Death Valley Curve

AAA

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.

RELATED TERMS
  1. Cash Flow

    The net amount of cash and cash-equivalents moving into and out ...
  2. Venture Capital

    Money provided by investors to startup firms and small businesses ...
  3. Startup

    A company that is in the first stage of its operations. These ...
  4. Financing

    The act of providing funds for business activities, making purchases ...
  5. Seed Capital

    The initial capital used to start a business. Seed capital often ...
  6. Venture Capitalist

    An investor who either provides capital to startup ventures or ...
Related Articles
  1. Fundamental Analysis

    Cashing In On The Venture Capital Cycle

    Find out how VC firms make the market go round, and round and round.
  2. Professionals

    Warning Signs Of A Company In Trouble

    Don't let your clients go down with ship! Learn how to escape sinking with these tips.
  3. Mutual Funds & ETFs

    How To Invest In Private Equity

    Private Equity might be a pricey investment, but returns are on the rise and the payoff could be big.
  4. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  5. Investing

    The Rise of Corporate Venture Capital

    After the success of Google Ventures, corporate venture capital is an increasingly popular diversification and hedging tool for many large corporations.
  6. Mutual Funds & ETFs

    Top 2 ETFs Targeting Startups

    Learn about the best ways to gain exposure to startups. Startup investing has become quite popular and is slowly being democratized.
  7. Markets

    Trader Joe's Stock Doesn’t Exist. Here’s Why

    Learn about Trader Joe's and how it operates. Understand why Trader Joe's has chosen not to be a public company and why it should remain that way.
  8. Mutual Funds & ETFs

    ETF Analysis: PowerShares Global Listed Private Eq

    Learn more about the PowerShares Global Listed Private Equity Portfolio, a private equity-based exchange-traded fund, or ETF.
  9. Entrepreneurship

    Top 5 Startups That Emerged in Denver

    Learn why Denver is one of the hottest markets in America for startups, and identify five of the top startups that are emerging from the Denver market.
  10. Entrepreneurship

    Top 5 Startups That Emerged in Raleigh

    Learn about the startup scene in the Research Triangle hub of Raleigh, North Carolina. Discover which startups are the hottest to emerge from this tech city.
RELATED FAQS
  1. How do you find the break-even point using a payback period?

    It does not make sense to find the breakeven point using a company's payback period. A company's payback period is concerned ... Read Full Answer >>
  2. What does residual value represent in a private equity investment?

    It is common to see a private equity investment's net asset value, or NAV, referred to as its residual value, since it represents ... Read Full Answer >>
  3. What is considered a reasonable interest rate for a syndicated loan?

    A 2010 survey of syndicated loans found an average interest rate of 7.9%. However, the majority of syndicated loans are floating ... Read Full Answer >>
  4. How strong are the barriers to entry for new companies in the telecommunications ...

    The barriers to entry for new companies in the telecommunications sector are very strong and primarily revolve around the ... Read Full Answer >>
  5. How much, if any, influence do non-controlling interest shareholders have?

    Non-controlling interest shareholders do not typically have much influence. The level of influence can vary, however, depending ... Read Full Answer >>
  6. What is the relationship between research and development and innovation?

    Although it's possible to achieve innovation without research and development and it's possible to conduct research and development ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  2. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  3. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  4. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  5. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  6. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!