Death Valley Curve

DEFINITION of 'Death Valley Curve'

A slang phrase used in venture capital to refer to the period of time from when a startup firm receives an initial capital contribution to when it begins generating revenues. During the death valley curve, additional financing is usually scarce, leaving the firm vulnerable to cash flow requirements.

BREAKING DOWN 'Death Valley Curve'

The name "death valley" refers to the high probability that a startup firm will die off before a steady stream of revenues is established. After a firm receives its first round of financing, it incurs a lot of initial costs. Offices are usually built, staff is hired and operating costs are incurred; meanwhile, the firm is not earning significant income. Unless a firm can effectively manage itself through the death valley curve, it will fall victim to negative cash flows.

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