http://www.daryllu.com/wp-content/uploads/2018/10/entrepreneurial-ninja_logo_sm.png 0 0 Daryl Lu http://www.daryllu.com/wp-content/uploads/2018/10/entrepreneurial-ninja_logo_sm.png Daryl Lu2016-08-04 12:41:002020-12-09 10:13:12Value Is Fundamental to Driving Traction
Value Is Fundamental to Driving Traction
Ash Mauryarecently wrote in Entrepreneur an article titled “Traction Is What Investors Are Looking for When You Present Your Plan”. Ash writes that investors are looking for traction, above all other criteria like market opportunity and competitive advantage.
Ash’s definition of traction is:
rate at which a business model captures monetizable value from its users
Before Ash describes the definition of traction, he shares his thoughts on value…
- Created value > captured value. That is, the value a customer receives is greater than the value the company receives (the customer pays).
- Captured value ≥ cost (delivering solution). This is simplistically understanding revenue is greater than (or equal to) cost.
- Created value ≥≥ cost.
This is a pretty simple to understand. For companies looking for investment (well, any company looking to be successful), it’s important to understand traction and all the drivers thereof. As an early-stage startup wiggles and fights its way towards product-market fit (or service-market fit), traction will likely be near-flat. But as the company reaches product-market fit, that traction curve starts to climb fast. Here, focus turns towards customer acquisition, and thus, the sales and marketing machine commences.
Understanding what traction is is important, and just as important is understanding the real value you are creating for your consumers. If you can help your consumers capture great value, then can you start to build traction. Value àtraction. Value does not = traction. That requires some marketing and sales, but value is fundamental.