114 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
When faced with a technological innovation, most potential buyers seem
to react in a predictable manner, aggregating along an axis of risk aversion,
as proposed by Moore
23
and is known as the Technology Adoption Life Cycle,
as shown in Figure5.15.
Potential buyers are (1) enthusiasts that exhibit a high desire to
explore. (2) Early adopters (visionaries) are inclined to exploit an inno-
vation to achieve an early competitive advantage and are very inuential
during the early stages of the adoption life cycle. Frequently there is a wide
time gap in sales before the (3) early majority (pragmatists) decides to
enter the market. The entrepreneur must be able nancially to withstand
this period, euphemistically called the Valley of Death. The (4) late major-
ity (conservatives) enter the market after the technological risks have been
mitigated, and buy from the market leader. Last, the (5) laggards (skeptics)
may nally enter the market, but are constant critics. Using the 80/20 rule,
laggards represent 80% of the complaints and criticisms experienced by the
company.
e Early Market
e Mainstream
Market
Early adopters and insiders:
“Techies” and “Visionaries”
“Pragmatists” and
“Conservatives”
e “Valley
of Death”
Figure 5.15 Valley of Death. Also called the “funding gap.” Do you have sufcient
funds to survive the “Valley of Death”?
New Venture Creation ◾ 115
5.13 Bridging the Valley of Death
“If you think you are going thru Hell, keep on going.”
—Winston Churchill
The phrase “Valley of Death” was coined by Marczewski
24
to describe the
missing link during the transition from existing technologies to the creation
and acceptance of a compelling new market entry.
According to Frost and Sullivan, a consulting rm,
25
more than four out of
ve technologies developed globally never make it to the commercial world,
due to their inability to cross the Valley of Death—the virtual chasm that
separates the early market from technology demonstration in the mainstream
market.
Often this is due to businesses and investors failing to understand the
true market potential of a given technology platform and evaluate the risk-
reward elements, as seen in Figure5.16.
This is a period of exceptionally high nancial vulnerability to the
startup. The goal of the founder/entrepreneur is to nancially and techni-
cally survive the Valley of Death and then win a niche foothold in the main-
stream market as soon as possible. Examples include the rst PC, the rst
fax machine, the Internet, the cell phone, the smart phone, robotic surgery,
percutaneous heart valve repairs, etc.
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