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Why So Many Startups Never Reach Their Second Funding Round

Seed funding often gives a company more opportunities to fail, not succeed.

By Sam Hogg • Jan 1, 2014 Originally published Feb 2, 2014

Opinions expressed by Entrepreneur contributors are their own.

The "valley of death." I hear this term used a lot in startup circles, representing the gap between a great idea and the task of turning it into a business. From a financial standpoint, it points to the moment when the feel-good times funded by an initial seed investment come to an abrupt end after a search for formal venture capital fails.

Josh Lerner, Harvard Business School's venture capital guru, estimates that 90 percent of new businesses can't bridge this gap and end up shutting down because of it. That's a frightening stat, and it begs an explanation.

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