I should also point out that once you have traction, you may not need investors at all.
Oh how true.
I was recently pitching an angel who was telling me that he didn't see a market for my app when my cell phone vibrated. I checked voice mail after the meeting. It was the president of one of my customers, asking if the angel "got it". If not, no problem, just get back there because he had a bunch of new requirements and some more referrals. He never understood why I was pursuing funding when there was already so much demand for what I was building.
That's one time I wish I had been rude enough to take the call during the meeting, and handed off the phone saying, "Don't ask me. Ask him."
Traction is absolutely the most powerful asset for raising money.
You will find once you've closed that your investors keep pushing for traction at the cost of everything else including revenue and burn rate.
This is because, from their perspective, they want you to create a market for your stock. Which is now also their stock. They want you to do this the same way you created a market when they wanted to buy. With traction.
There are several target markets for your stock. Future angel and VC investors. The public markets through an IPO. An acquisition. Traction is good at creating interest in all of these [less so for an IPO].
You can be a very effective CEO from your investors perspective if you spend your career in your startup doing the things that are best at creating a market for your stock. This approach has the highest likelihood of creating a successful outcome in the shortest time for your investors.
However, you can not use this approach to build a lasting business or a great business. When your target market becomes investors and your product becomes your stock, you are not only neglecting the fundamentals of building a lasting business - you are working against them.
But the reality of the world we live in is that you occasionally need to raise money. So you need to somehow resolve this conflict which I leave as an exercise for the reader.
I should also point out that once you have traction, you may not need investors at all. - Sums it up perfectly.
Now that I actually have some traction, and I can roughly calculate how long it will be before I am ramen profitable, investors just completely fade from the picture.
My takeaway: it's easier to get money than to get traction. A powerful and sobering thought. I've never been present at the attainment of traction. I've either worked for big companies who already established traction long ago, or startups that could never find it. In my projects, no traction. It's starting to feel like the Moby Dick to my Ahab. TRACTION WHERE ARE YOU?
Gabriel, I think this would be even more useful if you talked about how that graph happened. Why was there a dip? How did you overcome it? Where did you get your traction? Etc.
Also I think it's relevant to show how much was spent on advertising. If all of that traffic came from paying $$$ to Reddit, then that needs to be taken into account, but if the majority of traffic is from real traction then very cool indeed.
If this is true, it says a lot about the chances Diaspora has. I think there is more traction there already, even before launch, than many failed social networks ever had.
[+] [-] edw519|15 years ago|reply
Oh how true.
I was recently pitching an angel who was telling me that he didn't see a market for my app when my cell phone vibrated. I checked voice mail after the meeting. It was the president of one of my customers, asking if the angel "got it". If not, no problem, just get back there because he had a bunch of new requirements and some more referrals. He never understood why I was pursuing funding when there was already so much demand for what I was building.
That's one time I wish I had been rude enough to take the call during the meeting, and handed off the phone saying, "Don't ask me. Ask him."
[+] [-] JoeAltmaier|15 years ago|reply
Or you just would have liked to score off the angel.
[+] [-] mmaunder|15 years ago|reply
You will find once you've closed that your investors keep pushing for traction at the cost of everything else including revenue and burn rate.
This is because, from their perspective, they want you to create a market for your stock. Which is now also their stock. They want you to do this the same way you created a market when they wanted to buy. With traction.
There are several target markets for your stock. Future angel and VC investors. The public markets through an IPO. An acquisition. Traction is good at creating interest in all of these [less so for an IPO].
You can be a very effective CEO from your investors perspective if you spend your career in your startup doing the things that are best at creating a market for your stock. This approach has the highest likelihood of creating a successful outcome in the shortest time for your investors.
However, you can not use this approach to build a lasting business or a great business. When your target market becomes investors and your product becomes your stock, you are not only neglecting the fundamentals of building a lasting business - you are working against them.
But the reality of the world we live in is that you occasionally need to raise money. So you need to somehow resolve this conflict which I leave as an exercise for the reader.
Recommended reading: Jim Collins - Good to Great.
Recommended viewing: Boiler Room
[+] [-] joshbert|15 years ago|reply
[+] [-] MicahWedemeyer|15 years ago|reply
Now that I actually have some traction, and I can roughly calculate how long it will be before I am ramen profitable, investors just completely fade from the picture.
[+] [-] famfam|15 years ago|reply
[+] [-] AndrewWarner|15 years ago|reply
[+] [-] axod|15 years ago|reply
[+] [-] phreeza|15 years ago|reply
[+] [-] adamhowell|15 years ago|reply
[+] [-] swiftman|15 years ago|reply
[+] [-] messel|15 years ago|reply
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.___/
This chart is pretty much playing on repeat in my head:
[+] [-] slvrspoon|15 years ago|reply
[+] [-] epi0Bauqu|15 years ago|reply