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What Investors Look for in Traction at Early-Stage Companies

What Investors Look for in Traction at Early-Stage Companies

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Vasily Alekseenko
September 16, 2024

What Investors Look for in Traction at Early-Stage Companies

Traction is a term you hear often in fundraising and startup circles, but what does it really mean for early-stage companies? At its core, traction is about providing evidence that reassures investors you can succeed—or at least mitigate risk if things don’t go as planned.

Here's a simplified breakdown of what traction means at different stages:

Founder Fit Round:

What it is: This is often the first round of funding, where traction might be minimal or non-existent.
Investor Focus: Investors are looking for founders who have previously achieved something extraordinarily difficult. If you’ve done something impressive in the past that’s relevant to your current venture, it’s easier to attract investors. This is when having a proven track record of tackling tough challenges can be your biggest asset.

Pre-Seed and Seed Stages:

What it is: These rounds are focused on the initial stages of your product or service.
Investor Focus: Investors want to see if your MVP (Minimum Viable Product) or early product is effectively changing behavior. Key metrics here include user retention and referrals. For instance, how many users come back or recommend your product to others?

A Round:

What it is: This stage typically involves more substantial traction and scaling.
Investor Focus: At this point, investors are looking for product-market fit. They want to know how many customers are not only buying your product but also repurchasing or recommending it. Here, customers and users are often distinct, with customers being those who pay for the product and users being those who use it.

B Round and Beyond:

What it is: This stage focuses on scaling and revenue generation.
Investor Focus: Traction metrics become more about gross numbers, revenue growth, and overall market presence.

In summary, investors look for different types of traction depending on the stage of your company, from founder achievements to customer behavior and financial performance. Understanding these stages and aligning your pitch with what investors are looking for can significantly impact your fundraising success.

DEMO DAY UPDATE 👀

Our big event is just 4 weeks away, and 50% of the tickets are already sold—what a fantastic start! The top 100 founders who will be pitching are 95% confirmed. We’re waiting on a few more names before making a public announcement. However, we can now share the sectors for the pitching sessions:

HR Tech / Recruitment
BioTech / Life Science / Pharma
Marketplace
eCommerce / Online Retail / Consumer Goods
Healthcare / HealthTech / MedTech / Digital Health
Fitness / Wellness / Sport Tech
FinTech
B2B SaaS / Business Software
Analytics / Big Data
B2C SaaS / Consumer Apps
Blockchain / Crypto / NFT / Web3 / Cybersecurity
Sustainability / Green Tech / CleanTech
Education / EdTech
AI / Machine Learning

We’re also finalizing the agenda for the rest of the conference and are thrilled about the speakers who are eager to share their knowledge with our audience, including a few traveling all the way from the US to join us.