Investors in Peru often ask to see traction before investing in a startup and evaluate founding teams based on their execution ability, or capacity to achieve traction.
But, what is traction anyway? Traction is action with holding power.
Two key components I look for are:
- Active users, with emphasis on the active
It is helpful to show these factors in your pitch deck – and in an upward trending graph.
Founders often get hung up on this point, convinced that investors want to see large monthly recurring revenue numbers. This is true for later stage startups, but for early stage startups, there are ways to show traction without having secured revenue.
- Active users can be measured in number of experiments, number of active early adopters, increasing conversion rates, faster sales cycles, or other ways that make sense for your particular startup
- Growth is best shown in weekly or monthly numbers, which are more helpful than cumulative numbers, especially if shown in a graph from.
The key is to show increasing activity over time and share that you have takeaways that will help the startup grow better (achieve more value from customers) in the future.