How much traction is enough traction?

Posted by Ventures Online on Fri Oct 09 2020
While it should be obvious that a single sale or subscriber, depending on the type of business, does not warrant sufficient traction to attract investors, there is no clear-cut answer to the question “How much traction is enough traction.” If a business exists to solve a problem or pain-point experienced by a certain segment of the market, then traction can be thought of as evidence that those for whom its product or service is intended are willing to adopt it as a solution to the problem.

Unless the product you are proposing is that radical and game-changing, like an actually proven cure to some terminal illness, then almost every investor you approach in the fundraising prosses will demand to see some traction. There is no guide or correct answer to what it should look like for every business but instead, the onus is in on you, the entrepreneur, to define traction metrics for your start-up.

Showing traction is all about finding a way to measure the progress and growth of your startup. Attracting funding is all about selling your results, based on the metrics you determine, convincingly to investors. This is an on-going process as your success or failure to deliver on promises previously made will determine the outcome of your subsequent fundraising efforts.

Some examples of useful metrics include:

1. Revenue — Are you making any money? Is the idea you are proposing profitable?

2. Life Time Value — How much you expect to earn from a customer during the time they are with your business?

3. Customer Acquisition Cost — How much does it cost to acquire a customer?

4. Customer Retention Rate — How good is your business at retaining customers over some specified period of time?

Remember that “Almost every failed startup has a product. What failed startups don’t have are enough customers.”― Gabriel Weinberg