- Building the framework for success factors that turn startups into sustainable businesses
- What it takes for companies with promising tech to become industry powerhouses
- The difference between seeking out investors and having investors come to you
Traction Gap: Patterns That Drive Success For Startups
As is the case with any set of guiding principles, the framework that is now the “traction gap” came about from a number of sources. First, I apply many of the insights and guidelines in Crossing The Chasm by Geoffrey Moore. Since its publication in the 1990s, it continues to be an essential part of the entrepreneurial lexicon for anyone who’s looking to start something on their own.
Most importantly, the traction gap is a reflection of my learnings from the venture capital world. After the company where I was an executive (Siebel Systems) was sold to Oracle, I started investing in several B2B companies. Fortunately, I made some wise decisions – including the first-ever investment in Marketo and early-stage investment in Workday.
However, not every investment hit it big like these two. As you might expect, some of my other investments didn’t work out so well. As I continued to navigate venture capital investments, I started to ask – why do certain companies and products make it? Furthermore, how do ideas or products with tons of potential end up failing?
To answer this question, you need to recognize that there isn’t one resource or location to pull data on startup success. In other words, you have to spend several years observing what goes well and what doesn’t in the real world. As a result, the traction gap represents a collection of insights and patterns that tie back to successful startups.
In my experience, the biggest stumbling block for emerging startups is not an engineering deficiency.
Instead, these companies tend to lack market engineering skills. For example, this involves creating or modifying a category to drive your product forward. In addition, teams will struggle to refine their value proposition or messaging to resonate with their target customers.
The biggest reason why most startups fail is when they move from product development to commercialization. As you may know, 80-85 percent of startups will fail to reach product/market fit. As a result, the traction gap framework seeks to guide emerging companies from getting the product right to getting it out into the open. Simply put, successful startups need to clear three phases to become sustainable businesses.
First, they must clear the go-to-product phase.
In other words, you have to get the nuts and bolts of your product sorted out. Now, I’m going to skip the second phase and go straight to phase three (you’ll see why in a moment). The third phase is the go-to-scale phase. At this point, your product is working and you’re not worrying about product/market fit. Instead, you’re starting to consider how to take your product to new customers/regions/etc.
Finally (or secondly), we get to the second and most important step – which is the go-to-market or traction gap phase. I intentionally call out this step “out of order” because it truly is the most important step in the entire journey for an emerging startup. Specifically, it starts with your minimum viable product (or MVP) achieving some early success. From there, you can advance to “minimum viable repeatability” or MVR – which demonstrates successful sales with multiple product phases or versions.
Lastly (but most importantly), you get to “minimum viable traction or MVT – which is when you don’t need to ask people to invest in you. Instead, the investors are knocking on your door to take their money. In the end, this represents the moment in which startups are virtually assured that they’re going to make it. The hard part is bridging the traction gap to get there.