Contents
Most start-ups encounter the “valley of death” and only a few make it through. We explain why this happens and how to avoid the death of the project at an early stage
About the Author: Stanislav Triers, Head of the Center for Network Acceleration Programs of the NTI Platform.
The “Valley of Death” is the period in the development of a startup, when it has not yet begun to earn money on its product, but spends the money received for its development as part of investments, grants or other investments. If the project cannot find the first customers and consumers, it “bankrupts” and closes. It is believed that only 10% of the projects created for the “valley of death” overcome. There are many reasons why this happens, and each startup has its own. I highlight five of the most common.
1. Unhealthy ambition
Exaggerated expectations for the product, focusing only on it, and disappointment in the absence of customers “here and now” – all this leads to a startup falling into a crisis, and if there are no correct actions in such a situation, it will not be able to overcome it.
Decision:
- study the market for which the project is being created,
- analyze the needs of potential consumers and their satisfaction with the product / service,
- be ready to make changes to the project and adapt it to the requests and needs of clients.
2. Inability to stand out from competitors
Almost every product has competitors. If they are not there today, it does not mean that they will not appear tomorrow. A startup that cannot formulate the benefits of its product, answer the questions why it is worth buying, is unlikely to be able to attract a large number of customers. The absence of a strategy to attract buyers of the product will not have a positive effect on business development.
Decision:
- formulate the advantages of the product in advance, identify its key and unique features,
- develop a strategy to attract customer attention to the solution.
3. Rejection of criticism
Feedback is an important component on the way to the successful development of the project. It helps to work on the weaknesses of the product. When a startup does not accept feedback, the business becomes static and uninteresting to customers.
Decision:
- request feedback from customers and partners,
- seek help, product evaluation from an industry expert or business growth specialist.
4. Financial illiteracy
The lack of a planned budget for the development and promotion of the product can lead to the fact that at one moment a startup will be left without finances and the opportunity for further existence. In addition, the crisis comes with excessive spending that does not affect the active and productive development of the solution.
Decision:
- plan a budget for the year ahead and with minimal cash costs at the initial stage of project development,
- determine in advance the sources of project financing in case of possible and unforeseen difficulties with finances.
5. Different goals for team members
A friendly team, burning with a common idea, each member of which has his own area of responsibility, is an important component on the path to success in any business, especially in entrepreneurship. Startups fall into the “valley of death”, in the team of which employees see the development of solutions in different ways. Another reason: some team members think about the product and are ready to work on it even in a crisis, while others came to the project solely for the sake of earning money and are ready to leave it at the first difficulties.
Decision:
- to gather a strong team of specialists passionate about one idea who will be ready to work on the product not only in easy times, but also in difficult times,
- clearly distribute the responsibilities and roles of the startup participants in working on the solution.