Crossing the valley of death!
A sad fact of life is that many high tech start-ups perish no matter how good their technology is. It is generally acknowledged that Silicon Valley is one of the easiest places to secure funding for high tech companies but even here, during the boom period of the 1990’s the mortality rate of small high tech companies was 51% . This means that even during one of the best investment climates in the world 1 in 2 high tech companies failed, despite having great technology.
The financial evolution of high tech start-ups typically follows the pattern below.
Generally most start-ups can secure some early stage funding, from owner investment, business angel funding, or seed capital funds. However inevitably this money dries up long before the required technical development and business development is done. Companies are therefore left languishing in the valley of death with most investors not being willing to pump more money into the company until they see commercial validation of the market need, as shown by early stage sales. This impasse of needing funds in order to deliver sales but funds not being available until the sales are delivered is called the valley of death and is where almost all start-up failures occur.
Surviving the valley of death and ensuring the success of a high tech start-up is straightforward. The executives of a company must ensure that they have the business skills in their company to drive the business development of their technology as swiftly as is possible. This is what will make the difference between success and failure!
A large problem for most early stage technology start-ups is that the founders naturally, will be very technically based. They will therefore often lack the business development skills that are needed to ensure the success of their years of hard work. An additional problem is that the initial funding received is often not enough to allow them to take on a full time business development executive.
It is here that Eshtech can make a huge difference for a company. Our operational excellence combined with our extensive business development experience allows us to provide interim executive services that helps companies deliver those important early-stage sales or OEM licensing deals in their route to market. We can literally make the difference between the success or failure of a company.
We welcome enquiries from company executives or fund managers in early stage venture funds to discuss how we can help early stage high tech companies.
Table 2.5, p.24, High tech start-ups and industry dynamics in Silicon Valley, Junfu Zhang 2003. http://www.ppic.org/content/pubs/report/R_703JZR.pdf