This post is part of the Hyde Park Angels Entrepreneurial Education Series, which brings together successful, influential entrepreneurs and investors to teach entrepreneurs everything they need to know about early-stage investment through events, articles, videos, and more.
Like market size, traction is a term that gets thrown around in investment and entrepreneurial circles all the time, but isn’t always clearly defined. That’s a serious problem. As an entrepreneur, you need to be able to understand your traction backwards and forwards because it’s one of the biggest predictors of future growth and one of the best tools to assess your company’s performance in the market. At its most basic, traction is the adoption rate for a product or service. This seems simple enough, except there are dozens of metrics you can use to measure something as broad as an “adoption rate.” To name a few:
· Monthly Recurring Revenue
· Total Number of Paying Users / Customers
· Total Number of Non-Paying Users / Customers
· Total Number of Products / Units Sold
· Month Over Month User Growth
· Revenue in Last Year
· Total Revenue
· Month over Month Revenue Growth
Depending on the value you’re trying to create, some, all, or none of these metrics matter. This is where it becomes crucial to know your target audience and its needs. None of these metrics means anything without contextualization.
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One way to measure traction is to start by asking what behavior you’re trying to change. Medium is a great example of this. The company’s CEO, Evan Williams recently wrote:
“We want to create a platform that enables people to make an impression on others. To make them think. To change their minds. To teach them something or connect emotionally.”
While that’s admittedly very difficult to quantify, Medium has come up with a metric to show traction, total time reading. “TTR” measures how much time people spend on story pages. It’s not perfect, but it’s certainly more meaningful than impressions. If the company’s value is getting people to read the content and engage intellectually and emotionally, the mere fact that a lot of people saw it doesn’t mean much. That they read it, and that they took a long time process it is far more telling. If the “TTR” grows, that means they’re successfully changing behavior — skimmers are slowing down.
The idea behind the strategy is simple: know your value and measure your traction according to what it is.
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About Hyde Park Angels
Hyde Park Angels is the largest and most active angel group in the Midwest. With a membership of over 100 successful entrepreneurs, executives, and venture capitalists, the organization prides itself on providing critical strategic expertise to entrepreneurs and the entrepreneurial community. By leveraging the members’ deep and broad knowledge of multiple industries and financial capital, Hyde Park Angels has driven multiple exits and invested millions of dollars in over 40 portfolio companies that have created over 850 jobs in the Midwest since 2006.
Alida Miranda-Wolff
Alida Miranda-Wolff is Associate Manager at Hyde Park Angels. Her role includes creating and executing marketing and communications strategies, planning and managing events, fostering and maintaining community and industry partnerships, and managing membership. Prior to joining Hyde Park Angels, Alida served as a manager, data analyst, and publication specialist at a multibillion dollar industrial supply corporation. She has lead two of the most successful Kickstarter campaigns in Chicago history and worked with half a dozen startups in various marketing, content creation, and project management roles. Alida believes in creating valuable, spreadable multimedia content, and has done so as a freelance writer for several print and online publications.
