By Esther Vargas
A frequent question I get asked is how much traction is necessary to attract potential investors. It’s a common dilemma technology entrepreneurs face – should I build traction first or should I focus my efforts on raising startup capital? Given that making progress towards acquiring and keeping customers (traction) is an important measure of a startup’s viability and potential for success, making informed decisions in this regard is critical. The answer lies in striking a balance between pursuing traction and seeking funding.
Funding allows startups to scale up operations, develop new products, and enter new markets. However, startups that focus primarily on raising capital without demonstrating traction often struggle to attract investors. Investors are most interested when their funding is used as an accelerator of existing traction, which makes a better case for the startup’s scalability and potential return on investment.
Startups can prioritize gaining traction initially by validating their product-market fit and building a dedicated customer base. Proving that there’s a real demand for your product or service and that customers genuinely value it validates your startup’s concept while making it more appealing to potential investors. Your prospects of securing funding improve substantially when you can showcase a track record of customer satisfaction and sustainable growth.
Start by putting traction front and center. Prove your product-market fit, gather a loyal customer base, and strengthen your market position. This not only makes your startup more attractive to potential investors but also builds trust and ensures that you’re on the right track towards growth. Once you’ve got the traction, funding becomes a way to turbocharge your growth and expand on your successes.
Moreover, when you prioritize gaining traction, you’re forced to make efficient use of your resources. You learn to optimize your product or service, target the right audience, and make every dollar count. This lean approach is not only attractive to investors but also sets a culture of efficiency that can benefit your startup in the long run. It’s about being resourceful and strategic in your growth journey.
Finding that sweet spot between traction and funding is an ongoing process. As you grow, you’ll need to continually demonstrate traction to keep investors interested. Each round of funding should be seen as a way to take your proven traction to the next level. So, whether you’re just starting or well into your journey, keep in mind that balancing traction and funding is a dynamic process that can propel your startup to sustainable growth and long-term success.
The University of Central Florida Business Incubation Program is a community resource that provides early-stage companies with the tools, training, and infrastructure to become financially stable, high growth/impact enterprises. Since 1999, this award-winning program has provided vital business development resources resulting in over 300 local startup companies reaching their potential faster and graduating into the community where they continue to grow and positively impact the local economy.
With nine facilities throughout the region, the UCF Business Incubation Program is an economic development partnership between the University of Central Florida, the Corridor, Lake, Orange, Osceola, Seminole, and Volusia Counties, and the cities of Eustis, Kissimmee, Orlando, and Winter Springs. For the 2017/2018 fiscal years, the activities of these participating firms have helped to sustain more than 6,725 local jobs and have had a cumulative impact of over $725 million on regional GDP and over $1.3 billion on regional sales. During the same period, the program has returned more than $12.00 in state and local taxes for every $1.00 invested in the program. In addition, for every $1.00 of public investment, the firms also produced $118 of additional regional GDP and $226 of regional sales. For more information, visit www.incubator.ucf.edu.
