How can start-ups overcome the ‘Valley of Death’?

Dr Harrison Evans, Collaboration Manager at Nexus, explores the ways in which start-ups and early-stage businesses can overcome and flourish through the so-called 'Valley of Death'.

One third of Nexus member businesses have accessed private investment since engaging with us and more than 80% have secured pre-seed funding.

This is something we’re extremely proud of, and want to continue to build upon, ensuring we give the right advice and make the right connections for businesses to secure the vital funding required to commercialise their ideas and bring them to fruition.

Something that early stage businesses often struggle with is the so-called “Valley of Death”. During this phase a startup tends to operate without any revenue from products and services, relying mostly on their initial invested capital. Surviving this valley is a major milestone for startups and generally means they have become self-sustainable before their initial investment runs dry.

So how can businesses overcome the “Valley of Death”?

1. Get advice and support

Start-ups should seek out mentors – people they admire and whose expertise they value. They might be entrepreneurs themselves, looking for their next business challenge, or they could be academic minds in their sector.

The world-leading Massachusetts Institute of Technology mentoring model, which we’ll be applying to our own mentoring programme in the coming months, has shown us that start-ups are far more likely to thrive when the entrepreneur can draw on the advice and guidance of a team of experienced and highly-talented mentors with a proven track record.

Learn from any fellow start-ups who have also been through this. What pitfalls did they face and what are their success tips? This type of advice can often be worth more than the investment and can be a defining factor in whether businesses survive or thrive.

2. Be savvy with grant funding

Also key to surviving this turbulent time are grants from government agencies which can bridge the gap between ideation stage and securing that all-important investment and funding. Grants aren’t like loans, in that you don’t need to pay them back or give equity in your business.

Within our own community, we find that often the members who migrate best between these stages are collaborating with the University on funding applications.

Typically, businesses only look for grants they are eligible for based on their industry. Whilst this makes sense on the surface, they miss out on a large proportion of grants that are in fact applicable to them. Partnering with a University can be a great way to scratch under that surface and open up new grant opportunities for your business.

3. Share the Load

There are a number of reasons why collaborating with Universities can be beneficial to businesses, but in this case it’s because as a funder, the risk of investment is significantly reduced due to the reputation of these institutions. They’re also drawing upon a wealth of experience and utilising existing partnerships that have a demonstrable track record in supporting businesses through their funding needs.

Also consider collaborating with other start-ups and businesses and seek opportunities for mutual gain. This allows you to build the expertise and knowledge of your team, without actually doing so, and alongside that, you’re also reducing the risk involved. Not only are you more skilled, but you’ve got more resource and power behind you as a collaboration and in our experience, entrepreneurs and often open to it.

For Nexus, we’re supporting our members through the difficult funding gaps by building on the partnerships and initiatives we have created for our community in our first year, which include:

  • National innovation agency Innovate UK, which aims to boost innovation-led business growth across the region.
  • MIT REAP – the Regional Entrepreneurship Acceleration Programme – whose evidence-based strategy is supporting entrepreneurs and fast-growing businesses, based on the phenomenally successful Massachusetts Institute of Technology model
  • Our new Nexus Venture Mentoring Service – helping our high-growth tech-based member businesses to develop, grow and expand their network

What has been your experience with the “Valley of Death”, and do you have any top tips for surviving it?

Share your thoughts with us by emailing hello@nexusleeds.co.uk or finding us on Twitter @nexusunileeds.