The order affects the outcome: First traction then investment

The order affects the outcome: First traction then investment

Some days ago I was watching my news feed on Facebook when I saw a phrase from Juan Diego Calle, Founder and CEO of dotCo: “Worry more about getting traction for your business and less about raising money. If you get traction, you’ll raise money. It’s not the other way around”. This statement kept me thinking about investment and traction and the following are my conclusions.

Lets start by defining what is traction in this context, for the ones that are not familiar with this concept. Traction refers to client adaptation to the product and to achieve sales. In other words this means that demand exists for our product and that it wont be an excellent product that no one is going to buy.

Now that it’s clear what traction means y will share what I thought about this subject. Entrepreneurs start with a business idea that we transform into a business plan that we will share with our investors in order to raise money for our company. Even though we can find a lot of business plan models, all of them have a chapter involving consumers, but in many cases they worry more about the numbers that about a real validation of our product. In this way they present the different markets: real market, target market, sales plan but I feel they need more emphasis in how they test the product and how it translate into actual sales. I don’t mean that numbers are not important but in our business plan they are just hypothesis. Remember that we can write whatever we want in our business plan and justify it, but it is just when we present our product to the clients when we will se if they are interested in it.

That is the reason why I totally agree with Calle. Entrepreneurs must stop worrying about spending all their efforts in business plans thinking that their only goal is investment and start by investigating if consumers like their product and if they are going to buy it. In this way investment is more likely to arrive. As I wrote in this lines not all business plan modes focus in validating the product, but if your model doesn’t I recommend you to include it. If you do it, you would not only benefit the investor that is believing in your project but you will know how valuable is your product and the changes you must perform in order to sell it. In this way every one wins: you, your investor and your consumers.

Image taken from Flickr.com

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