Spend any time in defense tech or innovation circles and eventually you’ll hear about the so-called “valley of death.”
Or maybe this is the first time you’ve heard of it?
Either way, you’re going to learn something new this week.
The J-curve
The valley of death is a nearly-ubiquitous phrase used to blame everything wrong with defense acquisitions.
While the origins of the phrase are murky, the valley of death
did not start in the military innovation sphere—and it likely didn’t start as a valley.
It probably originated from the J-curve, a non-linear performance/time trajectory that startup tech companies go through on their journey from founding to sustainable success.
The J-curve’s shape is derived from a typical startup’s cash flow when plotted on a graph.
The bottom of the J (the valley) reflects the period when a startup has not yet generated revenue, usually due to a gap between research and commercialization resources.
In other words, the company has a prospect of a product but has negative cash flow and lacks a sustainable and scalable business model to chart a path to revenue—a sellable product that makes money.
At this point in a company’s growth, it feels like stagnation, which can struggle to find further investors, and the whole company can quickly enter a death spiral.
Consider this: the #1 reason new businesses fail is they run out of investment money before they generate revenue (i.e., commercialization).
The Valley of Death
In the mid-1990s,
during the dot-com bull market, the explosion of tech startups with significant research investments coupled with massive growth speculation tweaked both ends of the J-curve upwards.
This magnified the size of the peaks and the distance between research and commercialization, which changed how the J-curve was viewed... and the valley of death entered the innovation lexicon.
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