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Three Survival Drivers to Get Through the Valley of Death
The Angle Issue #253
Three survival drivers to get through the valley of death
Gil Dibner
It's getting increasingly difficult to raise a Series A round, and—consequently—startups are stuck in seed for longer. The data is overwhelming, but here is one data point: according to data from Carta, the two-year graduation rate from seed to A has dropped from 36-40% two years ago to around 15% today. The valley of death—or the trough of sorrows—is getting longer, darker, and more dangerous…
Three essential survival drivers. Successfully navigating the valley of death requires startups to focus on three critical drivers that ensure survival and growth. These drivers form the foundation of a startup’s ability to overcome challenges and reach their next major milestone:
Compelling fundamentals: It goes without saying that a company must offer a unique, defensible, and consistently marketable value to its customers. This criterion is intentionally reductive, emphasizing that unless a startup's value proposition is truly sound, attempting to cross the valley of death is futile.
Grit: Founders must be both willing and able to endure the relentless challenges of navigating the valley of death. The journey demands extraordinary perseverance, as obstacles and setbacks will test their resolve at every turn. Insufficient grit often becomes apparent—it manifests when founders feel overwhelmed, fatigued, or on the brink of giving up. Yet, those who possess true grit dig deeper, finding strength in their purpose and determination to see their vision through. Grit is not just a nice-to-have quality; it is the essential ingredient that sustains founders through the darkest moments, transforming adversity into stepping stones toward success. Without it, nothing else matters, and failure is guaranteed.
Focus: I’ve come to the conclusion that grit and fundamentals are necessary but not sufficient. I’ve seen too many companies that scored highly on both ultimately fail. The missing ingredient, I believe, is focus. Surviving the valley of death is so difficult that it can only be done if a founding team is focused on a very precise set of activities and objectives that are specific to them.
Not obvious: a deeper dive on what focus actually means. Focus is the most elusive driver of startup success because it means something different in every case. It means doing less, but with purpose—channeling limited resources (cash, time, energy) into meaningful actions while avoiding distraction and waste. This clarity ensures every effort meaningfully contributes to survival and growth. To survive the valley of death, every action must align with the critical path forward by distilling complexity into clear objectives and prioritizing impactful efforts. This is the reason that so many startup hero stories sound so simple and reductive in the retelling. Founders who survived the valley of death will say confoundingly simple things like “we just listened to customers,” and it can sound trite, but it’s not. They remember one key north star because there was one north star. If they didn’t have that focus, they would not have survived to tell the tale.
Objective triage. Focus often involves sacrificing short-term business objectives to achieve more critical milestones. For example, a startup could prioritize adoption over revenue by offering its product for free or at a discount to early users if establishing credibility and market traction is seen as more important than immediate revenue proof points. Conversely, focus could mean redoubling focus on specific large accounts to ensure they generate certain levels of revenue, particularly if those goals are closely tied to proving the product's value and de-risking the business for future investors.
Every step counts. But focus is not just about avoiding distractions. When a startup is in the valley of death, focus means taking only the actions necessary to unlock the critical path forward. Consider the journey through the valley of death as similar to a hike through an actual valley. Every step must align with the ultimate goal and conserve energy for the path ahead. Focus is about much more than just "not falling." It's about ensuring that you are on the most efficient path out of the valley - that each step takes you closer to survival.
Entropy is the absence of focus, and erosion of grit and value is the result. It represents the natural tendency for energy and effort to dissipate and become disorganized without deliberate intention. Consider a startup that has strong fundamental value and a deep reservoir of grit. Though they walk through the valley of death, they fear not for they know they are on a righteous mission. The problem - however - is that their righteous mission is very unlikely to ever be completed. Their lack of focus will mean they are very unlikely to organize themselves around the right activities to achieve the right milestones to see them through. As they burn time (and capital), their lack of focus will eventually begin to erode their resiliency and, ultimately, their fundamental value as well.
No shortcut. There is no shortcut to injecting focus into a team that lacks it. Focus usually stems from CEOs and founders who have a natural ability to distill complex problems into their essential components and block out distractions or considerations that might impede their focus. For founders struggling with this, my advice is to first reassess your confidence in your company's fundamental value proposition. Is it truly sound? Second, evaluate whether you and your team possess the grit needed to persevere through challenges. If the answer to both questions is yes, then your primary challenge—whether you realize it or not—is focus. You may believe you are doing everything necessary to succeed, but true focus requires that you ensure you are doing only and exactly what is needed to succeed, cutting away anything extraneous.
Keep drilling down and reduce activities to the critical minimum. Suppose you’ve identified product adoption as the crucial unlock for your survival because it drives investor interest and could lead to revenues. Now, refine and interrogate every assumption: What exactly is the core product? Can non-essential features be stripped away while still achieving adoption? Are there barriers, such as pricing models or sales processes, that can be temporarily simplified or removed to prioritize adoption? Adoption by whom? How? Sales, PLG, self-serve? Does marketing need to play a role? Can it be done without marketing? Can you focus on a narrower customer segment where adoption is more likely or impactful? Are there specific product enhancements or iterations that could unlock adoption faster?
Evaluate internal efforts: Is anyone on your team working on activities that don’t directly contribute to the critical goal of driving adoption? If so, can they be reassigned to efforts that align with this objective? Every action and resource must be evaluated through the lens of whether it directly contributes to unlocking this crucial milestone. By continuously narrowing and refining your efforts, you can conserve resources and maximize impact on the most vital objectives.
Each of the three survival drivers is essential. Compelling fundamentals, grit, and focus are not just isolated concepts but interdependent drivers of survival for startups. Each reinforces the other: fundamentals provide the foundation, grit powers the endurance, and focus ensures the energy is directed toward the right milestones. Together, these three pillars create a framework for navigating the valley of death and emerging stronger on the other side. Without any one of these, the journey becomes exponentially harder, if not impossible.
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ENTERPRISE/TECH NEWS
DeepSeek-R1. Following the launch of Chinese AI startup DeepSeek’s V3 model in December, DeepSeek released R1 last week, dethroning ChatGPT from the top most-downloaded free app in the US on Apple’s App Store. The launch of DeepSeek-R1 has sent shockwaves through the tech industry, as it demonstrated a high-performing model can be built far cheaper than previously thought possible. Training models is expensive – OpenAI, Anthropic and other AI companies are spending hundreds of millions just on compute. DeepSeek was able to create a model that rivals GPT-4 and Claude while only spending $5.58M. Morgan Brown details how DeepSeek was able to create the model so cheaply and notes that the implications are massive. “AI development becomes more accessible, competition increases dramatically, the "moats" of big tech companies look more like puddles, hardware requirements (and costs) plummet”. One company in particular that stands to be impacted is Nividia. Jeffrey Emanuel wrote a must-read piece on DeepSeek-R1 and the implications for Nividia. “Perhaps most devastating is DeepSeek's recent efficiency breakthrough, achieving comparable model performance at approximately 1/45th the compute cost. This suggests the entire industry has been massively over-provisioning compute resources. Combined with the emergence of more efficient inference architectures through chain-of-thought models, the aggregate demand for compute could be significantly lower than current projections assume. The economics here are compelling: when DeepSeek can match GPT-4 level performance while charging 95% less for API calls, it suggests either NVIDIA's customers are burning cash unnecessarily or margins must come down dramatically.”
Meta AI in panic mode. The Meta GenAI team is reportedly in panic mode as concerns grow they are falling behind in the AI race, as DeepSeek, a previously “unknown Chinese” company outperformed Llama. DeepSeek was able to achieve this despite having a training budget of just a fraction of what Meta spent on salaries alone for the AI org. In response to DeepSeek’s launch, “Meta has set up several war rooms, or specialized groups of researchers, to dissect DeepSeek and use the insights to improve Llama”.
Quantum computing on the horizon. Despite Nvidia CEO Jensen Huang's assertion that quantum computing is still 15 to 30 years away, recent advances suggest useful quantum is both inevitable and increasingly imminent. Notably, Google’s Willow “ran a benchmark test in under five minutes that would take one of today’s fastest supercomputers 10 septillion years. While too small to be commercially useful with known algorithms, Willow shows that quantum supremacy (executing a task that is effectively impossible for any classical computer to handle in a reasonable amount of time) and fault tolerance (correcting errors faster than they are made) are achievable.” This breakthrough indicates that practical applications of quantum computing, such as drug discovery, fusion energy, and battery development, may be closer than previously anticipated.
HOW TO STARTUP
The role of naysayers. Startup adviser Itay Sagie breaks down the role of naysayers for early stage founders. The challenge, he says is “discerning valuable feedback from background noise. This distinction is critical when deciding whether to pivot, persist or refine your approach.” The entire post is worth reading, but this section on channeling skepticism into something productive is key:
“Use doubt as a prompt to validate your assumptions through direct engagement with your target audience.
Let feedback from potential customers, surveys and interviews guide you more than generalized opinions.
Recognize that no one sees your vision as clearly as you do. The strength of your conviction, combined with real-world validation, is what separates fleeting ideas from potentially impactful businesses.”
Toxic investors. In today’s tough fundraising climate, early stage founders are more likely to accept the first funding offer they receive, even if that offer comes from toxic investors, whose unfavorable terms can be incredibly harmful to a startup’s future. Investor Murat Abdrakhmanov shared practical advice on how founders can spot red flags, steer clear of toxic investors, and find the right backer. According to Murat, demands that signal a toxic investor include: “Buying 35%-40% of a startup at an early stage, requiring a refund if the startup fails, buying additional equity at a fixed price after a certain period, and seeking too much control.”
HOW TO VENTURE
VC roll-ups. Some VCs are adopting a new strategy – private equity-style roll-ups, combining multiple competitors into a single company to cut costs and improve efficiency. Funds like General Catalyst and 8VC are creating roll-ups and targeting service sectors like call centers, accounting, and property management. Unlike private equity roll-ups, VC roll-ups have largely focused on starting companies or backing them before their businesses have proven themselves. Additionally, they’re incorporating AI to take over work where possible. This strategy represents “a shift from traditional venture bets in more ways than one. Venture investors have typically backed high-margin software or consumer internet businesses they hope will go public someday. In pursuing services firms, they are writing checks for lower-margin businesses that are unlikely to yield the same high investment returns from going public as software companies. But returns are more guaranteed.”
PORTFOLIO NEWS
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