When startups run out of cash and need dollars, they often seek funding. They can find it difficult to get interest from investors. Investors are on the lookout for good companies and what you need to raise funding comes down to two words: team and traction.
Traction
Investors look for teams that are achieving traction at some level. In a pre seed deal building out the IP, the product and the customer interest in the form of LOIs, freemium use cases, and more count as traction. With Series A companies, revenue growth and unit economics coming into focus counts as traction. In Series B companies, scaling growth and expansion into other verticals counts as traction.
In each case, the investors look for the team coming together to support the growth. They look for teams that have the right skills. The team includes C-level executives, advisors, mentors, partners, and consultants.
The investor constantly looks for evidence that it is working. Those raising funding must demonstrate that the team is achieving traction.
Most startups talk about the promise of the business, while this is okay for the first pitch, afterwards the investor no longer wants to hear about the promise and the forecast, they want to see progress happening.
Before launching your fund raise campaign ask yourself: Can I show a growth story now? Can I show customer interest? Can I demonstrate I have the right team?
Team members don’t necessarily have to be on staff at full salary and many team member slides are filled with those who in reality are working part-time. It demonstrates you know who will do the work when the demand increases.
Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies
