How to Get Startup Traction & Social Proof

In the world of business and startups, traction is king. In this chapter, we’ll offer tips on generating startup traction and social proof. Traction is a startup’s claim to validity, or as Union Square Ventures managing partner Fred Wilson puts it: 

Traction shows the world (and investors) that your startup is viable. It’s really common sense: if your startup provides value, then people will use it. If it does not provide value, then people will not use it. 

However, traction is not simply constrained to user base or even revenue – there are many different facets of a business, and showing traction in any and all of these facets is beneficial.  Brendan Baker, a VC at Greylock uses this chart to demonstrate what investors care about.

Types of Traction Chart

[2] Source: Brendan Baker via Quora 

Modes of Demonstrating Traction 

Formation 

Pitching a business that does not yet have a legal entity, a tax ID number, business bank account, collateral, or team/employees is not as impressive or exciting as a business that has been legally formed and has a team working full time. This shows traction toward legitimacy. 

The basic steps of forming a legal entity, creating a basic website, and beginning to create collateral legitimizes your business past the point of ideation. And fortunately, they are fairly easily done. 

Without these initial steps, you won’t be taken very seriously. Think of it like the adage that appropriate dress in an interview won’t land you the job, but you won’t even be considered without it. It’s next to impossible to pitch potential customers or investors on a business that only exists in your head. 

Customers 

While the above example won’t be enough traction to garner much attention from the investment community, it begins to give your startup momentum.

Paying customers that equate to revenue and profitability are the best possible form of traction to demonstrate. If you are able to pull in paying customers without raising capital, your startup is in a very good position. In fact, many startups find that focusing on traction early and acquiring paying users will eliminate much of the need to raise capital in the first place. 

In an ideal situation, an entrepreneur can immediately begin developing or manufacturing their product offering for distribution. Unfortunately, for many entrepreneurs, funding is a prerequisite to building a product to sell to customers. In that case, it is not possible to show traction in the form of revenue or profitability, and that is OK. 

Playing second fiddle to a paying customer is an interested customer. An entrepreneur who is constrained by not being able to develop the product should hustle potential, interested customers for his or her business. This can come in the form of testimonials or letters of intent, but the key is to find genuinely interested individuals who are hurting for your product and excited to use it. 

Though testimonials can be a good tool for demonstrating a need or telling a customer’s story, Brendan Baker of Greylock Partners warns against leaning too heavily on them, as well as labeling publicity as traction. 

The final types of customers used to demonstrate traction are free customers, otherwise known as “users.” Not all customers need to pay to demonstrate your product’s worth. The idea of giving away a free sample in order to hook the user into wanting more has been around forever (think mall food courts or even drug trafficking). 

Initial beta customers may be granted early access at a discount in order to receive real feedback from customers and begin building a user base. It is rumored that Google’s pitch deck consisted of one slide: user growth. 

A recent trend has been to adopt an acquire-users-now-and-try-to-monetize-it-later revenue model. Few businesses have had any measure of success with this model, and time will tell how those few fare in the coming years. However, there is value in demonstrating that you are amassing eyeballs on your product.

 Product and Team Development 

Each build and iteration of your product shows traction. Making note of the different stages of a product’s evolution (alpha, beta, full launch) marks an important step in the development of your business, and an opportunity to show what you’ve learned in the process. 

Baker recommends framing your traction in terms of different stages of product in order to “shorten your x-axis” and paint a better, more accurate picture of your progress. 

In addition to building a product, showing growth in your team is an important indication of traction. It’s often said that investors “bet on the jockey, not the horse,” and for many, that is their true philosophy. 

For an early-stage startup, the founding team and initial employees are crucial to success. It is important to hire slow, fire fast to ensure an efficient use of your startup’s time and resources in its critical growth phase. 

Great talent is a reflection of you as an entrepreneur as a recruiter and salesman of your own vision, as well as a reflection of your business’s potential. Attracting top talent to a startup company over other opportunities shows that other intelligent individuals see and value the market opportunity you are presenting. 

In addition to drawing great talent for the team itself, an entrepreneur should strive to achieve social proof and backing from other high-powered or influential individuals (discussed after Creating Traction). 

Creating Traction 

Ok, so now you know different ways to show traction. But how can you build that traction, and specifically drive traffic and attract users? DuckDuckGo founder Gabriel Weinberg explains that there are several different strategies that have been used successfully, including traditional and nontraditional PR, Search Engine Marking and Optimization (SEM/SEO), blogs, viral videos, and more. 

For a full list of Weinberg’s traction “verticals,” click here or visit our [Supporting Content].

Social Proof 

Social proof is the endorsement for your business by others. The value and legitimacy of your social proof is proportionate to the value and legitimacy of those endorsing you. Social proof typically comes from four different sources: advisors, customers, the media, and investors. 

Having credible advisors is a welcome sign to investors that your idea has merit. Often, a company’s advisors have secured investment in the past and bring that positive influence to the business. Their name is important to them, so their support really boosts credibility. 

Customers also boost a company’s legitimacy. Big name customers can be flaunted on website pages, within articles, and in pitch books to other customers. The bigger the customer, the easier it is to mobilize other customers in addition to demonstrating market demand. 

Being covered in a reputable media outlet speaks to credibility as well. It shows that at least somebody thinks you are newsworthy, and the more reputable the better. Just like big name customers, important media placements can be flaunted to demonstrate the worth of your product. 

Finally, investors provide a huge endorsement in the form of their hard-earned cash. If someone entrusts your business with their money with the expectation of a return, it is a very good sign for other investors – regardless of amount. 

In the next chapter, we will talk about nailing down paying and interested customers – before you begin building your product. 

References 

[1] http://www.usv.com/posts/traction 

[2] http://www.quora.com/How-do-you-define-traction-for-a-start-up/answer/Brendan-Baker 

[3] http://www.quora.com/Brendan-Baker/Posts/Startups-How-to-Communicate-Traction-to-Investors 

[4] http://www.inc.com/abigail-tracy/shark-tank-daymond-john-on-finding-investors.html 

[5] http://www.gabrielweinberg.com/blog/2010/04/in-the-pursuit-of-traction-have-you-considered-all-verticals.html 

Source Twitter Handles

Brendan Baker – https://twitter.com/brendanbaker (@brendanbaker)

Fred Wilson – https://twitter.com/fredwilson (@fredwilson)

Daymond John – https://twitter.com/TheSharkDaymond (@TheSharkDaymond)

Gabriel Weinberg – https://twitter.com/yegg (@yegg)