The top 3 things we look for in the startups that apply to AngelList are initial traction, social proof, and product. The team is also obviously important, but good teams tend to have good traction, social proof, and products.

Since I was a child, people have asked me, “How much traction do investors want to see?” My answer is “you tell me.” Find the competitors that investors wish they had invested in, and compare yourself to them. And skip the #’s — show graphs. The Google Analytics screenshot above compares the traffic bump that [Startup Digest] got from TechCrunch vs. Venture Hacks.

Even better, show cumulative graphs that imply your second derivative is positive:

(Unlike these graphs, make sure you include axis labels, a legend, and a title.)

I’ve heard that Google’s entire presentation when they were raising money was a metrics graph. You should put together a more complete presentation than that — but, if you only have time to pull together one slide, make it traction.

Topics AngelList · Pitching

9 comments · Show

  • Shafqat

    Great post.

    When it comes to traction, my rule of thumb is “If you have to ask, you probably don’t have enough.”

  • Anonymous

    Sorry if this is a dimwitted question, but what principal of traction does the first graph demonstrate?

    [Startup Digest] getting visits?

    Venture Hacks being able to send traffic to [Startup Digest] almost as effectively as TechCrunch, so if you like TC you should like VH?

    Thanks for the explanation — it’s probably obvious and I just don’t see it.

    • Nivi

      This one: “Venture Hacks being able to send traffic to [Startup Digest] almost as effectively as TechCrunch, so if you like TC you should like VH?”

  • Matt Oesterle

    “Even better, show cumulative graphs that imply your second derivative is positive” — this would be a great additional post on its own.

  • chris

    Didn’t notice this post until now! I’ll be using the cumulative traffic slide for my presentation this week :)

  • dv

    What round are you talking about? If you’re raising seed expecting traction is unrealistic, even up to the A round most startups should be focused on their product-market fit not traction.

    • Nivi

      There’s no formal definition of product/market fit or traction. It’s up to you to define the metrics that investors should use to evaluate the company. For example, Marc Andreessen describes product/market fit like this:

      “And you can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can. Reporters are calling because they’ve heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house. You could eat free for a year at Buck’s.”

      For consumer internet companies, the seed round is for getting initial product/market fit, which also means you should probably be feeling some “pull” and perhaps even some second derivative action. A and B rounds are for continuing to work on your product and scaling up customer acquisition (what I think you mean by ‘traction’ in your comment).

  • Mark MacLeod

    Agree on the importance of traction. No one is funding a story any more. No one’s taking a leap of faith. I helped raise follow on funding for 6 seed funded web startups in the last 9 months. In all cases, we had to show real traction. Not just growth in users and usage, but core metrics like churn rate, viral cooefficient, etc.

  • Patrick Vlaskovits

    @Nivi

    While there may be no formal definition of Product-Market Fit and retaining flexibility is always encouraged, I don’t think it behooves entrepreneurs or investors to define P-M Ft so nebulously, such that it loses all meaning (as some in the Lean Startup community are already doing).

    From our upcoming book at CustDev.com:


    Product-Market Fit requires three criteria be resolved:

    1. The customer is willing to pay for the product.

    2. The cost of acquiring the customer is less than what they pay for the product.

    3. There’s sufficient evidence indicating the market is large enough to support the business.