Milestones That Get Investor Interest = Traction

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Traction is an elusive term thrown around by every VC when discussing interesting ventures to invest in. As an entrepreneur looking for funds finding investors is really about understanding which investors you should be talking to and what you need to have to show them. Using lean startup principles build out your idea with more efficiency, less waste and better results. Understand what investors want to invest in, and prioritize your efforts.

Update Aug 21 2014 for the TechFoundry Accelerator program

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Milestones That Get Investor Interest = Traction

  1. 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. 2. FOUR TRACTION POINTS 1. Idea 2. Product 3. Business model 4. Expansion
  3. 3. A STARTUP IS A TEMPORARY ORGANIZATION DESIGNED TO SEARCH FOR A REPEATABLE AND SCALABLE BUSINESS MODEL
  4. 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. 5. $1B+ Market? Scalable Solution? Recurring Revenue? Past Successes? Full team? (Hipster, Hacker, Hustler) Traction? Investment Interest Level
  6. 6. DREW HOUSTON, CEO DROPBOX
  7. 7. DEVELOPING YOUR IDEA How do I get funding at this stage? Do it yourself (and learn.) SWEAT EQUITY
  8. 8. DEVELOPING YOUR IDEA Nothing beats a good conversation. GET OUT AND TALK TO POTENTIAL CUSTOMERS
  9. 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. 10. DEVELOPING YOUR IDEA Goal: VALIDATE ASSUMPTIONS - FIND POTENTIAL CUSTOMERS
  11. 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. 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. 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. 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. 15. CREATING YOUR PRODUCT GOAL: • Paying customers • Product usage VALIDATE PRODUCT REAL CUSTOMERS
  16. 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. 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. 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. 19. PERFECTING YOUR BUSINESS MODEL Essentials Actions: Acquisition Activation Retention Referral Revenue. CONVERSION METRICS
  20. 20. PERFECTING YOUR BUSINESS MODEL Lean Startup Principle: Measure progress and prioritize work. INNOVATION ACCOUTING
  21. 21. PERFECTING YOUR BUSINESS MODEL GOAL: This equals successful monetization REPLICABLE / SCALABLE BUSINESS MODEL
  22. 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. 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. 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. 25. EXPANSION OF YOUR PRODUCT Lean Startup: Build, measure and learn BML
  26. 26. EXPANSION OF YOUR PRODUCT GOAL: What does the door look like: Buyout or IPO? INVESTOR EXIT
  27. 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. 28. EXPANSION OF YOUR PRODUCT Next steps: Meet with investment bankers and M&A specialists PREPARE TO PITCH
  29. 29. QUESTIONS?
  30. 30. START HERE. GO FURTHER. WWW.ELEVATEVENTURES.COM
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