What is traction? Why is traction important for startup businesses and specific channels for acquiring it
Posted: Wed Dec 04, 2024 6:47 am
Traction What is traction? Why is traction important for startup businesses and specific channels for acquiring it
"Traction" in a startup refers to the current financial situation and future growth potential, and is a major criterion for investors when selecting investment targets.
For startups, whether or not they can receive support from angel investors or venture capitalists is one of the hurdles to business growth. They must be able to list of argentina consumer email succinctly and clearly communicate the possibility of their business succeeding and why they are a company worthy of investment.
To that end, it is important for startup company executives to clearly include the current state of "traction" and an outline of where the company is headed in the future in their pitch (presentation) to investors.
This article will explain in detail what B2B startups should know about traction, from its importance to examples of indicators, methods for gaining traction, and points to note after traction is established. Please read this article if you are creating a pitch for investors or preparing to participate in a pitch competition .
What is traction?
Traction literally means "pulling force."
Traction = "pulling, towing, traction force, static friction (such as a tire on a road or a rope on a pulley), transportation, contraction, traction (as in treating a fracture)" (Source: Weblio )
In business English, " get traction" means that a project is progressing smoothly, while " gain traction" means that a business is gaining momentum or support.
What traction means for startups
However, in the startup world, traction is used not only to mean "pulling force" but also to mean "early results that show the potential for business growth."
In the United States, it is common for traction to be included in presentation materials (pitches) to investors, and it can be said that it is a required item on the template .Traction Template
(Source: Slide members -Traction Template )
For example, early traction from SaaS startups includes:
Examples of traction: number of customers, growth rate, MRR, ARR, CAC, LTV, CS, etc.
Startup companies often explain their business to investors before they have a strong track record, so these indicators are not necessarily clear-cut, but can also be interpreted as "signs of growth" or "early indicators of potential."
The reason traction is important is that, as the CB INSIGTS data below shows, a lack of market need is one of the reasons why startups fail.
Why startups fail
(Source: Entrepreneur “ Infographic: The 20 Most Common Reasons Startups Fail and How to Avoid Them ”)
Traction is an indicator of whether there is a need for a product or service in the market. It is a key criterion for investors when selecting companies to invest in. Of course, it is also an important point that entrepreneurs should be aware of when moving to go to market.
The importance of startups being aware of traction
For startups, traction is not just a trendy business term but a key metric for measuring business success and sustainability. Traction is heavily related to attracting new customers and demonstrating consistent growth.
In other words, traction is the foundation on which a startup builds its future, proving the value of its business model and helping it stand out in the market.
Here, we will look at five perspectives that explain why it is important for startups to be aware of traction.
Profitability assessment
ARR growth rate chart
(Source: medium )
For startups, measuring profitability is an important indicator of market acceptance of your product or service, the viability of your business model, and the sustainability of your company. Profitability reflects whether customers are actually willing to pay for your product or service and proves the viability of your business model.
In other words, high profitability means that customers value your product or service and are willing to pay for it. Steady revenue growth and high profit margins are key to gaining the trust of investors and partners because they demonstrate the high demand for your product or service in the market and demonstrate the possibility of success.
A profitable startup demonstrates a competitive edge in the market and is well on its way to long-term success. Profitability helps a startup establish itself in the market and lays the foundation for continued growth.
Prove and improve the value of your business
Traction is crucial for startups to prove the value of their business and continually increase that value. Clearly demonstrating the need for and effectiveness of your product in the market will help you and your product or service to have a meaningful presence.
Proving the value of your products and services can strengthen your competitiveness in the market and develop new customer segments. For example, using user feedback to improve your products and increase customer satisfaction can increase brand awareness in the market and differentiate your products.
In this way, by continually improving the value of their products and services, startups can establish their position in the market and expand their business growth opportunities. Therefore, responding to changes in the market and constantly developing products to meet customer needs is essential for the sustainable growth of a business.
"Traction" in a startup refers to the current financial situation and future growth potential, and is a major criterion for investors when selecting investment targets.
For startups, whether or not they can receive support from angel investors or venture capitalists is one of the hurdles to business growth. They must be able to list of argentina consumer email succinctly and clearly communicate the possibility of their business succeeding and why they are a company worthy of investment.
To that end, it is important for startup company executives to clearly include the current state of "traction" and an outline of where the company is headed in the future in their pitch (presentation) to investors.
This article will explain in detail what B2B startups should know about traction, from its importance to examples of indicators, methods for gaining traction, and points to note after traction is established. Please read this article if you are creating a pitch for investors or preparing to participate in a pitch competition .
What is traction?
Traction literally means "pulling force."
Traction = "pulling, towing, traction force, static friction (such as a tire on a road or a rope on a pulley), transportation, contraction, traction (as in treating a fracture)" (Source: Weblio )
In business English, " get traction" means that a project is progressing smoothly, while " gain traction" means that a business is gaining momentum or support.
What traction means for startups
However, in the startup world, traction is used not only to mean "pulling force" but also to mean "early results that show the potential for business growth."
In the United States, it is common for traction to be included in presentation materials (pitches) to investors, and it can be said that it is a required item on the template .Traction Template
(Source: Slide members -Traction Template )
For example, early traction from SaaS startups includes:
Examples of traction: number of customers, growth rate, MRR, ARR, CAC, LTV, CS, etc.
Startup companies often explain their business to investors before they have a strong track record, so these indicators are not necessarily clear-cut, but can also be interpreted as "signs of growth" or "early indicators of potential."
The reason traction is important is that, as the CB INSIGTS data below shows, a lack of market need is one of the reasons why startups fail.
Why startups fail
(Source: Entrepreneur “ Infographic: The 20 Most Common Reasons Startups Fail and How to Avoid Them ”)
Traction is an indicator of whether there is a need for a product or service in the market. It is a key criterion for investors when selecting companies to invest in. Of course, it is also an important point that entrepreneurs should be aware of when moving to go to market.
The importance of startups being aware of traction
For startups, traction is not just a trendy business term but a key metric for measuring business success and sustainability. Traction is heavily related to attracting new customers and demonstrating consistent growth.
In other words, traction is the foundation on which a startup builds its future, proving the value of its business model and helping it stand out in the market.
Here, we will look at five perspectives that explain why it is important for startups to be aware of traction.
Profitability assessment
ARR growth rate chart
(Source: medium )
For startups, measuring profitability is an important indicator of market acceptance of your product or service, the viability of your business model, and the sustainability of your company. Profitability reflects whether customers are actually willing to pay for your product or service and proves the viability of your business model.
In other words, high profitability means that customers value your product or service and are willing to pay for it. Steady revenue growth and high profit margins are key to gaining the trust of investors and partners because they demonstrate the high demand for your product or service in the market and demonstrate the possibility of success.
A profitable startup demonstrates a competitive edge in the market and is well on its way to long-term success. Profitability helps a startup establish itself in the market and lays the foundation for continued growth.
Prove and improve the value of your business
Traction is crucial for startups to prove the value of their business and continually increase that value. Clearly demonstrating the need for and effectiveness of your product in the market will help you and your product or service to have a meaningful presence.
Proving the value of your products and services can strengthen your competitiveness in the market and develop new customer segments. For example, using user feedback to improve your products and increase customer satisfaction can increase brand awareness in the market and differentiate your products.
In this way, by continually improving the value of their products and services, startups can establish their position in the market and expand their business growth opportunities. Therefore, responding to changes in the market and constantly developing products to meet customer needs is essential for the sustainable growth of a business.