If you have made any efforts at all to put together an investor pitch deck, then no doubt you’ve heard that one of the critical slides to include is the infamous “Traction” slide. Traction, when you have some, is an amazingly powerful component in your presentation. Strong, well-presented traction can make up for a lot of weaknesses elsewhere in your pitch.
When I am out in the world attending demo days, pitch nights, or working with accelerators, I see founders putting up a wide array of information and calling it traction. Putting up “not-really-traction” information on your traction slide just highlights the fact that you don’t have real traction, so avoid the temptation to fill the gap with fluff.
Many founders don’t seem to understand the true significance and importance of traction. From what I see out in the startup ecosystem, some founders don’t think about traction until they are starting to put together their investor pitch deck. That’s way too late. I’ll explain why that is after I give you a quick primer on traction.
…some founders don’t think about traction until they are starting to put together their investor pitch deck. That’s way too late.
If you Google “define startup traction” as I did before writing this, you’ll get a mixed bag of answers. For example:
In a 2013 article in Entrepreneur Magazine, Martin Zwilling said this: “First of all, a definition: Traction is evidence that your product or service has started that “hockey- stick” adoption rate which implies a large market, a valid business model and sustainable growth. Investors want evidence that the “dogs are eating the dog food,” and your financial projections are not just a dream.”
A 2010 article in ReadWrite says: “Traction means having a measurable set of customers or users that serves to prove to a potential investor that your startup is ‘going places.’”
An article in Inc. Magazine says that Naval Ravikant, a co-founder of Angel List defines traction as “quantitative evidence of market demand.”
I could list more, but the point is that there is no fixed definition of traction in the startup world. And it makes sense that a fixed definition would be difficult since there are different types of startups, different types of investors, different business models, different funding stages, and on and on.
But I won’t let that stop me from adding the definition that I give to the companies that I work with. I define startup traction as:
“Any event, trend, or outcome which shows the successful execution of a startup’s business and marketing strategy, and which validates the company’s assumptions and projections. In other words, any proof that the market thinks you have a great product and that you can actually execute.”
The biggest difference in my definition is the link to execution. Traction is proof that you are executing. A lack of traction is the opposite.
“Traction” is “Proof”
When you browse the internet for traction info, you will see a ton of articles about things like “how much traction is enough” or “what’s the best way to present traction”. Since those articles are plentiful, I’m not going to answer them here. What I am going to do is to put traction into context so that it’s not this separate thing created just for funding. Hopefully, I can also make it easy for you to know what is and what is not traction.
As I mentioned earlier, if you are starting to think about traction when you are putting together your pitch deck, that’s too late. In my definition of traction, I mentioned your business and marketing strategy. That’s because your business plan includes a list of events, activities, milestones, and outcomes that are all stepping stones on your path to unicorn-dom. You need to negotiate partnerships, acquire customers, achieve specific metrics like customer acquisition costs, generate user sign ups or downloads, get customers to reorder, etc.
Before you start building the business, those are all just plans. Your strategy. When those things start to happen the way that you predicted, they change from being plans to being “traction”. So traction isn’t just something that you think about when you are getting ready for funding. Traction is just your plans actually happening.
That’s why investors want to see your traction slide! They want to know that your plans are not just plans. They want to know that you are able to Get Shit Done. What that also means is that you are not just running your business and then looking back to see if you can find traction to include in your deck. It means that if you are trying to build a company, that you are trying to get traction each and every day. It means that you and your team are managing the business to achieve traction. It means that traction is your operating roadmap, not something that you look at in the rear view mirror.
Because traction is a strong indicator of your ability to execute, that means that traction should be limited to things that you influenced or made happen. So a change in regulations that benefits your company is NOT traction. Another important element of traction is that it shows third-party validation of your plan. We already know that you believe in the company, but traction shows that other people do too. So bootstrapping your company is NOT traction.
Other things that are NOT traction include:
- Hiring a big name law firm that takes on any startup.
- Issuing a press release that doesn’t get picked up by meaningful media
- Hiring a development firm or other vendor at their typical market rate
- Hiring inexperienced people who get paid
- Moving into new offices
Those things are nice, but they don’t actually show that third parties or customers are validating what you are doing or planning to do. They are not things that you would have included in your business plan that are critical to your success. They don’t show that your business plan is likely to be highly predictive.
The now famous Buffer Seed Deck is a great example of how traction shows execution hustle. Take a look at the Deck Review I wrote about it as part of my Pitch Deck Spotlight series.
I can’t think of a situation where anyone had too much traction in their presentation.
To figure out what you should include as traction in your pitch deck or investor presentation, you have to start with what’s in your plan. What are the milestones that you need to achieve to know that you are on track? What metrics do you need to hit to have a viable business model? How quickly do you need to acquire customers to hit your targets? What channel or distribution partnerships do you need? How much media are you hoping to get? What are your big media targets? What conversion rates do you need? What average transaction value? How much virality are you counting on?
Some, if not most, of your traction items will be quantitative. For those, you want to show that momentum is building or that the economics are improving. So keep track of the historical numbers as you go. Set operational targets to show strong growth. If your growth metrics aren’t showing strong percentage increases, don’t expect investors to be excited.
Now from that list of planned activities or milestones, pick the 4 or 5 things that will be or are the main drivers of the business. Then track the progress of those things relentlessly. That list will be the basis of your traction metrics. Not just in your initial pitch, but in your follow up newsletter updates to investors. Those follow-ups will keep you on the investors’ radar. They will also show investors that you are an execution machine. If the early parts of your forecasts are being hit, it will give them some level of confidence in your ability to hit more.
I know I said to focus on 4-5 things, but the reality is that if you have more than 4-5 great traction metrics, use them. I can’t think of a situation where anyone had too much traction in their presentation. Frankly, if you have “too much” traction, the money will find you.
What do you do if all you have is your plan and nothing has actually happened yet? You start making things happen. If you don’t have anything that can show that you aren’t the only one that loves your idea, then you will have a really hard time getting funding.
Bootstrap to get some early validation of your plan. Use some of the Lean Startup tactics, like MVPs and Customer Development interviews. Do some low budget advertising to show that you can hit decent acquisition costs. Start having conversations with potential partners and get some conditional commitments. There’s a lot you can do before you raise money. The critical thing is to understand that today’s activity is tomorrow’s “traction”.
Build something great.