Four Types of Traction to Help you Fundraise

Using Traction in Your Pitch

In the Pre-seed, Seed  and even Series A stages, showcasing traction that surpasses that exceeds market expectations is not just advantageous—it's crucial. An exceptional metric can often be the focus of your fundraising narrative, providing a concrete proof point of your company's standout performance. There is a constantly fluctuating market that investors will use to gauge specifics like if a company is ready to raise a new round and at what valuation. Investors base this market off of several factors like the state of other companies that have raised recently (current market rate) and the competition to be involved in a company’s round (deal heat).

Four Types of Traction

For most companies there are four different types of traction. Raising when you have an outlier metric on at least one of these will make the fundraise go much better. The further down this list, the more risk that has been taken off the table, so the better the outcome.

Warning: Only highlight truly outlier metrics in your pitch! It will look bad to investors if you show a slide with 2000 people in your Discord server and say, “our fans love us.” Remember, every detail you expose in your pitch invites judgment from the audience (more on that in a future post).

Demand

This encompasses indicators like your waitlist size, social media following, and community engagement metrics. Gaming and consumer companies that have tens or hundreds of thousands of rabid fans ready to throw money at them is a great signal. For B2B startups, a substantial waitlist of companies eager to use your product can significantly de-risk market size and product demand assumptions. Leverage publicly available competitive data to benchmark your performance and highlight your standout achievements in this area.

Growth/Scale

This refers to your user or customer base and, importantly, the quality of these users or customers. Demonstrating growth is a step closer to achieving product-market fit. In the consumer sector and in gaming, a large user number can be impressive, even if they don't monetize. For B2B startups, the emphasis should be on either the number of customers or the caliber the customers. While achieving outlier status in user/customer numbers before a growth round may be challenging, it can be effective. 

Retention

Retention metrics offer a deeper insight into product-market fit, indicating not just initial interest but sustained engagement with your product. For consumer and game companies, early retention rates (Day 7, Day 30) are primarily used as predictors of long-term user engagement (Day 180, Day 365). I consider a strong Day 30 number to be the best possible form of traction for any game. In the B2B space, good indicators are not just lack of churn, but proof of renewal. 

Revenue

The best possible traction is revenue. It is the holy grail and the major step to proving out product-market fit. If you are pre-Series A and have an outlier retention metric I would argue you may not need to raise a round at all. As mentioned before, having a small amount of revenue is not worth mentioning. It is easier to explain that while you’re making some revenue now, it is not a major focus, than it is to act like you’re excited about a few thousand dollars coming in.

What about Acquisition Cost or Session Length or …

There are a number of other metrics that teams can use to fit into their fundraising narrative. I believe the ones listed above do the best job of showing progress towards product-market fit. If you think you have a truly outlier metric that reinforces your fundraising narrative, use it.

Metric vs. Momentum

Remember that the trajectory towards achieving these outlier metrics can be just as compelling as the metrics themselves. Demonstrating consistent month-over-month growth across any of these dimensions is a strong signal to potential investors. Conversely, a declining metric can raise concerns so be careful how you position your current traction.