Making it across the valley of death

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Courtesy of GLOBE Foundation

Many cleantech entrepreneurs are in the tough place we commonly call the Valley of Death. Stable, but underfunded, which they need for growth. If this describes your company, find out what you should do.

Is your cleantech startup falling short of your 2011 funding goals? The answer is most likely 'yes.' But the reality is this doesn't make you different from the vast majority of startups, both in the cleantech sector and beyond.

Many cleantech entrepreneurs I speak with are in the tough place we commonly call the Valley of Death. [See Why Can't Cleantech Companies Get Funded When There is Plenty of Capital for Them]

What is the Valley of Death? On the near side of the valley of death is safety: Your company is small, but relatively stable. You haven't taken on a lot of debt, so there's less risk.

You've probably invested some of your own money into the project, but most of your savings are still safe. Of course, there's a downside to this safety: Your prospects for growth are much smaller because you need funding to reach a critical mass and gain some momentum.

When you look across the Valley of Death, what do you see?

Stability is there, also.

This is the oasis that companies find after they've hit their funding goals, and they can focus on the blocking-and-tackling execution of creating a successful business. I can't tell you how many cleantech entrepreneurs have told me that if they could just get funding, there's no doubt in their mind they have a product that will find a market, scale, and turn a profit.

The Valley of Death lies between these two comfortable places, and it's a place where you're exposed and at risk. You can't stay on the safe side of the valley forever: You'll need to grow to survive. And to achieve this growth, you'll need funding.

In this economic climate, very few startup companies get sufficient funding while they're still on the safe side of the valley. Investors want to see that the company can scale, that there's a market for the product, and that the company has the ability to execute its business plan. It's hard to prove that when you're playing it safe.

Once you're across the Valley, you'll be far less risky to investors, because you've provided them with evidence you can deliver what they need to see. But can you get there? Can you make it across? And if you don't get funded in the second half of this year, what should you be doing?

You should invest the rest of 2011 in relationships. When the money comes back into the market in a bigger way, you're going to want investors to know who you are, and what you do. Go to conferences. Network. Understand that it's a long game and make sure you can last.

Proterra, a Colorado-based electric bus manufacturer, announced this month a $30 million venture capital investment. The money is starting to loosen up for good companies, even if you think you've heard that before in the last couple of years. In Colorado, the cleantech industry grew 33 percent in the last five years, and it was the only sector that showed growth last year.

The Valley of Death is a dark, lonely place. But it can be crossed. Realize that it won't happen all at once, and start planning your crossing today.

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