By Ian Campbell, WG’12, founder of What Goes With This?
Everyone is talking about traction these days. It’s what investors say is necessary for raising money in today’s environment.
My startup doesn’t have traction (yet!). But while it’s important to know what traction is, I’ve learned that it’s also crucial to know what traction is not.
Learn to recognize when you don’t have traction, and sometimes you figure out that a particular project will never have traction. Then you can let it go, the alternative being a slow slide into the dread zone of the zombie startup.
According to Paul Graham, traction is simply growth. It can be user growth or revenue growth. It’s up to you to pick your most important metric to measure traction. Whatever metric you choose, if your growth rate is below 2% average week after week, you don’t have traction. And you should probably start checking for symptoms of zombie-hood.
It seems simple, but many startups waste time building ideas for which traction will never be possible. Here are two lessons I’ve learned the hard way:
1. If your goal is revenue traction, you must have high revenue per customer.
Not having this doomed my previous startup, FitValet. We had 30%+ conversion rates to email signup for customers on our landing page. Still do, in fact – people want style advice! However, it cost us $0.85 to get a customer to sign up, and we were making $0.10/month/customer in affiliate and ad revenue. When you factor in list decay, we might have made up the marginal acquisition cost per customer in 15-18 months.
For a regular business, recouping marginal cost in 18 months is fantastic. This is why it’s so hard to quit a startup that’s growing too slowly. For a startup, this isn’t fast enough, and you’re wasting your time. There are better ideas out there, and the risk is too high to wait 18 months for one sales cycle.
Our revenue strategy (advertising/affiliate) was low revenue per customer, which simply does not lead to revenue traction. High revenue per customer is measured in dollars, not cents.
2. If your goal is user traction, your startup must have some kind of viral mechanism.
This means that you can’t be paying for your customers. Also, your mechanism can’t be “word of mouth.” Virality is planned, designed, and optimized before it’s ever realized.
When customers signed up for FitValet, there was no inherent reason or built-in opportunity for them to refer their friends. To grow virally, a startup needs a viral mechanism, such as a network effect or unprecedented daily user engagement.
My current company, What Goes With This?, has two potential viral mechanisms. First, the site is more fun when your friends are on it, because it’s a community. Second, we’re hoping our user generated content will drive SEO results in the same way it has for Q&A sites like StackOverflow or Quora.
The life of an entrepreneur
Looking back, What Goes With This? builds on many of the things I learned from FitValet. The pivot from one company to the next took six months too long, though, because I didn’t want to see the inevitable and let go of my precious idea. Today, I would see that this business model was doomed before I started building it.
This is the life of an entrepreneur. It was hard to accept that not only did FitValet not have traction, but it never would. I learned a lot, though, and some kinds of learning can only be done the painful way, by living through them. I hope that my experience can help other entrepreneurs out there learn more quickly.
Bio: Ian Campbell, WG’12, is an entrepreneur based in NYC. At Wharton, he was an active member of the entrepreneurial community and a member of the Venture Initiation Program. He is a cofounder of What Goes With This?“