Startup Traction

What is startup traction?

Startup traction is the initial process of a startup company progressing to the point of product-market fit. In simple words, traction is real-life proof that the product or service is more than just a concept and can attract customers and generate profits. 

Investors use startup traction as a criterion to evaluate startup momentum and define whether a business is likely to succeed or fail. Business traction can be measured using a wide range of metrics, such as the number of registered and active users, customer acquisition cost, or monthly recurring revenue, depending on the industry and type of the company.

Why traction is important for startups

Today, gaining traction in business is undoubtedly one of the most crucial steps in setting up and maintaining your company. There are several valid reasons why it’s vital to focus on startup traction.

Scale your business

The first and foremost reason why startups need to gain traction is to grow. Measuring traction metrics helps to keep track of growth and stay focused on long-term goals. Without properly defined and monitored traction, it’s difficult for startups to move in the right direction and see what needs to be changed to scale and reach product-market fit. High traction shows the progress of the business, whereas lack of traction may be a sign that the company needs to pivot.

Attract investors to get funded

Investors are looking for returns, and traction is one of the main factors they assess to determine if the company will be successful or not. Investing in businesses with existing traction decreases the risk of failure and money loss. Therefore, the higher the traction your company generates, the more money you are likely to fundraise. Make sure to include a slide with traction numbers in your pitch deck to support your startup idea with feasible results.

Build awareness and trust

Startups can use existing traction to generate more traction. For example, a company’s success represented by traction might create buzz on social media, which will increase awareness and bring more active users. At the same time, traction indicates credibility and ability to deliver, which is a great leverage to use in building partnerships with other companies. 

How to measure business traction 

Business traction can be measured in various ways depending on the type of startup and industry. Below are the top crucial traction metrics that will help to grow a startup business.

Unit economics and revenue

Unit economics is used to calculate the financial stability of a business model and predict potential profit. Revenue is one of the main indicators of business traction that shows how well the startup is monetizing its product. It is important not only for investors but also for startups themselves to identify if their marketing and sales strategies are working well. Unit economics measures how much profit a company makes per one business unit, such as a product, service, or customer. 

The way you should calculate your unit economics mostly depends on your particular business model. The most common and basic way to do this is by dividing your customer lifetime value (LTV) by customer acquisition cost (CAC). However, there are also other metrics worth your attention:

• Monthly recurring revenue (MRR)
• Annual recurring revenue (ARR)
• Average revenue per user (ARPU)
• Average order value (AOV)
• Churn rate
• Retention rate (R)
• Discount rate (D)

Competitive advantage

To stand out in a crowded market, startups need to offer something distinctive, such as a unique product feature, cost efficiency, or superior customer service. Such differentiation not only attracts customers but also ensures sustainability by creating barriers to entry for competitors. 

Innovation helps startups maintain a competitive edge in their respective markets. It also enables businesses to adapt swiftly to changing market demands, keeping them ahead of the curve. To prove your competitive advantage, consider the following factors:

• Unique value proposition
• Proprietary technology
• Intellectual property
• Network effects
• Brand recognition
• Customer loyalty
• Strategic partnerships

Product-market fit

Product-market fit is about how well your product or service meets what your target customers need. It’s a big deal for startups because it decides if people will buy your product and if your business will make money. Here are the key things to look at for checking if your product fits the market:

• Net promoter score (NPS)
• Customer feedback
• Engagement metrics
• Referral metrics
• Viral coefficient 

To collect product-market fit traction metrics, you can use specialized software for each channel.

For example, you can get insight into your social media engagement with an app like Hootsuite or use tools like Typeform to collect user feedback.

Market size and market penetration

Market size and market penetration help startups assess the potential and scalability of their business. A large market size signifies a broader customer base and more opportunities for growth and revenue generation. Simply put, you need to understand the total size of the market, the share you already own, and how much you can still win.

Investors are more eager to invest in opportunities with bigger market sizes since for them it directly correlates with a higher potential return on investment. When assessing the market, pay attention to the following metrics:

• Total addressable market (TAM)
• Serviceable addressable market (SAM)
• Serviceable obtainable market (SOM)
• Market penetration

Example of startup traction

One thing to remember about traction is that different companies can define their traction differently. The best way to come up with your traction metrics is to think of your startup’s key value and the behavior you’re trying to change. A good example of finding the right metrics for showing traction is Medium. 

Medium is an open publishing platform. The company sees its value in offering readers unique content on the topics that matter most to them. So the platform has defined its own key metric to monitor traction — total reading time (TTR), a measurement of how much time people spend reading story pages. 

Unlike impressions, TTR shows that people not only view the page but actually take time to read it. If the total reading time is increasing, it’s proof that readers find the content engaging and connect with it emotionally. This measurement correlates with the company’s goal. 

How to gain traction for a startup 

Now that we’ve covered the importance and essentials of traction for business, let’s focus on how to get it for your startup.

Network and team up

Explore your field and discover communities and influencers you can connect with. Reach influencers in your industry and offer them your product. Getting social media reviews from popular people in your community can give a quick boost to lure potential customers and gain the needed traction. 

Try to team up with well-known brands. Since reputable companies have already acquired a pool of active customers who trust the brand, this is your chance to raise interest in your new product or service. For example, Hari Ravichandran, founder and CEO of Aura, says that extending his professional network has helped him to not lose growth traction, especially in a difficult economy. He advises entrepreneurs to take as many meetings as they can and to keep in touch with their colleagues.

Reach potential customers 

No matter how great your product or service is, if no one’s heard of it, no one will buy it. Traction for startups comes along with building brand awareness. That is why startup companies increase their social media and content marketing efforts to reach potential customers.

Get in contact with your target audience via social media, forums, and comment sections of relevant blogs. Share guides, how-to videos, and infographics on social media addressing customers’ problems your product is solving. If your startup is tight on the budget, you can save up by using modern AI tools such as an AI writer for blog content or AI image generator for visuals. 

Examine your customer

It’s crucial to learn how your target audience uses your product. Research what they like and what they don’t. Analyze their pain points and think about how you can ensure customer success. Offer free trials and send free samples to get first-hand experience feedback. 

Track behavioral patterns, conduct conjoint analysis and user interviews, so you can adapt your product to customer needs. Collecting and analyzing user feedback will guide iterative product improvements and enhance overall customer satisfaction.

Conclusion 

Startup traction is the initial process of a startup company proving that its product or service is appealing to customers and can generate profits. Getting startup traction is both challenging and vital. This concept is still considered baffling since there are different types of traction and various ways to measure them. However, one thing is clear — the moment a new brand starts gaining traction, it becomes more appealing to investors. Traction indicates growth and potential that your product is worthy.