allocated to the business and consider how these allocations would need to change. Take a portfolio-view of different types of growth opportunities. How much profit and cash flow must the core business generate? How much to scale up? How much should go into low-cost, high potential opportunities for future platforms? The typical portfolio of initiatives will contain a mix of short-term projects designed to enhance positive cash flows with low cash-drain.
Help frame a growth challenge at the founder level and define the growth frame for the startup. The outcome is a set of guidelines for the types of initiatives to be pursued. As a result, everybody will be clear about what kinds of opportunities are legitimate and aligned with the business.