There’s a moment most founders know, even if they can’t name it. The original grant has run its course. Revenue is real but modest. The product works, but the business model is still proving itself. Investors who back companies at scale aren’t interested yet. Investors who will fund early experiments still want to see more traction. And the runway is shrinking.

This is the “valley of death”: the financing gap between early-stage support and sustainable commercial growth that claims a staggering number of promising ventures every year. As many as 90% of startups are reported to fail, most of which do so before raising a seed round.

For impact-driven startups working in areas such as climate adaptation and resilience, healthcare accessibility, and economic equity, the odds are even steeper. These companies are often solving problems that market forces have historically ignored, pursuing business models that don’t map cleanly onto venture capital’s preferred shapes, and serving customers who may lack the purchasing power that makes growth look inevitable.

At Halcyon, we work with founders in exactly this moment across our three verticals of Climate, Health, and EquityTech. After more than a decade in the startup ecosystem, we’ve come to believe that the “valley of death” is the wrong frame entirely—not because the danger isn’t real, but because the metaphor trains founders to ask the wrong question.

The Metaphor’s Hidden Instruction

The standard framing goes like this: you’re on one side of the valley, your investors are on the other, and your job is to reach them before you run out of oxygen. The goal is speed. The measure of success is the next round. Everything—the pitch, the metrics, the narrative—is optimized for that crossing.

We’ve seen what that instruction produces. Founders will pitch investors who aren’t right for their stage, because the alternative is waiting to encounter a mythical “impact investor” who truly gets their vision. Founders will accept terms that compromise their mission by, for example, pivoting to serve a wealthier customer segment, because the pressure to cross the valley overrides their judgment about what the crossing might cost in exchange. Founders will measure themselves against venture-scale benchmarks and timelines that have nothing to do with the kind of company they’re actually building, because they’ve been taught to value urgency over alignment.

The survival instinct, understandable as it is, becomes its own form of mission drift. And from a funder’s perspective, it produces something equally frustrating: strong companies that fail not because their ideas were wrong, but because the capital available to them at the critical moment was the wrong kind, on the wrong terms, that pushed them in the wrong direction.

What We See in the Valley

At Halcyon, almost every company that takes part in our programming is pre-seed or seed stage; here, we’ve chosen to live in the valley alongside them, knowing that this is exactly where most impact-driven startups will sputter and fail. And what we observe, cohort after cohort, is that the valley doesn’t have to be dangerous. The strongest founders use it as a time to gain clarity.   

The leaders who move through the valley well aren’t the ones who cross fastest. They’re the ones who take advantage of the time to answer the questions that outside capital can’t answer for them: Who pays for this, and why? What does the unit economics story look like at ten times the current scale? What kind of investor—and what kind of capital structure—actually fits where we’re going?

These aren’t questions you can address neatly in a pitch deck. They require the slower work of building real revenue, acquiring real customers, and stress-testing a business model against real market conditions. The valley, in this sense, is not the obstacle to growth. It’s where growth gets grounded.

A Valley of Organic Growth

So, we’ve started describing this period differently to the founders we work with. Rather than a “valley of death,” or a stretch to be survived, we think of it as a valley of organic growth: a period of learning that, when done well, will make a company fundamentally harder to kill.

A founder who understands that the valley is where their value proposition gets refined—not where they race to escape it—is more likely to pursue the right capital, on the right terms, at the right time. Most of all, they’re more likely to come out the other side with a company that can sustain what they’ve set out to build.

This reframe is not about minimizing any difficulties. The financing gap between early-stage grants and institutional investment is real, and it falls hardest on impact-driven companies whose business models may require patience and tradeoffs that traditional venture capital isn’t built for. This is a structural problem, and one that leaves viable, important companies without the capital they need to become the durable businesses they could be. And this cost isn’t just borne by founders; it’s borne by the communities those companies were built to serve.

How We’re Helping

Our role, as we see it, is to help founders slow down enough to think strategically about capital. This means helping them map the full landscape of funding available to them, not just the loudest options. It means pressing them to connect their fundraising approach to their actual exit thesis and growth plan. And it means building relationships with a broader set of capital allocators, from philanthropic investors deploying program-related investments to revenue-based lenders who are willing to meet impact-driven companies where they actually are.

If you’re a founder wondering whether you’re in the valley right now, you probably are. The question isn’t how to escape it—it’s what you’re learning while you’re in it.

—

Adam Caplan is the Capital Strategy & Investment Manager at Halcyon, where he supports Halcyon founders and alumni on their investment journey including fundraising strategy, network connections, and alternative financing options. Adam previously managed Halcyon’s Residential programs, leading curriculum development and redesigning the accelerator program to help founders working in Health, Climate, and EquityTech scale their ventures.

Adam got his start in impact investing at the Aga Khan Foundation, where he helped to create their first impact investment fund. He then led research initiatives at several global incubators and accelerators, mentoring founding teams and mobilizing investments for mission-driven startups in the US, South Asia, and East Africa.