Traction. It’s what everyone is looking for before they invest, right? At least that’s the norm of what one might hear when they start pitching their ideas to investors.
Over the last 5 years, I’ve seen some of the larger and “slower to move” investors start to take more risk on early stage companies.
Not only have I seen an increase in the amount of deals that are being funded in the Midwest but I’m also seeing people get involved at earlier stages. Whether it means there are more fish in the sea, more educated investors, or people are generally taking more risk, it appears the space overall is picking up.
Two years ago, Hyde Park Angels released an article on “Investor Metrics”. If someone is looking for a broad spectrum, this article is a perfect place to start, in particular the section on “Understanding what traction means for you”. For a first time entrepreneur or even someone who thinks they’re well established to raise capital, Hyde Park Angels lays out the basics in this article of what one should consider before they start talking to investors, IMHO.
But what about this traction thing? What is it? Well, it’s different for everyone. It’s subjective. Some might look at revenue, customers, usage time or organic growth. These are just a few.
Whether you feel like you have significant traction or not, define the things that you can measure and apply simple business logic to see how they might pertain to an investor.
When Venture Connects evaluates a company for the first time, we start with a few very basic things.
- Do we understand it?
- Is it a real company and operating?
- Is there a good business opportunity and are the founder(s) promising?
- Would we potentially invest in it and do we think others might as well?
If you think about it, these are pretty simple questions. That’s the basis of it. We have to like the founders, the business, and think it’s going somewhere. If these few things are a go, we usually move forward evaluating the company.
While traction might be different for everyone and measuring it can be a beast of its own, it’s even more important to tell your story of “why.”
Why you. Why the company. Why you are different. Why this will work. Why your traction metrics important. Why you are the person to execute.
At the end of the day, it’s about telling what might be a complex story, simply, while incorporating the important stuff as factual data to refer to.
Written by RJ PahuraTags: business, capital, early stage investing, Fundraising, growth, Hyde Park Angels, invest, investor, measure, metrics, revenue, startup, traction