In this video from DEMO Traction in San Francisco on April 22, 2015, Jake Flomenberg, partner at venture capital firm Accel Partners, and Ravi Viswanathan, general partner at VC firm NEA, discuss the traction data that convinces venture capitalists to back start-ups. (To watch the video, register or log in below.)
From the video:
One of the things I think about when I think about traction is the underlying business model’s economics. [The startup] doesn't even necessarily need to be profitable today — some things require certain economies of scale — but it’s about understanding what that business model is and not just throwing tens of millions of dollars into a field in Salesforce to manufacture a couple million dollars of sales. Most people could do that in almost any market.
So there’s that underlying business model, and there’s that level of growth that is acceptable if you’re a very early stage startup. In almost any market if you’re not doubling each year, that’s probably a very scary proposition to be in out of the gate because certain businesses are going to grow a lot faster than that.
And then the more macro level question is, What is this market you’re growing into? It’s possible to manufacture traction in a market that’s just going to have limited upsides: How much market is there for you to go after, how much are you going to be able to address and what is that going to be worth at the end of the day?
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