When is traction worth talking to VC about? With a service you want to go big with (10s of millions users)... is it 1k, 10k, 100k users?
So we have a startup that we know, if we get it right and have the resources we need to support our user base, could scale very big - Twitter big or Blogger big.
We opened the doors and had so many users come in that we cannot cope with the demand - we're 2 people bootstrapping on $0. However that "too many users" is still only around 10k, albeit with high conversion rates, growing at 100% in a month.
I've talked to VCs with startups in the past and it's mostly been very vague. As you can guess we're so snowed we don't want to talk a ton of time out dancing around with a bunch of VCs for months. So at what point do we have the kind of traction that makes it worth us talking with VCs?
We think we've proven enough to ourselves already - we're all in. No backup plan. This is the one. But obviously VCs are a mystery in this regard.
Hi Richard,
Great question with no easy answer.
From a VC perspective, while traction is important - it's not the only criteria we look for in an investment. Some other criteria include shifts in market trends, the number of competitors in the space, the future business model, and whether or not is a fit for our portfolio.
Should you talk to VCs now? Absolutely - just like you should talk to other entrepreneurs, industry professionals, journalists, and anyone else who will listen. By talking through your product and ideas, you'll be able to have a far clearer picture of what you're building as well as gain useful insight from outsiders you may not have been privy to otherwise.
Should you take VC money? That's a different question that goes back to what your goal is with starting your venture - if your goal is simply to create a valuable company that allows you to live a comfortable life for your and your family - VC is probably not the correct route for you. However, if your goal is to grow the company to take it public or sell it - and your business has a scalable model - you may need to raise capital to achieve that goal.
The best VCs are exceptionally transparent in what they are thinking and whether or not they are considering investing. At True, we consider this to be a core part of our model (and the funds we work with such as GRP Partners, First Round Capital, Floodgate, as well as others work in a very similar fashion.)
To go back to your original question - if you're looking to take VC capital for your venture - spend some time talking to Angel Investors and Venture Capitalists and discuss your business and plans. Most will be open and honest with their feedback - which will help better answer your question here about traction and how much will be enough
Great question with no easy answer.
From a VC perspective, while traction is important - it's not the only criteria we look for in an investment. Some other criteria include shifts in market trends, the number of competitors in the space, the future business model, and whether or not is a fit for our portfolio.
Should you talk to VCs now? Absolutely - just like you should talk to other entrepreneurs, industry professionals, journalists, and anyone else who will listen. By talking through your product and ideas, you'll be able to have a far clearer picture of what you're building as well as gain useful insight from outsiders you may not have been privy to otherwise.
Should you take VC money? That's a different question that goes back to what your goal is with starting your venture - if your goal is simply to create a valuable company that allows you to live a comfortable life for your and your family - VC is probably not the correct route for you. However, if your goal is to grow the company to take it public or sell it - and your business has a scalable model - you may need to raise capital to achieve that goal.
The best VCs are exceptionally transparent in what they are thinking and whether or not they are considering investing. At True, we consider this to be a core part of our model (and the funds we work with such as GRP Partners, First Round Capital, Floodgate, as well as others work in a very similar fashion.)
To go back to your original question - if you're looking to take VC capital for your venture - spend some time talking to Angel Investors and Venture Capitalists and discuss your business and plans. Most will be open and honest with their feedback - which will help better answer your question here about traction and how much will be enough
Thanks for the answer... this is about where we were thinking this question lands.
Right now we're pulling together a small angel round so we can solidify our traction and gains and go to the VCs in a position to be able to digest the $$ they'd need to put to work. To scale to the size we want this business to get to we'll need to have decent VCs on board with us helping us get there.
We just know it's a mystery as to what numbers different people find convincing. We just have to keep adding users till we hit a tipping point.
Right now we're pulling together a small angel round so we can solidify our traction and gains and go to the VCs in a position to be able to digest the $$ they'd need to put to work. To scale to the size we want this business to get to we'll need to have decent VCs on board with us helping us get there.
We just know it's a mystery as to what numbers different people find convincing. We just have to keep adding users till we hit a tipping point.
