Traction Trumps Everything
gabrielweinberg.com
gabrielweinberg.com
Oh how true.
I was recently pitching an angel who was telling me that he didn't see a market for my app when my cell phone vibrated. I checked voice mail after the meeting. It was the president of one of my customers, asking if the angel "got it". If not, no problem, just get back there because he had a bunch of new requirements and some more referrals. He never understood why I was pursuing funding when there was already so much demand for what I was building.
That's one time I wish I had been rude enough to take the call during the meeting, and handed off the phone saying, "Don't ask me. Ask him."
Or you just would have liked to score off the angel.
You will find once you've closed that your investors keep pushing for traction at the cost of everything else including revenue and burn rate.
This is because, from their perspective, they want you to create a market for your stock. Which is now also their stock. They want you to do this the same way you created a market when they wanted to buy. With traction.
There are several target markets for your stock. Future angel and VC investors. The public markets through an IPO. An acquisition. Traction is good at creating interest in all of these [less so for an IPO].
You can be a very effective CEO from your investors perspective if you spend your career in your startup doing the things that are best at creating a market for your stock. This approach has the highest likelihood of creating a successful outcome in the shortest time for your investors.
However, you can not use this approach to build a lasting business or a great business. When your target market becomes investors and your product becomes your stock, you are not only neglecting the fundamentals of building a lasting business - you are working against them.
But the reality of the world we live in is that you occasionally need to raise money. So you need to somehow resolve this conflict which I leave as an exercise for the reader.
Recommended reading: Jim Collins - Good to Great.
Recommended viewing: Boiler Room
Now that I actually have some traction, and I can roughly calculate how long it will be before I am ramen profitable, investors just completely fade from the picture.
That said, I'm happy to answer your questions. Andrew, I didn't see a dip on my end. That's something weird with compete, which is known to have various biases (and is only US). Axod, not much advertising $$$. From 1/1/10-6/1/10, ~$500 in online advertising, ~$250 on reddit. Most of DDG traffic is actually direct.
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This chart is pretty much playing on repeat in my head:
I can vouch for the Hacker Angels' willingness to help just for the sake of it, though. I pinged them when their announcement first hit HN, and while I am sure they were deluged, and my business is "pre-traction", they still took the time to respond in detail to my questions. This type of advice is difficult to get, especially from angels themselves. It's a great service to the community, and personally I don't mind them extracting a little value of out it!
The classic programmer with a sketch on a napkin has a Lot of risk. There may be assumptions that never pan out, and he may never be able to write what he's said he would.
Once there's a prototype, it moves the slider further to the "Less Risk" category. Things are moving, it CAN be written, now the risk lies more in growth and marketing.
Traction solves that problem as well- Now it shows that the code works, the marketing works, and the team really can pull things off. The slider is firmly over on the "Rather safe, as things go" category.
Here's the problem- Entrepreneurs see the slider too. By the time I'm over in the "Hey, this thing is actually gonna work" category, the need for angels, particularly the micro angels like Gabriel, has diminished.
At that point in the process you're actually making money, and you can look at the slider, see that things look likely to succeed. This is in part, what is responsible for the increasing number of startups bootstrapping. By the time they get a working version, decent marketing, and some traction, they start to realize that they have a good shot at being able to do this on their own, and keep the equity.
That said, I have also seen a number of cases where early customer sign-ups ultimately led to little once the initial excitement faded. Startups targeting the enterprise market are particularly vulnerable to this, where they may get all sorts of customers signing up for trials of a product but then are ultimately unable to convert them into large, paying customers owing to the small and untested nature of the startup involved. In such cases, if traction does not reach a critical level, the early gains may sputter. But this doesn't change the basic point, which is that investors will often want to scramble to sign on once they see the initial signs of such traction (even if it later proves illusory).
This is a nice piece highlighting this important point.