Death Valley Curve

Posted in Finance, Accounting and Economics Terms, Total Reads: 649
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Definition: Death Valley Curve

Death Valley Curve is a phrase used in venture capital. It refers to a span of time from when a start up firm raises an initial capital investment till it starts generating revenues. Additional financing during this phase becomes extremely difficult as the company has not started generating revenues yet. And thus it could leave the company with inadequate cash flow requirements.


This curve is called a death valley curve as the start up is most vulnerable to death because of capital requirements and income has not yet been generated. Secondly, initial costs of almost all the start-ups are very high compared to operating costs. Costs include land, construction, staff recruitment and other such. Thus it very important for a start up to manage itself during the death valley phase.

 

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