“Growth hacking”. “Pivot”. “Exit”. Sometimes it seems like the startup scenehas it’s own language. But there’s one word that tells me everything I need to know about your venture: traction..
I’m not talking about dragging something over a rough surface. Ironically, once you get traction in the startup world, you’ll find everything starts to move a lot more quickly.
I’ll never forget when I realised I was really onto something with my first business, SE Net. It was when the number of people demanding our product, a fixed-line dial-up internet service, began to outstrip our ability to deliver it with the team and resources we had. I found myself working 12-hour days, and it dawned on me that we needed to rapidly grow our team and systems to take advantage of the opportunity in the market, we were lucky we could access debt and had no requirement to sell equity. This is what traction feels like.
On Sunday’s episode of TEN’s Shark Tank we saw a legend of a startup entrepreneur: a true-blue farmer who I think represents everything that’s right about Aussie ingenuity. John Gorman came to pitch what could be a fantastic, world-changing product. He had, off his own back and using $700,000 of his own money, invented a panel-board produced from the excess waste left over from rice production.
John had teamed up with Grant, a finance guy, to launch the product under the AMPAN brand. They were asking the Sharks for $250,000 to build a factory capable of producing over one million metres of the AMPAN board over the next 12 months.
Great product, great founder – but terrible business strategy. They had no traction: they had not yet proven that one single customer wanted to use their product. To sink a quarter of a million dollars into building a factory without first proving demand is not something any Shark was keen to finance. Sadly, they walked away empty handed.
Above all, what investors want to see in startups, is signs of traction. Proof that your idea is delivering, based on solid numbers (be it sales, users, revenues or profits) is essential in getting investors over the line.
It doesn’t have to be shifting a million metres. If John and Grant had a few glowing customer reviews talking about how AMPAN board was better, cheaper, easier to use than the rest – I’d have been in, and probably fighting off other Sharks to clinch the deal.
Inventing new products and service can be an expensive game. Discovering whether your product will gain traction in the market can make a massive difference, between throwing hundreds of thousands of dollars into a black hole, or changing your course to find how your startup can work.
Robbie Adams of Mobilyser had found this out the hard way, spending nearly half a million to develop his startup, which aims to help people track and differentiate between work and personal calls on their mobile phones. For me it’s a solution in search of a problem, and I begged Robbie to stop pursuing this idea without validating the market for it first.
If you want to avoid the risks of building a startup without gaining traction, there are methods to do this. The answer is to test, test, and test some more – and get your customers to help you develop the right product. Read Eric Reis’ The Lean Startup, participate in a Lean Startup Weekend. If you’re initial idea isn’t gaining traction, stop and take a breath. Try to understand why you are not getting the traction you expect then, if need be, take a different path.
Once you have people willing to pay for your product – and you see increasing numbers of them coming to your door – you’ll know what traction feels like. That’s when the real work begins.
This article first appeared on Business Review Weekly. View the original here.