What is Traction? Important Things When Building a Startup

 


For startups , funding is one of the important factors to be able to grow. Unfortunately, it is not easy to attract investors, unless your business is considered promising. Well, traction is a startup tool to show its business potential. 

Then, is traction only related to investment? Or, is an indicator to show startup performance in general?

Well, in this article you will learn what traction is, what it does, what are the traction indicators, and how to maintain them.

What Is Traction?

Traction is one of the phases of a startup's development. Generally, startups will undergo three stages of development, namely Traction, Transition, and Growth.

In the traction stage, which is the initial stage of startup development , the company's focus is:

  • Ensuring product market fit or the product has a good position in the market and is needed by consumers.
  • Measuring retention or customers who buy the product repeatedly.
  • Increase volume , such as the number of users, the number of merchants, the number of conversions, revenue, and more.
  • Focusing marketing on one marketing channel and experimenting on several other platforms, so that promotions can effectively reach a wide market.
  • Optimizing business in macro or general aspects, such as brand awareness, cooperating with business partners, and others.
  • Strengthening team development so that although the number of team members is not large, they are competent in carrying out their duties.

If you are able to do the six points in the traction phase above, then a startup will be able to: 

  • show business development trends
  • increase customer brand awareness
  • show credibility in the eyes of business partners
  • attracting new investors according to the business potential shown
  • make the team more enthusiastic to work better

Typically, traction startup takes about 18 months . However, it can be different according to the type of business, the team you have, and the initial funding ability you have. 

For example, Gojek in 2010 only had 20 driver partners and one call center to solve transportation problems in Jakarta. Then, they released the app in 2015 and helped find product market fit points and other traction phase points. 

The result? Gojek received Series A funding from Sequoia Capital India and the Formation Group , which made it grow as it is now.

What Are Traction Indicators?

With six points as the focus, what exactly are the startup traction indicators?

1. Revenue

Consistent revenue is evidence of traction on startups. However, startup revenue during the traction period is usually not profit-oriented, especially in the first few years. 

Well, investors themselves are usually more interested in how much revenue can be generated and reinvested for business growth, not net profit. However, traction startup is not only seen from the revenue side. 

2. Customer Acquisition

The number of consumers owned by a startup is something that investors are very concerned about. It can be from how startups get new customers, retain existing customers, to have customers they get from other customer referrals .

The reason is, with consumers who continue to grow, startup opportunities to develop are even greater. This is important both for the startup itself and for investors who want to provide funds. 

3. Traffic dan Engagement

The startup world is closely related to technology and the internet. So having a good online presence is no longer an option. 

Now, in the traction phase, an online presence that is owned by a startup provides at least two benefits, namely traffic and engagement . 

Traffic is important to get more consumers, and engagement is needed to make consumers more loyal and aware of the startup brand.

If you already have engagement in an online presence like the example above, of course it will be very easy for the business to develop better, especially in the traction phase. 

4. Innovation

Even though they have good revenue, but don't have cool product innovations, startups can be difficult to develop quickly. That's why the traction period is the right moment to test all ideas into innovative products. 

Some of the approaches can be to improve quality, add features, package UI and UX to be more user-friendly, to streamline customer service procedures. 

With this innovation journey, investors can judge that the startup's potential to develop is greater because it is able to dynamically follow market needs. 

5. Media Coverage

The more often a startup is covered by the media with positive news, the more people will know about the presence of a startup, both potential customers and investors. 

Such as Meatable, a startup that carries the concept of meat cultivation, has received attention and publications from the Cambridge Independent as follows:

examples of startup media coverage at traction time

The news above not only adds to the media coverage portfolio, but also shows Meatable's potential as a business.

So that every startup achievement can be covered by the media, it is important for startups to establish communication with news portals or online media. 

6. Partnership

Especially in the early stages such as traction, startups need to work together with many parties. The goal is to provide the best products and services for consumers without having to do everything yourself. 

In addition, collaboration with other parties can also fill the needs of consumers who are not the focus of the startup product. 

An example of a partnership that can inspire your startup is the Niagahoster Points program for loyal users as a form of appreciation. Later, the points earned can be enjoyed on other services thanks to collaboration with Gojek, Telkom, Grab.

This can certainly build business credibility, strengthen cooperation with other parties as well as increase product usage transactions. 

Traction Function in Startup

In addition to showing startup potential, there are several important traction functions for startups, namely:

1. Opening Investment Opportunities

One of the traction functions is to show business potential to investors. All startup achievements at this stage will be taken into consideration by investors. Both in terms of revenue, number of users, and others.

For example, if a startup has a high number of consumers, but a low retention rate, then investors may fail to provide funding because they think the startup has no potential to develop in the future.

2. Increase Reputation

A good reputation can help a startup grow rapidly. Reputation needs to be built consistently in relationships with consumers, business partners, potential investors and the team within the startup. 

This is also what Gojek did when they chose to work with Google Maps instead of making their own map application. In addition, by continuing to add restaurant partners, their food service will become more attractive to consumers with the variety that is presented. 

3. Increase Awareness 

Traction is the phase where the startup shows its quality in terms of products, services and revenue. Not surprisingly, a lot of media coverage contains stories about startups as businesses. This can certa

10 Ways to Get Startup Traction 

There are several ways for a successful startup to reach the traction stage, namely:

1. Focus on Problem Solving

The success of traction startup begins with a mission to solve a problem encountered by consumers. 

There have been many companies in this phase that have focused on solving problems and managed to become successful companies. One example is Tokopedia, which wants to make it easier for sellers and buyers to transact.

If startups succeed in finding solutions to consumer problems, more and more people will use their products and the potential for growth will be higher.

2. Perform Pre-Launching

Before marketing a ready-to-use product or service widely, you can already pre-launch. 

The goal is for consumers to get to know the product or service first, either from excellence or excellence, before its official release.

Well, startups usually use several effective ways to pre-launch, such as:

  • Give special price
  • Offer an extra product or service at no extra cost
  • Provide product samples or service free trials
  • Do a competition or challenge at launch to win a product or service

3. Creating a Superior Product or Service

Presenting solutions to consumer problems is not enough. The products your startup offers must be superior to competitors.

For example, startup Sribuu has an application product for automatic financial recording from bank accounts and e-wallet users, with AI technology that is personalized for each user.

In addition, Sribuu offers financial consulting services for users, where the concept is still very new and different from other financial planning applications. 

That's why during the traction period, Sribuu was able to get 45 thousand customers with a valuation value of more than Rp. 2.3 trillion.

With this product, in just one year, Sribuu managed to get bigger funding.inly increase brand awareness. 

Not only that, the product innovations that are owned will also make consumers interested. Moreover, if this is followed by various promos through social media channels or websites, it can be in the form of giveaways, free trials, and others.  

4. Increase Sales

At the traction stage, startups cannot focus on high revenue, but must focus on selling products or services. 

Not surprisingly, what is often done is "burn money", which is to use funds to serve consumers by providing more value, for example free shipping.

Well, how to make traction that startups usually do include providing free trial services with membership, giving discounts, promo codes, to creating referral programs, and others. 

When many consumers use your product or service, it can encourage word of mouth promotion . So, the opportunity to get new customers will be even greater with easy steps.

5. Strengthen Brand Awareness

In the early stages of business development, startups must strive to make their brand known to many people. Even though it has not yet reached the purchase stage, at least potential customers are familiar with your brand.

Now, there are various ways to strengthen brand awareness , starting from providing freemium content, expanding partners, partners, collaborating with influencers, holding giveaways, and others.

6. Increase Customer Retention

Getting new customers is important, but making sure consumers buy the product or service again is equally important?

If a startup has loyal customers, it means that their product or service is really needed by consumers. This is certainly not easy because it requires continuous innovation and good consumer understanding.

If the startup is able to maintain customer retention , the value and potential of the business will increase in the eyes of investors.

7. Enter Community

One way to get the most powerful traction is by utilizing community marketing . This strategy will help startups communicate more interactively with consumers.

The trick, startups can be involved in a community that is their target market. Communication can be done both online and offline. 

With good communication within the community, startups can find out whether their products or services match the needs of consumers. This can be seen from the business-related feedback given by community members who join. 

8. Build a Strong Team

Traction is a very crucial phase to form the foundation of a startup. Therefore, building a quality team is necessary so that early business development can be successful.

Investors are certainly more confident in providing funding if the startup has an experienced team and understands strategies to advance the startup.

One example, Ula, an e-commerce startup in Indonesia has four team members who are unquestionably competent, namely: 

  • Nipun Mehra (CEO)- Former Executive of Flipkart India and investor of Sequoia Capital India.
  • Alan Wong (CTO) – Eks Director of Software Development Booking.com, Eks Senior Software Development Engineer Amazon.
  • Derry Sakti (CCO) – Former supervisor of P&G Indonesia.
  • Riky Tenggara (COO) – Ex Lazada and aCommerce.

With the experience of the Ula core team, it's no wonder Jeff Bezos was interested in investing.

9. Create an Official Platform

Because it is closely related to technology, startups are required to build an official platform. Both websites, web apps , and applications can be the main means for consumers to get to know startup products or services.

For this reason, the official startup platform must be designed according to the brand image, because it will be the first impression for users.

10. Periodic Evaluation and Analysis

Finally, startups need to evaluate and analyze all traction indicators on a regular basis. This is done to determine whether the startup trend is increasing or decreasing.

If the performance of the traction indicator increases, it will be a good capital to attract investors. 

But if it declines, it's time for you to evaluate and launch business strategies so that the decline can be overcome. Calm down, if you are able to overcome the decrease in traction, it will also be a plus in the eyes of investors.

Building a Startup? Prepare Your Traction!

Traction is a crucial early stage of startup growth. At this time, you need to pay attention to all traction indicators to ensure the business is running well, for example from the products or services offered.

Unfortunately, no matter how good the product innovations are, if you haven't used online channels to introduce products, the number of consumers you will get is certainly not optimal. 

If this happens, the growth of the startup could be threatened and investors could cancel providing funding to your company.

So, so that your innovation can attract many consumers, using a website or web app is the best choice. However, make sure to use reliable hosting technology to maintain the credibility of your business.

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