When you're getting ready to raise money for your startup,
investors are going to want to know the details of your
progress and growth to date. One of the primary things
investors look at is the current traction of your startup to
date. To demonstrate your traction, you have to understand
what it is and be able to communicate your progress with
potential investors. But what if your startup doesn't have any
traction so far?
For many new startups with no traction to show, investors will
likely say 'no.' If startups in their early stages cannot
demonstrate or show growth or show that customers want their
product or service, it can be a risk to invest. When you're in
you're early stages, it feels like an impossible situation to
get through. You need growth to show traction, and you need
capital to fund that growth.
While it may seem difficult when you're in your early stages
and still need traction to show your startup's worth, there
are ways to raise money. Read on to learn more about what
traction is and how to raise capital when you don't have the
growth to prove your worth yet.
What Exactly is Traction?
Investors won't invest in a startup based on ideas or guesses.
Investing early in a startup is a big risk where investors can
lose considerable amounts of money. They want to be sure that
by investing in your startup, their funds aren't backing a
startup that doesn't grow. Traction is a way to prove to
investors that your startup is either showing proof of
profitability or that the product or service is in demand for
your target market.
Traction is important to all stakeholders, such as founders,
employees, and especially to investors. Investors want to back
a company with growth potential without a major risk of losing
its investment. Because of the increased risk of investing in
a company with no traction, investors will be hesitant to
How is Traction Measured?
Founders know that a successful business is much more than
just about bringing in revenue and profitability. It's about
creating a product or service that people want. Traction is
much more than simply showing your sales to date. It can be
measured in many ways, and investors are interested in
learning about your early traction. The more evidence you can
provide that your startup has gained traction, the more likely
you can secure the funding necessary for growth.
There are a few ways traction is measured that can be
presented to investors.
Revenue – The revenue shows the
money brought in by a startup before deducting any
Profitability – The profitability
shows how much profit a startup makes compared to its
expenses. The higher the profitability, the more likely
investors will be willing to invest.
Clients and Partners – If you
have a significant number of partners and clients in the
early stages, it can show that you are effective at
building relationships. Vendors, partners, and clients
are essential to building your business, and it can
demonstrate to investors that you are on the right
Active Users – If your startup is
tech-based, you can track active users on your
application to show that an audience is interested in
your product. The number of registered users can help
show the awareness and reach your startup currently has.
How to Raise Money for Your Startup with No Traction
Raising money can be a big challenge as it is, and when your
startup is pre-revenue, it's even harder. There are a lot of
tools, resources, and data that can help founders build
momentum even before your product is ready to launch. Founders
that have a lot of passion and enthusiasm can go a long way,
but by implementing these simple tips, you show that your
company is worth investing in and has the potential for major
growth that is appealing to investors.
Total Addressable Market – When
presenting your startup, instead of showing traction, you can
identify the Total Addressable Market (TAM). TAM is the total
revenue opportunity for your company and the product in the
market in the market as evaluated today. Founders need to use
data, research, and visuals to persuade investors that the TAM
is attractive enough for successful distribution. If you can
show your TAM is scalable and considerable, investors are more
likely to be interested in at least learning more about your
Tell a Compelling Story – During your
presentation with investors, you're going to want to improve
your storytelling abilities. You want to be able to show your
passion, determination, and drive as you create a story about
why you created the company. Your story will detail the
problems in the market you hope to solve and where you can see
your company realistically going. Create a detailed narrative
so investors can visualize the company's potential and the
value it can provide your customers.
Use Comparisons – Another tactic you
can use to convince investors to fund your startup at an early
phase is to create a presentation or visual on comparisons
between your startup and other successful businesses in your
industry with similar ideas. Detail customer dynamics and
profiles, market conditions, and the potential growth for
similar businesses. You basically are showing investors your
competitors, detailing their success and how you plan to take
them on and make your company perform better. You'll want to
choose a business that is close in geography and target
demographics to draw similar conclusions.
Build a Prototype – During the earliest
stages, it's hard to show how your business can be successful
without something physical or data backing you up. You can
invest your early resources and time by building a prototype
to create a physical element that your potential investors can
touch and see what the product may look like. You can create
mockups, demo videos, or even splash pages for digital
products. Creating a prototype through 3D printing or visual
illustrations are cost-effective solutions to help investors
easily visualize the potential.
Sign on Partners – Before you start
making revenue, you can work to convince people to partner
with you to develop your product or service. Whether it's
through signing a letter of intent or any commitment to
partnering with you can show investors that people are willing
to sign on and partner with you because they believe in your
Build Waiting Lists and Pre-Registrations
– Before you launch, you can use the power of marketing
to start building a waitlist and open up pre-registration. By
creating a simple sales landing page, you can collect the data
of customers who want to learn more about the product or
service and get notifications when your company launches. This
data can provide valuable information to help showcase the dem
and for your startup before you even open for business.
While investors are more likely to sign on to a startup that
shows significant traction, it doesn't mean you won't be able
to find an investor that sees potential. Focus on implementing
these tips, and you can create a narrative that will appeal to
investors and get you the capital you need to move forward in
your startup journey.
It can be overwhelming when you're ready to start on your
journey to find the perfect investor. Get the help you deserve
to get your startup off the ground. Investor Hunt can match
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