The pull slide should present information about how the product or service is already showing its value. This may include current sales, growth, valuable partnerships, sponsorships, pre-orders, or data from a pilot study outlining current consumer interest.
When working with early-stage startups on how they can tell their story, falling traction is often a sticking point. How do you show traction when a product hasn't been brought to market yet, or when revenue is more of a trickle than a downpour? To answer the question, you need to know what traction represents for a startup.
Traction, in a nutshell, is evidence that the company's chances of success are increasing, while the inherent risk of the business is going the other way. Traction is proof that what is being built is working.
The approach can materialize as presenting the process of creating a company as the elimination of risks in stages. Perhaps that can materialize in the following question: What risks have been eliminated from the business so far?
When the company was founded, it probably started with nothing. There are some resources, such as mental capital (training and experience), social capital (friends, contacts, people you could lean on), and self-drive (the desire to run this company in the first place). There may also be some real capital, whether it's money raised from friends, family, or one's own savings. There is also an almost infinite amount of risk. At this stage, no venture is a guaranteed success.
When building the startup, the typical process is to take a look at the company being built and assess the assumptions that have been made. This can be technical assumptions: "It is possible to build this." They may be market assumptions: "Someone is willing to pay for this." They could be sales assumptions: "I'll be able to find my leads and persuade them to buy." It could also be regulatory: “The FDA will approve this” supply chain; “I will be able to buy all the lithium I need”; and any number of other assumptions you're making along the way.
Every assumption made represents a risk: something is claimed to be true, but there is no certainty. Examples of incorrect statements could be:
- Triggertrap assumed that mobile phones would have 3,5mm audio jacks for the foreseeable future. That turned out to be an incorrect assumption and was one of the (many) reasons the company failed.
- LifeFolder assumed that people would be willing to pay to have their end-of-life documents prepared quickly and easily. That was not exact.
Most business failures can be traced to three problems: egos getting in the way, founders unable to work together, or everyone making incorrect assumptions about the business.
Traction, then, is anything that can show the higher risk assumptions to be correct. If a business generates a large amount of revenue, chances are many of the underlying assumptions have been "proven," assuming revenue is higher than the cost of acquiring customers.
A lot can be done to build traction that has little to do with money, so you don't have to wait for revenue to come in. Technical challenges can be overcome by building prototypes. Risks around regulatory approval can be mitigated before building the product by finding products that closely resemble your own and then working with regulatory experts to figure out how to reduce the risk of getting caught up in compliance, legal, etc.
Another way to test traction is to create an MVP with product advisors. If you're building a ticketing service for air travel, it can be integrated with airline reservation systems because it's been done before, but that takes six months of work. The high risk, however, is whether you can actually attract customers to the business. What do you have to do six months of work before building the interface and starting to see if anyone is interested in the product? build a good interface and good staff to make reservations manually. This model does not scale at all, but it means that the value proposition is viable and the high risk part is mitigated. Make a thousand sales, measure the cost of acquisition and report all of this in a traction slide. It is real? No, but it doesn't have to be: the experiment showed that the thesis is probably correct. Now the slow and boring part of the product that underpins the rest of the business can be built.
To find out what scares investors the most, you have to talk to them and pay attention to the questions they ask. Don't be afraid to ask them what worries them about the business. An experiment is then designed around that and the findings reported as traction.
Is it as good as showing exponential user and revenue growth? Of course not, but it's a lot better than saying you have the email addresses of 200 people and a bunch of news articles written about you. And, more importantly, it shows that the founder understands what the risks are and that he is actively working to design them around his overall business model.
