Up & Right - What is Traction for a Startup? A couple of the most common questions entrepreneurs face are “how much traction is enough before approaching VCs?”
And “how do you define traction–what are the right metrics?” The answer to how much traction you should have before approaching VC is a fairly simple one: as much as possible. You want to maximize your bargaining power and to the extent that you have 1,000 users versus 0 or 1,000,000 versus 1,000 users this will affect your relative terms and valuation. There is no “right number” or universal metric of course as a B2B enterprise software company may have a ton of traction with just three customers but the next Facebook or Groupon killer may need 30,000 users for angels to even take the meeting. So once again we come back to the question, what is traction for your business?
VCs, even the ones with amazing track records, aren’t very good prognosticators or futurists. They key to all this for the VC is evidence. That’s where traction comes in. How Elite Entrepreneurs Define Traction (and Attract Funding) This answer may hurt a little.
The startup world’s definition of traction is one of the fastest evolving ideas that is affecting investors’ decisions on funding-worthy enterprises as of late. In actuality, the meaning of traction has evolved over the past ten years. Surely, not all startups have the same definition or degree of traction, and not all startups can boast about the same results. But many of the elite entrepreneurs who have outperformed the competition have a very similar conception… to an astounding degree! To be more clear, let’s examine closely what it means to have traction – a very important attribute that investors and on-the-fence consumers will use to judge your ability to deliver on your promise and grow your business. It is not sales. It’s a little bit of all of the above, and more. Traction is essentially twofold. How much traction is enough?
The book “Traction” by Justin Mares articulates 17 traction channels for systematically approaching marketing. How to Show Market Traction. What Is Business Traction? Many new businesses and start-up companies often find it difficult to get off the ground.
Finding enough capital to fund a developing business and keep it running can be difficult for a company that has not had sufficient time to prove itself in the marketplace. By creating business traction, new companies can attract potential investors and gain a competitive edge in their industry. What is Business Traction? Business traction refers to the progress of a start-up company and the momentum it gains as the business grows.
There is no one way to measure traction, however, companies usually rely on customer response and revenue as indicators of their success. Importance to Investors While the concept of traction is important for the company founders and employees, it is of equal importance to investors or other stakeholders who have an interest in the organization. Related Reading: Definition of a Business to Business E-Business Model Creating Traction Issues About the Author. How do investors define traction for a startup? Growth Hacking Like A Pirate, A Beginner's Guide To Pirate Metrics. Actionable customer analytics in just a few clicks - get instant metrics without code, SQL or confusing dashboards!
Get It Here UPDATE: Go and download the ‘Growth Pirate’ eBook here At trak.io we use Pirate Metrics as a simple metrics and analytics foundation for startups. Based on the assumption that every startup needs to get customers through 5 key stages, Acquisition, Activation, Retention, Referral & Revenue. AARRR! We’ve made this structure tightly integrated with our upcoming Metrics product, so I wanted to give a full explanation of why and also write a beginners guide for startup founders who have never come across AARRR before, or, for those who have heard about it but are unsure as to how it actually translates into actions they can take in their day-to-day of growing their startup.
AARRR Origins It’s impossible to discuss AARRR without first discussing it’s creator, Dave McClure.