What INVESTORS Mean When They "Want To See More Traction"
Updated: Apr 26, 2022
In this video Argona Partners Chairman, Richard Anderson, answers the question on what investors really mean when they tell you that they want to see more traction in your company. This question was submitted by Kesavan, from iShield.ai.
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Richard Anderson III:
"This question is asking, what does traction really mean? Most of the time, there are sort of hidden cut-offs from investors that like are, they would say, "Oh man, hit $5,000 in monthly recurring revenue hit $10,000 hit 20,000". And most of the time in a seed round or what they're looking at, I would say around $20,000 in monthly recurring revenue is what a lot of investors are kind of using as an early stage gauge for yes, we can go ahead and move forward with a seed round, we can move forward with whatever your, you know, whatever your next round is going to look like. It starts to interest investors at that point, because they know that you're bringing in revenue and that $20,000 mark tends to be sort of a barrier for some people. Typically by "wanting to see more traction", they're actually saying, "Hey, we want to see you, you know, leverage what you currently have to produce more sales, more marketing" and just understanding it really does come down to finance again, where it's saying like, "Hey, what are you actually making in any given month? What are your expenses? We want to see you penetrate into the market a little bit further", which is basically just go talk to more people. Do your sales, do your marketing and continue on with that way, and they want to see that you're being picked up and that your natural marketing and your solution is being naturally picked up by people who have that problem. Because most of the time, when an investor makes an investment, most of the money in VC is just going to go towards scaling the marketing and sales of a solution that has pretty much already been put together."
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