I’ve been thinking about Dan Martell’s recently post, “To Raise or Not to Raise”, which encourages entrepreneurs to “go out there and make some money” rather than being too focused on raising seed capital.
It’s solid advice, particularly in Canada given ideas rarely (ever?) get funded. In many respects, the pursuit of venture capital, while sexy and challenging, is distracting and a productivity killer. Getting funded to develop an idea is a nice luxury but it’s also akin to putting the cart before the horse.
In talking with an entrepreneur who has built a large community, the big advice he offered to start-ups is the importance of getting “traction”. This is different from making revenue because it’s about attracting and delighting users with your service. Once there is a critical mass of users, it can open up a variety of doors to generate revenue.
A question is how do you attract users without money for marketing or customer acquisition. Obviously, making people pay for a service is a no-brainer but it’s also about being creative and flexible enough to find ways to get lots of users while, at the same time, managing to pay the bills and put food on the table.
It’s a concept called “Hamburger Profitability” in which an entrepreneur survives financially by supporting the start-up through things such as consulting or a part-time job. It is a tough way to make a living and establish a business but if you’re successful it also offers tremendous experience and the traction to seek financing without being desperate or without clout.
It would remiss to over-estimate the challenges in getting traction because it’s not a simple proposition. It’s a combination of having a service that is accessible, user-friendly and delightful, smart and creative marketing and some luck.
In the scheme of things, traction is a huge hurdle for entrepreneurs. It’s one thing to start a business or have a good idea, it’s another to convince lots of other people to embrace it. But if an entrepreneur can overcome this hurdle, it can set the stage for success and maybe even venture capital.
