Financiers evaluating your company as a good investment opportunity are looking for assurance that their money is secure and they will get rich returns. If entrepreneurs can demonstrate that the venture has traction, getting the funding they need will be easier. Traction is essentially customer validation and other metrics that show the company is growing quickly. Even if the business has yet to build a customer base and is in the seed stage, it can show estimated traction based on industry-specific projected numbers. Read ahead for detailed information on how to use startup traction for pitching to investors successfully.

Precursor to the Traction Slide is the Problem Slide

You’ll lay the groundwork for impressive traction by designing a great problem slide that typically comes before. The slide will outline the specific problem customers face and how the products and services will resolve that problem. You’ll provide information about the particular market you’re targetting, its scope, order fulfillment strategies, logistics, and more. If your product can successfully create a problem that didn’t exist before, that’s a positive since it indicates innovation and thinking outside the box–qualities that investors appreciate.

Now for the Traction Slide – Let’s Talk About Profits

When designing the traction slide, you’ll include Key Performance Indicators (KPIs). Depending on the specific stage where your startup is at, you can add profits and revenues. Although investors want to back a company that is already showing profits, their focus is more on the future growth prospects of the startup. Even if you can demonstrate that the business has successfully built infrastructure and a robust production line with an excellent team on board, that should impress financiers. A company may not be able to show profits if its sales have yet to pick up, but if it has some revenues, that’s an incentive to investors who see it as a positive indicator.

Beta Testing and Pre-Orders Show Customer Validation

Established and mature companies can use their extensive customer base as traction indicators. You can add stats about the sales you’re making each month or every quarter. But, if your venture is still to get there, you can add information about beta testing results and reviews from users who have tried the products and services before the formal launch. Listing enterprise clients or subscriptions coming in even before the product is ready for the market shows customer validation and that the startup is likely to succeed.

Investments from Renowned Venture Capitalists and Incubator Support

Startups that have been accepted into renowned incubator programs carry their stamp of approval. Getting into such programs is notoriously challenging. If entrepreneurs can demonstrate that they’ve developed their products with the backing and peer support made available by an incubator, that factor could interest investors. Most organizations connect startup owners with financiers in their network, and getting seed capital is good validation. Investments from venture capitalists can help attract funding since VCs are known to evaluate and back ventures with potential.

Partnerships and Endorsements

Entrepreneurs who have successfully entered into partnerships with well-known companies in their respective industries can use their association to show traction. Partnering to buy and source inventory, manufacture complementing products, or deliver related services is a great way to indicate future growth prospects. If you can get permission from renowned brands to use their name, that works well for your fundraising efforts.

Demonstrating impressive metrics and KPIs is always the best way to show traction and get funding for your business. But, even if your startup is yet to launch, you can get the investments you need by using other factors that indicate the business has the necessary potential for growing quickly.

BIO

 

 

 

 

 

 

Alejandro Cremades is a serial entrepreneur and the author of The Art of Startup Fundraising. With a foreword by ‘Shark Tank‘ star, Barbara Corcoran and published by John Wiley & Sons, the book was named one of the best books for entrepreneurs. The book offers a step-by-step guide to today‘s way of raising money for entrepreneurs.

Most recently, Alejandro built and exited CoFoundersLab, which is one of the largest communities of founders online.

Prior to CoFoundersLab, Alejandro worked as a lawyer at King & Spalding, where he was involved in one of the biggest investment arbitration cases in history ($113 billion at stake).

Alejandro is an active speaker and has given guest lectures at the Wharton School of Business, Columbia Business School, and NYU Stern School of Business.

Alejandro has been involved with the JOBS Act since its inception and was invited to the White House and the US House of Representatives to provide his stands on the new regulatory changes concerning fundraising online.