Abstract for: Investigating the Valley of Death and Dynamics of Deep Tech Commercialization from the Firm's Perspective

The technology “valley of death” (VOD) phenomenon is widely researched but limited work has been published in the system dynamics field. This study provides a generic structure of the VOD from firm perspective and analyses one of the many potential causes – a firm's inability to sufficiently de-risk the business case for venture capital investment, resulting in a funding gap. We developed a model to analyze the development of a deep tech firm. The model structure can produce both desired and undesired scenarios, with the key differentiator being a graphical function, which represents the shift, or failure to shift, the firm’s budget allocation from technology to business development sufficiently. The feedback loops and dynamic interactions, as well as policies to improve the behavior were analyzed. The simulations show that the shift of budget from technology to business development, at the right timing and to a sufficient degree, is crucial for firm survival. Conversely with the desired scenario, in the undesired scenario the firm does not shift their budget to business development and thus fails to de-risk the business case, resulting in a funding gap and failure in the VOD. It could be useful to calibrate this generic structure of the VOD to specific sectors, industries or technologies, to yield more nuanced analysis and policy insights. Multivariate analysis of large datasets could be useful to model interacting factors affecting firm survival and identifying key drivers of market adoption and growth. Firm-market and firm-investor information asymmetries and perception gaps warrant future study.