Oh man, you got 300 email sign-ups, awesome! Goodness, your web traffic spiked by 200%! Yesssss! Holy god, you got a feature article on TechCrunch — well done! You won an award from the regional chamber of commerce! Break open the champagne, right?
Not so fast. These moments of excitement are, in fact, your body lying to you. The little hits of dopamine feel so good. You want more.
You know who doesn’t care? Your would-be investors.
At the earliest stages of raising money, before you have any real traction, it can be tempting to take anything that looks like traction and shout it from the rooftops. The truth is that investors know what real traction looks like, and none of the above qualify. And yet, I’ve seen all of them in pitch decks. Trust me: At best, your investor doesn’t care. At worst, it shows that you are a founder who doesn’t know what’s important when you’re building your business, which is a huge red flag for investors.
The goal of a startup is to stop being a startup
I subscribe to Steve Blank’s definition of a startup: A “temporary organization in search of a repeatable, sustainable business model.”
Temporary because once it finds the business model, it stops being a startup. Or because it fails and, well, stops existing at all. And so, everything you do as a startup founder is to build a machine where you can pour $10 million into the top and get $15 million falling out the bottom.
In other words: You’re creating a flywheel that can take investment (in marketing and product development) and turn that into paying customers. It’s OK not to be profitable, even for a very long time; you’re building up potential in your machinery. But you do have to be on a path toward the possibility of being profitable. If you’re not, you’re not building a company.
The problem with many metrics I see in pitch decks is that they aren’t necessarily in service of finding a repeatable business model.
One example: In my previous startup, Life Folder, we built a chatbot that had conversations with people about end-of-life decisions. As part of that, we asked folks to invite their friends to take part. On average, they invited just over two friends each. That’s a viral coefficient (K-factor) of more than two. That is almost unheard of. Unfortunately, while people were inviting their friends, almost nobody accepted the invitations. That sort of makes sense; talking about death is scary. It put us in a hard place: We had an off-the-charts invite rate and a down-the-toilet conversion rate. It would have been so easy to put “K factor >2” on a slide of a pitch deck, but it would have been a vanity metric — the real number that mattered was the number of conversions, and we were never able to crack that nut.
Awards make you feel better, but unless they result in sales, they are meaningless.
Press coverage can give you an influx of interest from customers, potential hires and investors, but only if the timing is right.
Email sign-ups, traffic to your website, inquiries, people following your company on Twitter or Linkedin or Instagram … if they don’t convert into something that could become revenue, they are worthless.
It’s worth noting that this data isn’t nothing — they could potentially be leading indicators of what is about to happen. But it’s crucial to remember that it hasn’t happened yet. If you have a very beefy non-converting top of funnel, try to figure out what’s happening to your traffic and how you can start converting these customers in some way. Unless you have metrics on how well these top-of-funnel numbers can convert into customers, they are hopes, wishes and dreams, not the foundations of a company.
It’s a commonly accepted truth that you need traction as a startup. At the same time, if you don’t have traction, you don’t have traction — at the pre-seed stage, investors will understand. What you need is a plan to get traction. Don’t confuse fluffy numbers and vanity metrics with your go-to-market strategy.