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Understanding Traction
Recently I’ve had a few strategy calls with companies building consumer products (software, services or goods to sell to consumers) who are trying to raise without traction.
For many of these founders they are disheartened to hear that raising without traction for a consumer company is very difficult. Today I wanted to explain why that is and to explain what type of traction you need. Traction doesn’t always mean that you have a finished product with paying users and sometimes showing traction is easier than you think.
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Why do VCs want to see traction?
When it comes to consumer products the primary reason that VCs want to see traction is to show that there is demand for what you are building in the market. For a long time, pre-seed investors would try to guess and predict whether products would hit consumers. Today they’ve realized that the best way to know is to test the idea in the market.
While this may seem unreasonable to many founders, the reality is that getting a product to market is easier and cheaper today than it ever has been. 20 years ago just building a website cost tens of thousands of dollars or required specialized skillsets and building an app wasn’t even a thing yet. It was hard to reach people and build anything to put in front of them. That is why founders were able to raise without traction, they needed funds to get any type of traction.
Today that isn’t the case.
What is traction?
Traction is any proof that customers want to buy your product. What many founders don’t understand is that you don’t need a finalized polished product to get traction. All that you need is to get customers to pay for a version of the product that proves that you unique insight into the industry is correct.
For example Uber was built because they fundamentally believed that people would rather order and track car services from their phone on demand instead of needing to hail a cab or call to book one. The first version of their product was an app where you would submit a form that would go to the founders who would call a cab for you. This allowed them to prove that people would order a car from an app.
So, if you have a consumer product and you don’t feel you can get traction before pitching, do the following:
Ask yourself what you believe that nobody else in your industry does. What are you doing differently to the incumbents?
Find a way to prove that one difference is something that will make people buy your product.
Do you have a strong traction slide in your pitch? |
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