29
Aug

How to Get Funding: Traction and Trajectory

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Today I decided that in order to be compelling, business plan
presentations really need to have two things: traction and trajectory.

It’s pretty hard to convince anyone, especially an investor who is
naturally protective of his/her own money, that your idea will actually
work.

Entrepreneurs often count their chickens before they hatch. In fact, we
count our chickens before we have ever sourced the eggs. We just
believe. We just have faith that somehow it will all work out. So we
invest time and energy in our idea.

Investors aren’t “full of faith” like that. Investors have wealth and
they want to protect it. They want to grow it too, but there are myriad
ways to do that, some with very little risk. If they even consider
investing in high risk/high reward startup companies, they know they
will have to be careful because most businesses fail. Investors don’t
want tothrow their hard-earned money away.

So how do you convince someone that your idea really will work?

Show them evidence that it is already working. That’s traction.

And show them that the rate at which it is working is accelerating, and
therefore, that success will be achieved because the metrics show that
they will. That’s trajectory.

I like to think that with traction and trajectory that a business plan
presentation could become so compelling that no one would see it
without believing in it.

This happened to me when I saw Jeffrey Brewer, CEO of Goto.com give a
presentation at a conference sometime in 1999. His charts showed
quarter after quarter of dramatic query growth, growth in “paid
introductions” and growth in the average price per paid click.

I came away believing that this model was the best internet advertising model ever devised.

About a year later I championed the acquisition by MyFamily.com of
Ah-ha, a pay-per-click search engine company, because I believed
wholeheartedly in the model and saw Ah-ha charts showing similar
traction and a similar trajectory. (Today Ah-ha.com is known as Enhance
Interactive and is owned by Marchex, a publicly traded company.)

Of course, the Goto.com model was the best internet advertising model
ever devised, and it is the rocket fuel behind Yahoo and Google’s
meteoric success.

Business presentations that show traction and trajectory have tremendous power.

There is a scriptural account of a prophet in ancient times who spoke with so much power that “it were not possible that the people could disbelieve his words.”

Can you imagine giving a presentation that is so powerful that it is
not possible for people to disbelieve what you are saying? I think it
would take a lot of evidence (like in his case, raising someone from
the dead) for that to occur.

What evidence do you have that your idea is working?

What evidence do you have that your rate of success is increasing?

Build your presentation around that.

If you are an online business, make sure you invest adequately in web
analytics so that you can measure your success and your acceleration.
Without web analytics, it’s really tough to have the evidence that you
need.

When you show an investor that your faith (in your idea) has translated
into product development (already) and into marketing programs which
are bringing you customers daily (already) and that the rate of
customer attraction is accelerating and that your product and marketing
roadmaps will bring improvements that will actually increase the rate
of acceleration.

Convince investors with your evidence to the point that it is easy for
them to believe in your five year projections. Make sure it doesn’t
take a huge leap of faith on their part. As long as the global economy
doesn’t collapse, you can tell them, they can believe that you will
succeed.

Not every business has the traction or trajectory to convince investors
to put money down. But work hard and get as close as you can. And even
if you don’t raise capital, measuring your traction and trajectory will
help you run your business the right way.

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