Many founders we speak to have had this happen to them. They launch a startup and start working on it for a couple of months/years, building up the team, sales, operations etc. At a certain point they decide to look for their first external funding (e.g. Angel or VC). Investors are welcoming to hear what they have been working on and the founders are keen to present their company and results/milestones achieved thus far. However, the conclusion many of them receive is that they ought to get back in touch once they have more traction i.e. validated the model a bit more and improved their KPI’s. So more signups, more monthly sales, more subscribers, more users – more traction!
To get this traction startup founders face a dilemma sometimes. Funding is required to get it and in order to get funding investors are asking for the traction – a classic chicken and egg situation. This dilemma is only one of many that startup founders face on their journey to building a successful venture, but we will only focus on this problem throughout this article.
A Traction Dilemma?
A founder facing this traction dilemma can usually do one of two things. Go back to the office and put a strategy together to improve their metrics for the next 6 months to 1 year or get in touch with another investor in the hopes that this will tell you something different. The former option can be a long path of steady (but slow) growth that will yield results, especially if you’ve already been testing and validating your model for the last couple of months. However, even with improved numbers, a ‘yes’ from investors is never certain. Investors meet with founders all the time and have access to a lot of info on what’s is happening in their markets of interest. So the odds are that they may be approached by a competitor or a startup doing something in the same direction as you. The latter option on the other hand can be the choice for founder that believe they’ve done everything they could to build things up and validate their model, with the growth phase being their next challenge. As such, choosing to find other investors may lead to the same conclusion or getting a different answer. However, most professional investors know what they’re doing. If everybody is telling you to make a left and come back later it probably means that you need to consider this feedback seriously. A bad investment decision at the early-stage can be to invest in a business model that has not been sufficiently tested and/or validated. Pouring more funding into such a startup tends to carry too much risk – more than investors can handle. However, let’s not forget that aside from the market potential and business model, the team behind the startup is perhaps one of the most important factors in the decision.
Whichever option the founder chooses, being faced with a traction dilemma can be difficult to navigate through and not everybody makes it out. Again most startups fail long before you got a chance to hear about them and this is one of those reasons.
What to do?
So what to do in such a scenario? Well, this is where we come in. Our main focus is to help founders create sustainable business models that generate solid monthly revenues. Sustainable in this case refers to a revenue model that can be sustained on the long-run, ensuring a steady cash inflow for the startup (can’t pay salaries with peanuts…). In doing so, growth (i.e. new product lines, new markets etc.) can be financed through sales profit au lieu of needing to find external funding. As such we assist founders in areas such as Go-To-Market Strategy, Business Development, Automation, Finance and Marketing. Whether we are developing a new GTM-strategy or finding new partners to work with, we always look for building foundations for the long-term. Together with founders, we support the growth of their startup as a means to reach critical milestones. Looking for external funding afterwards is always possible but ultimately, everything rises and falls with solid sales.
If you’re wondering what to do next, get in touch with us. We are always eager to learn about new innovative startups and what you’re working on.
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