How to tell if a startup actually has traction

Entrepreneurs have a lot of ideas. It’s easy to tell when you’re talking to one because they’ll come up with at least 2–3 business ideas in a half hour conversation on nearly anything. 

But an idea is not the same thing as a business. In a startup the most important people are those who execute, who get things done when others simply talk about it. 

Something I’ve learned from both investors and experienced entrepreneurs is not to worry about keeping secrets in the early stages of a business. 

There are exceptions — like security software or the first idea in a niche market— but for the most part ideas are worthless because everyone has them, and reaching 400,000 customers leads to a whole different set of concerns than reaching 40 (or 40,000, for that matter). It’s mostly the execution, and team, that matters. 

So how do you know if the walk matches the talk? It’s a critical question both if you’re working on a startup, or investing / partnering / considering working for one.

Here are a few things I’ve noticed about companies that are experiencing significant traction… 

They measure the product in motion — growth is best measured by rates, not by static, overall gains. In other words, by how much is more important than how much

1,700 new users this month sounds compelling until you realize it’s only 5 users more than last month. That means your growth strategy isn’t having a measurable effect. Also, looking at it in this manner helps you think more carefully about the levers (or channels) for growth. 

It also helps you stay realistic. A 27% increase in the rate of users or customers gained in a month is less impressive when most of the gain was due to a channel that’s non-scaleable or that gave you a one-time bump you can’t replicate. 

Emotion isn’t an afterthought— this is one of the things inexperienced entrepreneurs (and investors with little expertise in building a company) consider a soft / unimportant metric but is actually critical. 

Sometimes it comes through via things like Net Promoter Score (NPS), or your metrics on how likely people are to refer the product to their friends and broader networks. But most of the time it requires qualitative analysis, or deep customer development

The heart of it is: how do people actually feel about your product? Does the UX / UI of your online platform literally make them crack a grin and say “honestly I never thought doing my accounting / design collaboration etc. online would be anything other than drudgery, but this is actually interesting.” Same goes for apps and physical products, and even digging deep with just 10–15 people will quickly get you an answer as to whether you’re on the right track. 

They boil the story down — one of the most difficult learning curves for an entrepreneur / founder is learning to tell the story of a startup. The mistake that most first timers make is thinking that the story is about them. It’s not. 

Rather, the question is “who is it for?” and “what is their story?” Seth Godin wrote about this recently… 

The marketer can change her story, but she can’t easily change the worldview of the person she seeks to sell to. It’s almost impossible to turn someone who doesn’t care about hats (in particular) into someone who cares a lot about hats.
This person the product is for: What do they believe? Who do they trust? What do they seek? What are they afraid of?

They start with strong partnerships — in my experience this is the secret weapon for successful startups, and especially for first time entrepreneurs. It contains all of the other proof points, and when someone tells me they are launching to a huge market with no partnerships in process, I pretty much write them off. 

The experienced investors and entrepreneurs that I know feel the same way. If you can’t line up and deliver on a partnership you’ll likely have a hard time focusing on what the core value of your company is to a wider audience.