1.
FOUR TRACTION POINTS THAT INTEREST INVESTORS
MILESTONES OF
FUNDING NEW VENTURES
By Kelly Schwedland
kellys@elevateventures.com
Prepared for Tech Foundry Accelerator Fall 2014

2.
FOUR TRACTION POINTS
1. Idea
2. Product
3. Business model
4. Expansion

3.
A STARTUP IS A TEMPORARY
ORGANIZATION
DESIGNED TO SEARCH
FOR A REPEATABLE AND SCALABLE
BUSINESS MODEL

4.
INVESTMENT READINESS LEVEL
Mkt Size/Competitive analysis
Complete first-pass canvas
Problem/Solution Validation
Low Fidelity MVP Experiments
Validate Product/Market fit
Validate right side of canvas
Prototype High-Fidelity MVP
Validate left-side of canvas
Validate metrics that matter
Friends and Family
Angel investors
Venture Capital
None

5.
$1B+ Market?
Scalable Solution?
Recurring Revenue?
Past Successes?
Full team?
(Hipster, Hacker, Hustler)
Traction?
Investment Interest Level

6.
DREW HOUSTON, CEO DROPBOX

7.
DEVELOPING YOUR IDEA
How do I get funding at this stage?
Do it yourself (and learn.)
SWEAT EQUITY

8.
DEVELOPING YOUR IDEA
Nothing beats a good conversation.
GET OUT AND TALK TO
POTENTIAL CUSTOMERS

9.
DEVELOPING YOUR IDEA
Lean Startup Principle:
Examples: Lean Startup Challenges, Startup Weekends, Launchrock,
Mock ups, WIX, Code Training, Hackathons, etc.
USE FREE/CHEAP
RESOURCES AND TEST

10.
DEVELOPING YOUR IDEA
Goal:
VALIDATE ASSUMPTIONS -
FIND POTENTIAL
CUSTOMERS

11.
DEVELOPING YOUR IDEA
What does traction look like?
Examples: 100 – 1000 possible users/emails, 10-15 potential
customers, 2-3 letters of intent, 1 enterprise client MOU
COMMITMENTS

12.
CREATING YOUR PRODUCT
How do I fund my prototype?
Get creative. Leverage your network. Reach out to friends, family,
customers, Kickstarter, Indiegogo, and similar sources.
Tell your story. Make a little go a long way.
ASK THOSE YOU KNOW

13.
CREATING YOUR PRODUCT
Essentials Actions:
BUILD A TEAM
Include a hipster, a hacker
and a hustler;
In other words, every
good team needs a
designer, a developer
and a business person.

14.
CREATING YOUR PRODUCT
Lean Startup Principle:
• Build an MVP of MVP
(Minimum Viable Product of Most Valuable Piece)
• Use API’s and other existing resources when possible
VALIDATED
LEARNING

15.
CREATING YOUR PRODUCT
GOAL:
• Paying customers
• Product usage
VALIDATE PRODUCT
REAL CUSTOMERS

16.
CREATING YOUR PRODUCT
What does traction look like?
Examples: 10,000 downloads, 1000 daily active users, 100+ paying
customers, 1 paying enterprise client with 100+ seats ($3K -
$5K/month), etc.
PROOF OF VALUE
TO CUSTOMERS

17.
PERFECTING YOUR BUSINESS MODEL
How do I fund this thing?
ANGELS
Prepare your 10 point
pitch and share your
traction with angel
investors, networks,
funds, Angel.co, etc.

18.
You Need to Get Here!
Product/Market Fit:
LTV/3 >= CAC
You Are Here
You’ve only just begun
PERFECTING YOUR BUSINESS MODEL

19.
PERFECTING YOUR BUSINESS MODEL
Essentials Actions:
Acquisition Activation Retention Referral Revenue.
CONVERSION METRICS

20.
PERFECTING YOUR BUSINESS MODEL
Lean Startup Principle:
Measure progress and prioritize work.
INNOVATION
ACCOUTING

21.
PERFECTING YOUR BUSINESS MODEL
GOAL:
This equals successful monetization
REPLICABLE / SCALABLE
BUSINESS MODEL

22.
PERFECTING YOUR BUSINESS MODEL
What does traction look like?
*cost of acquisition is less than 3x lifetime value; $1 in, $3 out
• Enterprise: 1000 seats @ $10/seat/mo.,
• Big Enterprise: 2 pilot contracts and some $
• Social: 100,000 downloads/signups
• Marketplace: $50,000 revenue/mo.
• E-Commerce: $50,000 revenue/mo.
CAC < 3X LTV

23.
EXPANSION OF YOUR PRODUCT
How do I fund this thing?
CASHFLOW? OR
VENTURE CAPITAL?
Meet with a dozen venture capital
firms to find fit and funding for
growth.

24.
EXPANSION OF YOUR PRODUCT
Essentials actions:
Execution to metrics, revenue, profits,
team growth, key frustration
process improvement and
acquire niche companies.
CONSISTENT GROWTH

25.
EXPANSION OF YOUR PRODUCT
Lean Startup:
Build, measure and learn
BML

26.
EXPANSION OF YOUR PRODUCT
GOAL:
What does the door look like:
Buyout or IPO?
INVESTOR EXIT

27.
EXPANSION OF YOUR PRODUCT
What does traction look like?
Consistently driving customer acquisition and revenue as expected.
Finding new avenues for revenue growth.
ONGOING ROLLOUT

28.
EXPANSION OF YOUR PRODUCT
Next steps:
Meet with investment
bankers and M&A
specialists
PREPARE TO PITCH

29.
QUESTIONS?

30.
START HERE. GO FURTHER.
WWW.ELEVATEVENTURES.COM