How to Show Traction Pre-Revenue
Raising money from investors can be tough as it is, but when pre-revenue it can be difficult. Here's three simple ways to show traction.
Here are three great alternative ways to demonstrate traction.
I often run into entrepreneurs who are trying to raise money pre-revenue. While raising money can be challenging at any stage, pre-revenue is even harder. You can do fancy hockey-stick projections but that really doesn’t help. You can sell the vision, but investors often want to see some form of traction. There are several ways to show some early traction pre-revenue, yet many entrepreneurs either do not or have not taken the time to demonstrate some of these early signs of validating an idea.
Customer discovery learnings
As you are researching the problem you are solving, you should be doing customer discovery by speaking to many potential customers and industry folks. Almost every problem/idea I see goes through many iterations at this stage. Entrepreneurs should be able to talk through how many potential customers they have spoken with, how the problem/idea has evolved, and how these learnings have shaped their vision and idea. This level of depth and understanding of your space can help convince investors that you have put in the work to really know the problem/space and may be onto something special.
As you progress through customer discovery, you will refine your idea. An easy and simple way to test early authentic demand is to set up a landing page. Describe your problem, target customer, and solution in a simple way and have a call-to-action to sign-up for the service/get more information. With some basic marketing, you can gauge the level of interest from the website. How high are the number of open rates, clicks, signups, etc.? What type of questions are potential customers asking (are they purchase oriented or information oriented)? This information is another way to show traction pre-revenue.
Even pre-revenue, you can still convince early customers to take the next step. Will they commit to being development partners and pay to build the product with you? Will they sign a letter of intent (LOI) to purchase a certain number of products? How do you quantify your sales pipeline? While not quite paid and implemented, these additional steps towards purchase are better than nothing.
While all of these steps above are not as good as passionate, paying customers, they can still show early signs of traction that can help you raise money from investors despite being pre-revenue.