2014 KOTRA: Showing Traction to Investors

© 2014 Luxr Incorporated www.luxr.co
Showing Traction To
Investors
Preparing Startups for a Brighter Future
March 14, 2014
Janice Fraser
Jason Fraser

Follow Us
@luxrco
Hashtag
#leankotra

Martin Zwilling
http://www.alleywatch.com/2013/06/10-keys-to-startup-traction-that-
investors-look-for/
@StartupPro

10 things that demonstrate traction
1. Documented business/product plan (Business Model
Canvas)
2. Some completed milestones
3. A well-rounded team
4. Qualified Advisors
5. Minimum product released and validating
6. Real Customers/Real Revenue
7. Registered IP
8. Letters of Intent or endorsements
9. Personal investment
10. Be a dedicated expert in your field (Know your stuff!)

Brendan Baker
http://www.quora.com/Brendan-Baker/Posts/Startups-How-to-Communicate-
Traction-to-Investors
@brendanbaker

Traction = Strong Forward Momentum
demonstrated by
“quantified evidence of
market demand for your product”

8 things you can do
to improve your traction story
&
2 things you should never do

Each of these tips is about
framing your story
If, when you frame your story properly
it’s still not convincing,
then you have more work to do on the
product.

Tip 1: Compress your X-Axis
Company founding
(Aug 2010)
Today
Some
Lots

This looks slow.
Company founding
(Aug 2010)
Today
Some
Lots

Check that your start date
is accurate.
You want to demonstrate that growth happened
quickly.
Did you start in 2010 and now you have 5000
users? (125 users/month)
Or did you start the company in 2010, but
open to the public in late 2012 and now you
have 5000 users? (333 users/month)

The blue line shows growth
from Launch.
Company founding
(Aug 2010)
Today
Public Beta Launch
(Dec 2012)
Today
Some
Lots

That’s a lot more impressive.
Some
Lots
Public Beta Launch
(Dec 2012)
Today

Tip #2: Choose your X-Axis
You can use all kinds of numbers for the X-Axis,
to show traction:
Time
Product Iterations
Market Releases
Sales Cycles (academic terms, etc.)
Etc.

Iterations instead of time
1st release
Some
Lots
2nd release 3rd release

Tip #3: Reduce Expectations
Provide proper context for your numbers:
Are you in a closed beta?
Have you generated lots of interest with no
investment?
If numbers are low now, what compelling
evidence do you have that they’ll go up
quickly?

Public Beta Launch
(Dec 2012)
Today
Some
Lots
Tip #4: Choose your Y-Axis

Public Beta Launch
(Dec 2012)
Today
Some
Lots
R
e
v
e
n
u
e

Public Beta Launch
(Dec 2012)
Today
Some
Lots
P
r
o
f
i
t

Public Beta Launch
(Dec 2012)
Today
Some
Lots
E
n
g
a
g
e
m
e
n
t

- Profitability
- Revenue
- Active users
- Registered users
- Engagement
- Partnerships/clients
- Traffic
- Low CAC/High Lifetime Value (my own addition)
Y-Axis options, in order of persuasiveness:
Choose the one that shows your growth.

Tip #5: Use Absolute and
Growth numbers
Absolute: We have X (number) now.
Growth: We grew Y% per time period.
An absolute number with no (or a low)
growth number is dead.

We have 5000 now.
The growth rate is ______% per _______.
This tells a story and lets your
investor imagine the future.
18 month
(absolute)
(growth)

Tip #6: For b2b, tell a story of
a customer
(NOT how much they love your product or
how it changed their business.)
How much has usage grown?
What’s the future potential?
(using numbers)

Tip #7: Benchmark against a
known competitor
This can put growth into perspective.
(Choose comparisons carefully.)

Tip #8: Annotate a graph
Easy way to demonstrate growth
Combine with tips 1 and 2 with this to
create powerful graphs.
Annotation serves to compress the X-Axis by
providing reference points.
Annotation allows you to keep the X-Axis as time, while
still breaking it up into meaningful segments.

0
250
500
750
1000
August September October November
Private Beta
(web only)
Android
& iOS
Web
Launch

Do Not:
Do not use testimonials.
Do not use press mentions.
Investors don’t care what people say about you.
NO ONE cares what the press says about you.

Instead:
Name major clients.
Use statements of support from
major industry groups.
Big name clients provide validation.
Gartner, Consumer Reports, etc.

- Profitability
- Revenue
- Active users
- Registered users
- Engagement
- Traffic
- Low CAC/High Lifetime Value
Which of your numbers are most likely to
tell an effective growth story?
Prompt:

- Profitability
- Revenue
- Active users
- Registered users
- Engagement
- Traffic
- Low CAC/High Lifetime Value
Where could you get those numbers?

Homework:
Use the Baker tips to improve your traction
slide.
Use the Zwilling checklist to identify what else
you need.

Zwilling’s Checklist for Showing Traction
Documented business/product plan (Business Model
Canvas)
Some completed milestones
A well-rounded team
Qualified Advisors
Minimum product released and validating
Real Customers/Real Revenue
Registered IP
Letters of Intent or endorsements
Personal investment
Be a dedicated expert in your field (Know your stuff!)

Baker’s Checklist for Showing Traction
Compress your X-Axis
Choose your X-Axis (carefully).
Reduce expectations (by setting appropriate
context).
Choose your Y-Axis.
Use Absolute and Growth numbers.
Tell a story of a customer (for B2B).
Benchmark against a known competitor.
Annotate a graph.
DO NOT use testimonials.
DO NOT use press mentions.

2014 KOTRA: Showing Traction to Investors

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2014 KOTRA: Showing Traction to Investors