Traction is what entrepreneurs need to show to get investors interested. Simple as that. However, it’s a concept that doesn’t just mean “bigger numbers”, it is something more intricate.

In my world, the word “traction” depicts a clear direction you see from the users active on your site. Think about it from the root of the word: a tire that is slowly gaining traction in the desert sand is about the right metaphor. Forget about F1, and think about Granada-Dakar.

Where to identify traction without huge growth numbers:

• Is there a specific, identifiable group of people on your site who use it in a particular way? If you can find that group, communicate clearly about their activity and the value they get from the product.
• Are there some metrics that you can reliably track that make usage or signups grow? This can be a viral coefficient for sharing activities, a traceable growth rate that isn’t just a vanity metric, but something tangible (prolonged use, ideally), or a metric that influences said growth/usage rate.
• Are some specific users coming to your product from a specific source? See how Checkthis grew their early user base in the creative space, see how Soundcloud enabled DJs to share sets better than other sites, or how pinboard is attracting a very specific type of user from places like delicious.

This is the traction that shows your company is going into a specific direction, and that shows where the product, user base, and therefore company, is going to be in the future.

The above mentioned insights are something that you will most probably see if you are already very clear about the value set you provide. If not, trying to identify them will most often give you a clear view of who you should focus on or what features you should actually build to cater to that group.

Besides a clearer focus, this can bring forth a very deep understanding of the USP you provide – not in your own words and understanding, but much more so from the perspective of your users, underlined by the evidence of their actions.

“Progress comes in two flavors: horizontal/extensive and vertical/intensive. Horizontal or extensive progress basically means copying things that work. In one word, it means simply “globalization.” Consider what China will be like in 50 years. The safe bet is it will be a lot like the United States is now. Cities will be copied, cars will be copied, and rail systems will be copied. Maybe some steps will be skipped. But it’s copying all the same. Vertical or intensive progress, by contrast, means doing new things. The single word for this is “technology.” Intensive progress involves going from 0 to 1 (not simply the 1 to n of globalization). We see much of our vertical progress come from places like California, and specifically Silicon Valley. But there is every reason to question whether we have enough of it.”

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From Blake Masters’ excellent notes on Peter Thiel’s Entrepreneurship class

This was one of the most powerful notions I learned about in my earlier innovation and futurism classes. Reading up about it reminded me of the strong concepts vertical vs horizontal thinking bring with it. Here are some VC/Entrepreneurship oriented examples:

1) Think about the decrying of the Samwers and their copying of existing business models – it is simply horizontal expansion of vertical innovation. What makes it so difficult? The tight margins and operational difficulties that other globalisation and “horizontalization” efforts bring with themselves.

2) Think about Venture Capital in emerging markets: funds in developing VC usually take bigger stakes, give less money, provide less value add than established firms can. Bringing the VC model to new places still carries tons of risks like market, growth, and exit uncertainties (not to mention legal issues).

3) The fact that lean startups focus on innovating very vertically around a minimum viable product is another good analogy. Find one feature that sticks, and build the neighbouring features to scale the product and company to wider appeal.

During a conversation today, Sander also made a very good point: the underlying technology, namely programming, is also divided into horizontal and vertical advances. Scaling is structured in either one of these concepts. And so on…

What’s the point? The point is, you should read all the class notes on Blake’s blog, because they are very insightful.

Venture Village asked me to share some insights on what to look out for when pitch investors. These points apply both for Seedcamp and other opportunities to present – from elevator pitches to partner meetings.

Who are you pitching to and what are they interested in – know your audience

Very often, startups under-prepare pitch sessions. You need to put enough thought and consideration into who you are going to talk to and what that audience wants to understand. Investors want to know a lot about the market and business model, entrepreneurs want to hear about anecdotes and insights they can apply, engineers and designers want to hear about the product. Make sure you understand who you will be talking to to make your talk most interesting – and think about what you want people to remember.

Have your messaging and core communication set in stone – find your mantra

Knowing what the core of your offering is, and delivering that one-sentence pitch without flaw is the single most important thing to get right. It should be like a mantra that you repeat again and again – the rest of the pitch should support every part of that message. For example, you might be the premier international platform for entrepreneurs looking for capital, mentors, and network (this is our mantra) – use the presentation to show how you deliver on these points.

People want data, not superlatives, as proof – use numbers

When you want to impress your audience, you can best do that by supplying them with measurable outcomes that show your progress. Traction does not mean huge user numbers or massive revenue, it only means that the line is moving in the right direction. Do you have customers that use and love your application? Are they using it in critical situations? Are referrals through the roof? Were you able to prove a viral coefficient, a cheap way of sourcing traffic? All these may be different for your own startup, but from day one you should collect data points that show anyone outside that you are moving in the right direction.

Bonus point – Demos fail. Use screenshots

I have yet to see a pitch session where all technology works right. Don’t use fancy fonts, avoid video and sound like the plague, and rely on screencasts or screenshots to present your product. Demos are good for longer sessions, but anything under five minutes should not have you clicking through a product. And when you do demo live – make sure you have a good demo account with interesting data and a well rehearsed click through story ready.

TL; DR: Key point: context awareness.