Got traction? Prove it!
5 reasons why early stage startup founders should focus on the proof of traction
While the investors’ attention span gets shorter, as an early stage startup founder you’d want to mention a solid proof of traction before you dive into your passionate vision, your cool features, your ambitious roadmap and ofc, your ask. Here are the main points why you should seriously consider investing time & effort into this:
User-Centricity and Validation of Market Fit: The investors’ attention span got shorter, but also the users’ one. Prove that you know your tribe. Who are they? What challenges do they face? What solutions are they currently using? And that a solid number of them liked your solution better. Proof of traction offers evidence that the startup has resonated with its’ target audience, validating its’ value proposition and market fit.
Iterative Development and Demonstrating Execution Ability: At this point, you might have a very early MVP or even be running your solution half-manually leveraging the existing automation tools, but it already shows you have what it takes. Investors don't just invest in ideas, they invest in teams that can execute effectively. In addition, you need the users actually using your product, so that your next release is planned and scoped based on some actual feedback.
Metrics-Driven Decision Making and Risk Mitigation: By tracking metrics such as user retention, engagement, and conversion rates, founders can assess the effectiveness of their strategies and make informed decisions when designing that roadmap and estimating the development and marketing costs. This kind of data gives assurance that there is a genuine demand for the product as mapped and and reduces the perceived risk of failure, making it a more attractive investment opportunity.
Rapid Experimentation and Learning: If you have a user base, you can also offer the investor to test a hypothesis they might be curious about.
Scalability, Sustainability and Growth Potential: Beyond acquiring initial users, you need a scalable and sustainable product. If you manage to onboard your early adopters, that path will be way easier. Investors analyze metrics such as user acquisition rates, retention rates, and revenue growth to assess the scalability and sustainability of the startup's business model.
Even without a complex product, and often leveraging existing tools and no-code platforms, early stage founders can start building their users community early into their journey and leverage it to attract investors. It's about demonstrating that your solution resonates with users and showcasing that there's a demand for what you're offering. If you need help, contact any of us at the CxO in Residence board at https://linktr.ee/canopy_inresidence