The Many Schools of Thought on Traction
As an angel or new venture investor, it’s important to understand what traction is - and what it is not.
When risking capital, it’s in our nature to look for signals of security, and traction is what makes us believe we’re making a safe(r) bet. But traction is not one-size-fits-all.
Traction Isn’t Always Obvious
For a $15 monthly subscription software startup, traction might mean 100 paying customers. For a healthcare device company, it might mean 4 patents, 6 research publications, and 3 major hospital conversations - even with no revenue. Both can be traction, and both can also be misleading.
The software startup may have burned $30 on ads to get each $15 customer. Meanwhile, the healthcare company could be stuck in FDA limbo for years despite having a potentially life-saving product. Neither case is black or white.
Vanity vs. Substance
Revenue, users, approvals, and patents are often “grey” traction metrics. However, some signals are pure vanity: news features, website visits, click-through rates, and paid partnerships. They are great for confidence and branding but don’t prove execution.
Why Angels Exist
Remember why founders pitch to you: they’ve exhausted personal savings, friends and family, and conventional lending. They seek patient capital – funding provided with a long-term outlook, expecting returns over many years rather than a quick exit – from someone who believes in their vision and ability to build a market that can return 20-30X. That’s the role of an angel.
A Simple Way to Define Real Traction
If you must set a yardstick, use a framework like Customer Acquisition Cost (CAC) vs. Lifetime Value (LTV). If a software startup spends $15 to acquire a customer worth $150 in LTV, that is healthy traction. If the LTV is less than the CAC, no matter how many customers they claim, it is not sustainable.
In other industries, milestones may look different: patents for deep tech, pilot programs in agriculture technology (Agtech), or integrations in generative artificial intelligence (GenAI). But the principle remains: traction is proof that execution creates value beyond the cost of capturing it.
Execution Is the Real Test
At the end of the day, traction should be judged against what the founder set out to do. If the founder’s goal was testing the market, validating a hypothesis, or running pilots, then you should measure their traction against those milestones.
As angels, we benefit from being laser-focused on the merit of the solution and the clarity of the vision. Saying a startup “lacks traction” is often just a polite way of declining an investment, but real traction is simply proof of execution and not always proof of product-market fit.
As angels, we don’t invest in yesterday’s traction; we invest in tomorrow’s execution.