“Get back to us when you have more traction.” Bet you’ve heard that before! But what the heck is “traction,” anyway?
Traction is evidence your company is succeeding.
Traction comes in many forms. Some types of evidence are more persuasive than others.
Here are 6 common types of traction, from most compelling to least…
1. Recurring Revenue
This is the gold standard.
Top-tier seed stage deals today usually have between $500,000 ARR and $1.5 million ARR. That’s a lot higher than when I started doing this. A couple of years ago, $200,000 would have been quite impressive.
But everything is accelerating with AI. Like it or not, standards are going up.
2. Paid Pilots
This is still real money. But it’s valued lower than recurring contracts because pilots typically end after a few months.
Still, paid pilots are a lot better than no revenue at all! Just be clear that they’re pilots, not normal contracts.
A couple of paid pilots could get you into an accelerator. You might even be able to raise a pre-seed round.
But a full seed round isn’t likely unless you have a killer track record
3. Unpaid Users
This is very relevant for consumer startups. For everyone else, it doesn’t matter.
If you’re building a new consumer social app, monthly active users and retention are going to be key metrics. But if you’re building a SaaS app, paying customers are what count.
4. Launched Product
Maybe you don’t have any revenue yet. But just launching a product puts you above most startups.
A launched product may be enough to get you into an accelerator. But a product alone probably isn’t enough to raise a full funding round.
5. Prototype
A prototype and a strong team in place is usually enough to raise a seed round for a deep tech startup. Last summer, I invested in an awesome robotics startup with just a prototype.
For software startups, the bar is higher. You probably need to launch a product and get a few customers before you can raise money.
6. Team in Place
You don’t have any revenue. Your product isn’t finished.
Do you at least have a team of builders in place?
That’s a form of traction. Strong builders working full-time on the startup is one of the key things I look for.
Having a good team in place could get you into an accelerator. But unless you have an incredible track record, you’re probably too early for a full funding round.
I’ve done 42 investments. I’ve never written a check without at least a prototype.
Wrap-Up
Honestly assess what traction your startup has today.
Do you have several hundred thousand in ARR? You might be ready for a seed round.
Do you have a solid team of builders but no product yet? Try an accelerator.
Being realistic about traction will save you months spinning your wheels. Put that time into building product and getting more customers.
When customers are flocking to you, raising money is a lot easier.
More on tech:
From Cold DM to Wire in 5 Days: Why I Move Fast on Great Startups
38 Words Got This Founder on My Calendar — Here’s the Cold Email Formula That Wins
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