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How To Communicate
Traction to Investors

   @brendanbaker + @hnshah
     Skillshare – October 20, 2011
@brendanbaker   @hnshah




                     Brendan Baker, Hiten Shah
Today

1   How do investors think?


2   What is traction?


3   Building a traction Story



                                Brendan Baker, Hiten Shah
1
How do investors
    think?


              Brendan Baker, Hiten Shah
Investors respond to
       a story.



                 Brendan Baker, Hiten Shah
Momentum




 Green is good.


                  Brendan Baker, Hiten Shah
Excitement > Hesitation




   Amplify and focus on the excitement points.
  Surface and deal with the hesitation points.
                                         Brendan Baker, Hiten Shah
They’ve seen everything
     Don’t try to fit in. Be unique.




                                       Brendan Baker, Hiten Shah
FOMO
Fear of Missing out.




                       Brendan Baker, Hiten Shah
Derisking
             Can they build the product?

                       Will people use it?

Risk
                                 Will people pay for it?

                                             Will people come in mass?




                          Progress

           Derisking often happens in steps.
       These steps may vary for different startups.
                                                           Brendan Baker, Hiten Shah
2
What is traction?



                Brendan Baker, Hiten Shah
Traction is your story of
momentum, told through
 quantified evidence of
market demand for your
        product.

                    Brendan Baker, Hiten Shah
“your story”
 Not told directly, but implied in examples of evidence.
Your traction is unique – use examples that are unique.
      Don’t hide weaknesses, but do frame them.




                                              Brendan Baker, Hiten Shah
“quantified evidence”
                     Yes                                 Maybe
                  Profits                        Cohort progress
                Revenues                       Engagement progress
               Active users                      Product velocity
               Engagement
             Customers/clients
             Registered Users                               No
                Downloads                                Press
               Partnerships                           Testimonials
                  Traffic



* This isn’t a set list. Use evidence that makes sense for you.
                                                                     Brendan Baker, Hiten Shah
“Market demand”
      Aka ‘people want your shit’
Use evidence that describes momentum,
       and hints at market potential.




                                    Brendan Baker, Hiten Shah
<pause>
    8 Words* that truly suck
   1)   Gamechanging/er                    5)    Groundbreaking
   2)   Visionary                          6)    Innovative
   3)   Next-generation                    7)    Disruptive/or
   4)   Seasoned Professional              8)    ©®™

                                                            β
Baker’s Rule           Actual Progress =
                                                Number of times these words
                                                    are used in your pitch

* Fine – and symbols
                                                            Brendan Baker, Hiten Shah
3
Building a traction story



                    Brendan Baker, Hiten Shah
The story is the implied message you want to send. It’s
              not something you’ll say directly.

   Think of it this way: say you pitched an Associate at a VC
firm. She liked you, and had a minute to describe your status
 and progress to a Partner. What would you want her to say?

         That’s your target story. Tell it with traction.




                                                      Brendan Baker, Hiten Shah
Your traction story:

 Is unique to you.


 Is concrete and evidence-based.


 Shows a path to world domination.


                           Brendan Baker, Hiten Shah
Some examples




                Brendan Baker, Hiten Shah
story
  “They’re super early, but they build and learn fast. They’re
                        worth betting on.”

traction




                                                  Brendan Baker, Hiten Shah
story
“They’re creating a marketplace. That’s hard, but they know it.
   They knew they had to build the supply side first, and they
      nailed it. Now they’re tackling the demand side. Early
 indications are good, and I think they know how to ramp it up.”


traction
Launched in March 2011:
- 25,000 vendors, with avg 25 items (growing 20-30%/month)
- 11K uniques (growing 40%/month), with 3% conversion
- avg purchase of $45 (growing 5%/month)
- $120,000 revenue run rate (increasing 30%/month)
- Just signed partnership with Yahoo! and ramping up ads.

                                                  Brendan Baker, Hiten Shah
story
The product is pre-product-market fit, but they’re working in a
   high potential space, and the founder has a huge vision.
    Plus, he’s crazy smart. This is a founder worth backing.


traction
    Working to enable one-click populated third party accounts, giving
    the user ability to manage privacy setting from one dashboard.
    Founder:
-   Won an NSA hacking competition by outsmarting the organizers
-   Secured 100s of trading applications and developed security
    language for a top global investment bank.
-   Founded an RFID security consumer product company which has
    multi millions in revenues, and is growing 50-100%/year.
                                                       Brendan Baker, Hiten Shah
story
“They’re accelerating their school by school rollout. The first schools are
   showing faster adoption than Facebook at their start, and are already
     nearing local market saturation. They’ve started in the next set of
      schools, and adoption and engagement is even higher. They’re
       releasing faster than anyone I’ve ever seen, and it’s working.”

 traction
  Launched 2 months ago in first school:
  - Downloaded by 80% of addressable population
  - Weekly actives: 55%
  - Feature requests: course sets, note sharing, daily deals  V2

  With V2, now ramping to 10 more schools in 3 months:
  - 3 launched to date
  - Each school population is downloading the app at a 15% faster rate
  - Engagement (photos shared, messages, etc) has increased 40%+ over V1

  Currently found a way to roll out much more rapidly to new schools, in under a few hours
  each.
                                                                          Brendan Baker, Hiten Shah
Resources
                    KISSmetrics

      How to Communicate Traction to Investors

       How to Hustle with AngelList in 10 Steps

Anatomy of Seed: An Inside Look at a $1M Seed Round




                                            Brendan Baker, Hiten Shah
Thank you.
Thank you for building kick-ass companies.

       @brendanbaker & @hnshah




                                       Brendan Baker, Hiten Shah

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How to Communicate Traction to Investors with Brendan Baker and Hiten Shah

  • 1. How To Communicate Traction to Investors @brendanbaker + @hnshah Skillshare – October 20, 2011
  • 2. @brendanbaker @hnshah Brendan Baker, Hiten Shah
  • 3. Today 1 How do investors think? 2 What is traction? 3 Building a traction Story Brendan Baker, Hiten Shah
  • 4. 1 How do investors think? Brendan Baker, Hiten Shah
  • 5. Investors respond to a story. Brendan Baker, Hiten Shah
  • 6. Momentum Green is good. Brendan Baker, Hiten Shah
  • 7. Excitement > Hesitation Amplify and focus on the excitement points. Surface and deal with the hesitation points. Brendan Baker, Hiten Shah
  • 8. They’ve seen everything Don’t try to fit in. Be unique. Brendan Baker, Hiten Shah
  • 9. FOMO Fear of Missing out. Brendan Baker, Hiten Shah
  • 10. Derisking Can they build the product? Will people use it? Risk Will people pay for it? Will people come in mass? Progress Derisking often happens in steps. These steps may vary for different startups. Brendan Baker, Hiten Shah
  • 11. 2 What is traction? Brendan Baker, Hiten Shah
  • 12. Traction is your story of momentum, told through quantified evidence of market demand for your product. Brendan Baker, Hiten Shah
  • 13. “your story” Not told directly, but implied in examples of evidence. Your traction is unique – use examples that are unique. Don’t hide weaknesses, but do frame them. Brendan Baker, Hiten Shah
  • 14. “quantified evidence” Yes Maybe Profits Cohort progress Revenues Engagement progress Active users Product velocity Engagement Customers/clients Registered Users No Downloads Press Partnerships Testimonials Traffic * This isn’t a set list. Use evidence that makes sense for you. Brendan Baker, Hiten Shah
  • 15. “Market demand” Aka ‘people want your shit’ Use evidence that describes momentum, and hints at market potential. Brendan Baker, Hiten Shah
  • 16. <pause> 8 Words* that truly suck 1) Gamechanging/er 5) Groundbreaking 2) Visionary 6) Innovative 3) Next-generation 7) Disruptive/or 4) Seasoned Professional 8) ©®™ β Baker’s Rule Actual Progress = Number of times these words are used in your pitch * Fine – and symbols Brendan Baker, Hiten Shah
  • 17. 3 Building a traction story Brendan Baker, Hiten Shah
  • 18. The story is the implied message you want to send. It’s not something you’ll say directly. Think of it this way: say you pitched an Associate at a VC firm. She liked you, and had a minute to describe your status and progress to a Partner. What would you want her to say? That’s your target story. Tell it with traction. Brendan Baker, Hiten Shah
  • 19. Your traction story: Is unique to you. Is concrete and evidence-based. Shows a path to world domination. Brendan Baker, Hiten Shah
  • 20. Some examples Brendan Baker, Hiten Shah
  • 21. story “They’re super early, but they build and learn fast. They’re worth betting on.” traction Brendan Baker, Hiten Shah
  • 22. story “They’re creating a marketplace. That’s hard, but they know it. They knew they had to build the supply side first, and they nailed it. Now they’re tackling the demand side. Early indications are good, and I think they know how to ramp it up.” traction Launched in March 2011: - 25,000 vendors, with avg 25 items (growing 20-30%/month) - 11K uniques (growing 40%/month), with 3% conversion - avg purchase of $45 (growing 5%/month) - $120,000 revenue run rate (increasing 30%/month) - Just signed partnership with Yahoo! and ramping up ads. Brendan Baker, Hiten Shah
  • 23. story The product is pre-product-market fit, but they’re working in a high potential space, and the founder has a huge vision. Plus, he’s crazy smart. This is a founder worth backing. traction Working to enable one-click populated third party accounts, giving the user ability to manage privacy setting from one dashboard. Founder: - Won an NSA hacking competition by outsmarting the organizers - Secured 100s of trading applications and developed security language for a top global investment bank. - Founded an RFID security consumer product company which has multi millions in revenues, and is growing 50-100%/year. Brendan Baker, Hiten Shah
  • 24. story “They’re accelerating their school by school rollout. The first schools are showing faster adoption than Facebook at their start, and are already nearing local market saturation. They’ve started in the next set of schools, and adoption and engagement is even higher. They’re releasing faster than anyone I’ve ever seen, and it’s working.” traction Launched 2 months ago in first school: - Downloaded by 80% of addressable population - Weekly actives: 55% - Feature requests: course sets, note sharing, daily deals  V2 With V2, now ramping to 10 more schools in 3 months: - 3 launched to date - Each school population is downloading the app at a 15% faster rate - Engagement (photos shared, messages, etc) has increased 40%+ over V1 Currently found a way to roll out much more rapidly to new schools, in under a few hours each. Brendan Baker, Hiten Shah
  • 25. Resources KISSmetrics How to Communicate Traction to Investors How to Hustle with AngelList in 10 Steps Anatomy of Seed: An Inside Look at a $1M Seed Round Brendan Baker, Hiten Shah
  • 26. Thank you. Thank you for building kick-ass companies. @brendanbaker & @hnshah Brendan Baker, Hiten Shah