How to Communicate Traction to Investors with Brendan Baker and Hiten Shah

How To Communicate Traction to Investors

@brendanbaker + @hnshah

Skillshare – October 20, 2011

Brendan Baker, Hiten Shah

@brendanbaker @hnshah

What is traction?2How do investors think?1

Building a traction Story3

Today


How do investors think?

1


Investors respond to a story.


Momentum

Green is good.


Excitement > Hesitation

Amplify and focus on the excitement points.

Surface and deal with the hesitation points.


They’ve seen everythingDon’t try to fit in. Be unique.


FOMOFear of Missing out.


Derisking

Risk

Progress

Can they build the product?

Will people use it?

Will people pay for it?

Will people come in mass?

Derisking often happens in steps.

These steps may vary for different startups.Brendan Baker, Hiten Shah

What is traction?2


Traction is your story of momentum, told through

quantified evidence of market demand for your

product.


“your story”Not told directly, but implied in examples of evidence.

Your traction is unique – use examples that are unique.

Don’t hide weaknesses, but do frame them.


“quantified evidence”

Profits

Revenues

Active users

Engagement

Customers/clients

Registered Users

Downloads

Partnerships

Traffic

Yes MaybeCohort progress

Engagement progressProduct velocity

NoPress

Testimonials

* This isn’t a set list. Use evidence that makes sense for you. Brendan Baker, Hiten Shah

“Market demand”Aka ‘people want your shit’

Use evidence that describes momentum, and hints at market potential.


8 Words* that truly suck

1) Gamechanging/er

2) Visionary

3) Next-generation

4) Seasoned Professional

Baker’s Rule

* Fine – and symbolsBrendan Baker, Hiten Shah

5) Groundbreaking

6) Innovative

7) Disruptive/or

8) © ® ™

Actual Progress =β

Number of times these words are used in your pitch

<pause>

Building a traction story3


The story is the implied message you want to send. It’s not something you’ll say directly.

Think of it this way: say you pitched an Associate at a VC firm. She liked you, and had a minute to describe your status and progress to a Partner. What would you want her to say?

That’s your target story. Tell it with traction.


Is concrete and evidence-based.

Is unique to you.

Shows a path to world domination.

Your traction story:


Some examples


“They’re super early, but they build and learn fast. They’re worth betting on.”

story

traction


“They’re creating a marketplace. That’s hard, but they know it. They knew they had to build the supply side first, and they

nailed it. Now they’re tackling the demand side. Early indications are good, and I think they know how to ramp it up.”

Launched in March 2011:- 25,000 vendors, with avg 25 items (growing 20-30%/month)- 11K uniques (growing 40%/month), with 3% conversion - avg purchase of $45 (growing 5%/month)- $120,000 revenue run rate (increasing 30%/month)- Just signed partnership with Yahoo! and ramping up ads.

story

traction


The product is pre-product-market fit, but they’re working in a high potential space, and the founder has a huge vision. Plus, he’s crazy smart. This is a founder worth backing.

Working to enable one-click populated third party accounts, giving the user ability to manage privacy setting from one dashboard. Founder:

- Won an NSA hacking competition by outsmarting the organizers- Secured 100s of trading applications and developed security

language for a top global investment bank.- Founded an RFID security consumer product company which

has multi millions in revenues, and is growing 50-100%/year.

story

traction


“They’re accelerating their school by school rollout. The first schools are showing faster adoption than Facebook at their start, and are already

nearing local market saturation. They’ve started in the next set of schools, and adoption and engagement is even higher. They’re releasing faster than anyone I’ve ever seen, and it’s working.”

Launched 2 months ago in first school:- Downloaded by 80% of addressable population- Weekly actives: 55%- Feature requests: course sets, note sharing, daily deals V2

With V2, now ramping to 10 more schools in 3 months:- 3 launched to date- Each school population is downloading the app at a 15% faster rate- Engagement (photos shared, messages, etc) has increased 40%+ over V1

Currently found a way to roll out much more rapidly to new schools, in under a few hours each.

story

traction


Resources

KISSmetrics

How to Communicate Traction to Investors

How to Hustle with AngelList in 10 Steps

Anatomy of Seed: An Inside Look at a $1M Seed Round


http://www.kissmetrics.com/

http://www.quora.com/Brendan-Baker/Startups-How-to-Communicate-Traction-to-Investors

http://www.quora.com/Brendan-Baker/Startups-How-to-Hustle-with-AngelList-in-10-Steps?q=how+to+hustle

http://www.quora.com/Brendan-Baker/Anatomy-of-Seed-An-Inside-Look-at-a-1M-Seed-Round

Thank you.

Thank you for building kick-ass companies.

@brendanbaker & @hnshah


How to Communicate Traction to Investors with Brendan Baker and Hiten Shah

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