Stop pitching investors & start talking to customers

Founders, if you are pitching investors pre-traction, this post is for YOU!

Over the last few months, I’ve met with a number of startups in New Orleans (though this applies anywhere) and they’ve run me through their pitch, their product, etc etc.

My first question is: “tell me about your customers.”

They then proceed to talk about lead flow, website hits, product refinements, beta launches, blog mentions, pitch events, things generally going “really well” and neglect giving an answer to the actual question.

I ask again directly: “do you have any paying customers?”

“No.”

If you are a non-silicon valley startup and you are talking to institutional investors, they will be investing on evidence of traction. Local angels will invest emotionally because they believe in you, your vision, your team, your potential. Early-stage VC’s, anyone investing someone else’s money are unlikely to invest unless you have real traction.

So, unless you are in NY or Silicon Valley, if you are pitching VC’s pre-traction you are probably wasting your time.

Redirect that time and energy to talking to customers and generating traction.

WHAT IS TRACTION?

You will need to define traction for your startup. Brendan Baker has written some great posts here & here. I wrote about pitching vs communicating here.

Ash Fontana at AngelList has solid empirical indications of what traction it takes to raise a million dollar round.

Here are thresholds that I keep in mind:

• 100 downloads a day (b/c 95% of apps have <100)

• 1,000 new users per month

• 10,000 revenue per month

• 100,000 vistors per month

• 1,000,000 pageviews per month (b/c this will pay a 60k salary)

Hitting any of those yet? Great! You probably can attract some real investor interest.

Not even close? My advice: Stop pitching investors & start talking to customers.

PS: I’d love feedback on my #’s above. Are they meaningful benchmarks? Too high or low?