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[15 Strategies] How To Communicate Traction To Investors
Startup 101

[15 Strategies] How To Communicate Traction To Investors 

Traction is paramount in the business world and in startups. . It is a valid statement for the start-up. How to communicate traction to investors?

As the managing partner of Union Square Ventures, Fred Wilson, says :-

“Traction is certainly one of the most overused words in the venture capital vernacular. But it is also the “shorthand” people use to talk about how much uptake a given project has gotten in the marketplace.Many want to understand the business model. We don’t need any of that to pull the trigger. But we want to see the most important thing – uptake. We think that’s the hardest nut to crack.”

-Fred Wilson

Director of Union Square Ventures

Traction indicates that the start-up is world-friendly (and investors). It really was common sense. If the startup adds value, people use it. People won’t use it unless it provides a sense.

Traction is not exclusively confined to the client base, or there are also several different sizes of a sector, and traction across these facets is advantageous.

Types of Traction Chart

There are various types of traction chart. Let’s discuss below:

Types of traction to focus on for E-commerce Businesses :

  • Revenue growth
  • Average sales or gross margins
  • Customers
  • Average return visits/customer
  • Units sold

Types of traction to focus on for Consumer Products :

  • Units sold
  • Revenues
  • Number of retail outlets product sold in
  • Distribution partners

Types of traction to focus on for Premium SaaS product for small business :

  • Revenues
  • Conversion to paid customers
  • Registered users
  • Customer acquisition costs
  • Lifetime value/customer
  • Distribution partners

Types of traction to focus on for Enterprises :

  • Revenues
  • Number of clients
  • Average contract size
  • Qualified sales pipeline

Types of traction to focus on for Fashion Q&A Consumer Internet product :

  • User numbers
  • Engaged users and type of engagement
  • Virality
  • Partnerships

Types of traction to focus on for Retail :

  • Revenue growth
  • Units sold
  • Average sales or gross margins
  • Customers
  • Lifetime value/customer

Modes of Demonstrating Traction 

There are 3 types of demonstrating traction. These are-

Formation 

A firm without yet the legal entity is not as impressive or exciting as a legally constituted business with a full-time working team as a tax identifier, a business bank account, collateral, or team/employees. The tendency towards legitimacy is evident.

team

The fundamental steps to build up a legal entity, create a basic website, and start creating collateral legitimize your enterprise past the idea. Luckily, they’re pretty easy to do.  You will not be taken very seriously without these initial steps.

Think of it as an adage, that in an interview you won’t get the job, but without it, you won’t even be seen. Potential customers and investors cannot be pitched on a company that only exists in your head.

Creation Of Product and Team

Every product creation and iteration shows traction. Taking note of the various steps in the production of a product (alpha, beta, full release) represents a significant achievement for your market development and an opportunity to illustrate what you learned.

product creation

In order to shorten you’re and paint a clearer and more detailed picture of your development, Baker recommends framing the traction in various product stages. Besides building a product, it is a significant sign of traction to demonstrate the growth of your team. It is widely said to be their real ideology for investors, “Bet on the Jockey, not the horse”

The founding team and initial staff is important for a successful start-up early on. It is necessary to take time and fire quickly to ensure that startup time and resources are used efficiently during its crucial phase of development.

Great talent represents your own vision as an entrepreneur and seller, as well as the potential of your company. It shows that other intelligent people see and appreciate the business potential you present to a start-up company for other opportunities.

An organization should aim to gain social proof and encouragement from other strong or influential people in addition to drawing great talent for the team itself.

Customers 

Although its not easy to bring the investor community much attention, it gives the startup traction. It is not enough.  It is the finest possible form of support for displaying pay customers consistent with money, product, and cost.

customers

You are in an excellent position to start-up if you can pull payment customers without collecting funds. Indeed many start-ups believe it is important to increase capital first and foremost to concentrate on early momentum and the acquisition of paying users.

The contractor will start to create or produce his product offer for sale immediately in the ideal situation. Unfortunately, financing is a requirement of building a product to market to consumers for many entrepreneurs. In this situation, traction in the form of sales or profitability cannot be demonstrated, and this is OK.

While testimonials are an important tool to demonstrate a need or say a story for a consumer, Brendan Baker from Greylock Partners warns against depending too much on them and also warns against ads as traction.

Final consumer forms used to prove traction are free customers or consumers. Not all customers have to pay to show the value of the product. There has always been a concept of offering a free demo to the customer to want more.

Initial beta customers will early access an early discount to gain real customer reviews and start developing a user base. Google’s pitch deck has been rumored to consist of a single slide: user development.

One recent trend was to follow a new-and-try-to-monetize revenue model for acquire-users. Few companies have had some measure of success with this model, and time will say how these few will do in the years ahead.

How To Communicate Traction To Investors?

You now know numerous ways of showing traction. But how can this traction be created and pushing and attracting users in particular? Well! Here are, 15 Early Traction Growth Hacking Strategies For Startups.  According to Gabriel Weinberg, founder of DuckDuckGo,

“The second major thing I’ve learned from interviewing people on getting traction is that initial traction can happen in a lot of different ways, often unpredictably.”

Gabriel Weinberg

Founder / DuckDuckGo

He also said there are a range of successful techniques including traditional non-traditional, Search Engine Labeling and Optimization (SEM/SEO), blogs, viral videos, etc. Besides you can try other strategies too. As following :

  1. Have A Clearly Defined Goal
  2. Using Your Pre-Launch List
  3. Do Things That Don’t Scale
  4. Build an Awesome Product
  5. Find Good Partners
  6. Get Your Analytics Right
  7. Strongly concentrate on email list building
  8. Case Studies & Use Cases Are Amazing
  9. Leverage Adjacent Markets
  10. Embrace Freemium
  11. Invite Based Rewards
  12. Utilise Branding To Your Advantage
  13. The Hack of Community
  14. The Social Profile Hack
  15. The Email Signature Hack

Traction for some is simple but most difficult. Early adopters, consumers and reviews are critical to your product’s continuous development. These 15 traction growth strategies can help you boost your business.

 

 

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